Former Tongaat Hulett executives, charged with fraud, allegedly misrepresented the company’s revenue by R2,4 billion in order to score bonuses.
This information was contained in a 76-page indictment where six former Hulett executives and an auditor are facing a combined 26 counts of fraud, racketeering, contravention of the Financial Markets Act, Companies Act and Prevention of Organised Crime Act (POCA)
Peter Staude, former chief executive officer; Murray Munro, former chief financial officer; Michael Deighton, former managing director; Rory Wilkinson, former finance section head; Kamasagrie Singh, former legal executive; Samantha Shukla, former finance executive and Gavin Kruger, former Deloitte auditor, all made a brief appearance at the Durban Specialised Commercial Crimes court this week.
They were initially arrested in February, however, the start of the trial had been postponed while the state secured a racketeering certificate from the National Director of Public Prosecutions, Shamila Batohi.
Racketeering is one of the most serious white collar crimes and carries a sentence of up to 10 years.
On Monday, the state submitted to court an indictment that includes racketeering charges, authorised by the NDPP.
During the period of March 2014 to October 2018, the accused are alleged to have falsified the company’s financial records. According to the indictment, the accused worked in common purpose to misrepresent the true state of the revenue derived from the sales of land by Tongaat Hulett Development (THD).
THD is a subsidiary of Tongaat Hulett Limited (THL) that deals mainly with property development in KZN through the sale of land to prospective buyers for development.
The accused are alleged to have backdated contracts to make it appear as if the sales had been concluded in the months that preceded the actual sale.
This was contrary to the company’s revenue recognition policy that states that sales could only be recognised when “a meaningful deposit had been paid or arrangements to pay had been made”, reads the indictment.
The purpose of their association was to manipulate the financial records of THL and THD through acts of fraud to ensure that the annual financial statements of THL and THD reflected a false picture of their financial health
“This conduct would lead directly and/or indirectly to their personal financial benefit and/or the financial benefit of individuals they associated with who are either known or unknown to the state.”
As a publicly traded company, Tongaat Hulett has a fiduciary responsibility to present accurate financial statements. The indictment states that the “premature” and “incorrect” revenue totalled R2,4 billion as of March 31, 2018. As a result, THL had to pay approximately R44,6 million to have its financial statements restated.
The company was also fined R7,5 million by the Johannesburg Stock Exchange and a further R20 million by the Financial Sector Conduct Authority (FSCA).
This is in addition to suffering negative publicity and being brought into disrepute with its shareholders, lenders, regulatory authorities and the broader public, the indictment reads.
Defence lawyers told the court that they will be requesting further information from the state. Magistrate Garth Davis said the matter to will be transferred to the Durban high court for trial.
Davis extended the bail of all the accused. The case was adjourned to September 15 for pre-trial hearings at the Durban high court. There are 37 people listed as state witnesses in the case.