Mediclinic has revealed that it s uccumbed t o R5.3m “material incidents of fraud and corruption” by staff and third parties during the 2014 financial year. While not one senior manager stole from or defrauded the group under CEO Danie Meintjes in either 2013 or 2014, as Mediclinic puts it, staffers caught looting were red-carded. Others could end up with criminal records or time behind bars.
Stellenbosch-headquartered Mediclinic – which, together with Life Healthcare and Netcare, control a remarkable three quarters of the South African market – is valued at R73bn on the JSE. Thus, the millions snatched from Mediclinic investors’ pockets is a drop in the bucket that can barely bankrupt this healthcare titan. But that’s not the issue. The incidents, amid Mediclinic’s claims of extensive control systems and policies in place, are hardly an advertisement for ethics.
“Staff found guilty of theft or fraud after thorough investigation are managed accordingly, examples of theft cases are theft of vehicles and computer equipment,” according to Mediclinic’s Tertia Kruger.
In the Middle East, Mediclinic’s latest records show that a huge R40m, which vanished temporarily in Dubai, was a case of “external bank fraud”. The matter was immediately taken up and duly investi- gated by Mediclinic’s unnamed bank, which subsequently refunded the listed group every dirham. “No Mediclinic staff members were involved,” explains Kruger in a statement sent to Finweek.
That is not to say that the company evaded swindlers in Dubai during the year. Mediclinic Welcare Hospital fell victim to staff fraud in the region of almost R500 000. The JSE-listed group – which earns R3.4bn or 11% of its revenues from there – claims to have jacked up its checks in the wake of this case that saw two corrupt staff members in the Middle East dismissed while a further three were reported to the “local authorities for further prosecution”.
The Dubai numbers simply pale next to those of Switzerland’s Hirslanden subsidiary. In this aff luent part of Europe where the group is splurging a huge R1.5bn to buy a hospital in Geneva, Mediclinic is battling a bigger headache. Not only is Hirslanden’s normalised EBITDA (earnings before interest, taxes, depreciation and amortisation) margin going south – albeit slowly – and thus bucking the trend, but the scale of fraud incidents and the time it is taking to solve these is becoming worrisome. Mediclinic notes that “no new incidents of fraud” came to Ole Wiesinger-led Hirslanden’s attention in 2014, but explains that the yet-to-be resolved case of theft has ballooned from just under R2m previously to R3.2m now.
Why is it taking so long to solve this case? How exactly was Hirslanden defrauded and who is being investigated?
“The Swiss case is subject to a judicial process and, as such, the timeframe is not in our control. The increased amount is due to further misappropriated funds that were discovered during a police investigation, the judicial process will determine the recoverability of the amount,” Kruger explains, but gives no indication on how the company was defrauded.
Now churning R12bn in revenues, the Swiss unit is the single largest contributor in this titan. On the other hand, the Southern African subsidiary, which last year made R10.1bn (or 41% of group revenues), remains the star performer by way of profits. This subsidiary, which, like other health service operators, is in the throes of a market inquiry into private fees, operates in Namibia and South Africa – where it boasts almost 8 000 beds and more than 250 theatres in 52 hospitals.
While the amount involved is nowhere near its Swiss peer, the Southern African subsidiary was also swindled of investor funds during the year. Here, Mediclinic lost R1.6m in eight separate incidents of theft and fraud but Kruger seems to take some solace in the fact that “there is no significant upward trend in losses in Southern Africa”. Still that’s cold comfort for defrauded shareholders.