Staff of Gupta-Linked S. Africa Auditor Nkonki Fight Closure

(Bloomberg) -- Employees at South African audit firm Nkonki Inc. applied to a Pretoria court to block the company’s liquidation and have it put into administration instead so there’s a chance the business can be rescued, according to a court filing.

The auditing profession is under pressure in South Africa with Nkonki and the local unit of KPMG LLP losing clients after being linked to the politically connected Gupta family. Deloitte & Touche LLP is also under scrutiny for having audited scandal-ridden South African retailer Steinhoff International Holdings NV. Last month South Africa’s Auditor-General ended its contract with Nkonki following reports that a management buyout, led by the firm’s former Chief Executive Officer Mitesh Patel, was funded by an associate of the Gupta family.

The group of 102 employees said in the court papers that they hadn’t understood the liquidation process when it was proposed at an urgent company meeting on April 23. Employees were advised to nominate a liquidator that same day, according to the documents. The staff have now asked that the court set aside the liquidator’s appointment and allow the firm to go into business rescue, South Africa’s equivalent of bankruptcy protection.

“The business rescue process would be a sensible approach to save our employment and to save the company,” Nkululeko Khaba, a representative for the Nkonki staff, said in the papers. The court was also asked to scrutinize managements’ possible motives for choosing voluntary liquidation, according to the documents.

Nkonki CEO Patel resigned in April following reports by investigative journalism unit amaBhungane that Gupta associate Salim Essa had funded his management buyout. The Guptas, who are associates of former President Jacob Zuma, have been accused of using their political connections to win state contracts and influence government appointments. Zuma and the Guptas deny wrongdoing.

To contact the reporter on this story: Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net.

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Renee Bonorchis, John Bowker

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