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Former Prasa CFO must pay back R8.22m

Aug 01 2017 10:07
Carin Smith

Cape Town - Former chief financial officer and consultant at the Passenger Rail Agency of SA (Prasa) Fenton Gastin must pay back R8.22m to the agency, the high court in Pretoria has ordered.

The court declared certain agreements of employment and consultancy between Gastin and former Prasa group CEO Lucky Montana unlawful, invalid, void from the start and of no force and effect.

Prasa applied to have a contract for professional services regarding finance and strategic advice concluded on September 30 2014 between Montana and Gastin declared unlawful and invalid.

Prasa asked for Gastin to pay back R8.2m relating to certain contracts. The amount included about R3.4m as part of a "mutual separation" agreement between Montana and Gastin dated July 16 2013, and about R4.9m in payments made to Gastin in terms of a consultancy agreement of September 30 2014.

In an affidavit to substantiate the application on behalf of Prasa, Sipho Sithole, group chief strategy officer of the rail agency, explained that Gastin is a former Prasa employee.

According to Sithole, the history of Gastin's employment at Prasa demonstrated that he and Montana maintained a relationship with the purpose of defrauding the rail agency.

Montana had appointed Gastin as group chief risk officer on a five-year contract from August 1 2010. In January 2012 Gastin was appointed acting group chief financial officer and subsequently group chief financial officer at R3m per year.

READ: Lucky Montana wants to expose Prasa 'mafia'

No board resolution to approve appointment

"After a diligent search no board resolution was found approving this appointment," said Sithole.

A clause in the contract stated Prasa would compensate Gastin a six-month payout if his employment of group chief risk officer was terminated.

Sithole states, however, that by becoming chief financial officer, Gastin's remunaration increased from R2m to R3m per year.

"There was no legal basis for (Prasa) to compensate (Gastin) on the basis that his appointment as the group CFP had terminated his permanent employment," stated Sithole.

In his view, the payment of the compensation was a "deliberate ploy" by Montana and Gastin to pay the latter monies not legally due to him.

Later in his affidavit, Sithole said "it is wholly inexplicable that an employee's contract of employment could be terminated on the basis that the trust relationship between the employer and employee had irrevocably broken down, only to have the same relationship restored on the very day of termination, moreover at an increased remuneration and for an indefinite period.

"It is my submission that this was simply a further attempt to defraud (Prasa)".

Minutes of a board meeting in November 2014 reflect that Montana advised the board that Gastin had retired.

READ: Prasa probe costing taxpayers R148m over 2 years

Board 'misled'

"In doing so Montana clearly misled the new board...as (Gastin) was already contracted as a consultant of Prasa from September 30 2014," stated Sithole.

The consultancy agreement was for five years with a guaranteed minimum commitment of R19.44m - payable regardless of whether services were actually rendered.

Sithole stated that in his view the appointment of Gastin was unlawfully made and that the consultancy contract was concluded in a "clandestine manner".

Sithole also pointed out in his affidavit that in a report by the Public Protector in August 2015 she refers to numerous irregularities at Prasa and directed the organisation to investigate the matters.

"I can confirm that (Prasa) has taken steps as directed by the Public Protector," stated Sithole.

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