MTN caught up in legal challenges
TELECOMS operator MTN has a big legal dispute on its hands stemming from its decision to suspend senior executive Robert Madzonga
Madzonga’s suspension follows the resignation of group chief financial officer Nazir Patel last month, understood to be linked to governance lapses related to MTN’s Iran business.
It is a setback in the group’s effort to restore its reputation after claims last year that it bribed officials in Iran to score a licence.
Madzonga, chief operations officer at the group’s South African subsidiary, filed summons on Friday last week against the company, accusing it of suspending him to block an internal grievance claim he had made against senior manager Lily Zondo.
In a responding affidavit, MTN executive business risk manager Shauket Fakie accused Madzonga of being economical with the truth when he was previously investigated by PwC for a series of dodgy invoices from a firm owned by Nozuko Nxusani, which PwC alleged was his “friend”.
A PwC forensic report allegedly nailed Madzonga for signing off 78 invoices worth R12.3-million, some for work done during an impossible 40hour day.
Though Madzonga was
She chose the other company despite [us] winning bids. Apparently we were not white enough
given a written warning for negligence, MTN now claims it did not have a full picture of what really happened with Nxusani, as it subsequently hired a law firm to demand records from her late last year to back up what she and Madzonga had told PwC.
After some delays, Fakie says, Nxusani finally sent the documents in January. These largely contradicted Madzonga’s version of events.
MTN is now accusing Madzonga of not being merely negligent, but of actively colluding with Nxusani “to secure the payment of grossly inflated invoices”.
But Madzonga dismissed this charge as being “nothing new”.
“Why wait 14 months to reopen it? These issues only come up after lodging my grievance. I have never colluded with any supplier. This is what MTN alleges they have found in Nozuko’s files, and they [are] still going to investigate.”
Fakie charged that Madzonga lodged the grievance only after finding out senior executives at the company were already discussing his suspension.
Also in Fakie’s affidavit was a matter involving Mashiane Moodley & Monama, another law firm. He accused Madzonga of signing off on inflated invoices, with one worth R10-million.
But Madzonga said that invoice was “negotiated not by me but by HR, finance and procurement, and again approved upfront by the board before commencement of work”.
Business Times has seen internal documents that appear to confirm this, stating that Mashiane’s legal costs were projected at about R20million, but there were negotiations for a 50% discount.
In e-mail correspondence last month, MTN SA human resources boss Themba Nyathi said that “Mashiane’s fees were highly competitive”.
But a senior manager at MTN insisted on comparing Mashiane’s invoices with others from law firms such as Webber Wentzel, which Nyathi agreed to.
It is not clear what the comparison found.
Madzonga said he intended to contest MTN’s attempts to move the case to the CCMA.
Undermining MTN’s bluster about dealing decisively with misconduct was the news this week that another executive, Eleanor Potter, walked away with a golden handshake despite facing more than 15 charges.
A spokesman for MTN SA confirmed that certain allegations were made last year against Potter, GM of its branded retail channel.
“The company took these seriously, and accordingly investigated them during the course of last year,” said the spokesman.
“The investigation concluded that the allegations were unfounded and Eleanor was not guilty. MTN also confirms that Eleanor has resigned. The reasons for her resignation are personal as she wishes to pursue her own interests.”
It is understood the allegations related to procurement irregularities, including Potter ignoring a contract signed with New Age Holdings, a wholly blackowned company.
A source in the company alleged that Potter refused to work with New Age, and had appointed “her own white company she used to work for”.
New Age CEO Sello Phakoe is suing MTN for R120-million in loss of profit for the quarter during which MTN breached the contract.
“MTN is contesting the amount, not the breach,” said Phakoe. “We were the only contracted company in that channel. She chose the other company despite [us] winning bids against them. Apparently we were not white enough.
“We sued because in that quarter we were sure that we had won the price bid and MTN had written to us telling us we had won it.”