Delta probe reveals R46m fraud

Another accounting scandal involving a JSE-listed firm is coming to light with Delta Property Fund’s new management revealing that a forensic investigation into former senior executives has found instances of unsubstantiated payments, procurement irregularities and other unethical business dealings totalling R46 million.

The group put out a JSE Sens updated cautionary on the matter after the market closed on Wednesday, which also noted that the probe and subsequent forensic report has resulted in the withdrawal of its 2020 annual financial statements (to the end February).

Delta has also further delayed the release of its interim results, ending 31 August, warning that its investment property valuation for the 2020 financial year could decrease by about R1.9 billion due to an assessment of the findings from the forensic report.

The group reiterated that it has reported the matter to the police and relevant authorities (likely the National Prosecuting Authority), which will be undertaking further investigation.

The completion of the group’s internal but independent forensic investigation follows the sudden resignation of Delta’s top three
executives in recent months, including the group’s founder and former CEO Sandile Nomvete.

Nomvete resigned together with the group’s former chief financial officer Shaneel Maharaj on 24 August, with immediate effect.

Former chief operations officer Otis Tshabalala, who resigned on 2 July, also opted not to complete his notice period at the time and also left with immediate effect.

“Delta shareholders are referred to the various announcements released by the company on Sens, the latest being on 27 November, relating to a forensic investigation by Mazars [the ‘Forensic Investigation’] into alleged procurement irregularities and the misappropriation of funds by senior executives, and Delta’s subsequent engagement with its auditor, BDO South Africa Incorporated in respect of the Forensic Investigation and the circumstances surrounding the resignations of its former executive management,” it noted in its latest Sens statement.

“Following the submission of a forensic report by Mazars and the recommendations by Mazars to the board of directors of Delta… the board has recently completed an internal assessment of the findings of the Forensic Investigation.

“While the forensic report is confidential and subject to legal privilege, and without waiving this legal privilege, the board confirms that the forensic investigation has found evidence of past practices involving governance failings and wrongdoing at the company, including unsubstantiated payments, procurement irregularities and other unethical business dealings,” it added.

Delta’s new board, led by Phumzile Langeni as chair, noted that the “past practices are of significant concern to the board and the group’s auditor.

“The required reporting has been made by the company to the South African Police Service and other relevant authorities for further investigation and the board is taking legal advice based on the forensic report as to any civil claims that may arise,” it added.

Some of the key issues identified in forensic report include:

• Payment of commission by the company totalling R43.9 million (for the three financial years ended February 2018, 2019, and 2020), resulting from invalid, lapsed or no broker mandates
• Fraud resulting from unethical dealings amounting to R2.1 million
• Non-disclosure of related or connected party transactions to the board.

This article first appeared on Moneyweb and was republished with permission.

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