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Harry Cassin
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Double declination ends Net1 FCPA probe

Net 1 UEPS Technologies said in a securities filing Thursday that the DOJ has closed its investigation of possible violations of the Foreign Corrupt Practices Act.

The DOJ investigation had apparently continued since the company received an SEC declination (pdf) in mid 2015 for the same matter.

The two declinations mean the U.S. probe has ended.

South Africa-based Net1 said in December 2012 that the SEC, DOJ, and FBI were investigating payments to South African government officials to win a contract with the Social Security Agency.

The investigation started after a Barclays unit in Africa lost a bid and complained to the DOJ about possible corruption in the public tender, Net1 said.

Net1 provides payment processing services. It does business in South Africa, Korea, and Europe, among others.

The U.S. investigation was considered unusual because it involved Net1’s payments in South Africa, to South Africans, working for the South African government.

But Net1 is an “issuer” under the Foreign Corrupt Practices Act. It trades on the Nasdaq Global Select Market under the symbol UEPS.

*     *     *

Here’s Net 1 UEPS Technologies, Inc.’s full FCPA disclosure from its Form 8-K filed with the SEC on July 27, 2017:

Net1 Announces Closure of FCPA Investigation by U.S. Department of Justice

Johannesburg, July 27, 2017 – Net 1 UEPS Technologies, Inc. (“Net1” or the “Company”) (NasdaqGS: UEPS; JSE: NT1) today announced that its legal counsel has received a letter from the Department of Justice, Criminal Division, Fraud Section (“DOJ”), advising the Company that the DOJ has closed its investigation concerning possible violations of the Foreign Corrupt Practices Act (“FCPA”). The letter received from the DOJ is [here, pdf].

The DOJ investigation commenced in November 2012, following the award of the SASSA national contract to the Company in January 2012. The investigation was initiated largely as a result of one of the losing bidders for the contract, Barclays Africa’s subsidiary AllPay Consolidated Investment Holdings (Pty) Ltd (“AllPay”), referring unsubstantiated South African press articles to the DOJ, alleging or implying that the SASSA tender process was tainted by corruption involving the Company’s subsidiary, Cash Paymaster Services Proprietary Limited. These actions resulted in the DOJ and United States Securities and Exchange Commission (“SEC”) announcing investigations into alleged FCPA and disclosures violations on November 30, 2012.

On June 8, 2015, the Company received a letter from the SEC stating that it had concluded its investigation and that it did not intend to recommend an enforcement action against the Company. The receipt of the letter from the DOJ yesterday therefore concludes the United States government’s investigation into this matter which commenced in 2012.

On February 14, 2013, the Company filed an application pursuant to Section 34 of the South African Prevention of Corrupt Activities Act in South Africa with the South African Police Service to investigate the allegations of corruption that were contained in certain newspaper reports. Section 34 deals with the reporting of suspected fraud, theft, extortion and forgery. In November, 2015, the Company received a written notice from the South African Police Service’s Directorate for Priority Crime Investigation (“the Hawks”), stating this case was investigated and the prosecutors assigned to the case declined to prosecute these matters. The Hawks closed the investigations in November 2015.

As a result of the U.S. government investigations initiated in 2012, on December 24, 2013, the Company, its chief executive officer and its chief financial officer were named as defendants in a purported class action lawsuit filed in the United States District Court for the Southern District of New York alleging violations of the federal securities laws. The lawsuit was brought on behalf of a purported shareholder of Net1 and all other similarly situated shareholders who purchased our securities between August 27, 2009 and November 27, 2013. The U.S. District Court dismissed this class action litigation in September 2015.

“We co-operated with all government agencies and other regulatory bodies regarding these allegations as well as the extensive investigations that followed over the last four and half years,” said Mr. Herman G. Kotzé, chief executive officer of Net1. “The closure of the DOJ investigation concludes a lengthy, arduous and costly exercise involving government agencies in the United States and South Africa, including the DOJ, SEC and the Hawks. This letter from the DOJ is the final step to clear our name, and is consistent with the total absence of any findings of irregularities against us by any United States or South African court or regulator, the SEC or the Hawks. We will continue to focus our energies and resources on the expansion of our businesses in South Africa and internationally,” he concluded.

Access to Net1 filings provided courtesy of FCPA Tracker.


Richard L. Cassin is the publisher and editor of the FCPA Blog.

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