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Jan 28, 2018 - settlement with McKinsey and Trillion. In this regard you sought to give the false impression that you were at best peripherally involved in these ...
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28 January 2018

ANNEXURE A

ANNEXURE A TO THE NOTICE OF A DISCIPLINARY HEARING: CHARGES

To:

Matshela Koko

It is alleged that in your position as Group Executive: Commercial & Technology, and / or Group Executive: Generation, and/ or interim Group Chief Executive (GCE) you committed serious acts of misconduct, alternatively gross negligence, in terms of the Eskom Disciplinary Code (the Code), which is destructive of the trust required for an ongoing employment relationship, involving inter alia the following:



Item 2.1 of the Code: contravening or failing to comply with Eskom's conditions of service, agreements with trade unions, operating regulations, security and / or safety measures, procedures, directives and applicable statutory requirements;



Item 2.28 of the Code: negligence in the performance of your duties;



Item 2.29 of the Code: committing an act or omissions detrimental to Eskom;



Item 2.30 of the Code: making any false statement or representation that relates to, or ensues from, your duties;



Item 2.35 of the Code: conducting yourself in a way that is reasonably regarded and unacceptable in terms of Eskom's values and ethics;



irregular and/or unlawful decision making;



breach of statutory obligations and in particular breach of the Public Finance Management Act 1 of 1999 (PFMA);



facilitating payments without there being a contractual basis for doing so;



irregular and wasteful expenditure;



exposing Eskom to financial risk and harm.

The misconduct referred to above occurred in relation to activities falling in your area of responsibility and accountability in the following circumstances:

1.

CHARGE 1 You breached your duties and responsibilities to Eskom in breach of items 2.1, and / or 2.28, and / or 2.29, and I or 2.30 and / or 2.35 of the Code in that you were not open. forthright and candid in your submissions to the Parliamentary Portfolio Committee in January 2018 and or attempted to knowingly mislead Parliament (at paragraphs 156 to 169) in relation to your role in securing Eskom's conclusion of various contractual arrangements with McKinsey and in particular payments made the Trillian and the settlement with McKinsey and Trillion. In this regard you sought to give the false impression that you were at best peripherally involved in these matters and had in fact "opposed" making payments to Trillian. In fact you sought and carried a direct mandate from the Board and Board Tender Committee in relation to the McKinsey contracts you were a central figure in the negotiation of the relevant contracts and in the settlement of the 2016 Contract matter in a manner which included various payments to Trillian. You also occupied a position of ultimate responsibility within Eskom and failed to account to Parliament for ( ;

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how you ensured that decisions that you "oppose" were in fact not implemented by the company you ~

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were at the helm of. In this regard your failure to make candid and honest submissions and to fully disclose your role caused continuing damage to EskQm's reputation and financial standing in the market place. 1.1

You deal with the 2015 Contract in paragraph 161 of your submissions, these submissions contain material non-disclosures. On 7 September 2015 you, together with Mr Anoj Singh. motivated to the Board of Directors for the conclusion of a contract with McKinsey (the 2015 Contract) on a sole source basis in circumstances where there were ongoing negotiations authorised by the Board Tender Committee (BTC) to conclude a contract with McKinsey which had been the subject of a number of intemal concems. The submission contained a number of omissions and misrepresentations. including that it referenced work that McKinsey had been doing at risk, as a basis for the sole source procurement, but failed to explain the impact of the McKinsey April 2015 proposal to Eskom. the negotiations for the 2016 Contract or the 'at risk' nature of the proposals made to Eskom in this context; there was no valid technical or business case for sole source procurement; the 2015 Contract had a significant potential to allow double counting by McKinsey (and Trillian/Regiments Capital) for work done on a time and cost basis under the 2015 Contract and a risk basis under the yet to be concluded 2016 Contract (the 2016 Contract). You and Mr Singh failed to make the Board of Directors aware of the ongoing negotiations regarding the 2016 Contract and failed to identify the risks that the 2015 Contract posed to Eskom.

1.2

You allege at paragraph 162 of your Parliamentary submission that arising from this 2015 Contract which you negotiated "Trillian apparently submitted an invoice directly to Eskom early in February 2016. I was not aware of it at the time". In fact, as above Tebogo Leballo the Chief Financial Officer of Trillian directly copied you on an e-mail to Anoj Singh attaching the "Trillian Invoice" in question on 3 February 2016. This clearly indicates that you had prior dealings with Trillian which you did not disclose to the Parliamentary Portfolio Committee and that the version you put to the Parliamentary Portfolio Committee regarding when you learned of the first Trillian invoice to Eskom is false.

