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EOH fraud disclosure includes payment of bribes to secure state tenders

The company can now get back to some sort of normality and focus on growth, says CEO.

RYK VAN NIEKERK: The technology group EOH announced that a forensic investigation found that eight of its employees were involved in irregular and corrupt transactions valued at around R1.2 billion. These include the payment of bribes to secure state tenders. Chief executive Stephen van Coller appointed ENSafrica in February this year to investigate the allegations of corruption after Microsoft earlier terminated its relationship with the company.

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On the line is Stephen van Coller, the chief executive of EOH. Stephen, welcome to the show. What is the nature of the corruption and financial irregularities ENSafrica found?

STEPHEN VAN COLLER: Thanks very much, Ryk. There are three categories of those, one is where we’ve had our own employees invoicing into a project and effectively paying themselves money. In the second [ category ] they’ve invoiced into a project and paid a customer party, or a middleman as we call it, money. And then others were really around over-invoicing by suppliers and somebody signed that off, and money has gone out. But we develop more of this in detail in terms of all the things sitting in the report that’s on our website.

RYK VAN NIEKERK: Are any of the irregularities related to the contract you received from the Department of Defence, where Microsoft software was installed?

STEPHEN VAN COLLER: We investigated that, as I said before, at half-year, and issued a Section 34 report on that. That’s gone to the Hawks, and they need to investigate that.

RYK VAN NIEKERK: How senior are the eight individuals who were involved?

STEPHEN VAN COLLER: Two of them were directors of EOH Mthombo, and the other six worked for them.

RYK VAN NIEKERK: And have any criminal charges been laid against them?

STEPHEN VAN COLLER: That’s the next phase of this whole investigation; we’ve now put our arms around it. We are showing now we’ve got 50 payments of R1.2 billion. There is a lot of work behind that, where you go through emails and contracts and payments, and then you sort them out. There are things like a single-director payment – who authorised it, is it irregular rather than time and material that gets paid every month, and so forth. And we came up with this group of R1.2 billion [worth of payments]. That was paid by eight people to 20 suppliers. That’s 84% of the payments, so you’ve got a good idea of what we have to look at.

Now, what ENS is doing is it’s saying okay, we’ve done the investigation, we think we’ve got a handle on what went wrong. Now you have to put it into its categories and make sure that the payments are or aren’t linked to a contract, or whether it was just accounting that put it in against a contract – and then work through those whole processes so we can start having a look at which are the criminal charges against which people, which are the civil claims, so that we can get money back from where they’ve taken money from EOH.

RYK VAN NIEKERK: You were appointed after these transgressions occurred. But, if you look at corporate South Africa, there is a lot of emphasis on integrity. And what we’ve seen from where there were allegations of irregularities relating to other companies, KPMG being one of them, some companies actually cut ties with that company. Have you been in discussions with some of your clients regarding the future relationship, or has there been any indication from some of your clients that they will discontinue the relationship?

STEPHEN VAN COLLER: Many things happen, especially Microsoft coming out and doing it clearly – that was the court action. And basically I’ve spent the last five months with ENS, going from customer to customer, presenting into their risk committees about what we found, why it went wrong, what we are doing about it to fix it going forward, and then are we dealing with the people who did no good.

And that really is the base if you have a look at the process for blacklisting in National Treasury. If you go to the Department of Justice website in the US, they’ll give you those four questions, and, if you can answer those four questions positively, generally risk committees are happy that you are moving forward.

I’ve been amazed at the response I’ve had from corporate South Africa in terms of how quickly we’ve moved, how fast and open and transparently we’ve moved. And so I’ve had a lot of positive feedback. And I think if we’d done nothing, if we had fallen on our hands and not remedied it, not gone into detail, not been transparent, I think we would have had some issues, like those you have talked about.

But I think we are doing the right thing, and I think now we are through most of it – and even today I’ve had some really good, positive feedback from most of our customers.

RYK VAN NIEKERK: What is the staff morale like?

STEPHEN VAN COLLER: That’s a very interesting question. Clearly they’ve been beaten around, probably most of last year and through half of this year; and the Microsoft allegations that came out I think were very discouraging. But, as we started remedying, as our clients had cleared us and taken us off the blacklist, people have started believing that we are back in the business.

And I think today there is a real monkey off our back. We’ve now come out, we know what it is, we know it’s containable, we know we can deal with it, and we are getting positive responses. So, I’ve seen most of the staff are really encouraged that we’ve now got to the end of it and can move forward, and we can take what is a very good business back into some kind of normality and start growing it again.

RYK VAN NIEKERK: Thank you, Stephen, for your time.

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