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Struggling sugar producer Tongaat Hulett says it intends to institute civil claims against former top executives, including its ex-CEO, and has been in contact with the National Prosecuting Authority and the police over misstatements in its financial reports.
This comes after the JSE-listed company received the results of a six-month forensic probe into its finances carried out by PwC, the same company that conducted a forensic probe into Steinhoff.
PwC was asked to conduct the probe by the group's CEO, Gavin Hudson, after the company received credible allegations of financial wrongdoing via its internal whistle-blowing line.
Tongaat said the PwC Report will not be made public, as it is subject to legal privilege and other confidentiality restrictions.
The sugar procurer on Friday published a seven-page overview of what it said were key findings in the PwC report.
According to the overview, PwC found that profits and assets had been overstated in earnings reports.
"Certain senior executives initiated or participated in undesirable accounting practices that resulted, among others, in revenue being recognised in earlier reporting periods than it should have been, and in expenses being inappropriately capitalised to assets," it said. "This resulted in profits in the respective years being overstated, and in the overstatement of certain assets in THL's financial statements."
Tongaat also said a culture "deference and lack of challenge" resulted in employees following instructions on accounting practices without question.
Senior executives, it said, were able to participate in financial reporting misstatements due to internal governance failures where policies, guidelines and frameworks were ignored.
Tongaat said its board intends to pursue claims against "certain individuals" who appear to have been responsible for, or party to, the undesirable activities outlined in the PwC Report," including its former CEO Peter Staude.
Staude retired from Tongaat in October 2018. At the time, the group's board said Staude had "exemplified integrity and commitment, and he served the interests of our stakeholders with distinction".
Overstatements
The overstatements may have been related to incentives that senior executives would receive if they reached certain employment targets.
"From the PwC investigation, it appears that personal financial enrichment of key senior employees was largely limited to the financial incentives paid to them during the years in which they achieved their employment targets," the overview said.
Tongaat said its board was also engaging with SAPS and the National Prosecuting Authority of South Africa to "assist them in pursuing those parties who the NPA determines should be prosecuted'.
"Equivalent authorities will be engaged in Zimbabwe and Mozambique where applicable."
Tongaat Hulett's statement
* Tongaat Hulett said that according to the PwC report, the following individuals were "involved in some or all of the above practices, to a greater or lesser extent."
"John Chibwe (Hippo Valley EstatesFinance Director), Michael Deighton (former managing director of THD), Steve Frampton (former Zimbabwe Sugar Sales General Manager), Shelton Nhari (Triangle Finance Director), Sydney Mtsambiwa (former managing director of THL’s Zimbabwean operations), Les Munro (former Finance Executive of Tongaat Hulett SA Sugar), Murray Munro (former Chief Financial Officer of THL), Mr Raphael Pfunye (Zimbabwe Sugar Sales Finance Executive), Sean Slabbert (former Finance Executive of THL); Peter Staude (former Chief Executive Officer of THL).
"Disciplinary action has been or is being taken in relation to certain of the senior executives referred to above and other individuals. The Board is considering the institution of civil actions against the senior executives referred to above and other individuals, including, amongst others: actions to recover bonuses and benefits paid to specific executives and other individuals for the relevant periods; and applications to court for orders declaring relevant people to be delinquent directors orotherwise incapable of occupying fiduciary positions."
