The Johannesburg Stock Exchange (JSE) has moved to censure listed technology services company group, EOH Holdings, for false and misleading reporting over several years, it said in a statement on Wednesday (29 July).
The exchange also imposed a fine on EOH, amounting to R7.5 million, with a portion of that to be suspended.
The errors, the JSE pointed out, were material and extended over a number of years.
“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.
“Further, EOH incurred VAT and tax liabilities on suspicious payments regarding fraudulent public sector contracts,” the JSE said.
EOH has since appointed chief executive Stephen van Coller, who has vowed to root out corruption within the group. EOH has conducted a number of internal investigations relating to dodgy contracts.
The JSE noted in its findings that EOH’s previously published financial information for the periods 2017 to 2018 did not comply with IFRS “and was incorrect, false and misleading in material aspects”. It said that his incorrect information was disseminated to shareholders, the JSE and the investing public.
“EOH assisted the JSE in its investigation and admitted its failure to comply with these provisions of the Listings Requirements,” it said.
The JSE said it has decided to impose a public censure and the maximum fine of R7.5 million on EOH as a result of its failure to comply with important provisions of the listings requirements.
The exchange said that it has considered all the relevant facts and information at its disposal in deciding on an appropriate censure and financial penalty. It said that as a result of the current economic climate, and EOH’s internal review that uncovered the irregular accounting and other practices, it has decided to suspend R2.5 million of the fine for a period of five years.
EOH said in a statement on Wednesday that while disappointed, it accepts the punishment imposed by the exchange.
Megan Pydigadu EOH Group CFO said: ”The current management team and board of directors have spent a significant amount of time rebuilding EOH credibility through the establishment of a robust governance framework, driving transparency in the business and ensuring the accuracy and reliability of the financial information disclosed to the market, whilst continuing to resolve the remaining inherited legacy issues.
“The EOH management team remains committed to transparency and the timeous dissemination of relevant and accurate information to all stakeholders.”