Delta reports multi-million fraud following forensic investigation

Delta Property Fund have reported alleged fraudulent activities to the South African Police Service (SAPS) following an internal forensic investigation by Mazars.

Following the submission of a forensic report by Mazars and its recommendations to the company’s board of directors, the board has recently completed an internal assessment of the findings of the forensic investigation.

While the forensic report is confidential and subject to legal privilege, the board has confirmed that the forensic investigation has found evidence of past practices involving governance failings and wrongdoing within the company including unsubstantiated payments, procurement irregularities and other unethical business dealings.

The board is taking legal advice based on the forensic report as to any civil claims which may arise.

Key issues identified in the forensic report include:

  • The payment of commission by the company totalling R43.9 million (for three financial years ended February 2018, 2018 and 2020) resulting from invalid, lapsed or no broker mandates.
  • Fraud resulting from unethical dealings amounting to R2.1 million and,
  • The non-disclosure of related or connected party transactions to the board.

The internal assessment has revealed failure to recognise commission and property management expenses in property valuations which will likely result in a decrease in the valuation of investment property (including investment property held-for-sale) from R10.6 billion to approximately R8.7 billion in the company’s financial yearend statements for the year ended February 2020.

Delta has been advised by its auditor, immediately prior to the SENS announcement, that the auditor has withdrawn its opinion with respect to the 2020 financial statements. Due to the withdrawal, the board has resolved to withdraw the 2020 financial statements. Continued reliance on the 2020 financial statements is therefore no longer appropriate.

Delta Property Fund will not be able to release its interim results by the 11th of December 2020. Shareholders have been advised and will continue to be advised on the full impact of the forensic investigation and the outcome of the further procedures by the auditor are still being determined.

In the SENS announcement, the company cited that ‘these circumstances may have a material effect on the price of the company’s securities. Delta shareholders are advised to continue exercising caution when dealing in the company’s securities until a further announcement is made’.

Source: Propertywheel.co.za | https://propertywheel.co.za/2020/12/delta-reports-multi-million-fraud-following-forensic-investigation/

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