Accounting watchdog strips 'grossly negligent' Anoj Singh of membership
Former Eskom finance boss found guilty on 12 of 18 charges
Former Eskom finance boss Anoj Singh has been stripped of his SA Institute of Chartered Accountants (Saica) membership.
This after the accounting watchdog found Singh guilty of “a number of breaches of the institute's bylaws and its code of conduct in relation to his conduct while he was employed as the group financial officer of Transnet, and while he was employed as the CFO at Eskom”. He was found guilty on 12 of 18 charges.
Saica found that while Singh was at Transnet, he “consciously or wilfully” disregarded the need to take care that saw the parastatal pay R15.9bn extra for the purchase of more than 1,000 locomotives.
It also found Singh was guilty of assisting Gupta-linked company Trillian while he was CFO at Eskom, but found him not guilty of an “improper relationship with the Gupta family and the fact that he had certain travelling expenses paid for by the Gupta family” because it did not have substantial evidence.
Singh did not appear before the hearing, despite a formal invitation, the institute said.
Singh was also ordered to pay half the costs of his disciplinary case, which concluded in July 2020, a year after Saica suspended him.
In a statement, the institute's CEO, Freeman Nomvalo, said: “Saica takes all instances of members’ alleged contravention of the Saica code of professional conduct seriously. All these matters are investigated, irrespective of the nature of the assignment or the individual member concerned. Saica's members who fail to uphold the highest ethical and professional standards compromise public and private sector institutions and the SA economy as a whole.
“This step [against Singh] confirms Saica's commitment to holding all its members accountable as well as an unwavering focus on serving the public interest, which is the foundation of the chartered accountancy profession.”
According to the decision of the disciplinary hearing, published on the Saica website, the charges relating to Singh's conduct at Transnet related to his involvement in the acquisition of what has colloquially been described as the “1,064 Locomotive Deal” — a controversial decision to buy 1,064 diesel and electric locomotives for R54.5bn.
In its ruling, Saica said the initial cost of the project was R38.6bn, but that it excluded forex hedging, forex escalation and other price escalations. However, after negotiations for the actual purchase of the locomotives — done by a team of which Singh a part — the price increased to R54.5bn.
It was for this R15.9bn cost increase that Singh was charged.
He would ultimately be found guilty of “conducting himself grossly negligently in failing to ensure that the business case accurately and clearly stated that the initial costs of R38.6bn included the potential effects from forex hedging, forex escalation and other price escalations”.
Explaining the difference between ordinary negligence and gross negligence, the institute said the former was “the failure to exercise reasonable care” while gross negligence is “a conscious or wilful disregard of the need to take such reasonable care that would likely cause harm or loss”.
A hurdle rate is the minimum rate of return on a project or investment required by a manager or investor.
The institute also found Singh misled Transnet to “present the increased cost of acquisition of the 1,064 locomotives as still being profitable to Transnet”.
Singh, the institute said, adjusted the hurdle rate from 18.56% to a lower rate of 15.2%.
Linked to this, Singh was also charged with “misleading Transnet's board or allowing it to be misled that a cost saving of between R6bn and R10bn had been realised in the conclusion of the 1,064 Locomotive Deal transaction when this was not the case”.
“The evidence before us established that the time when Mr Singh adopted the lower hurdle rate of 15.2%, Transnet had not amended its hurdle rate policy. Mr Singh knew that. The inference is irresistible that Mr Singh applied a lower hurdle rate to achieve a positive NPV [net present value], and consequently a representation to Transnet's board that the 1,064 Locomotive Deal remained profitable, notwithstanding the substantial increase of the total cost of acquisition to R54.5bn.
“We therefore find Mr Singh guilty of gross negligence in that he misled Transnet's board by failing to disclose that the increase in the cost of acquisition would render the business case or the 1,064 Locomotive Deal no longer profitable to Transnet. We also find that Mr Singh deliberately changed the hurdle rate from the applicable 18.56% to a lower rate of 15.2% to conceal from the board that the project was no longer profitable to Transnet.
“We find Mr Singh guilty of improper conduct in that he conducted himself grossly negligently by allowing the board to be misled about a cost saving which was not the case,” the ruling reads.
It also charged him for the failure to present “the best and final offers that had been received from the bidders” to the Transnet board before they had been signed.
“There was no evidence that the negotiating team, of which Mr Singh was the chairperson, had presented the details of the best and final offer to Transnet's board before the agreements with the bidders had been signed. This constituted a contravention of Transnet's procurement procedures manual.
