Delta Property Fund has reported alleged fraudulent activities to the police and other authorities after a forensic investigation found irregular payments and procurement at the company, it said on Wednesday.
Accounting firm Mazars Forensic Services conducted a forensic investigation into issues such as the alleged procurement irregularities and the misappropriation of funds by senior executives following an anonymous tip-off. This is the second investigation conducted by Mazars into the allegations.
Delta said in a Sens announcement released on November 3 that after the preliminary findings of the first investigation, founder and CEO Sandile Nomvete and CFO Shaneel Maharaj resigned with immediate effect. The pair left in August. COO Otis Tshabalala also left the company.
Delta said in a Sens statement on Wednesday afternoon that the forensic investigation “found evidence of past practices involving governance failings and wrongdoing at the company, including unsubstantiated payments, procurement irregularities and other unethical business dealings”.
Delta has reported the practices to the police and other authorities for further investigation. The board is taking legal advice on any civil claims that may arise.
Among key issues identified in the report were payment of commission by the company totalling R43.9m for the three financial years ended February 2018, 2019 and 2020, resulting from invalid, lapsed or no-broker mandates; fraud resulting from unethical dealings amounting to R2.1m; and nondisclosure of related or connected-party transactions to the board.
The failure to recognise commission and property management expenses in the property valuations is likely to result in a decrease in the valuation of Delta’s investment property from R10.6bn to about R8.7bn in the financial statements for the year to February 2020.
Delta’s auditor BDO has withdrawn its audit opinion for the 2020 financial statements.
The board has also withdrawn its 2020 financial statements.
The company said it will not release the interim results to end-August as the 2020 financial statements.
Delta’s share price rose almost 8% to close at 41c, giving the company a market capitalisation of R292.8m.
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