An investigation by law firm ENSafrica has unearthed “evidence of serious governance failings and wrongdoing at EOH”, the JSE-listed technology services group said on Tuesday.

The probe, requested by EOH Holdings CEO Stephen van Coller in February in the wake of allegations of irregularities involving the supply of Microsoft software to the South African department of defence, found serious problems in EOH’s public sector business run from the group’s head office as well as similar issues at subsidiary EOH Mthombo.

These include “unsubstantiated payments, tender irregularities and other unethical business dealings”.

A “limited number” of EOH head office employees were identified as being complicit. EOH said these people are now “ex-employees”.

The interim ENSafrica report has found that:

There were multiple points of failure in governance and oversight mechanisms, inadequate and ineffective controls and appropriate systems thus creating an enabling environment for wrongdoing.
There was opaque delegation of authority with significant responsibilities granted to a few executives.
EOH employees conspired with two preferred suppliers/partners to facilitate artificial/inflated software licence sales.
There were tender irregularities.
There was systemic use of connected middlemen recognised and used as “introducers” and sales agents.
Enterprise development subcontractors were used on projects and payments made to such suppliers, where it is questionable whether bona fide work was done by the said suppliers.
Inappropriate gifting, sponsorships and donations.

Payments of R1.2-billion to 78 supplier entities are being investigated to determine whether appropriate work was done for services rendered.

“It is worth noting that 84% of the payments were made to 20 entities. These payments were largely related to contracts entered into during 2014 and 2017. The majority of these contracts have been completed,” EOH said.

The company said employment has been terminated with individuals who have been directly implicated in the identified wrongdoing. EOH has also reported the concerns and the details of the parties implicated in the irregularities to the Hawks in terms of the Prevention and Combating of Corrupt Activities Act. Suspicious transactions arising from the investigation have been reported to the Financial Intelligence Centre.

“EOH is committed to ensuring that all perpetrators of wrongdoing are brought to justice. EOH has instructed ENS to initiate criminal charges and lodge civil claims to recover losses, as appropriate,” the group said. “The EOH board will act decisively in respect of any further wrongdoing that is identified during the ongoing investigation, in line with its zero tolerance on corruption policy.”