Stephen Van Coller, EOH CEO, talks to Bruce Whitfield about the recent lawsuits brought against former EOH executives for their alleged failure to deal effectively with governance breaches.
28 June 2021, Johannesburg: EOH Holdings is suing its co-founder and former CEO, Asher Bohbot, and its former chief financial officer, John King, for R1.7-billion in damages each. It is also pursuing several other former executives.
TechCentral has learnt that EOH has filed civil claims against Bohbot and King in the high court in Johannesburg, seeking R1.66-billion from each of them for damages inflicted on the group due to their alleged failure to deal effectively with governance breaches and malfeasance that have decimated the IT services group’s share price and valuation, not to mention its reputation.
Specifically, EOH is going after Bohbot and King on charges of delinquency, breach of fiduciary duties and breach of contract.
Bohbot and King aren’t the only two former executives EOH is pursuing for damages. It’s also going after its controversial former public sector head Jehan Mackay – for R1.5-billion. EOH is suing Mackay for a breach of fiduciary duties as well as for allegedly making payments to third parties for no work done. Mackay’s name featured prominently in evidence presented by law firm ENSafrica at the Zondo commission of inquiry into state capture.
EOH has also issued a summons against Ebrahim Laher, who served as head of EOH International, for an amount R1.58-billion. He faces claims of negligence and mismanagement.
Civil suits against other individuals may follow as the process unfolds.
Neither Bohbot nor King responded to WhatsApp messages on Monday seeking comment. TechCentral was unable to reach Mackay or Laher.
At the same time, EOH is in the process of reporting former employees to professional industry bodies, including the Institute of Directors South Africa, the South African Institute of Chartered Accountants and the Companies and Intellectual Property Commission. This could affect their obligations to their current employers and result in their professional associations being terminated.
The civil suits are the next step flowing from the investigative work done by ENSafrica into corruption in the group’s public sector contracts, a spokesman said. The civil litigation has been brought with the mandate of EOH’s board of directors.
EOH instructed ENSafrica in 2019 to expand its investigation after TechCentral broke the news in February of that year that Microsoft had terminated its relationship with the local IT services group over a dodgy software licensing contract between EOH unit EOH Mthombo and the South African department of defence. The news sent EOH’s share price into a tailspin from which it still hasn’t recovered. A whistle-blower reported the matter to the US Securities and Exchange Commission, which has since opened an investigation (though it’s not clear the probe is still active). The ENSafrica probe has since uncovered evidence of widespread wrongdoing at the group.
EOH, said the spokesman, is pursuing its former top executives through civil proceedings to try to recover as much of the money as possible that was “siphoned out of the business and paid to enterprise development partners and third parties that performed no services whatsoever”. The legal action comes on top of likely criminal proceedings against implicated individuals, with EOH “collaborating” with the Special Investigating Unit to “take investigations further”.
Companies being pursued in the civil proceedings including Clipper Financial Services, AM to PM Strategic, Ultimax Consulting, Alteram Municipal Solutions and Mfundi Mobile Networks, all of which are alleged to have received payments from EOH for no work done. Other defendants listed in the litigation include Patrick Monyeki (who engaged regularly with Mackay on public sector business); Michael Lautre, Pavel Ivanov and Mongezi Duma (individuals who were in control of the companies listed above).
There is simply no way that what happened at EOH could have happened without these individuals being suspicious of what was going on.
According to EOH, all parties involved under what it calls “summons 1” are defending themselves and the matter is now in the pleadings stage of the process.
A second set of legal action, grouped under “summons 2”, involves the suits against Bohbot and King, and is “aimed at holding executives responsible for gross misconduct and gross negligence”, the spokesman said.
“It is an internally focused action against former executives of the business. The individuals we chose to focus on, because they were the most senior in the organisation at the time, are Asher Bohbot, John King and Jehan Mackay,” the spokesman said, adding that other names could still be added to the list.
‘Hold them liable’
The former executives, the EOH spokesman said, agreed when they joined the group to comply with all its policies and procedures, stakeholder funding and JSE regulations, among other things. Their alleged failure to put in the necessary controls to address these problems resulted in EOH incurring significant financial damages.
“There is simply no way that what happened at EOH could have happened without these individuals being suspicious of what was going on. They should have picked this up in board meetings, in the financials. We want to hold them liable for the negligence they showed while performing their duties,” the spokesman said.
EOH has launched two separate applications against Bohbot, who co-founded the group and who is now believed to be living in Israel. The first is to have him declared a delinquent director, meaning he won’t be able to serve as a director in South Africa until he has been rehabilitated.
The second claim against Bohbot is a damages claim for alleged breach of fiduciary responsibilities. “We talk of breach of contract (his service and performance contracts). He received performance bonuses, etc. We say he wasn’t entitled to those in the first place.”
EOH reached the R1.7-billion damages claim figures against both Bohbot and King by estimating the reputational loss sustained by the group flowing from the negative press around corruption at the group as well as Microsoft’s partner termination decision.
A summons was served on Bohbot about four weeks ago, while the summons on King is with the sheriff of the court.
The spokesman said EOH is being careful about who it chooses to pursue so that it doesn’t squander shareholder resources on extensive litigation. Rather, it’s opted to go after the most senior figures who led the organisation at the time the malfeasance occurred.
“With other individuals, who were lower down the food chain but who didn’t benefit in a big way, those we will report to the professional bodies. There is no value in spending millions to get summonses against them. If we report them to the regulator that regulates them … we will have discharged our responsibilities. We are trying to be consistent in our approach.”
The civil claims are being instituted by Werksmans Attorneys. EOH specifically chose the law firm because of its experience in dealing with similar matters.
This article was first published on TechCentral on 28 June 2021.