EOH files criminal charges against corrupt employees

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 11 Oct 2019
EOH Group CEO Stephen van Coller.
EOH Group CEO Stephen van Coller.

Under-fire IT services firm EOH will lay criminal charges against employees implicated in corruption.

The JSE-listed company issued a statement yesterday saying it had concluded its forensic investigation that unearthed suspicious transactions worth R1.2 billion.

“Following the release of the interim update on the forensic investigation by ENSafrica on 16 July 2019, the board has now substantially completed the investigation into the R1.2 billion of suspicious transactions which were identified during the investigation,” says EOH.

“The ENSafrica investigation found evidence of a number of governance failings and wrongdoing at EOH, including unsubstantiated payments, tender irregularities and other unethical business practices which are primarily limited to the public sector business centralised in EOH Mthombo and to a limited number of EOH employees.”

EOH’s problems surfaced after software giant Microsoft in February terminated its contract with the IT services company after an anonymous whistle-blower filed a complaint with the United States Securities and Exchange Commission about alleged malfeasance to do with a R120 million contract with the SA Department of Defence.

“ENSafrica has assisted EOH in submitting further reports to the authorities in line with our statutory reporting obligations, and well beyond, as well as proceeding with criminal charges and other legal processes to recover losses caused by the perpetrators of wrongdoing,” the company says.

EOH has also now assessed the current anticipated financial impact of the findings and will announce the details thereof and progress on the investigation outcomes in its results announcement for the year ended 31 July, on 15 October, it adds.

CEO Stephen van Coller has been trying to clean up the mess at the company since his appointment. In July, he indicated the company will “ring-fence” problematic contracts into a single entity.

He blamed eight people for the corruption that has tainted the IT services company, pointing out that corrupt payments were largely related to contracts entered into between 2014 and 2017.

According to Van Coller, those eight people paid 84% of those payments to about 20 suppliers. “Some people were just stealing from us – just putting in invoices and taking money out of the company where they were directors. In some cases, they were overpaying enterprise development suppliers for very little work done,” he said.

Top executives Pumeza Bam, Zunaid Mayet and Rob Godlonton have since resigned from the company.

An EOH spokesperson told ITWeb it is anticipated EOH Mthombo, the subsidiary that was largely implicated in the suspicious payments, will be closed within two years.

EOH Mthombo client contracts will be ceded to another appropriate legal entity within the group “to ensure continuity and continued service delivery for our clients, subject to the required regulatory approvals and client consent.

“This forms part of EOH’s reorganisation process for enhanced governance, which includes the ring-fencing of problematic contracts from the past into a single entity to provide focused management and resolution of the issues,” the company says.

It also faced contract challenges with US-based software provider Qlik until the companies entered a marriage of convenience last month.

To add to the woes, earlier this month ITWeb reported EOH was embroiled in a dispute with service desk agents who lamented they had not been paid their salaries since May.

The company expects to report a headline loss per share of at least 1 800c for the year ended July 2019, from a profit of 278c per share in the prior year.

The group says it expects earnings per share to show a loss of at least 2 700c, from a profit of 202c per share before.