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Johannesburg – The massive drop in the share price of JSE-listed IT company EOH may be linked to the clampdown on multibillion-rand police tenders by the Independent Police Investigative Directorate (IPID).
Earlier this week, IPID raided seven properties linked to former acting police boss, Lieutentant General Khomotso Phahlane, and businessman Keith Keating, whose company Forensic Data Analysts (FDA) was bought by EOH.
EOH’s share price fell from R80 on Monday to R30 on Friday morning. It recovered slightly on Friday afternoon and settled around R45.
Fin24 has reliably learned the IPID probe may extend to looking at how EOH acquired some of Keating’s companies in 2015.
In a SENS statement on Thursday, that company stated it would “unwind” the Keating transactions effective October 31 2017.
Sources close to the investigation have told Fin24 that EOH’s directors were informed of the investigation before it was made public early in November this year.
EOH denied this, saying they only learned about IPID’s probe when the media made it public and they would shortly be making a public statement on the speculation surrounding this.
On Thursday EOH’s share price plunged more than 45%, though industry analysts said they didn’t know what had caused it to drop so dramatically.
On Wednesday it emerged that a joint operation between the Hawks and IPID saw seven properties connected to Phahlane and Keating raided earlier in the week.
READ: IPID, Hawks raid 7 properties in case against Phahlane, SAPS contractor
It was recently revealed that Keating’s company FDA had allegedly received R5bn in SAPS contracts since 2010.
In a letter sent to then acting police commissioner Lieutenant General Lesetja Mothiba, IPID said that Keating had paid for vehicles for Phahlane, his wife and sister.
"The investigation has detected possible crimes of corruption, fraud and money laundering, facilitated by car dealer Durand Snyman," the letter said.
IPID said that Phahlane, his sister, his wife, and a Colonel Potgieter (from the SAPS unit known as TMS) had received vehicles allegedly sponsored by businessman Snyman and paid for by Keating.
Corruption and money laundering
This week's raids were conducted under the direction of the Special Commercial Crimes Unit, and were part of IPID’s investigation into allegations of corruption and money laundering involving Phahlane.
The properties searched included Phahlane’s home in Sable Hills, Keating’s FDA offices and home, Snyman’s office and home, Potgieter’s home and Phahlane’s sister’s house.
Sources close to the investigation allege that a vehicle was seized from Phahlane’s sister's house; SAPS’ LCRC (Local Criminal Record Centre) equipment was found at Keating’s offices; and a bakkie load of documents was seized from Keating’s house and offices.
"RFID (radio-frequency identification) tags, which the SAPS paid R374m for were found hidden at a construction site and never used," a source said.
Documents which allegedly show Phahlane’s involvement in the cases against IPID investigators and IPID head Robert McBride were found at Phahlane’s house.
Last week, the police and the State Information Technology Agency (SITA) were asked questions by the Standing Committee on Public Accounts (Scopa) about their contracts with FDA.
Keating sat and watched the meeting throughout.
READ: Scopa instructs SITA to end 'corrupt' R900m deal
Scopa chairperson Themba Godi said it was the position of the committee that the contracts with FDA were of a corrupt nature, and that they wanted them cancelled.
EOH’s connection to FDA was never mentioned in the media reports related to the raids, however, earlier reports on a R1bn SAPS forensic torch contract did name them.
The Daily Maverick reported that in November 2015, the Competition Tribunal unconditionally approved a merger between EOH Abantu, Grid Control Technologies, Forensic Data Analysts and Investigative Software Solutions.
Keating, Desmond van Rooyen, Vhonani Mufamadi, John William King and Adri Els were listed as directors of Grid Control Technologies (GCT) as well as Investigative Software Solutions.
EOH Holdings’ Consolidated Results from January 2016 show that the company purchased GCT for about R869m.
The report said that EOH purchased 100% of the shares of all of Keating’s companies, but Keating told Daily Maverick that the sale of his businesses to EOH had become “unviable” over time and that FDA is now “privately owned”.
EOH mentioned Keating-owned companies in a SENS announcement on Thursday, giving credence to the theory that it was this week’s police activity that could have caused the drop in the share price.
A company owned by EOH executive director, Jehan Mackay, sold R6.2m’s EOH shares on November 24 and another R6m’s worth of stock on December 1.
Focus on value
EOH said in the statement that their business continued to focus on providing value to their clients through the provision of technology solutions, knowledge and skills.
“The Group has also reached agreement with the former shareholders of Grid Control Technologies Proprietary Limited, Forensic Data Analysts Proprietary Limited and Investigative Software Solutions Proprietary Limited, to unwind the transaction effective October 31, 2017.”
They said that EOH remained committed to being an ethical and relevant force for good in society, ensuring that all their business was conducted with integrity, transparency, and the highest moral standards.
“EOH would therefore like to reassure the market that the business remains strong, with a great leadership team and strong fundamentals.”
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