JSE fines EOH the maximum for accounting errors

Technology group EOH has received a maximum R7.5m fine from the JSE for releasing results that had errors in them, including those related to allegedly fraudulent public sector contracts.

EOH’s statements for 2017 and 2018 had understated losses, the JSE said, though R2.5m of the fine has been conditionally suspended for five years, partly due to EOH’s full co-operation during the investigation.

“A lack of governance and oversight mechanisms, inadequate and ineffective controls and systems in prior financial periods which arose during the tenure of previous executive management resulted in irregularities and fraudulent contracts, premature revenue recognition, unsubstantiated tender payments, and lack of impairment of financial assets, despite impairment indicators that were present,” the JSE said.

“Further, EOH incurred VAT and tax liabilities on suspicious payments regarding fraudulent public sector contracts,” the statement read.

EOH said in 2019 a forensic probe by ENSafrica had found evidence “of a number of governance failings and wrongdoings”.

These included unsubstantiated payments, tender irregularities and “other unethical business practices”, including bribery and theft, mainly within the public-sector business operated by EOH Mthombo.

EOH said on Wednesday it accepted the JSE’s findings.

“EOH has worked tirelessly to address the inherited legacy issues and ensure that EOH is once again a respected name in the SA ICT sector,” the group said in a statement.

“EOH remains committed to pursuing legal action against the main perpetrators identified during the ENSafrica forensic investigation and to try to recover losses caused by the main perpetrators of wrongdoing,” the statement read.