EOH has filed a R1.7bn lawsuit against co-founder and former boss Asher Bohbot, alleging he failed to carry out his fiduciary duties and created an enabling environment for corruption and financial irresponsibility.
The lawsuit, filed in the high court in Johannesburg, comes about three years after EOH, which provides technology services, revealed underhanded dealings with its biggest client, the government, forcing the one-time investor favourite into taking billions of rand in writedown charges and triggering a selling frenzy in its shares.
"The defendant’s failure to discharge his duties created an enabling environment for corruption, wrongdoing and financial irresponsibility," EOH said in court papers.
EOH, which is on the comeback trail after bringing in Stephen van Coller as CEO to clean its image and fix its balance sheet, is also going after former CFO John King for a similar amount.
The duo are further accused of tarnishing the company’s reputation with governance failures that ensnared EOH in the state capture project and led to the loss of a lucrative supply contract with Microsoft. EOH has also applied to have Bohbot declared a delinquent director, disqualifying him from serving as a director in SA for at least seven years.
Other former senior executives in the company’s legal crosshairs include former public sector head Jehan Mackay, who has been slapped with a R1.5bn suit for alleged payments to third parties for bogus work, and former EOH International head Ebrahim Laher, who faces a R1.58bn lawsuit for allegedly abusing his position for personal gain and negligence.
The lawsuits mark the latest episode in one of the country’s biggest corporate scandals, which shocked investors who had rallied behind EOH’s ascent from a small IT group in the early 2000s to a must-have in fund managers’ portfolios.
The company ran into trouble three years ago when allegations of dodgy tender dealings with the government surfaced, prompting it to clear out its top management, bring in Van Coller and appoint ENSafrica to get to the bottom of the allegations.
The investigation by ENSafrica found a hole of close to R1bn in its accounts stemming from underhanded dealings with its government client, including transactions worth more than R600m with no evidence of valid contracts being in place or for which no work was done, as well as R90m of loans written off and overbilling of about R180m.
The investigation resulted in up to 46 people being reported to authorities; 16 employees at EOH were implicated directly in the wrongdoing, together with 12 government employees.
But the company is showing signs that it is on the comeback trail operationally after the senior ranks mapped out a punishing cost-cutting and asset disposal plan, helping the company turn profit for the first time since Bohbot resigned as chair in its latest earnings report.
But investors have been wary to commit as its share price has hovered in a range of R8 to R6, a dramatic fall from grace for the stock that fetched more than R170 at its peak in 2015. With Tiisetso Motsoeneng
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.