Neotel board reports possible bribery to police

Telecoms firm Neotel paid tens of millions of rands in “commissions” to the letterbox company Homix to clinch deals worth R2-billion plus from Transnet. Now Neotel’s board has reported the payments to the police as possible bribery. The unfolding scandal has possible implications for Vodacom’s proposed takeover of Neotel. Embroiled in the transactions is Transnet finance boss Anoj Singh, who has also been tasked to save Eskom’s, and a former “Gupta man”, Ashok Naryan. AmaBhungane’s Stefaans Bramber, Sam Sole, Tabelo Timse and Lionel Faull went in search of Homix and answers from Transnet, Neotel, Singh and Narayan.

[Also read: Neotel CEO on “special leave” due to alleged bribery scandal: report]

Twenty minutes north of Neotel’s capacious headquarters in Midrand lies downtown Wierda Park, an unkempt precinct of discount shops and squat office blocks.

On the first floor of one block, a plain blue door is in a corner abutting a toilet entrance. A notice on the door identifies the occupant as Homix (Pty) Ltd, but informs those in search of its services – identified only as “applying thought” – that it has moved on, “relocating to Midrand”.

The two firms could not be more unlike. Neotel is a national telecoms provider boasting R3.9-billion turn­over. Homix, amaBhungane discovered in recent weeks, is virtually unknowable, its directors untraceable, or unwilling to comment.

But Neotel’s top managers approved paying Homix tens of millions for no apparent work.

The other pieces of the puzzle you need to know:

Auditors’ alarm

Neotel’s auditors, Deloitte, first blew the whistle to Neotel’s board of directors in April.

Deloitte correspondence seen by amaBhungane questions the “commerciality” of R91-million in fees – more than R100-million including VAT – payable to Homix.

Neotel, Deloitte says, remitted R30-million to Homix in April last year and R36-million in February this year. Another R25-million was agreed but not yet paid. Each was in respect of contracts being secured with Transnet, a key Neotel customer.

Deloitte also reported the matter to the Independent Regulatory Board of Auditors (IRBA), as required by legislation regulating the auditing profession when an unlawful act or omission is suspected.

Neotel’s board was duty-bound to commission a law firm to investigate it. It also self-reported the payments to the police as required under the Prevention and Combating of Corrupt Activities Act when bribery is suspected.

IRBA chief executive Bernard Agulhas this week said Deloitte stood by their suspicion in a second report, after the Neotel board had provided feedback on its investigation, and believed that the irregularity was “continuing – that it hasn’t been addressed [by Neotel]”.

This may complicate Vodacom’s R7-billion planned takeover of Neotel, which hinges on Competition Tribunal hearings at the end of the year. Competitors Telkom, MTN and Cell C oppose the tie-up, fearing Vodacom will gain an unfair advantage in the mobile spectrum wars.

Vodacom’s British parent, Vodafone, is subject to foreign anti-bribery laws and may find it difficult to absorb a company with a serious, unresolved compliance problem.

Transnet this week denied any involvement in the Homix payments, and said the telecoms contract it awarded to Neotel “met all our stringent governance requirements” and was reviewed by its independent auditors. “There is therefore no basis for suggesting impropriety or breach of our governance procedures.”

Neotel said that, to the best of their knowledge, the investigation commissioned by the board made “no finding of corruption or illegal activities undertaken by any current employees of Neotel”.

“However, the investigation has identified some control gaps, and plans have been put in place to tighten the processes and controls to ensure such gaps do not re-occur. Compliance with the company’s policies, procedures, internal controls and corporate governance is presently the subject of investigation and possible action, if required, by the board.”

Trail to nowhere

The Deloitte correspondence suggests Neotel management approved the Homix payments despite not knowing “who this entity is”.

AmaBhungane’s attempts to learn more about Homix were rewarded with little success. Conclusion: the company appears to be a letterbox – a front for persons undeclared.

The trail starts at Homix’s registered address in Mayfair West, Johannesburg. Property records show that the boxy little home was owned by Yakub Bhikhu and his wife until 2012, the year Homix was registered. A neighbour said Bhikhu moved out perhaps a year ago.

Company records list Bhikhu as Homix’s only active director. But he appears not to have made any initial success of it. Court records show Standard Bank obtained a R108 000 debt judgment against him in September 2013, a year after the company was formed.

A second director, Taufique Hasware, is listed as having resigned, effective in September last year. Many calls to numbers associated with him went unanswered. At one, a resident said he had rented a room but “shifted from here – he said he would go overseas”.

Another belonged to a carpet dealer who said Hasware had left his employ perhaps six months ago, and would we like to buy a carpet?

A third person listed as a former director of Homix claimed not to know the company. He said he suspected he was added as a director when he needed a loan, despite being blacklisted. He went to a Wierda Park office where he was told he might be helped “if I register a company”. He filled in forms but got no loan.

Which brings us back to the blue door on the first floor in Wierda Park. Letting records show Hasware and Bhikhu signed Homix’s lease last September. A year’s rent – about R45 000 – was paid upfront. The company’s business was given as “administration”.

Not much appears to have happened behind that door, though. Neighbouring office workers said they knew nothing about the company. One said after Homix moved in, the door generally remained shut. An “Indian gentleman” came in perhaps twice a week after hours, “two months at a stretch”. The “relocating to Midrand” sign went up months ago. “Strange,” she said.

After trying for the better part of a week, amaBhungane finally reached a man who identified himself as Bhikhu on a cellphone number provided on the “relocating” sign. On being told that we were looking at possible corruption involving Homix, he said: “We’re reserving our right not to issue any comment at the moment.”

He agreed to accept emailed questions, but did not respond.

Transnet billions

The prize that caused all the trouble is a master service agreement to provide Transnet with a suite of telecom services worth hundreds of millions a year. Neotel got the contract for an initial five years when it bought Transnet’s in-house provider, Transtel, in 2008.

At the end of 2013, Transnet put the master agreement out to tender. It was provisionally awarded to a competitor, T-Systems, but the latter withdrew by agreement some months later, an insider said, when it became apparent its solutions were inappropriate.

In April 2014, during this hiatus, Neotel paid its first R30-million to Homix. The Deloitte correspondence identifies the payment as relating to routers and other equipment that Neotel sold to Transnet.

Transnet is understood to have paid Neotel about R300-million for the equipment. Neotel’s payment to Homix equals a 10% “commission”.

In August 2014, Transnet notified Neotel that it was the new preferred bidder for the master agreement and that negotiations should be concluded before Christmas.

By early December, individuals close to the negotiations have claimed, Transnet became intransigent without clear reason. To protect sources, they cannot be identified.

A week later, they said, Neotel’s chief executive, Sunil Joshi, met Transnet’s chief financial officer, Anoj Singh, to whom the state-owned entity’s procurement structures reported. After the meeting, Joshi allegedly asked his staff to approach Homix again.

A “success fee” was agreed with Homix – 2% of the R1.8-billion value of the master agreement with Transnet, equating to R36-million, plus R25-million in respect of a related agreement to sell assets to Transnet. Within hours, Transnet was ready to resume negotiations.

The next day, a Saturday, representatives from both sides met and resolved remaining issues – without any overt assistance from Homix. The master agreement was signed before Christmas.

Source: Mail & Guardian. Republished with permission.

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Neotel board reports possible bribery to police