MUSTAQ BREY: Telling it like it happened

Seven months after Oceana announced a delay in publishing its 2021 financial results it remains the subject of intense media speculation despite the best efforts of the board to keep stakeholders informed, to be fair and honest, and to act with integrity.

It is time to set the record straight. Since October 29 2021 the company has regularly updated shareholders and has safeguarded the legal rights and dignity of all employees, including those who resigned or were dismissed.

In particular, Oceana protected the identity of the employee who raised the initial concerns, affording the legal rights normally granted to a whistle-blower even though the individual did not initially consider themselves one. This was done with an abundance of caution and in recognising a duty of care.

The initial delay was so that ENS Forensics and external accounting and legal advisers had time to complete an independent forensic investigation into concerns the employee had raised. The most significant of these related to the accounting for the group’s 25% shareholding in Westbank, held by its wholly-owned subsidiary Daybrook. Westbank is a commercial fishing business that provides Daybrook with 100% of its catch.

The draft results of the investigation were made available to the auditors on December 24 2021, and the company announced the findings on January 31 on Sens. It described how the Daybrook acquisition had been designed to comply with US regulations on US-citizen control of fishing vessels, and had been approved by shareholders. US maritime and fisheries legal advisers had supported the transaction advisory team.

Westbank’s fishing rights were approved and have been endorsed annually since 2015. A technical opinion obtained at the time confirmed the basis of the accounting. Again, during the forensic investigation Oceana’s accounting advisers, Mazars SA, Mazars International and other independent International Financial Reporting Standards specialists, concluded that the equity accounting treatment of Westbank in Oceana’s previous financial statements, audited by Deloitte, was correct.

Then, in 2021 PwC, Oceana’s new auditors classified Daybrook as a joint operation, and to finalise the financial statements the board was compelled to adopt a new accounting treatment that resulted in a change to the prior year’s numbers. This had no effect on the earnings or net asset value of the group. Westbank contributes less than 1% to profits.

The Sens announcement also described how the investigation had uncovered unrelated but serious concerns about certain senior management. These were later defined as reportable irregularities, which PwC reported to the Independent Regulatory Board for Auditors (Irba). They included:

• A senior manager approving a line manager’s bonus request for a staff member with whom the senior manager was having a relationship; and instances of dominance and bullying by the same senior manager.
• Two senior managers deleting information in violation of a clear instruction from the board and the forensic investigators, as well as behavioural and conduct transgressions in performing their fiduciary duties.

Shortly after the board acted to rectify these breaches two senior managers resigned. In February, as a consequence of the remedial action adopted by the board, the CFO was suspended pending the outcome of a disciplinary hearing. Following the hearing, chaired by a retired supreme court justice, she was dismissed.

Throughout the process the company opted to respect the rights and privacy of the individuals concerned, despite significant criticism and pressure to name them, and amid a barrage of false and misleading information leaking into the media.

On February 10 the company announced on Sens that the 2021 results would again be delayed due to the dating of signatures on an internal document relating to an incorrect R63m insurance accrual. While ENS and PwC found there was no evidence of fraud or criminal conduct and no financial loss, appropriate disciplinary action was undertaken. PwC identified this as a reportable irregularity and reported it to Irba.

When the company’s audited financial statements were published on March 25 PwC confirmed that none of the reportable irregularities were ongoing and informed Irba. 

PwC resigned on May 30, one business day before a planned shareholder consultation to assess its ongoing appointment given the strained relationship resulting from unnecessary delays in completing the 2021 audit and the unprecedented low 62% vote in support of its reappointment.

There has since been ongoing speculation that the company has something to hide, that there is more to what has happened than was communicated, or that there was something untoward about the Daybrook transaction.

Not only are these without merit, but they impinge on the integrity of the board and the current executive management, and blight a company with a proud 104-year track record.

The independent board subcommittee that oversaw the Daybrook transaction evaluated three bids. Standard Bank facilitated the negotiations and shareholders agreed to the decision. All of this is in the public domain.

As detailed here, the board has communicated consistently and clearly throughout. It revealed the auditor’s concerns and the results of investigations. It addressed questions at shareholder meetings, results presentations and at the AGM, and answered countless media questions. The company has been as transparent and honest as possible.

Of course, human nature being what it is there have been constant demands for more information and potentially scurrilous detail. At the outset the board agreed it would not name, blame or sacrifice any individuals and would act within the constraints of the law and common decency. We have done so.

• Brey chairs the board of Oceana Group.