Embattled JSE-listed company Tongaat Hulett has laid a criminal charge against one of its former executives, it confirmed this week, as a forensic audit begins to unravel what looks set to become another high-profile accounting scandal.
The company declined to name the individual, but Business Times has been reliably informed that charges have been laid against a former executive at a Tongaat Hulett division.
The executive, who was among those who oversaw projects in which vast tracts of land owned by the sugar giant were sold for developments at Sibaya, Umhlanga Ridge and Cornubia, left the company in May after more than a decade of service. No reason was given publicly for his departure.
He was one of the "old guard" which included CEO Peter Staude, who took early retirement last year, and CFO Murray Munro, who stepped down, also last year, because of ill health.
Business Times attempted to contact the executive. His cellphone was off. A recorded message advised that he was no longer working for the company and could only be contacted on LinkedIn. A message sent on that service was not answered.
Another high-profile departure is that of Jenitha John, a nonexecutive director and chair of the audit and compliance committee, who resigned last month.
— Assets were overstated by up to R4.5bn, with pending sales reflected as finalised
The company has been rocked by scandal after it confirmed that its 2018 financial results could not be trusted and assets were overstated by up to R4.5bn, with pending land sales reflected as being finalised.
It has hired PwC to conduct an independent forensic audit. And this week it announced that it was suspending its share trading on both the JSE and London Stock Exchange to avoid "speculative trading" after the share price plunged by 76% this year.
The company would not disclose details of any charges against the former executive.
Company spokesperson Michelle Jean-Louis told Business Times: "Management are taking appropriate actions arising from the evidence emerging in the forensic investigation. At this point, a criminal case has been opened against one former executive and, given that this is now a matter being investigated by the SAPS, we are not able to provide any further information."
She said a financial review mandated by the board revealed certain past practices which are "of significant concern to the board and the company's auditors" and appear to have resulted in financial statements that did not reflect Tongaat Hulett's underlying business performance accurately.
"The review is ongoing and incorporates an independent forensic investigation to establish any evidence of whether any of these past practices were deliberate. The board has made a decision to restate the financials for the year ended March 31 2018."
This was expected to happen by October. It is expected that trade in Tongaat's shares will resume then, or possibly earlier if reliable information can be released.
The company is also working on a turnaround strategy, which could include the sale of some assets.
Already under way is a retrenchment process, with as many as 5,000 jobs on the line in SA, Mozambique and Zimbabwe.
Jean-Louis said the company was in a section 189 process and the final jobs figure would only be known once the restructuring process was more advanced. "Tongaat Hulett has notified all trade unions represented at the company in SA that it is considering reducing its head count across the company's operations in six Sadc [Southern African Development Community] countries based on operational requirements."
The aim of the head count review is to make sure Tongaat has the right skills and experience to take advantage of its new operating strategy, which seeks to address its debt burden, streamline operations and fundamentally change its business model. Apart from reducing staff, the company is also strengthening its leadership team, with a capable and skilled new executive committee supported by the board of directors.
The fallout from Tongaat has hit auditing firm Deloitte.
This week asset management company Sygnia said it had decided to look for another external auditor as a result of "our unsatisfactory engagement with Deloitte and the reputational risk associated with the firm".
In response, Deloitte said "we maintain the highest standards of ethical behaviour and client confidentiality, [and] we believe it is prudent" to point out that the Sens statement from Sygnia "contains certain factual inaccuracies relating to the circumstances of our resignation".
Deloitte also said it had changed its Tongaat audit leadership team and "supplemented the core team with senior audit, forensic and corporate finance experts".
Opportune Investments CIO Chris Logan said: "The question is why they didn't pick up this massive misstatement to begin with. It's not like Steinhoff, where there was an excuse that they didn't audit the underlying companies. They audited everything there, so what's the excuse this time as to the misstatement? I think to a degree that bonuses were paid based on misstated earnings, they should definitely be clawed back. That's clear as daylight.
"Everyone is just blaming the previous CEO, [but] it's broader than that. There's the board who got very well paid, and the institutional shareholders, who voted year in and year out for all the bonuses. There needs to be a bit of collective soul-searching."
Shareholder activist Theo Botha said: "Tongaat is very disappointing in terms of having to restate their figures for one year, but I think they might have to go back further."
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