CASE STUDY [30 Marks] Former Tongaat Hulett bosses in court for fraud Just over two years after charges were laid against them, former Tongaat Hulett Limited chief executive Peter Staude and six others accused of defrauding the sugar and property giant of R2.5-billion have finally appeared in court. The group of former executives charged over the fraud includes Deloitte audit partner Gavin Kruger, who was responsible for auditing Tongaats books; former chief financial officer Murray Munro; former property division head Michael Deighton, finance section head Rory Wilkinson; legal executive Kamlasagrie Singh and finance executive Samantha Shukla. They appeared in the Durban commercial crimes court on Thursday and were granted bail of R30 000 each. They will appear in court again on 11 April, then the matter will be transferred to the high court. Straude and his co-accused backdated sale agreements by Tongaats property division to the value of R2.5-billion between March 2015 and September 2018, when the fraud was discovered by the new Tongaat board, which appointed a forensic investigation. By inflating the companys profits, they scored themselves millions of rand in productivity bonuses based on the fraudulent sales, with Straude alone raking in R94-million by cooking the books. Their greed cost nearly 8 000 workers in Tongaats sugar division and its milling operations their jobs when the company moved to sell off assets and reduce its debt, while the firm and its suppliers sustained huge losses. The company has gone after Staudes assets and those of Munro and Deighton. It instituted a high court claim against them for R450-million in 2020, seeking repayment of all the bonuses, salary payments and benefits it had paid them during their tenure. Tongatt also wants the court to attach the accuseds pensions, which it has withheld pending the outcome of the civil and criminal matters. According to the charge sheet, the seven had acted with common purpose in planning to falsify sales figures and defraud the company. The group also actively associated themselves with the common purpose, and worked together to misrepresent the true state of the revenue brought about by sales of land by Tongaat Hulett Development (THD), and to falsify the financial records of THD and or Tongaat Hulett Limited. They had overstated the company revenue by R2.4-billion, an act which, once discovered, exposed Tongaat to negative publicity and has been brought into disrepute with shareholders, lenders, regulatory authorities and the broader public. Their fraudulent conduct cost Tongaat R44-milion to have its financial statements restated and it was fined a further R7.5million by local bourse the JSE and R20-million by the Financial Sector Conduct Authority. The seven knew that material inaccurate accounting records had been compiled and maintained which were ultimately processed and incorporated into the financial statements, the indictment said, adding: The financial stateme.

1. CASE STUDY [30 Marks] Former Tongaat Hulett bosses in court for fraud Just over two years
after charges were laid against them, former Tongaat Hulett Limited chief executive Peter Staude
and six others accused of defrauding the sugar and property giant of R2.5-billion have finally
appeared in court. The group of former executives charged over the fraud includes Deloitte audit
partner Gavin Kruger, who was responsible for auditing Tongaats books; former chief financial
officer Murray Munro; former property division head Michael Deighton, finance section head
Rory Wilkinson; legal executive Kamlasagrie Singh and finance executive Samantha Shukla.
They appeared in the Durban commercial crimes court on Thursday and were granted bail of
R30 000 each. They will appear in court again on 11 April, then the matter will be transferred to
the high court. Straude and his co-accused backdated sale agreements by Tongaats property
division to the value of R2.5-billion between March 2015 and September 2018, when the fraud
was discovered by the new Tongaat board, which appointed a forensic investigation. By inflating
the companys profits, they scored themselves millions of rand in productivity bonuses based on
the fraudulent sales, with Straude alone raking in R94-million by cooking the books. Their greed
cost nearly 8 000 workers in Tongaats sugar division and its milling operations their jobs when
the company moved to sell off assets and reduce its debt, while the firm and its suppliers
sustained huge losses. The company has gone after Staudes assets and those of Munro and
Deighton. It instituted a high court claim against them for R450-million in 2020, seeking
repayment of all the bonuses, salary payments and benefits it had paid them during their tenure.
Tongatt also wants the court to attach the accuseds pensions, which it has withheld pending the
outcome of the civil and criminal matters. According to the charge sheet, the seven had acted
with common purpose in planning to falsify sales figures and defraud the company. The group
also actively associated themselves with the common purpose, and worked together to
misrepresent the true state of the revenue brought about by sales of land by Tongaat Hulett
Development (THD), and to falsify the financial records of THD and or Tongaat Hulett Limited.
They had overstated the company revenue by R2.4-billion, an act which, once discovered,
exposed Tongaat to negative publicity and has been brought into disrepute with shareholders,
lenders, regulatory authorities and the broader public. Their fraudulent conduct cost Tongaat
R44-milion to have its financial statements restated and it was fined a further R7.5million by
local bourse the JSE and R20-million by the Financial Sector Conduct Authority. The seven
knew that material inaccurate accounting records had been compiled and maintained which were
ultimately processed and incorporated into the financial statements, the indictment said, adding:
The financial statements, as prepared and presented to the board for its approval and their
subsequent presentation to the shareholders, were materially unreliable, false. It said Kruger, as
Tongaats external auditor, had failed in his duties and had presented an audit opinion that was

2. not true and correct. He has also been charged for failing to report a criminal offence. Tongaat
company secretary Johann van Rooyen said the company welcomed the arrests and would
continue with the civil action against its former executives: Tongaat Hulett welcomes this
development in the legal process and it will continue to cooperate with law enforcement
authorities whenever required to ensure that those responsible for the historic mismanagement of
Tongaat Hulett are held accountable, Van Rooyen said. (Harper, 2022 -
https://mg.co.za/news/2022-02-11-former-tongaat-hulett-bosses-in-court-for-fraud/) Question 1
(15 Marks) There are several factors that have contributed to the current prominence of corporate
governance. Identify and discuss at least five such factors in relations to Tongaat Hulett.
Question 2 (15 Marks) King IV report on governance has elevated the prominence and
importance of ethics to unprecedented heights. Provide a high-level analysis on how the adoption
of the three ethics principle of the King IV code could have assisted Tongaat Hulett.