Probe into SAA share payments

8 January, 2007 at 10:40 am | Posted in Companies | Leave a comment

A criminal investigation into the SAA share incentive scheme may be on the cards but who will be in the firing line is not yet clear.
Jacqui O’Sullivan, SAA’s head of corporate communications, said last week: “The process to resolve issues that arose out of the initial investigation is still under way as it includes compiling data for referral to the relevant criminal justice authorities for further investigation.”

This was in response to questions on progress in resolving the SAA share scheme mess that emerged in a report, released last year, by corporate governance expert Mervyn King into the airline’s affairs between April 1999 and December 2004.

O’Sullivan would not elaborate on which aspects of the report or which SAA executives might end up being the focus of a criminal investigation.

The report by King, which deals primarily with the SAA share incentive scheme, finds the scheme to be invalid and recommends that the money paid out to directors in terms of the scheme be recovered.

Andre Viljoen, SAA’s former chief executive, received payments of about R4.7 million.

Viljoen said last year that he would defend any attempt to recover the money and was considering legal action to “correct the smear on [his] reputation”.

He could not be reached last week for further comment.

O’Sullivan said: “Although neither SAA nor the trustees are in a position to determine time frames, all actions necessary for the resolution of this matter are being taken without delay.”

It was previously reported by Moneyweb that about R20 million was paid to directors.

None of the executives mentioned in the report still works at SAA. If the money is recovered, the trust would settle a loan owed to the airline.


The report, which was completed in 2005 but released only late last year, says the scheme was invalid because the first trustees “never met … [nor] applied their minds at any time to any issue”.

The report says: “The initial trustees did not do anything. In consequence, they were in breach of their duties under the trust deed and … under the Trust Properties Control Act.”

In terms of the rules of the scheme, the share price would be set by a third party, based on a valuation of SAA on March 31 each year. The value would be given to the trustees no later than July 31 and participants could sell their shares only between August and December at that year’s price. However, the directors changed this rule to allow vested shares to be sold any time.

For this amendment to be valid would have required a resolution of the members of SAA in a general meeting, which never occurred, the report says.

The report says: “We have not found evidence of dishonesty or neglect on the part of the directors and managers save for the arguable proposition” of whether board members had acted negligently in terms of the Public Finance Management Act; and whether management, who were also directors, acted wittingly by directing the share valuations and in effect acting as both seller and purchaser. The report makes no finding in this regard.

The report says SAA has right of action against the trust in terms of the act on the basis of fruitless and wasteful expenditure, and it is arguable that directors who sold shares to the trust before June 2002 could be liable to SAA.

(BusRep)

Looks like if they haven’t lost your bag they’ve lost thier money…

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