Tongaat Hulett is seeking around R450 million in total claims as part of its civil court action against several implicated former executives as the once formidable JSE-listed sugar producer and land developer still tries to recover from the accounting scandal that brought the group to its knees three years ago.
The group confirmed the civil claims figure in a statement on Tuesday, as it awaits news from the National Prosecuting Authority (NPA) on whether the NPA will criminally charge and prosecute the former executives for the alleged accounting irregularities.
Following several accounting anomalies being revealed in a forensic investigation in 2019 by PwC (appointed by Tongaat’s new executives), Tongaat Hulett had to restate its results for its 2018 and 2019 financial years.
This saw the group being fined by both the JSE and Financial Sector Conduct Authority (FSCA) in July and August 2020. The JSE fine of R7.5 million (R2.5 million of which was suspended) and FSCA fine of R20 million (reduced from R118 million) were related to Tongaat Hulett breaching its listing requirements and contravening the Financial Markets Act.
Former executives cited in the PwC forensic report included erstwhile CEO Peter Staude, former CFO Murray Munro, former finance executive and director of Tongaat Hulett Sugar South Africa Sean Slabbert; and, former Tongaat Hulett Developments managing director Michael Deighton, amongst others.
“Tongaat Hulett is committed to its undertaking to act on the findings of the PwC forensic investigations,” it said in the statement on Tuesday.
It reiterated that the investigation had “identified that certain senior executives initiated or participated in undesirable accounting practices which resulted in the company’s profits being overstated over a number of years. This led to the loss of value to our shareholders and many of our other stakeholders,”
Tongaat Hulett pointed out that in September 2020 “the company instituted civil proceedings in the Pietermaritzburg High Court” against Staude, Munro and Slabbert.
“The civil action is based on the findings of the PwC forensic investigation, namely unjustified enrichment, damages consequent upon the breach of their fiduciary duties and misrepresentation,” its statement noted.
“Tongaat Hulett is also seeking an order declaring them as delinquent directors,” it added.
“In separate proceedings, Tongaat Hulett Developments, a subsidiary of the group, instituted a civil case in the Pietermaritzburg High Court in February 2020 against the former Managing Director, Michael Deighton,” it said.
“In total, Tongaat is claiming some R450 million against these past directors and executives. It is anticipated that full trials will be scheduled for early 2023,” the group noted.
Tongaat Hulett Company Secretary, Johann van Rooyen said, “While the process has been significantly delayed through the filing of a number of interlocutory objections on highly technical arguments by the defendants, Tongaat Hulett is determined to pursue this matter and do everything within its power to secure a fair outcome for [its] shareholders.”
He confirmed that Tongaat Hulett is withholding Staude and Deighton’s pensions until the finalisation of the litigation initiated against them.
“Munro and Slabbert had unfortunately already left the business and withdrawn their pensions by the time the action was instituted.”
“The implementation of sound corporate governance principles is at the very heart of the progress made in our business over the past two years. Our board, management structures, internal audit, risk and compliance processes, have been considerably bolstered,” said Van Rooyen.
Tongaat Hulett reiterated that criminal cases against former executives and senior managers have been opened, both in South Africa and in Zimbabwe.
“We continue to work with the relevant authorities. In South Africa, the matter is still with the NPA and we understand that a decision on the next steps is imminent,” the group’s statement noted.
Staude did not respond to calls and messages from Moneyweb for comment.
In a brief emailed response to Moneyweb, Deighton said: “I prefer not to litigate through the media.”
He added: “I have defended the matter and argued an exception against the plaintiff’s particulars of claim on the basis that their claims, for various reasons, do not sustain a cause of action against me. Judgment remains reserved.”
Moneyweb could not get into contact with Munro and Slabbert, however, this story will be update once they have been reached.
Nevertheless, Munro denied the claims according to a Bloomberg report.
“Munro denies any wrongdoing in the matter, as alleged or otherwise, and has resolved to defend the claim through to its conclusion,” the former CFO’s lawyer said in an emailed statement to Bloomberg.