THIS week’s mysterious suspension of Telkom’s financial director, Jacques Schindehütte, related to how he allegedly hired a consultant he knew without going through the proper process.
After Mr Schindehütte’s suspension was announced on Thursday, speculation ran high that he was suspended over a R6m share purchase on September 30, the day before the fixed-line operator went into a closed period from October 1.
The trade raised eyebrows not just because of its timing, but also because within a week Telkom’s share price rallied more than 10%.
But on Friday, Telkom said in a statement the suspension “relates to allegations of personal misconduct ... which came to the board’s attention through a whistle-blower”.
Neither Telkom nor Mr Schindehütte would clarify what that meant, and investors took this to be bad news.
Telkom’s share price plunged 3.9% on Friday, wiping R573-million off its market value.
Business Times understands that the charge sheet given to Mr Schindehütte contained no reference to the share trades, but listed five matters — most of which related to how Schindehutte allegedly hired a consultant whom he knew before.
The allegation evidently is that he somehow pushed this appointment through without going through proper processes.
However, Mr Schindehütte is understood to have obtained the consent of former CEO Pinky Moholi for the appointment, and the contracts were apparently also sent through Telkom’s legal department.
The total value of these contracts is understood to be less than R5m.
Mr Schindehütte’s suspension has raised the spectre of political interference in his departure.
While Telkom is listed on the JSE and is not technically a state institution, there is no doubt that government — which owns 40% of the company — calls the shots.
He is understood to have been critical of how government vetoed an investment in Telkom by Korea’s KT Corporation two years ago, which would have given Telkom a foreign partner with deep pockets and global skills.
This move also comes amid a spate of suspensions in state-owned companies as government flexes its muscles. This week, the head of the Government Employees Pension Fund, John Oliphant, was suspended “pending disciplinary proceedings”. Once again, no information was made available.
Mr Oliphant was in a powerful position. With assets worth about R1-trillion, the fund is the single-biggest investor on the JSE and the largest government bond holder.
Last week, the Sunday Times broke the story that Competition Commission boss Shan Ramburuth was forced to resign after using R123,000 of taxpayers’ money on data he racked up watching porn.
However, pundits immediately asked whether Mr Ramburuth’s infraction had been exposed because he clashed with Economic Development Minister Ebrahim Patel over Walmart’s controversial investment in the country, which was hotly opposed by labour.
Despite Telkom’s declaration that Mr Schindehütte’s suspension related to personal misconduct, questions about his last-minute trade must have caused a measure of embarrassment at board level.
Mr Schindehütte ploughed R6m into Telkom stock at R24.43 on September 30, the day before the company went into a closed period.
The purchase would have been considered insider trading had the shares been bought 12 hours later.
As arbitrary a distinction as the cut-off time might be, Mr Schindehütte’s trade was legal and was, in fact, endorsed by the CEO Sipho Maseko and chairman Jabu Mabuza.
However, a week later, on October 7, the Independent Communications Authority of South Africa announced it was going to cut interconnection fees that would boost Telkom Mobile’s earnings, and the Telkom share price bounced to R26.50. Two days later, Telkom released a trading statement, saying it expected earnings per share to increase at least 20% for the six months to September, and the share price went up to R27.30.
Solly Keetse, head of the Financial Services Board’s directorate of market abuse, denied media reports this week that the board was investigating the trade.
Telkom said on Friday that an investigation was carried out by an external law firm, and its findings and recommendations were presented to the board. After Mr Schindehütte was given the chance to respond to the allegations, the board was legally advised to suspend him.
Mr Schindehütte put out his own sanitised press statement this week, saying his suspension from Telkom had not come as a surprise and that there had been a process leading up to it during which he had been asked to resign. He said he had refused because doing so would not be “congruent with his value system”.
It was clear from his statement that he did not feel he had done anything wrong: “I believe I always act competently and in good faith to enhance the interests of my employer and all its stakeholders.”
He admitted on Thursday evening the suspension had been “sobering”. He said he was going home to Stellenbosch to be with his family and to support them through what he expected to be a long process.
• This article was first published in Sunday Times: Business Times