Insider IT Procurement Fraud at South African Operator May Have Been Worth over $35mn

Four IT professionals accused of using inflated invoices to defraud South African mobile operator Cell C will have to wait until October for their trial but new revelations suggest the value of their crimes may be much higher than previously reported.

When Mohamed Ismal Adamjee, formerly the Executive Head of IT at Cell C, was arrested in January, the police originally reported that his fraud had caused losses of ZAR64mn (USD4.5mn) to his employer. In February they arrested Adriaan Pillay, Adamjee’s subordinate at Cell C, who was alleged to have padded invoices issued by businesses that Pillay controlled before giving Adamjee a cut of the proceeds. By then the estimated loss had risen to ZAR130mn (USD9mn). Two other alleged accomplices have since been arrested: Lufuno Nevhutalu, former Chief Executive of tech business Cornastone, and Manuel Teixeira, who was Cornastone’s Sales Director. Cornastone was a contractor that regularly invoiced Cell C during the eight years when Adamjee was in a position to approve them. Documents shown to Mail & Guardian journalists in advance of a September court hearing stated that the Adamjee-Pillay-Nevhutalu-Teixeira ‘syndicate’ had collectively scammed Cell C out of ZAR357.3mn (USD25mn).

The latest hearing adjourned the case to October 15 to allow more time for evidence to be gathered. It seems the police believe the additional evidence will show the total amount stolen by the syndicate was even higher. An unnamed source told the Mail & Guardian that…

…it looks as if the probe will reach above R500-million [USD34.9mn] as more transactions are being unearthed

Cell C’s Internal Audit team was given credit for identifying the anomalies that led to these arrests but that should not disguise the fact that Adamjee and his cohort are said to have executed 83 different fraudulent transactions over an 8-year period. This represents a severe failing by managers and auditors who should have noticed that at least some of the invoices were unreasonably high compared to the prices that Cell C could have obtained elsewhere. The overriding impression is that Cell C lost control of its costs and was too trusting of staff, or that perhaps this fraud was symptomatic of more extensive corruption. Repeated losses have driven Cell C to the brink of collapse on more than one occasion but it seems the latest management team are finally turning around its fortunes, having recently announced a profit for the first time in years.

The Mail & Guardian’s reporting of the Cell C fraud can be found here.

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.