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How corruption happens

EOH CEO says it begins with poor oversight at the top.
EOH staff who have not done their anti-bribery and corruption attestations will not get bonuses – Stephen van Coller. Image: Moneyweb

EOH CEO Stephen van Coller’s testimony at the Zondo Commission of Inquiry into State Capture inadvertently turned into a lecture on how corruption between the state and the public sector happens.

Over the past few years, the technology group has been implicated in various bribery scandals, leading to Microsoft cancelling its software licencing agreement with EOH, after it emerged that a deal with the Department of Defence did not follow the correct channels and was corrupt.

Since the corruption came to light, Van Coller has instituted several changes within the organisation to not only root it out but also to change the organisation.

Poor governance 

Van Coller in his testimony said EOH’s governance failure started with its board. The failure of the board was not only in its oversight role but also in how it was constituted.

He said the King IV codes of governance, for instance, say there should be a cooling-off period before an executive joining the board can be considered for the role of board chair, to ensure they can act as an independent director.

This, however, did not happen with Asher Bohbot, the founder and former CEO who became chair soon after leaving the CEO job. Bohbot was one of four ‘non-independent’ directors on the board as he, along with the other three, had served on it for over 10 years.

Read:

Van Coller saw how this attitude to governance affected the organisation. For example, no minutes of executive committee meetings – the next oversight level down from the board – were kept. There was also no centralised legal accounting entity. And the group had 232 separate bank accounts.

These issues were compounded by there being no delegation of authority. Without it, they found instances people of being able to sign up a supplier and be directly responsible for paying that supplier – with little to no oversight.

Under the new structure, Van Coller said even as the CEO, he does not have the power to make a payment, as that now falls under the chief finance director or the chief financial officer.

The lack of oversight can also be seen in there being no share dealing policy in place that required directors to get approval for selling shares.

Such a policy would have prevented a margin call triggering a 35% drop in the share price to R45 in December 2017.

EOH share price still suffering

“If the board and the executive committee are not walking the walk, people will follow them and they will do whatever they are doing and so it is a very important thing. And we started with that coming from the top, which was the leadership commitment, anti-bribery and corruption.”

Read: EOH subsidiary accused of sabotage and racketeering

When there are no proper oversight structures in place, it opens the way for some in the organisation to take advantage of the situation.

Schemes, ploys and go-betweens

This led to schemes where “rogue employees” were selling 20 000 Microsoft software licences but only delivering 15 000, and charging above the normal rate.

Another ploy is to rope in subcontractors under the guise of enterprise development in government tenders. “But in nearly all these tenders these companies never featured in the tender.”

Van Coller said there were several issues around these subcontractors that hinted at the dubious nature of their involvement.

Project managers could not remember them, they were paid for no work or questionable work, no timesheets were handed in, and they were not part of the original tender bid. They were also paid in round numbers and were not hired for a specific job.

There were also instances of EOH winning tenders regardless of what it put in the bidding documents. “The costings did not really make a difference.”

This tender fraud resulted in EOH writing off R900 million in “problematic contracts” because it under-tendered and could not deliver on the contracts.

Van Coller said there was also misuse of regulations that allowed state entities to buy from a single source.

The curious role of go-betweens known as ‘introducers’, who were paid a fee for setting up meetings, was also an issue.

One of the more cunning schemes was issuing loans to subcontractors and then writing the loan off.

This way it would not be questioned by project managers as it would not go through a contract account.

So far 85 EOH and 12 government employees have been investigated for corruption.

Culture eats bonuses 

To turn around the organisation, Van Coller has not only implemented more stringent controls, he is also trying to change the culture of EOH by making people attend anti-bribery and corruption attestations every year.

Not taking governance seriously can cost employees in their pockets.

“If you have not done your anti-bribery and corruption attestations, you have not done your compliance training and/or you have not done your conflict of interest disclosure, you are gonged out for any bonus for that year,” he says.

“It does not matter how well you performed, and that has been a very good start for us.”

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What? We need a new book on this now? We know how corruption happens and the reasons for it happening and how ‘moral paragons’ are turned into ‘money bag mules’. We don’t need another book, we need the evidence to be submitted to the police and for responsible parties to go into the slammer. And for the shareholders to be made whole, and not left with a hole in their pockets and bank accounts. We don’t need company leaders coming out there and going on the lecture circuit about ‘how corruption happens’. Just the evidence and charge sheet, trial and sentencing will do. Thank you very much. Mon Ami.

Agreed. When are we going to see some action? Up until now it has been all talk.

There is a book? The Zondo commission testimony is a lecture circuit? I’m sure the evidence has been submitted to whomever should have it (as per other articles in the past), now go write a letter to government telling the prosecuting authorities to get on with it.

Perfectly put BageSuge!

Try this stuff..
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29 NOVEMBER 2020 @ 6:04 PM
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29 NOVEMBER 2020 @ 6:03 PM
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29 NOVEMBER 2020 @ 6:01 PM
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29 NOVEMBER 2020 @ 5:58 PM
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29 NOVEMBER 2020 @ 5:55 PM
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29 NOVEMBER 2020 @ 5:48 PM
The bias toward the minority view is most certainly the preference of this website..

COMMENT HELD FOR MODERATION
29 NOVEMBER 2020 @ 7:55 AM
Moneyweb is evidently employing the new advanced style of censorship? Comments that are too difficult for the admin bot to categorize are simply held indefinitely?
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28 NOVEMBER 2020 @ 5:36 PM
Agree about the biggest issue being further pandemic reactions. Dems want lockdowns until vaccinations completed = success for economic suicide and vaccine merchants. But now there is a truth leak that must surely sprag the vaccine merchants and scuttle the prospective bargain business acquisition targets. A high level analysis of the US Covid-19 deaths reveals errors that reduce these numbers into non-existence. https://www.aier.org/article/new-study-highlights-serious-accounting-error-regarding-covid-deaths/
All hands on deck to fix the leak and PR it into river? You bet.
The acceptance of this analysis will have global repercussions.
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How corruption happens in SA..VOTE for the ANC.

