Rapacious, financially illiterate lawyers clean out Randgold’s war chest.
On numerous previous occasions Noseweek has reported on how Randgold & Exploration Company (Randgold), a simple investment holding company listed on the JSE and formerly on the Nasdaq in New York, was pillaged of billions of rands over 1999 to 2005 by JCI (Brett Kebble’s mothership), without detection by the then board of directors, who were wilfully blind to the destruction in value, and its careless independent auditors, who had easily been hoodwinked.
Once discovered, Randgold – had it been under independent control – would surely, as a matter of extreme urgency, have completed a forensic investigation and then immediately issued summons against the thief (JCI), the recipients of the proceeds of the thefts and other wrongdoers. If JCI was unable to pay the claims, it would have been liquidated and an inquiry in terms of Section 417 of the Companies Act would have ensued.
The liquidation of JCI would have been too ghastly to contemplate for Investec because it had received and sold 5.46 million Randgold Resources shares that JCI had stolen from Randgold and the bank needed JCI to carry on funding Western Areas. Hence it provided a R460 million loan to JCI in August 2005. Obviously the loan could have been made to Randgold, but that would not have buried the claims against Investec, arising from the receipt of the stolen shares.
The Randgold forensic team, which was appointed with a limited mandate by way of an unsigned appointment letter, completed their initial investigations between 14 October 2005 and 14 March 2006. In June 2006 the forensic team formulated Randgold’s claims against JCI for presentation to the mediators who had been appointed in April 2006. This provided Randgold’s management and the legal team with a complete foundation to pursue litigation against JCI, the recipients of the proceeds of the thefts and other wrongdoers.
The cornerstone action, the issuing of the summons against JCI, was never taken, albeit that it was prepared two years prior to August 2008 – being the date when the claims would prescribe if no summons had been issued.
In 2005 Investec reconstituted and thereby took control of the boards of both the thief (JCI) and the victim (Randgold) – by appointing an Investec executive as chairman of both companies, Kebble’s stockbroker as CEO of both companies, and Western Areas’ former FD as FD of both companies. This conflicted control persisted until July 2008 by which time Randgold’s efforts to recover its damages had been irretrievably compromised.
During this period, when Randgold’s board was controlled by Investec appointees, it not only agreed to an absurd pseudo mediation process (how could Randgold mediate with the party that had robbed it almost into extinction?) but proposed an absurd merger between Randgold and JCI, whereby the insolvent thief (JCI) would walk away with 22% of the enlarged Randgold. The mediators wrote on 27 February 2007: “Having considered the various Randgold claims and taking account the areas of agreement and disagreement in relation to the underlying cash flows, it appears to us that the value of sustainable Randgold claims might well exceed the net asset value of JCI.” In plain speach: JCI was bust.
In March 2008 whilst the Randgold board was still controlled by Investec, and thereafter until April 2014, the Randgold legal team have pursued the deep pockets of the insurers of the hoodwinked auditors of Randgold. The cheek of this is almost incomprehensible considering the claims Randgold’s board has failed to pursue, but it did generate millions in fees for the very nasty lawyers, whose sole objective appears to be to transfer the remaining resources of Randgold to their own bank accounts.
During the period when Randgold’s board was controlled by Investec appointees no summonses were issued against the recipients. Shortly after the resignation in July 2008 of the then-chairman and the then-CEO of Randgold, summonses were issued, just in time to interrupt prescription, against Investec and Western Areas – but not against JCI which clearly was royal game.
The absurd merger proposal failed in April 2009, some three years after Randgold’s forensic reports had become available.
Randgold’s legal team have spent in excess of ten years at huge cost investigating what had happened to Randgold over 1999 to 2005. This after Randgold’s forensic team completed their investigations by March 2006, the findings of which have never been disputed, and had thus provided the legal team with a complete foundation to pursue litigation against JCI, the recipients of the proceeds of the thefts and other wrongdoers.
Overreaching lawyers in South Africa have a penchant for duplicating preparation time for litigation primarily due to (1) rabid greed, and (2) an inability to grasp even the most simple financial transactions, let alone a complex maze of irregular/fraudulent transactions. They are helpless without the support of Chartered Accountants who they actually despise and consider bottom feeders.
A significant portion of the 2008 legal and forensic fees (R30m that year) was spent on preparing huge claims against the thief (JCI) that never saw the light of day as no summons was ever issued. The unconverted-to-a-summons-claims against JCI were settled in 2010 for an amount determined by what JCI could pay without going insolvent. The settlement was for less than 4% of the amount claimed!
Randgold’s most valuable claim, that against Gold Fields Operations (formerly Western Areas), has been slow-tracked and was only resuscitated in April 2014 after the multi-billion-rand claim against PricewaterhouseCoopers (PwC) issued six years earlier in March 2008, had been settled for R150 million. However, as part of the 2010 settlement between JCI and Randgold an indemnity was issued to protect JCI, which has reduced the value of Randgold’s claim against Gold Fields Operations significantly if not completely.
The other valuable claims – those against Investec and Investec UK – were squashed in 2010 as part of an unfavourable JCI settlement that triggered bonuses to Randgold’s CEO and FD.
Over the period 2005 to 2016 four executives have received compensation totalling R148m from JCI and Randgold: the conflicted Peter Gray R59m (from JCI over 2005 to 2016 and from Randgold over 2005 to 2008), Marais Steyn R42m (from Randgold over 2006 to 2016), Les Maxwell R28m (from JCI over 2008 to 2013) and the conflicted Chris Lamprecht R19m (over 2005 and 2006, from both JCI and Randgold). In spite of this exorbitant remuneration, the shareholders of the victim and the thief have been left high and dry.
Massive frauds against the JSE and the Nasdaq have not been pursued by either the Financial Services Board (FSB) or the Securities Exchange Commission (SEC) in the USA. The toothless FSB in South Africa has simply buried the matter, probably due to a combination of sheer incompetence and political machinations. The SEC chairman simply said it was primarily a local (South African) matter and that the authorities in SA should deal with it. The SA stockbroking member of the JSE that facilitated the massive sale of a major part of Randgold’s valuable portfolio of listed assets with the full knowledge of the fraud being committed, wasn’t even censured by the FSB or the JSE. Inexplicably they continued to be a member of the JSE.
The legal fees of R152m spent by Randgold to date in pursuing incidental “wrongdoers” could have (and should have) been more wisely expended on pursuing the true wrongdoers, including liquidating JCI in 2006.
A significant part of the fortune spent on legal and forensic expenses over 2006 to 2016 by both Randgold (R354m) and JCI (R141m), would probably have been saved. The cost of the mediators, estimated at more than R10m would also not have been incurred. Not only would the liquidation of JCI have resulted in huge cost savings, it would also have ensured the equitable treatment of Randgold. The processes followed resulted in a huge transfer of value from Randgold to JCI, Investec and Western Areas.
Randgold has since settled with JCI and Investec on hugely unfavourable terms and has effectively neutered its multi-billion-rand claims against Western Areas by issuing an indemnity (to JCI).
JCI, a once venerable mining house, is today a non-operational company with dirty hands. It is without a doubt the most corrupt company in the private sector of South Africa and should simply not be in existence today. It is incapable of producing audited group financial statements, having not published full annual financial statements after 2010. It simply exists to protect the true wrongdoers in this saga, fully supported by the blood-sucking legal fraternity.
Is this how business, at the highest level, operates in South Africa today? And we complain about a criminal government?
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