Loss-making Cell C was ‘defrauded’ of R357m
A former IT executive at the company allegedly led an elaborate fraudulent syndicate for eight years
Afraud scam to the tune of R357.3-million allegedly from a “syndicate” led by a former Cell C information technology executive has highlighted the telecommunications company’s financial woes after it posted a R5.5-billion annual loss.
Documents from the National Prosecuting Authority (NPA) show how, from January 2012 to January 2020, Mohamed Adamjee allegedly orchestrated 83 transactions to defraud Cell C and worked with Manuel Teixeira, the former sales director of technology company Cornastone.
A company owned by Adamjee, Techno Genius, was used to allegedly funnel what the state asserts were ill-gotten monetary gains from Cell C, with the NPA document showing how his family members also supposedly benefited from the loot.
Bond and loan repayments, a Toyota Hilux, a Yamaha superbike, and cash gifts to relatives were some of the benefits Adamjee apparently bestowed on family and close friends.
The three other accused in the matter, who will all face 83 counts of fraud, are Teixeira, Adriaan Pillay — who worked under Adamjee in Cell C’s IT department — and Lufuno Nevhutalu, the former chief executive of Cornastone.
In documents the Mail & Guardian has seen, the NPA alleges that Adamjee “colluded with [Teixeira] and manipulated procurements of goods or works or services sourced by Cell C from Cornastone”.
Cornastone was a contractor to Cell C during the eight years in which the alleged elaborate fraud took place.
A well-placed source with knowledge of the investigation and who spoke on condition of anonymity said the amount would go beyond the current R357-million as investigators probed the case further.
“The original amount when the investigation began last year showed that the total fraud was around R60-million. But now it looks as if the probe will reach above R500-million as more transactions are being unearthed,” the source told the M&G.
“The accused communicated via email, which will be important in securing a conviction,” the source said. “Adamjee used his private email account, which was intercepted by Cell C executives and handed over to investigators. There hasn’t been a lead as to how this syndicate could have gone on for this long without being detected. But this will surely emerge as the investigation continues. The current Cell C management has been very cooperative with the prosecution team.”
According to the NPA’S records, Adamjee would allegedly communicate with Teixeira to procure goods and services for Cell C “at substantially inflated prices”.
Adamjee worked for Cell C from September 2004 to May 2020, when the company discovered the alleged collusion. Pillay was employed by the telecommunications firm from September 2004 to July 2014, when he resigned while a disciplinary hearing was pending against him. It is unclear whether the disciplinary process was related to the alleged fraud.
The procurement included wi-fi infrastructure, laptops, office printers, adapters and IT system maintenance for Cell C.
“In some instances, Cornastone, through the instrumentality of the [four] accused, colluded with other persons and created an impression that the procurement processes followed by Cell C were competitive and cost effective. Cell C and Cornastone suffered actual and/or potential losses because of the unlawful and fraudulent acts of the accused,” reads the NPA document.
“[Adamjee] had an agreement with some or all of his co-accused that the prices for the goods or works or services would be inflated and portions of the amounts … would be shared by the conspirators.
“A total of R357 329 677.30 was paid to Cornastone by Cell C as a result of the fraudulent procurements,” the report added.
The lowest amount that was allegedly stolen was R330 for a laptop adaptor in November 2015, and the highest more than R44.8-million for the renewal of a maintenance and support contract in January last year. The R44.8-million was the last allegedly bogus transaction.
Once the transactions were done, according to the state, the money would be channelled to Techno Genius and then into Adamjee’s First National Bank account to be disbursed.
“Techno Genius was not a registered vendor of Cell C and did not render any services to Cell C. Techno Genius was used as one of the vehicles through which the [fraudulent] amounts … were siphoned from Cornastone and shared by the accused,” the NPA document says.
“The accused misrepresented that Cornastone owed Techno Genius [money].”
The state claims in its report that Adamjee’s family enjoyed the fruits of the allegedly fraudulent largesse.
One family member, according
to the state’s records, had R610 000 paid towards their bond debt. The name of the family member is known to the M&G, but cannot be disclosed as they have yet to be charged.
Adamjee paid a further R604 250 towards the same relative’s loan and other debt repayments.
But Adamjee, the state asserts, did not leave himself out of the spoils of his eight-year spending spree, as he allegedly bought himself a 2018 Toyota Hilux Dakar for R520 000 and a Yamaha superbike for R33000, among many other toys and gadgets.
The four accused appeared in the Palm Ridge specialised commercial crimes court in Johannesburg this week, and their case was postponed to October to allow for the disclosure of documents to the defence.
All four accused indicated that they would plead not guilty to the counts against them. They are all out on bail of R50 000 each.
Meanwhile, the company Adamjee and his co-accused allegedly defrauded suffered a net annual loss of R5.5-billion for the 2020 financial year. The loss was still an improvement on the net loss of R7.6-billion in the previous comparative period.
Cell C is looking to turn its troubles around and is pinning its hopes on recapitalisation. Chief executive Douglas Stevenson was bullish in November last year, during the
release of the company’s financials, when he said that the narrowing of the net loss showed its turnaround strategy was beginning to bear fruit.
A local media report last week said the mobile phone operator had registered R2.36-billion in profit before tax. The amount, however, is not part of the company’s audited financial statements, as these are expected to be announced later in the year.
Responding to the M&G this week about the alleged fraud scam, Cell C’s chief legal officer Zahir Williams said the company had “acted swiftly to involve law enforcement authorities to investigate incidents of serious workplace fraud, leading to the arrest of suspects who are now facing criminal prosecution”.
“Cell C is cooperating with the prosecuting authority and will allow the law to take its course in this case,” Williams said, also echoing Stevenson’s assertion about the company’s turnaround strategy beginning to bear fruit.
“Cell C’s new management has implemented a comprehensive business turnaround plan that includes robust governance processes to improve overall risk management and fraud prevention. The company has a zero-tolerance approach to illegal and unethical conduct and will not hesitate to take appropriate action where there is evidence of wrongdoing,” Williams added.
The M&G repeatedly called Cornastone’s Johannesburg office for comment to no avail. Cornastone acknowledged an email sent to it this week and said it would respond. It had however not done so by the time of publication.
Cell C is not the only telecommunications company to have allegedly fallen victim to years of fraud. The M&G reported in March how Vodacom was allegedly swindled out of R24.6-million through the “theft” of 8 700 iphones by the Poonsammy family from April 2012 to July 2014.
Peter Poonsammy, who the state claims was at the head of the alleged theft, was a business analyst at Vodacom and was stationed at the company’s headquarters in Midrand.
Poonsammy and his wife Khemie Poonsammy, along with Rajeen Gokulpersad and Rajesh Rawchand, are facing a combined 70 counts of theft and money laundering in the Palm Ridge specialised commercial crimes court.
All accused are out on bail and have indicated that they would plead not guilty should the matter make it to trial.