R6 million Schindehutte loan could be illegal

South Africa’s Telkom SA said on Monday it loaned its suspended chief financial officer R6 million ($590,000) to buy its shares, which could be illegal.

“Telkom’s management has recognised that the loan made to such an executive may not have been in compliance with the provisions of the companies act,” the company said in a statement.

The fixed-line operator suspended Jacques Schindehutte last month pending its disciplinary process over allegations against him. It has said that the suspension was related to personal misconduct, not insider trading.

Telkom, which also reported a sharp rise in first-half earnings on Monday, said that its loan to Schindehutte was interest-free.

Schindehutte bought Telkom shares worth nearly 6 million rand on Sept. 30, regulatory filings show.

The company did not say when it expected its disciplinary process against Schindehutte to be completed.

Telkom on Monday reported diluted headline earnings of 649.8 cents a share for the six months to Sept. 30, from a restated 24.9 cents a year earlier.

The higher earnings were largely because of an accounting gain related to its liability for health insurance for retired employees, it said.

Excluding that gain, headline earnings per share increased to 224.2 cents, it said. It did not give an equivalent number for diluted headline earnings per share.

Headline EPS, the main measure of profit in South Africa, excludes certain one-off items. ($1 = 10.1690 South African rand)

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R6 million Schindehutte loan could be illegal