1.3

You allege in your Parliamentary Submission that the 2016 Contract was approved, negotiated and concluded while you were on suspension in 2015 (see paragraph 160) and imply that you had little knowledge of the manner in which the contract was concluded. This is not true. In fact you played a key role in the negotiation and conclusion of this 2016 Contract. On 6 October 2015 you made a submission to the Board Tender Committee giving feedback on the negotiation and recommending the conclusion of the 2016 Contract, far from the "risk" basis of the contract being an understanding that you "achieved later" this was something that you personally negotiated. On 22 October 2015 the Board gave you a mandate to negotiate and conclude the agreement, you continued doing that until December 2015. You played a central role in discussions concerning whether National Treasury approvals were required for the conclusion of the 2016 Agreement. As such the whole of paragraph 160 amounts to an attempt to mislead and put a false version to Parliament.

1.4

In relation to the payment to Trillian in February 2016 you fail to disclose material facts regarding your personal involvement in decision-making. as well as fail to correctly characterise your responsibility for decisions taken while you occupied a roll as head of Eskom. You make the allegation at paragraph 167 that in February 2017 you were "confronted" with a request that direct payment be made t~ Trillian. You state at paragraph 167 that:

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"This occurred in terms of a memorandum, dated 17 February 2017, supported by amongst others Ms Daniels, that recommended and requested that I approve direct payment of the said sum [R460millionj to "McKinsey & Company and the BBBEE Partner". This document is document MMK 35 in the accompanying bundle. I declined to sign off on the document for the same reason as before -I could not authorise payment to an entity with whom Eskom had no contract." 1.5

The document you refer to at MMK 35 is a document to authorise the settlement of the McKinsey Trillian matter as a whole, and led to the payments to Trillian that you refer to. On 13 December 2016 the BTC authorized you, together with the Chief Rnancial Officer (Anoj Singh), Chief Procurement Officer (Edwin Mabelane) to negotiate and conclude that settlement process with McKinsey. The conclusion of the settlement process lead directly to payments to further Trillian. You failed to disclose this and failed to advise Parliament of the steps which you took to ensure that a settlement that you held a Board Tender Committee Mandate for would not be entered into as you did not agree with the terms of the settlement, altematively you failed to disclose to Parliament your dereliction of duty and your failure to properly discharge the mandate given to you by the Board on 13 December 2016.

2.

CHARGE 2: You breached your fiduciary and statutory duties and responsibilities as GCE of Eskom and committed misconduct in relation to the payment to Trillian in breach of items 2.1,2.28, 2.29, 2.30 and 2.35 of the code and lor facilitated payments without there being a contractual basis for doing so andlor failed to take any steps to prevent irregular and wasteful expenditure which was clearly contemplated andlorexposed Eskom to significant financial and reputational risk and harm and breached your obligations in terms of the PFMA and in particular section 57 of the PFMA in the following circumstances:

2.1

In your submission to the Parliamentary Portfolio Committee on January 2018 you fail to fully disclose your role in the settlement of the McKinsey Trillian matter which directly resulted in a total payment to McKinsey and Trillian of R1,593,155,413.01. You make the allegation that in February 2017 you were "confronted" with a request that direct payment be made to Trillian. You state at paragraph 167 that: "This occurred in terms of a memorandum, dated 17 February 2017, supported by amongst others Ms Daniels, that recommended and requested that 1 approve direct poyment of the said sum [R460millionj to "McKinsey & Company and the BBBEE Partner". This document is document MMK 35 in the accompanying bundle. 1declined to sign off on the document for the same reason as before -I could not authorise payment to an entity with whom Eskom had no contract. "

2.2

At the point in time that on the above version you were "confronted" with a request for a direct payment to Trillian, ie 17 February 2017, you were the Executive head of Eskom in the position of GCE. The document you refer to at MMK 35 is a document to authorise the settlement of the McKinsey Trillian matter as a whole, and lead to the payments to Trillian that you refer to. On 13 December 2016 the STC authorized you, together with the Chief Financial Officer (Anoj Singh), Chief Procurement Officer (Edwin Mabelane) to negotiate and conclude that settlement process with McKinsey.

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2.2.1

The settlement of the McKinsey matter was said to be for an additional payment of approximately R460million in February 2017 payable to McKinsey and Trillion and communicated to McKinsey by Mr Mabelane on 16 February 2017 but was the authorization for all payments made previously and still to be made to McKinsey and Trillion. The settlement figure was paid proportionally to McKinsey and Trillion.

