Net1 set for legal action against AllPay

Net1 UEPS Technologies, a provider of alternative payment systems, says it has commenced a lawsuit in the South Gauteng High Court against AllPay Consolidated
Investment Holdings.

Net1 alleges that AllPay wrongfully and unlawfully, and with the intention of injuring it’s
reputation, infringed Net1 and its subsidiaries’ goodwill and reduced it’s share price.

Net1 is currently being investigated by the US Department of Justice (DOJ) Criminal Division and the SEC, regarding possible acts of corruption in South Africa.

Shares in Net1 UEPS Technologies fell R37.10 – more than 55% – in early trade on the JSE on Wednesday (5 December), after the group said it was being investigated.

The company, through its subsidiary CashPaymaster Services, manages and distributes social grants in South Africa, having been awarded a R10 million contract by the SA Social Security Agency (Sassa).

In August, the North Gauteng High Court ruled that the tender process for the Sassa contract was improper, after rival bidder and Absa bank subsidiary, AllPay, voiced its concerns about the process.

The group is seeking damages of R478 million (approximately US$55 million based on the ZAR/US dollar exchange rate on December 11, 2012), plus interest and costs.

Net1 says that AllPay competed unlawfully with Net1, by doing the following:

  • Directly or indirectly making false reports and providing false information to members of the South African media, which AllPay orchestrated, thereby creating the basis for false media reports which alleged or implied that the SASSA tender process was tainted by corruption through bribes by or on behalf of Net 1´s subsidiary, CPS;
  • Introducing the media reports and allegations of corruption by or on behalf of Net1 in connection with the Sassa tender process into the court proceedings in South Africa, instituted by AllPay, which sought to set aside the award of the tender to CPS;
  • Causing an unfounded report to be made to the JSE regarding disclosure that Net1 made in relation to the Sassa contract;
  • Making a report to the US DOJ bringing to the attention of the DOJ the corruption allegations and the South African media reports, and repeating the allegations made in the report to the JSE; and
  • falsely seeking to create the impression in media reports and radio interviews that it had been found, in the South African court proceedings described above, that the tender process was tainted by corruption.
Net1 has a primary listing on the Nasdaq and a secondary listing on the JSE.

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Net1 set for legal action against AllPay