Photo: FW Archive
A culture of deference and a lack of challenging authority at Tongaat Hulett Limited (THL) resulted in employees following instructions without questioning the basis for accounting practices, according to an investigation by auditing firm PricewaterhouseCoopers (PwC).
It is alleged that six former senior THL executives and an auditor from Deloitte, among others, initiated or participated in “objectionable accounting practices”.
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The former executives, namely Peter Staude, Murray Munro, Michael Deighton, Rory Wilkinson, Kamlasagrie Singh and Samantha Shukla, appeared in the Durban Commercial Crimes Court on charges of fraud on Thursday, 10 February.
A seventh individual, Gavin Kruger, who was the Deloitte audit partner on the THL account at the time, also appeared in court.
The accused were released on bail and the case postponed to 11 April.
The PwC investigation showed major historical shortfalls in governance practices, delegation of authority, financial discipline, record-keeping, and financial reporting between March 2015 and September 2018.
This resulted in profits in the respective years being overstated, as well as certain assets in THL’s financial statements being overstated.
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PwC also exposed a number of governance failures pursuant to which internal policies, guidelines and frameworks were not followed. This created an environment in which senior executives could initiate or participate in financial misstatements.
According to a THL statement, the charges stemmed from alleged fraudulent activity, which saw the suspects co-operate to backdate land sale agreements. These backdated agreements had a significant impact on the company’s financial results.
THL said in the statement that civil proceedings brought by the company against four former executives during 2020 were also underway. THL was claiming some R450 million from these former executives.
Tongaat Hulett Developments, a subsidiary of the group, had also instituted a civil case in the Pietermaritzburg High Court against former managing director, Michael Deighton, and three others in February 2020.
Dr Kobus Laubscher, agricultural economist, told Farmer’s Weekly that sound and ethical management were non-negotiable in business.
“Business leaders who do not operate in a transparent, honest and morally responsible manner hurt and harm a wide array of affected parties, including shareholders, employees and the state,” he said.