I’d wager on the fact that EOH management knew exactly that there was corruption going their firm. They simply turned a blind eye to it, rationalizing to themselves that its just the way business gets done in Africa.

That is 100% correct. And the Dept of Water Affairs investigation is going to dwarf the Microsoft Licenses when and IF it ever gets finalized. And the prime culprit – SAP. Watch this space – there time is coming as they were also complicit in a huge number of dodgy deals.
Hell SAP even bribed the Panamanian President for a contract and they were caught out. The SEC in USA fined them $2m.

And with SAP, it’s not just the SOE’s that have been caught out, but banks, like Standard bank.
But this has just been swept under the carpet.

In today’s global economy you have to be either (1) innovative and come up with new inventions like i-Pads or electric cars or (2) you have to be more productive like the Chinese and produce more goods at lower prices. However, there is 3rd and much more easier way and that is bribery/corruption. For this you don’t need skills and you don’t need to be competitive nor innovative. You just need to have LEGISLATION and EVERYBODY must be in on the deal. Why make all the effort to go and pick the bananas off the tree when you can sit in the shade and wait for them to fall on the ground?? And that is why Africa will never get out of the mess it is in. Because people don’t want to be productive or innovative – they just want to be lazy.

Corruption happens when there are too few rules and no transparency. It thrives where petty officials are allowed by loopholes in the rules to award bids based on pigmentation and not to the lowest bidder who meets the technical requirements. It happens when the contents of tenders are kept secret.

”Feather-footed through the plashy fen passes the question vole”

Waugh Evelyn (1903-1966)

My ex-Boss at my old shop – I was very impressed by his presentation before the Zondo Commission yesterday He spoke and explained very clearly, direct sensically. I totally agree about crime starting right at the top – Kebblegate, the front runner of all crime that followed in sunny SA, like Guptagate – started right at the top!

That is why I think, people like Zuma and his cronies absolutely fear the Commission – their plot and modus operandi will be exposed by performances like this!

That would be Evelyn Waugh, but a great quote nonetheless.

Absolutely, thanks – I corrected a line above and unfortunately I missed that – screwed it up!

Fish rot from the head ..

How does corruption happen? By implementing BBBEE.

It was no secret amongst suppliers in the government space that EOH had an “inside track”. There were cozy meetings with government officials that nobody else could get meetings with, weekend golfing outings and junket trips and then “surprise” EOH would win the tender. This sort of thing does occur in the private sector but there are more checks and balances in place to curb it. EOH was nowhere near as effective in being able to win business in the pvt sector. In the government sector controls are poor and when combined with influence and patronage they are non-existent. I do hope the current management team follows through on providing evidence that will see those crook ex-directors behind bars.

This outpouring by Van Coller is way too late and means nothing, it merely demonstrates that all of them were hell bent on getting rich quick. Now they implement a directive that if you haven’t signed a piece of paper that you have not committed a crime you won’t get a bonus. I sincerely hope that this company is ethical enough to institute legal proceedings against all parties involved in the corruption and that the culpable parties pay back the organization all excessive salaries and bonuses and end up in jail

I am aware he is the new CEO and is trying to get things right and that employees do sometimes get up to corrupt activities especially when the culture at the top is rotten.

However every article written on EOH, this narrative seems to imply.

Good hardworking executives but NOT aware and just not following governance properly and allowing bad corrupt employees to go crazy.

Puleeez, these guys at the top must have known what was going on and even possibly involved and even instructing these corrupt activities otherwise this would not have happened. We want some truth and transparency here and not a book and/or lecture on how it happens such as executive so and so did this and we are laying charges against him.

hells bells…. as soon as a corporate… or ANY business telling the story of a figure of 232 x BANK ACCOUNTS??? then you know… there’s plenty of bank dongles & passphrase around… every Dick just put into the LOGON screen; 123

How is delivering 15k licenses but charging for 20k licenses at marked up prices corruption? Or inflating time sheets? I suspect that these are not even outright fraud, but merely businesses being a bit generous in the rounding. It’s up to the client then to fight back and say, no, the service wasn’t delivered per the invoice.

The client is asleep if they’re signing off on non-delivery. After that stunt, you’d use a different contractor to do the work that doesn’t try to pull a fast one. I can’t blame EOH here really. Well, except for that part where they paid bribes in order to get paid for the nondelivery.

Even the payment of introducers is a grey area actually. If the introducers were on EOH payroll and got commission for sales then it likely would be fine. If they are employed by your customer to ensure EOH wins then it’s a problem. And if they’re middlemen, then they’re enabled by the business environment that Government has created. Take your pick..

When the ANC gets involved.

Who cares about the facts and evidence. No one gets reprimanded or jailed.

Even SARS is sleeping.
Will anyone in SARS follow this one and check if it was declared in the returns? NO

“And the group had 232 separate bank accounts.”If that isn’t a red flag, then I don’t know what is.

And when will the 85 EOH and 12 government employees that have been investigated for corruption actually appear in court and get convicted?

Errr …. never?

You win 1st prize in the 1st of 630 rounds in the challenge to Zooma the Zondo dance competition!
Your prize will be awarded only if they both survive to the finish line (not going to happen) and provided that South Africa has not become an enslave of the WEF administered by the IMF branch of the NWO (highly probable).

What is the definition of tiresome and meaningless?
While the Zondo plays the cats still play.

End of comments.

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