A US court has dismissed a class action against Net1 UEPS Technologies, which manages South Africa’s social grant payment system.
This is according to a market update from Net1, which is listed on the Johannesburg Stock Exchange and the US-based Nasdaq.
On 24 December 2013, plaintiff Daniel Elstein’s attorneys filed a class action in the southern district court of New York against Net1, its chairman and CEO Serge Belamant, and chief financial officer Herman Kotze.
Elstein’s legal representatives Pomerantz LLP — who also represented other interested parties in the class action — said that during a period between August 2009 and November 2013, the “defendants (Net1, Belamant and Kotze) made materially false and misleading statements regarding the company’s business, operational and compliance policies”.
At the time, Elstein’s attorneys said Net1 failed to disclose that the company’s practices to secure contracts in South Africa were allegedly in violation of the US Foreign Corrupt Practices Act, and that its financial statements were “materially false and misleading at all relevant times”.
In December 2012, Net1 disclosed that the US department of justice, criminal division and the division of enforcement of the Securities and Exchange Commission (SEC) were investigating the company amid allegations that Net1 bribed South African government officials to win the South African Social Security Agency (Sassa) contract.
But Net1 on Friday said the class action by Elstein has been dismissed by the court, at least for the time being.
“We are pleased with the court’s decision and believe that its opinion confirms our assertion that this case was without any merit,” said Belamant in a statement.
Net1 said the court’s order allowed the plaintiff to file a further amended complaint on or before 16 October 2015, “failing which the action may be dismissed with prejudice”.
This development also follows the SEC having said in June this year that it had concluded its investigation against Net1 and that it did “not intend to recommend an enforcement action” against the company.
Net1 holds a non-exclusive worldwide licence to the Universal Electronic Payment System (UEPS), which is used by Sassa in a R10bn tender to disperse social grants.
But the company has come under the spotlight in recent years amid allegations that it bribed South African government officials to win the Sassa contract.
In November 2013, South Africa’s Constitutional Court ordered that Sassa’s awarding of the tender to Net1 subsidiary Cash Paymaster Services (CPS) was constitutionally invalid.
Furthermore, in April 2014 the constitutional court ordered that Sassa reissue the country’s R10bn grants tender, which was awarded to CPS in 2012.
The re-awarding of this tender is now expected to happen in October. Net1 also announced earlier this year that it has withdrawn from reapplying for the tender. — Fin24
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