Africa’s biggest telecoms company, MTN Group is facing shares scandals accusations with over 400 MTN employees filed an application for condonation at the High Court, pleading to have a matter in which senior executives stand accused of swindling millions of empowerment shares to be heard in an open court. Current and former MTN staffers are demanding over 200 million shares allocated to them over a decade ago in an employee share ownership scheme, saying their portion of shares was misappropriated in a trust. The trust, Alpine, was set up by MTN as an investment vehicle for the employees.
In October last year, the staffers threatened court action after failed attempts to get information from MTN and the trust regarding the shares. The group has now filed its court papers; the heads of arguments were filed last week. The dispute has pitted Africa’s leading telecoms company against its own employees, who vowed to hold the company and Alpine Trust accountable.
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At the core of the dispute is the allocation of more than 200 million shares from an initial 309 million shares that had been set aside for the employees. The employees, who go by the moniker Tsunami Group, claim that in late 2002, company Newshelf 664 purchased 309 million shares in MTN at R13.89 a share, and the agreement was that an employee would have to work for six consecutive years to receive 100% participation ratio. In addition, they claim after settling the debt, there were over 200 million shares that were never distributed. The employees say the estimated value of the shares was pegged at R35 billion.
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The Alpine Trust – which was headed by five MTN executives, including MTN Group chairman Phuthuma Nhleko and former CEO Sifiso Dabengwa – held Newshelf’s shares on behalf of the scheme’s 3 260 beneficiaries. The Alpine Trust aimed to allocate 75% of the benefits to black MTN employees. But beneficiaries of the scheme have claimed the trust reduced the amount originally allocated to them without explaining its process.
The Tsunami Group claims the scheme remains incomplete and suspect, accusing MTN’s chairman and six others of “continuing breach of their common law duty to account; together with the dereliction of their duty of impartiality, including avoidance of conflicts of interest; and their duty of due diligence in maintaining prudent oversight of investments”.
In the head of arguments filed before Justice Marcus Senyatsi last week, advocate Greg Fourie SC, representing Tsunami, says: “The applicants claim that the capital distribution to them remains incomplete and, indeed, suspect. Over the course of several years and many queries, the applicants to date have been denied a full accounting by the respondent.”
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In order to verify their “true financial position”, Fourie says the group sought the expertise of “leading financial forensic expert in financial accounting and tax, namely professor Harvey Wairner. He has confirmed to the applicants’ attorneys that the information supplied to them by the trust is too limited to verify whether the respondents have, in fact, short-changed the applicants.”
Perversely, he says, “bona fide attempt to obtain specific documentation required by Wairner from the respondents – to which they were in any event entitled to by law as capital beneficiaries − was rebuffed by the respondents’ attorneys as premature discovery.”
Furthermore, the heads of arguments say MTN and other respondents have sought to delay ventilation of the main dispute at every turn “inter alia by objecting to amendments to the notice of motion and the filing of further affidavits, challenging the mandate of the applicants’ attorney (despite the filing of over 200 powers of attorney) and now by opposing this application for condonation.”
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In his heads of arguments, Fourie says: “The matter is now at the stage that the key issue in dispute, being whether a full accounting has been made by the trustees to the capital beneficiaries of the trust, has been comprehensively ventilated in various affidavits.” In response, Nompilo Morafo, MTN group executive: corporate affairs, tells ITWeb: “The claim is against Alpine Trust and its trustees in respect of its shareholding in MTN. No relief has been sought against MTN. Given that the matter is before the courts (sub judice), we cannot comment any further.”
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry