The payment was flagged by a group of Deloitte SA trainees during a routine audit of the trade creditors of telecoms firm Neotel. An amount of R36-million excluding VAT had been earmarked for payment to Homix, then an unknown new vendor, and the invoice was not yet in hand.

Deloitte was sceptical and over the course of several months, its auditing team had extensive one-on-one meetings with Neotel’s former CEO, Sunil Joshi; then CFO, Steven Whiley; and the board’s audit committee.

Homix, it eventually became known, is a Gupta-linked letterbox company.

Testifying at the State Capture Commission on Tuesday, 11 June 2019, Chetan Vaghela, a Deloitte audit partner and previously the senior manager responsible for the Neotel audit, detailed how, throughout the firm’s engagement with Neotel, nobody could explain what service Homix had provided to the company to have justified the payment.

At every turn, efforts were seemingly being made by Neotel to validate the Homix deal – even arguing attorney-client privilege later, once Neotel had tasked a law firm to investigate amid the repeated interrogation by its auditors.

Homix had purportedly helped Neotel to resolve “an impasse” that had set in during negotiations for a lucrative contract with Transnet in December 2014. Neotel was cold-shouldered at the last minute and it had reached out to Homix.

Incredibly, once appointed, Homix was able to resolve the issues within a matter of three days and after one meeting at JB’s Corner at Melrose Arch. It had simply deployed “resources” to work around the clock to ensure Neotel and Transnet could sign the deal on 14 December 2014.

The deal later claimed the scalps of senior Neotel executives and, unsurprisingly, featured a meeting with a “distracted” Transnet CFO, Anoj Singh, and a letter from then acting CEO, Siyabonga Gama, saying it was all above board.

When first confronted with Homix while performing the routine audit for the year ending March 2015, Deloitte asked the obvious question: What did Homix do?

An initial batch of “onboarding documents” that Neotel had made available to its auditors didn’t contain the usual papers, such as proof of banking details and proof of Ids, and the Homix documents had been signed by Joshi without board approval, Deloitte reckoned at the time.

Over the course of several months, Deloitte dug deeper, finding:

• A companies’ registrar search for registration details of Homix yielded no results;

• Telephone calls to the number stated on an invoice went unanswered;

• An internet search on the address instead showed it belonged to a charity; and,

• The website address did not return a valid web page.

Homix is now commonly known as nothing more than a letterbox company linked to Gupta kingpin Salim Essa, through which millions of rand in alleged kickbacks emanating from deals with Transnet had flowed.

Although all things Gupta-related had an easy ride back in 2015, Deloitte saw a multitude of red flags and instead of turning a blind eye, it pressed on, hard.

“The payment to Homix and the nature of this creditor made us very sceptical because it was new to the company. The vendor was not known and management of Neotel had not disclosed it to us.”

Vaghela said Deloitte auditors then sought to establish the commerciality of the fees paid to Homix, who the company was and exactly what its contractual mandate was in respect of the Transnet contract.

The chief financial officer, Steven Whiley, knew the company had been contracted to help wrap up the negotiations, but knew nothing of Homix.

He sent the Deloitte delegation to the CEO, Joshi, who similarly couldn’t provide details of who Homix was.

Whiley had explained that in about December 2014, the company’s negotiations for a Master Services Agreement with Transnet had reached an impasse.

He allegedly said Joshi then suggested Neotel engage Homix, an agent, to settle the matter. It emerged that Homix had previously helped Neotel in a deal with Transnet.

Whiley, Vaghela said, was adamant Neotel had not found anything untoward with the company.

Deloitte contested this and said its investigation showed otherwise and that the company was in fact, in deregistration.

The audit firm then went to see Joshi, this time at Fire & Ice, also at Melrose Arch, where the team again explained their concerns about the reason for the payment. They again asked for details of who the company was.

Said Vaghela: “Joshi then told us Homix wanted 10% of the deal and they negotiated it down to 2%.”

Vaghela said the auditing team could not figure out if Transnet, in particular, the parastatal’s CFO, Anoj Singh, was aware that Neotel had engaged an agent.

Joshi allegedly told them that he had been introduced to Homix by Neotel’s Transnet portfolio manager, Francois van der Merwe – the man who would ultimately take the fall when Neotel said he had had a “clandestine” relationship with Homix and had been responsible for the entire middle-man arrangement.

Vaghela said that asked about Homix, Van der Merwe had said it was a specialised consultancy based in Dubai and Pretoria and that it had about 100 staff members.

And he usually met his Homix contact at Melrose Arch, Johannesburg.

The company, Van der Merwe allegedly told him, also did a lot of work with the government and “plays at board level” at Transnet.

Vaghela wanted a name and Van der Merwe said he dealt with one “Ashok”. He did not immediately recall the surname.

Further interrogation of the facts by Deloitte unmasked “Ashok” as none other than the known Gupta lieutenant, Ashok Narayan.

“We investigated and found that he was a former director of the Gupta-owned Sahara group of companies. This increased our worry around the commerciality of the fees and whether there was substance to Homix.”

The auditors sent a letter to the Neotel board about a month later because they were not satisfied with the responses from the company’s management. In the letter, Deloitte asked how Homix had been appointed by Neotel, what the credentials of the company were and what the terms of engagement were. In essence, the audit firm sought an explanation for what exactly Homix had brought to the table.

Vaghela said they had also asked for a copy of the board resolution relating to the company’s appointment.

Deloitte wanted all these questions answered to assess the commerciality of the deal as part of its general duties before it could sign off on the company’s annual financial statements.

The Neotel board scheduled a special audit committee meeting on 21 April 2015, which Vaghela and a few colleagues later joined. They again raised the same concerns.

The auditors were going nowhere and Deloitte had communicated that the Homix deal was a reportable transaction. Neotel eventually appointed law firm Werksmans to investigate on its behalf.

There would be a string of other meetings and much correspondence until Deloitte eventually informed the company that there were now multiple reportable transactions involving its dealings with Homix.

By February 2016 there were five, including the original one flagged by the firm.

Vaghela said Deloitte concluded that Neotel directors – once they had considered the findings of the company’s own investigation by Werksmans – ought to have known that the payments to Homix were not sound and should have reported those to the Financial Intelligence Centre and to law enforcement in terms of anti-corruption legislation.

The commission resumes on Wednesday, 12 June 2019 when the former national director of public prosecutions Mxolisi Nxasana is scheduled to testify. DM