Fixed-line operator Telkom has acknowledged the allegations levied against it by a controversial whistle-blowing report. However, the company argues that not only has it been aware of the allegations, but is already at various stages of investigations into the matter.
The report zeroes in on allegations of misconduct and gross negligence at Telkom's failed Nigerian subsidiary Multi-Links. Particular reference is made to allegations and calls for criminal charges to be brought against former Telkom CEO Reuben September for his role in the subsidiary's failure.
Multi-Links has been a thorn in Telkom's side ever since the company initially invested in Nigeria, in 2007. The fixed-line operator has written the unit down by more than R5.6 billion since entering the West African country.
The company has since announced it plans to pull out of the CDMA business of Multi-Links. Telkom expects shedding Multi-Links' CDMA business to cost it between $100 million (R690 million) and $180 million (R1.25 billion), excluding any benefit from the sale.
It is important to note is that the whistle-blowing report is not supported by any authoritative body, but drawn up by the the Communications Workers Union (CWU). The union acknowledges that it's a CWU report, but it says it is not yet willing to stand by the allegations made contained in it.
Gallant Roberts, CWU secretary and spokesperson, says the union will investigate the matter and state its position at a later stage. When questioned as to why the report was made available to the media prematurely, he explained that it was in the public's best interest to be made aware of the allegations.
Despite the dubious nature of the report, Telkom has opted to state its position on the allegations, noting that criminal investigations have already been launched into the matter.
Telkom investigates
A number of the issues contained in the document are already known to Telkom and are in various stages of investigation. Following a meeting of the audit and risk committee (ARC) of Telkom's board of directors yesterday, Telkom has decided to state its position on these matters publicly.
The Telkom board and, in particular, the ARC have already taken decisive action on the findings of several investigations into matters at Telkom and Multi-Links, over the past year.
Among other actions, the decisions of the ARC have led to official criminal investigations and internal disciplinary processes.
Forensic auditors at Ernst & Young were tasked by the Telkom board to perform an investigation into many aspects of Multi-Links, and this culminated in criminal and disciplinary processes being launched.
The findings of the Ernst & Young investigations have been handed to the South African Police Services (SAPS) and the National Prosecuting Authority (NPA) for consideration. The SAPS and NPA have subsequently instituted criminal investigations into certain activities at Multi-Links.
Telkom is not in a position to provide further details of the criminal investigations, states the company. While Telkom has not revealed which employees are under investigation, the CWU report makes continuous reference of mismanagement by September.
September implicated
Calls for criminal charges to be brought against the former CEO, as well as corrective measures to be taken against other Telkom executives involved in the Nigerian subsidiary's costly demise, have been listed as the desired result of the report.
Important to note is that while the allegations have been levied as statements of fact, little supporting evidence exists within the report to substantiate the allegations.
With no return on the billion-rand investment in Multi-Links, the memorandum states: “It is then distressing that we hear allegations of intentional destruction of value, corruption and manipulation of the company operations, policy and procedures.”
The report also points to major contracts commissioned by Multi-Links that it claims are “lynching the life out of the company [Multi-Links]”.
It is alleged these contracts were signed without following Telkom's governance and procurement structures by the Multi-Links board, of which September was the chairman at the time.
The report claims these actions amount to misconduct and gross mismanagement by the directors involved and call for corrective measures to be taken including criminal charges to be brought against September.
Telkom rebuts
An internal disciplinary process has also been instituted against various Telkom employees for failing to comply with company policies and for mismanagement. All disciplinary processes are a confidential matter between Telkom and the affected employees, and Telkom cannot disclose further details, explains the company.
“In addition to the Ernst & Young investigation, at the end of 2009 the Telkom board recommended that a task team be convened to gain better insight into the challenges confronting Multi-Links.
”Following engagement between the task team and management at Telkom, led by Jeffrey Hedberg, the Telkom board mandated Ernst & Young to review specific contracts concluded at Multi-Links which presented several commercial challenges,” notes Telkom.
The chairman of the Audit and Risk Committee, Sibusiso Luthuli, says that, apart from the issues already examined by Ernst & Young and other investigations, many of the statements in the recent dossiers were frivolous personal attacks on certain senior Telkom executives.
“However, the board takes all allegations seriously and will investigate where appropriate,” he notes.
“The documents that have been placed in the public domain recently are deliberately malicious and are intended to undermine and damage Telkom's reputation. They were not presented through the established mechanisms for whistle-blowing before being circulated to the media and other stakeholders,” says Luthuli.
Telkom's acting group CEO, Jeffrey Hedberg, said Telkom remained committed to upholding and applying sound corporate governance principles stringently at all times.
However, he notes: “We need to build a culture in which employees engage these processes, instead of reacting to unsubstantiated memoranda that make their way into the public arena”.
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