Telkom refused R27m settlement offer

By Damaria Senne for Telkom
Johannesburg, 18 Jul 2006

Documents presented at the bankruptcy hearing into the affairs of now-defunct Applied Card Technologies (ACT) last week showed that John Sterenborg, in his capacity as former CEO of ACT, asked Telkom to pay R27 million in settlement of the dispute regarding the 2002 smart card tender.

The awarding of the R600 million tender to Gijima Afrika Smart Card Technologies (now called Guma) became the focus of the hearing following Sterenborg`s allegation that the contract was diverted from ACT.

He suggested to commissioner Arnold Subel, who is overseeing the hearings into ACT`s affairs under section 417 of the Companies` Act, that documents from Telkom related to the awarding of the tender would support his allegation.

Offer declined

At the hearing last week, Telkom submitted a letter received from Sterenborg offering Telkom proof of the "fraudulent and illegal award" of the tender to Gijima. The letter stated that, upon payment of an upfront fee of R13.5 million, Telkom would receive half of the documents that allegedly substantiated his claim of fraud. All documents would be handed over upon full payment of a total R27 million, stated the letter.

Should Telkom refuse this offer, the ACT board threatened to:
* Make Telkom party to its R288 million claim against Gijima.
* Make Telkom party to its R10 million claim against Gijima.
* Make Telkom party to the Brait claim of R20 million for equipment purchased on instalment agreement.
* Issue summons to Telkom separately for R200 million loss incurred.
* The proof would be put in a public domain, harming Telkom`s interests in SA and the US.

Telkom refused to settle, and stated through its legal representative that it did not want to be seen to be circumventing proper procedures.

"[We] are of the view that the offer in the Sterenborg document to Telkom amounted to an attempt to extort payment from Telkom," says Robert Gumede, deputy executive chairman of Gijima.

It is not clear if the ACT board has since taken any of the steps outlined in its settlement offer.

Standing firm

Gijima and Telkom maintain that the tender was awarded to the right party. They also argue that ACT did not stand a chance of winning the tender, as the company went into final liquidation in February 2002, which documents show was the same month that Telkom officially opened bidding.

However, at the hearing a former Telkom employee stated that the operator had previously awarded a tender to a company that was in liquidation, with the proviso that an assessment was undertaken.

Gumede says Telkom awarded Gijima the contract because it knew the company intended to purchase the rest of ACT`s shareholding, as well as the equipment it needed to fulfil the contract. This was done by the time bidding took place, he says.

Despite numerous attempts, ITWeb was unable to reach Sterenborg either personally or through his legal representatives for comment on ACT`s settlement offer. However, ITWeb has obtained a copy of the document.