Tongaat Hulett mulls civil claims against top executives

Tongaat Hulett mulls civil claims against top executives
DURBAN – Tongaat Hulett is considering launching civil claims against the senior executives fingered in the PricewaterhouseCoopers (PwC) report for their role in overstating assets and profits by using “undesirable accounting practices”.

The seven-page report named 10 executives for wrongdoing, including former chief executive Peter Staude. Other executives fingered in the PwC report are John Chibwe, Michael Deighton, Steve Frampton, Shelton Nhari, Sydney Mtsambiwa, Les Munro, Murray Munro, Raphael Pfunye and Sean Slabbert.

The agriculture and agri-processing company appointed PwC in March to conduct forensic investigation after it said its consolidated financial statements for the year to the end of March 2018 would have to be restated, with an estimated reduction in the amount reflected in the 2018 financial statements as the company’s equity as at April 1, 2018, anticipated to be between R3.5 billion and R4.5bn.

However, Tongaat said the PwC report would not be made public, as it was subject to legal privilege and other confidentiality restrictions.

Gavin Hudson, who was appointed as chief executive in February, initiated the investigation by PwC. Hudson was given a mandate to conduct an immediate and comprehensive strategic and financial review with the objective of stabilising the business, addressing the debt levels and setting the path towards acceptable returns for shareholders. 

“The strategic and financial review, as well as an initial investigation of allegations that came through the whistle-blowing line, revealed certain business, accounting and other practices which were of concern to the board and required further examination,” the group said.

The board said it was considering the institution of civil actions against the senior executives, which would also involve actions to recover bonuses and benefits paid.

The group would also make applications to court for orders declaring relevant people to be delinquent directors or otherwise incapable of occupying fiduciary positions.

“From a criminal law perspective, the board is engaging with the SAPS and the National Prosecuting Authority,” the group said.

In June, Tongaat informed the JSE that it was suspending its listing on the bourse after its share price declined by more than 75percent in one year.

Robert Lewenson, Old Mutual Investment Group’s head of ESG engagement, said he was not surprised by the irregularities that were found in Tongaat.

“However, we never anticipated the extent of these irregularities found in the report. We used to hold shares on behalf of the client in Tongaat and we decided to sell off before the company announced irregularities early in the year. 

"Part of our problem with Tongaat centred around the issues of governance and remuneration of the executives, particularly that of former chief executive Peter Staude,” Lewenson said.

Tongaat shares closed 5.3 percent lower at R13.21 on the JSE on Friday.