2.2.2

The Oliver Wyman Marsh (OWM) Final Report received by Eskom on 15 December 2016 (the OWM Final Report) did not support settlement for this amount and advised that this amount required further interrogation and also advises that Eskom should establish whether there was a legal basis for any such payment. It also questions the basis for making any payments to Trillion.

2.2.3

Despite OWM's statements in the OWM Final Report regarding the need for legal review it appears that the matter was settled without a comprehensive legal review and in the face of the legal advice received up to that point.

2.2.4

The settlement letter sent to McKinsey stated that an amount of "R937,630,000.00" had been paid previously, falsely understates the amounts actually paid out up to 16 February 2017 to McKinsey and Trillian by an amount of approximately RI31,200,OOO.00.

2.3

In February 2017 the question of payments by Eskom to Gupta linked Trillian was already in the public domain and Eskom had provided the Minister of Public Enterprises with a denial that any such payments had been made. An investigation by Mr Budlender SC was underway into the payments.

2.4

You as the GCE would have been directly responsible to the Board of Directors and the Minister for Eskom's public position on these matters and were directly responsible for the settlement pursuant to the mandate given to you by the Board in December 2016. You, on the above version understood the reference to a "BBBEE partner" in Mr Mabelane's document to be a reference to Trillian. Eskom was on record at this point as saying it had no contract with Trillian and had made no payments to it. Given your contention that you did not in fact support a payment to Trillion, given that you were "confronted" with a document which clear1y indicated to you that payments to Trillian had been made previously by Eskom and would be made again and given that such payment was made sho'rtly thereafter by your subordinates, you were at best grossly negligent in fulfilling the mandate given to you by the Board on 13 December 2016 and in the performance of your duties as GCE Eskom by not taking steps to stop the settlement of the matter and the unlawful payment and in not fully investigating the circumstances that could

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led to a request that you contend you understood

to have been unlawful. This attitude allowed a criminal scheme to defraud Eskom to continue, resulted directly in further significant unauthorised and wasteful expenditure by Eskom and also directly caused significant damage to the public image and reputation of Eskom which it was your direct responsibility to protect. 2.5

This constitutes a serious breach of your fiduciary duties to Eskom. a breach of the PFMA and a dereliction of your duties as an Executive Head of Eskom.

3.

CHARGE 3: You breached your duties and responsibilities as Executive and / or GCE of Eskom and/or acted in a conflict of interest with your position and/or received a benefit from a third party

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circumstances which compromised your position as Executive and / or GCE of Eskom and/or acted in contravention of items 2.1,2.28,2.29,2.30 and 2.35 of the code and/or item 3 of the Eskom Code of Ethics procedure and/or item 2.2.16 of the conflict of interests policy and/or caused harm and damage to Eskom's reputation in the following circumstances: 3.1

During your tenure as Executive and / or GCE you failed to declare trips to Dubai paid for by a third party and associate of the Gupta family, including during December 2015 and / or January 2016, and failed to record these on the Business Courtesies Register maintained in terms of section 3.1.13 of the Code of Ethics Procedure.

3.2

This breach of your duties particularly when viewed in light of your position of trust and responsibility within Eskom has caused damage to Eskom's reputation. This is a breach of (amongst others) item 3.1 A of the Eskom Code of Ethics Procedure.

3.3

This also places you in a position of conflict between your personal interests and the interests of Eskom which may have been engaging in business relationships with companies associated with the parties from whom you are alleged to have received a benefit. This amounts to (amongst other things) a serious breach of your fiduciary duties to Eskom and breaches 2.2.16 of the Conflict of Interests Policy in terms of which directors and employees are required to refuse business courtesies that could create the impression that their judgment or the judgment of others could be affected if these courtesies are accepted.

4.

CHARGE 4: You breached your duties and responsibilities as Executive and and/or acted in a conflict of

interest with your position and/or in breach of Item 2.35 of the Code you conducted yourself in a way that is unacceptable in terms of Eskom's values and ethics and in particular in breach of clause 3.6 of the Code of Ethics Procedure prohibiting the distribution of confidential Eskom documents to a third party. in that. in November 2015 you distributed (and failed to take steps to prevent such distribution using your personal e-mail account) confidential Eskom documents to persons associated with the Gupta family and sought to do this in a disguised manner from your private email account. This amounts to (amongst other things) a serious breach of your fiduciary duties to Eskom. 5.

Eskom reserves the right to supplement and amend these charges.

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