MTN directors face tax evasion suit in Uganda

2012-11-17 08:38

Africa’s biggest telecoms company faces a raft of charges, including fraud and conspiracy to evade tax to the tune of $35m

MTN chief executive Sifiso Dabengwa and eight other company directors have been summoned to appear in a Ugandan court on charges of tax evasion involving millions of rands.

This is the latest scandal to hit the telecommunications giant this year after the company was accused of paying bribes to win an operating licence in Iran.

Now Interpol has been instructed by a Ugandan court to serve criminal summons against current and former MTN executives relating to one of the East African country’s largest tax evasion cases.

The case follows actions by whistle-blower Naphtali Were, a former MTN Uganda employee who spilled the beans on the company’s alleged tax cheating.

MTN has, however, hit back at Were, saying his actions stem from sour grapes after being fired from the company last year.

Were has put the amount owed at $35 million (R310 million), while MTN Uganda has admitted to owing the taxman R44.1 million.

Friday Kagoro, a Ugandan lawyer representing Were in the matter, said the Ugandan court issued criminal summons “after ascertaining that there is a probable case of tax evasion, tax fraud and conspiracy to evade tax by the company”.

He said that “since criminal liability of a company falls squarely on its directors, the court has summoned them to plea” in the Buganda Road Magistrates’ Court on December 12 this year.

According to Kagoro: “The court thought people who are not residents of Uganda and cannot be reached by the Ugandan law enforcement agencies should be served with criminal summons through Interpol.”

City Press is in possession of the court summons for criminal case 276 of 2012: the Uganda Prosecutor v MTN Uganda Limited.

The summons call to court:
» Dabengwa, MTN group chief executive;

» Khumo Shuenyane, MTN group chief strategy, mergers and acquisitions officer;

» Christian de Faria, group chief commercial officer;

» Ignatius Sehoole, vice-president for South and East Africa;

» Nozipho January-Bardill, former group head of corporate affairs and a former South African ambassador to Switzerland;

» Mervin Immelman, MTN Uganda head of procurement and logistics;

» Mike Blackburn, MTN Uganda chief financial officer;

» Nigel Williams, former MTN Uganda chief financial officer; and

» Nosipho Molope, a director of MTN Service Provider.

The Ugandan directorate of public prosecutions is handling the case.

In October, Were, who is MTN Uganda’s former executive head of logistics, went to court armed with a bag of documents – invoices, receipts and internal MTN memorandums.

He claimed the company was not always tax compliant, and reported extensive failures to declare the correct prices of goods and equipment imported into Uganda.

This is estimated to have cost the Ugandan Revenue Authority millions of rands.

Were’s claims led to an inquiry by the Ugandan directorate of public prosecutions.

With a market capitalisation of R314 billion, MTN is South Africa’s largest company with a primary listing on the JSE.

MTN Uganda is a subsidiary of the MTN Group and the leading provider of cellular services in Uganda. It has a market share
of 50%.

City Press sent the company a list of detailed questions about the Ugandan case, but MTN only responded by sending a press statement that was posted on the website of its Ugandan subsidiary two weeks ago.

The unanswered questions are:
» Will Dabengwa and other MTN executives appear in court on December 12 to answer to the charges as set out in the court papers?

» What are the implications of the matter for MTN’s continuing business in Uganda?

» How will MTN plead to the charges of tax evasion?

» Does MTN’s licence agreement and contract with Uganda stipulate anything about paying tax in that country?

» Should the court decide against the company, what course of action will it take?

The media statement, issued by MTN Uganda CEO Mazen Mroué, denies liability and claims that MTN’s suppliers are responsible for any alleged misrepresentation of tax payable.

“MTN has also made criminal complaints against the suppliers implicated and filed a civil claim against one of them who reneged on their contractual undertaking to refund the funds misappropriated by them,” the statement read.

Mroué said Were made “baseless allegations of tax evasion against senior management and directors of the board of MTN Uganda. Through his lawyers he initiated a private prosecution . . . and applied to court to issue a warrant of arrest.”

But the Ugandan Revenue Authority has since joined the case. The complainants are calling for a comprehensive tax audit of MTN’s activities in Uganda.

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