A forensic investigation has been instituted against former executives at Delta Property Fund, including its founder CEO Sandile Nomvete and CFO Shaneel Maharaj.
This was effectively confirmed by the embattled JSE-listed group’s board in a Sens statement on Tuesday, despite the announcement not specifically mentioning the executives by name.
While Delta’s new board, chaired by businesswoman Phumzile Langeni, first announced the launch of an “investigation” in a cautionary announcement in September, it gave no indication of what the probe was about or who was being investigated.
In Tuesday’s update and renewed cautionary, it finally disclosed that the investigation is forensic in nature and involves former senior executives.
“The board wishes to inform shareholders that the forensic investigation work has now been concluded, and that a final issued report is expected shortly. The forensic investigation was conducted by Mazars Forensic Services,” the group said in its latest Sens statement.
“The forensic investigation is a second forensic investigation following an anonymous tip-off through the company’s whistleblowing programme in relation to alleged procurement irregularities and misappropriation of funds by senior executives,” Delta added.
It pointed out that the investigation initially covered the period between March 1, 2018 and April 30, 2020.
The group’s board further noted that on first becoming aware of the allegations, it had initiated a preliminary investigation, and subsequently a forensic investigation into the matter (“the first forensic investigation”). It subsequently sought further external legal advice.
Read: Delta’s founding CEO Sandile Nomvete resigns (Aug 25)
“Following receipt of the preliminary findings of the first forensic investigation … [i] the then Chief Executive Officer and Chief Financial Officer tendered their resignations with immediate effect; and [ii] the then Chief Operating Officer elected not to complete his notice period, as announced to the market through Sens on 24 August 2020,” Delta said.
“The board has subsequently engaged with its auditor, BDO South Africa Incorporated in respect of the preliminary forensic findings and the circumstances surrounding the resignation of the relevant directors,” it added.
Preliminary findings of the first forensic investigation have since been disclosed to the group’s auditor. BDO SA has subsequently issued a letter to the Independent Regulatory Board of Auditors in terms of Section 45 of the Auditing Professions Act, regarding “reportable irregularities”.
“The auditor is currently conducting additional audit procedures into the matters in light of the new information that came to their attention post sign off of their audit opinion. Shareholders should note that, subject to the further findings of the auditor, the auditor will consider the implications on the audit opinions issued,” Delta said.
The group added that its board has also reported the preliminary findings of the first forensic investigation to the relevant authorities for further investigation.
Asked for direct comment on the matter, Delta’s interim CEO Bongi Masinga said in an emailed statement to Moneyweb: “Considering the serious nature of the findings from the initial investigations, the board went to great lengths to provide shareholders with as much information as possible.”
She noted that investigations are ongoing and the full impact on the company is still being determined.
“Good corporate governance remains sacrosanct to the board and we will update investors on any material new findings as and when appropriate,” added Masinga.
Broader investigation in the works
Meanwhile, Delta’s new leadership wants the forensic probe to be extended to a three-and-a-half-year period, with another broader forensic investigation in the works.
“Following the final report and findings issued by Mazars on the first forensic investigation, the board further engaged Mazars to conduct a follow-up forensic investigation covering the period 1 March 2017 to 31 August 2020, with further emphasis on the double payment of commissions and improper procurement processes [“the second forensic investigation”],” it said in Tuesday’s renewed cautionary.
“Delta shareholders are advised that the full impact of the investigations and, in particular the outcome of the further procedures by the auditor and its impact on the company’s historical financial statements, are still being determined, and that these circumstances may have a material effect on the price of the company’s securities,” it added.
The board said that it will update shareholders once Mazars has issued its final report related to the second forensic investigation.
The group also reported another resignation on Tuesday, that of Mr MJN (JJ) Njeke – the lead independent non-executive director on its board, who is also chairman of the audit, risk, and compliance committee. Njeke’s resignation is effective from November 30.
The group’s former CEO and CFO have kept a low profile since their resignations.
Nomvete did not want to comment to Moneyweb on the matter on Tuesday as he is yet to see the forensic reports.