Director of S.African tech firm charged with attempted police bribe

by Reuters
Tuesday, 25 March 2014 18:29 GMT

* S.African IT firm loses quarter of value

* Executive Director charged with allegedly offering bribe

* Exchange investigating potential violation of disclosure

(Recasts, adds analyst comment and details of charges)

By David Dolan

JOHANNESBURG, March 25 (Reuters) - An executive director of South Africa's Pinnacle Holdings has been charged with offering a bribe to a senior police official in an attempt to win a contract, police said on Tuesday, sending its shares down 25 percent.

The Johannesburg Stock Exchange (JSE) said it was investigating whether Pinnacle violated rules on timely disclosure by waiting 20 days to announce the arrest of Executive Director Takalani Tshivhase.

Pinnacle is not the first company to come under scrutiny over awards of government contracts in Africa's biggest economy.

U.S. technology firm Net 1 UEPS Technologies has said it is being investigated by the U.S. Department of Justice and the FBI over whether it made "corrupt payments" to South African government officials to win a contract with the national welfare agency.

The country's graft watchdog said in a report earlier this month that President Jacob Zuma benefited "unduly" from a $23 million state-funded security upgrade to his home.

The South Africa Police Service said Tshivhase allegedly offered the 5 million rand ($464,400) bribe to a lieutenant general in the South African Police Service (SAPS) to secure a multi-million rand contract for devices used in police investigations.

The 59-year-old, who has denied the charges, was arrested by the police's anti-corruption unit earlier this month and released on bail the same day. His court case has been postponed until April 24 to allow for further investigation, police said.

Pinnacle confirmed the arrest in a statement on Tuesday and said there was no reason to doubt the veracity of Tshivhase's denial, based on the evidence available to it.

The announcement of the charges against Tshivhase came just days after Tshivhase sold 4 million rand ($368,300) worth of his Pinnacle shares.

The JSE declined to comment on whether it was investigating the timing of the sale.

Shares in Pinnacle, which manufactures and distributes information technology hardware and software, fell 25 percent, the stock's biggest one-day fall in almost 11 years.

"It's very surprising that management thought this information was not relevant to shareholders," Nic Norman-Smith, chief investment officer at Lentus Asset Management in Johannesburg, said.

"On top of that, the close timing between quite a significant stock sale and the release of the regulatory announcement is not helping sentiment."


Pinnacle Chief Executive Arnold Fourie said the charges against Tshivhase were based on a "huge misunderstanding." Fourie told Reuters in an interview he also did not believe the company had breached rules on timely disclosure.

The company had waited until after Tshivhase had appeared in court on Monday before informing the market, Fourie said.

"He only appeared (in court) yesterday so we could only get the detail of the charges after that," Fourie said. "There was no information that would affect the company - the company's performance - and therefore it was not necessary" to disclose earlier, he said.

Fourie said he knew of Tshivhase's plans to sell shares way before his arrest and did not believe it constituted insider trading.

Police spokesman Paul Ramaloko said Tshivhase allegedly offered the bribe to win a contract to supply the police force with electronic handheld devices used in police investigations.

The devices, which sell for 55,000 rand, allow police in the field to check whether a person has a criminal record. They are also equipped with fingerprint scanners, he said. South African police were looking to acquire 3,000 of the terminals, Ramaloko said, which would value the contract at 165 million rand.

"This arrest should serve as a reminder to companies doing business with government that corruption is not an option in securing business deals," Anwar Dramat, the head of the police's anti-corruption unit, said in a statement.

($1 = 10.7657 South African Rand) (Editing by Pravin Char and Jane Merriman)

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