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EOH, defence execs face prosecution over dodgy MS software licences

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The Special Investigating Unit (SIU) wants former EOH and Department of Defence (DoD) officials to be held criminally liable for alleged corruption.

This, after the SIU’s investigation into the R250 million Microsoft software licences procurement contracts awarded by the DoD to EOH uncovered irregularities relating to the procurement process and also overpricing of Microsoft licences amounting to more than R40 million.

On Monday, ITWeb reported that EOH is in the process of settling controversial public sector contracts and is resetting its relationship with government.

In an interview, Megan Pydigadu, EOH group finance director, acknowledged the irregularities with the contact with the DoD and said the company had agreed to pay back R40 million to the department.

Said Pydigadu: “One [of the dodgy public sector contracts] is with the Department of Defence, which we have already settled; we agreed on a fine of just over R40 million, which we are paying over three years. That was dealt with in October last year, and on the other one, we had over-invoiced for licences related to the Department of Water and Sanitation. We are busy negotiating to close that one too.”

In 2019, Microsoft cancelled its lucrative software licensing deal with EOH after an anonymous whistle-blower filed a complaint with the United States Securities and Exchange Commission about alleged malfeasance to do with the contract with the DoD.

Procurement irregularities

In a statement issued yesterday, the SIU said it found that the contract entered into was irregular.

The SIU conducted an intensive investigation, which revealed the procurement irregularities and overpricing by EOH arising from the 2016 and 2017 procurement of Microsoft licences.

According to the unit, with specific reference to the overpricing of the Microsoft licences, EOH was confronted and acknowledged the said overpricing.

It says EOH agreed to sign an Acknowledgement of Debt (AoD) and has since signed an AoD with the SIU to the value of R41 676 493.92, which is to be paid back to the DoD.

However, it points out the signing or acceptance of the AoD by EOH does not mean EOH is exonerated from paying any further amounts due to the DoD that may be subsequently uncovered by the SIU’s ongoing investigation.

“With regard to the irregular contract, the SIU will institute civil proceedings in the Special Tribunal to cancel the contract and determine any further monies that the DoD may have lost and recover such monies lost to be paid back to the DoD,” the SIU says.

“The DoD officials involved and implicated in these irregularities have been identified and referrals of evidence will be made to the DoD to institute disciplinary action.”

The investigation has also uncovered evidence pointing to criminal action, says the SIU, adding this evidence, as required by the SIU Act, will be referred to the National Prosecuting Authority and Directorate for Priority Crimes Investigation for further attention.

“The signed AoD does not exonerate any person or official involved from being disciplined or held criminally liable for any criminal conduct that may be revealed by the ongoing investigation of the SIU.”

On 12 July 2019, the SIU was directed in terms of Proclamation R 41 of 2019, to investigate the procurement of or contracting for Microsoft software licences by the DoD and payments that were made in respect thereof, to EOH, which is a supplier to the department.

The allegations the SIU is investigating are that the DoD procured Microsoft software licences via an intermediary, being EOH, without any valid procurement process having been followed.

It was also alleged the DoD paid an inflated price to the intermediary for the licences, which could have been purchased for approximately one-third of the price from Microsoft directly.

Furthermore, the SIU is also investigating an allegation that EOH was contractually obligated to provide 20 035 Microsoft licences to the DoD but only provided 15 108.

Making progress

In the past two years, EOH and the state had been negotiating settlement of legacy contracts that were found to be problematic by an ENSafrica forensic investigation.

EOH had appointed ENSafrica to conduct a proactive, comprehensive investigation into the company’s contracts and identify any wrongdoing or criminal conduct in the acquisition, award or execution of contracts.

The probe found R1.2 billion worth of suspicious transactions at EOH, which mostly involved those within public sector contracts.

EOH, which recently announced it was inching closer to tearing down the flagged legacy contracts, told ITWeb last week that relations have been mended and the public sector remains core to its operations.


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