“Even though Mr Singh was not the head of procurement, as the group CFO he ought to have known that such contracts could not be concluded before Transnet's board had approved them. He was either complicit or supine, both of which we consider to be improper conduct. We therefore find Mr Singh guilty,” the institute found.
Singh was also found guilty of gross negligence by approving certain relocation costs for two of the bidders for the locomotives, “though the business case made no provision for such relocation and though such relocation costs had not been budgeted for”.
“We accordingly find that Mr Singh had not only failed to exercise due care in committing Transnet to these costs, but that he flagrantly ignored the likely loss that Transnet would suffer as a consequence of his approval. We therefore find that he was grossly negligent in having approved the relocation costs,” the ruling reads.
When it came to charges while Singh was CFO at Eskom, Saica proffered seven charges against him.
It found he was not guilty of approval of allegedly irregular payments to McKinsey, but that payments were made to the controversial company Trillian, which has strong links to the Gupta family.
Saica probed Singh's conduct in approving payments in excess of R30m to Trillian “in circumstances where there was no contract between Eskom and Trillion [sic]”.
“On the documentary evidence provided by the institute, it was clear there was no contract between Eskom and Trillion [sic]. It was equally clear that invoices were sent by Trillion to Mr Singh's e-mail address and that he approved their payment. He did so without ascertaining whether the payments could and should be made. They were substantial payments and as pointed out by [name redacted], the erstwhile CFO of Trillion, Trillion could not have rendered any services as it had no employees.
“Mr Singh, as Eskom's CFO, ought to have been more diligent. Does this lack of due diligence constitute gross negligence? We are of the view it does. The amounts approved by Mr Singh were in excess of R30m and the consequences of the payments were that they amounted to irregular expenditure contrary to the Public Finance Management Act. We therefore conclude that Mr Singh is guilty of improper conduct. Equally, Mr Singh's conduct was, while not discreditable, dishonourable or dishonest, irregular and tends to bring the profession into disrepute,” Saica ruled.
It also found Singh was guilty of “causing the issue of a performance guarantee in the amount of R1.68bn in favour of Tegetta [sic], and second in providing financial assistance to Tegetta in the amount of R600m”. (The company is Tegeta Exploration and Resources.)
“A striking feature of both these charges is the elaborate means that had been employed to enable Tegetta to make payment to the business rescue practitioners of Optimum Mine and the use of Eskom's funds to do so. The documentary evidence relied upon by the institute showed Tegetta was R600m short in respect of the purchase price for Optimum Mine, and that its acquisition of the mine was in jeopardy unless it was in a position to obtain that amount of funding.
“Two days later, Eskom, on the instructions of Mr Singh, advanced an amount of R659m to Tegetta on the premise that it constituted a prepayment for the supply of coal. But Tegetta was not yet the owner of Optimum Mine and Eskom had no supply agreement with Tegetta.
“The only reasonable inference to be drawn was that this amount was being paid to assist Tegetta to meet its obligations to the business rescue practitioners and the consortium of bankers to acquire Optimum Mine. This was an improper use of Eskom's funds,” the institute found.
It said the procurement of a R1.68bn guarantee in favour of Tegetta “was no different”.
“It, too, had as its objective the assistance of Tegeta in circumstances where Eskom was financially not in a position to provide such a guarantee. It strained Eskom's financial resources and did not benefit Eskom at all. Moreover, no approval had been procured from the minister of public enterprises for the issuing of such a substantial guarantee,” Saica rules.
Singh was found guilty under the institute’s bylaws for this.
The final of the 18 charges related to Singh’s “improper relationship with the Gupta family and the fact that he had certain travelling expenses paid for by the Gupta family”.
It was claimed that during 2014 and 2015, Singh “travelled to and from Dubai at the expense of the Gupta family and their businesses”, and that these were “not business trips that Mr Singh took on behalf of Eskom or Transnet and that he accordingly acted improperly in engaging in an improper relationship with the Gupta family”.
Saica said evidence it relied upon showed Singh did travel to and from Dubai during May 2014 and June 2015, and that the trips and accommodation were paid for by Trillian.
“None of the trips undertaken by Mr Singh, and upon which the institute relies, were undertaken while employed at Eskom. That is because Mr Singh only joined Eskom during August 2015. To find guilt on this charge, we would have required oral evidence of a more substantial nature than merely the reliance on certain e-mails evidencing communications between a hotel chain in Dubai and Trillion.
“We cannot on that basis find Mr Singh guilty of having engaged in any improper relationship with the Gupta family while employed by Eskom, or having compromised his objectivity, independence, professional judgment or integrity at the time,” the institute ruled.