Fortunes may fall in MTN, Turkcell fight

2012-04-01 07:14

The personal fortunes of some black empowerment leaders, created on the back of MTN’s successful expansion across

Africa and the Middle East, may hang in the balance depending on the outcome of an unfolding lawsuit involving allegations of bribery, arms dealing and influence peddling.

The South African Companies Act of 2008 says that company directors may be held personally liable to the company for financial losses sustained through their failure to comply with their duties as directors.

If the Companies Act is invoked in the controversial MTN saga,in which the South African telecoms giant is being sued by Turkish telecoms firm Turkcell for $4.2 billion (about R32 billion) in a lawsuit lodged in a US court, then the largest fortunes ever made in South Africa’s empowerment programme could be at stake.

For this to happen, a court action testing the allegations made in the US would have to be launched on South African soil. This could be in the form of civil lawsuits or criminal investigations.

Those implicated in the alleged breaches of the Companies Act could face fines that could destroy large personal fortunes.

The act imposes fiduciary obligations on directors to act in the interests of their companies and to protect their reputation.

Legal experts say that charges can be brought against those involved if the South African authorities choose to investigate or prosecute executives for alleged wrongdoing.

A guilty finding and a fine in the US may prompt MTN to act against those directors and executives implicated in the saga.

Turkcell is claiming amounts to approximately 25% of the R122 billion in revenue reported by MTN for the year 2011.

Those named feature constantly on the list of South Africa’s richest individuals.

They are former chief executive Phuthuma Nhleko, who is worth an estimated R449 million, former head of Africa-Middle East region Irene Charnley, who is worth an estimated R1.2 billion, and current chief executive Sifiso Dabengwa, who commands a fortune estimated at R200 million.

Turkcell is claiming that officials at MTN paid bribes to former South African ambassador to Iran Yusuf Saloojee and to the Islamic nation’s former deputy foreign minister Javid Ghorbanoghli to secure a licence to provide mobile service in Iran.

It is alleged by Turkcell that MTN promised to secure a list of arms and ammunition from South African arms manufacturer Denel as part of a package of benefits that included support for Iran’s nuclear programme.

Turkcell, which was initially awarded the licence, believes that the Iranian authorities revoked the licence because MTN had acted improperly. Turkcell now seeks compensation for its losses as a result of MTN’s alleged underhanded actions.

Law experts emphasise the claims remain mere allegations until proven in a court of law.

MTN and its legal advisers continue to deny the allegations and question the jurisdiction of the US court to hear the matter.

It has set up an independent board committee, headed by internationally-renowned jurist Lord Leonard Hoffmann, to investigate Turkcell’s allegations.

The Hoffmann committee has already begun its investigations, MTN said this week.

“The Hoffmann committee has invited Turkcell to participate in its investigation, but Turkcell has to date not done so,” says MTN spokesperson Xolisa Vapi.

“The invitation remains open to Turkcell to participate in the Hoffmann committee’s investigation.”

Turkcell has argued that MTN has business interests in the US and therefore the allegations brought against it amount to a violation of the Alien Tort Statute of 1789 that grants US courts jurisdiction in some instances.

There is South African precedent in this respect. Victims of apartheid mining laws and practices relied on the statute to bring action against South African mining companies which benefited from apartheid-era policies.

In the Turkcell-MTN case, the US Supreme Court is yet to decide to hear the matter. Papers have been filed making stinging allegations against MTN and its current and former executives.

Charles de Matos Ala, a company law lecturer at the University of the Witwatersrand, says that the South African authorities can decide to institute a judicial commission of inquiry into the matter to determine if any wrongdoing occurred.

Banzi Malinga, director for corporate and commercial law practice at lawfirm Cliffe Dekker Hofmeyr, says current and former MTN directors implicated in the bribery claim cannot be convicted in South Africa on the basis of a decision by a US court.

“Obviously if there is a prima facie case, South African authorities will have to decide whether the allegations are worth prosecuting,” says Malinga, adding that South Africa has a vast body of law including the Companies Act to deal with allegations of corporate wrongdoing.

MTN is expected to challenge the jurisdiction of a US court to hear the civil matter.

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