Suspiciously ‘neat’ sums led EOH to R1.2bn dodgy outlay
● Curiously round numbers — that was one of the dead giveaways that helped law firm ENS uncover R1.2bn in suspicious payments at technology group EOH Holdings.
“The good news it that is was quite localised and involved only eight people out of 11,000 [employees],” EOH CEO Stephen van Coller told Business Times this week.
Besides the payments in round numbers, there were also transactions with companies that have a single director, some random payments and tip-offs from whistleblowers.
Van Coller, an investment banker, has been at the helm of the technology group since September — tapped by founder Asher Bohbot to strengthen corporate governance after a sharp drop in the share price due to a series of scandals.
The report released by ENS this week is part of the cleanup effort.
The R1.2bn could include legitimate payments that only appear dodgy, and the next step, says Van Coller, is for ENS to comb through the transactions.
In the meantime, EOH is putting the vrot (rotten) part of its business — most of the transactions happened in its EOH Mthombo unit — in quarantine and plans to sell it in about two years. There are still some contracts with the public sector that have to run their course at EOH Mthombo, but thereafter the subsidiary will be disposed of.
Three bosses at the division — Pumeza Bam, Zunaid Mayet and Rob Godlonton — resigned shortly before the announcement of some of the report’s findings, but Van Coller says they were not implicated but felt it was time to go to give the unit a new start.
He told staff the individuals should be applauded for resigning in this way.
eight people implicated by the ENS probe have been reported to the Hawks and the next step will be criminal charges and civil proceedings, says Van Coller.
Some of the dubious transactions date back to 2012, but the bulk were in 2015 and 2016.
Mthombo is not the only business on the block. The group “just grew too fast in five or six years and governance just did not keep up”, Van Coller says of EOH as a whole.
He is rejigging EOH from an amorphous business with about 270 legal entities into 60 units which will trade through six to 10 entities. This month it sold its stake in its German business for R444m.
So far, the group has raised half of the R1bn it plans to raise to ensure its new shape is a leaner business with enough capital.
Since the collapse of Steinhoff’s share price in December 2017 after the retailer announced “accounting irregularities”, investors have punished JSE-listed stocks whenever there is a whiff of impropriety.
EOH has seen billions of rands wiped off its share price over the past 18 months and fell to new lows when Microsoft cancelled a licensing agreement with it earlier this year.
Van Coller is now seen as the group’s white knight and it is understood that investors and creditors see him as vital to its turnaround.
Auditors PwC are redesigning EOH’s internal audit function and the group has much stricter policies on gifting, donations and entertainment.
Asked if his departure would be seen as a default event by creditors, Van Coller laughs and says there is still work to be done.
“We’ve got a plan with the banks. That takes us to the end of August next year. I’m going nowhere until this is done.”