A+truly+momentous+occasion,+Barry+Sergeant,+Moneyweb

Moneyweb, 27 April 2007
=A truly momentous occasion=

//The exquisite lightness of examining the late Brett Kebble’s final desperate big deal, with Investec.//




 * Barry Sergeant**

South Africa this week witnessed the start of one of the most important commercial and financial legal cases in its history, for those who were there. The matter at hand kicked off at 10h00 on Monday, in the Johannesburg High Court, with Judge Percy Blieden on the bench.

Legal counsel were to argue whether minority JCI shareholders, including Letšeng Diamonds and Trinity Asset Management, have standing in court - //locus standi// - to sue Investec and JCI. The basic matter at stake is a R500m "profit sharing fee" that JCI purportedly owes Investec.

The underlying facts trace most conveniently to August 2005, when JCI's old board, led by the late Brett Kebble, was booted out and replaced by a new one overpopulated by representatives of Investec, David Nurek, Donn Jowell and Peter Thomas. The three were given effective control of the JCI board, apparently in return for Investec granting JCI a "rescue package". The latter comprised normal commercial loans, but tagged on was also - what is now - a monster "profit sharing fee".

There are fundamental issues at stake in this case. Beyond the eye-popping amounts of money, corporate governance is under the microscope. Not only is Nurek chairman of JCI, he is also chairman of Randgold & Exploration (R&E), which has repeatedly found convenient tactics to delay prosecuting claims of up to R8bn against JCI.

For the forensically minded, this is one mother of a court case. Fundamental issues of law are under the microscope, not least the prevailing influence of an 1843 English court case, //Foss vs Harbottle.// This held that in any action where a company has been allegedly wronged, the proper claimant is the company itself. As such, do JCI's minority shareholders have a case?

Present in the court arguing and supporting the case for the various parties were some of the country's leading legal minds. Michael Kuper, senior counsel (SC), leading for Letšeng Diamonds, once again displayed his formidable genius, while his main opponent, Fanie Cilliers SC, representing Investec, displayed his charm, eloquence and rapier intelligence.

These guys are no slouches: the underlying papers in the Letšeng Diamonds case alone run to around 3 500 pages. The papers contain tantalising details about Kebble's final - he was murdered within a month - formal "rouge" act in the selling out of JCI in a desperate bid to cover his irrevocable defalcations. Equally exquisite details are to be found about the conduct of Kebble's willing counter-party, Investec.

To take just one example, the infamous minutes of the February 23 2006 JCI board meeting have come to light. According to this document, it was in 2003 that George Poole, an official at a number of Kebble entities, was given a package chock full of Randgold Resources (RRL) shares by Hennie Buitendag, the ubiquitous Kebble financial director.

Poole, having waited for instructions from Kebble, was told that the shares would be sold from time to time to fund JCI and R&E. Both entities were, naturally as ever, cash starved. Starting in 2003, the shares were sold via the Consolidated Investments account at T-Sec, a stockbroker.

For "audit" purposes, the Consolidated Investments account at T-Sec was treated, truly astonishingly as it may seem, as CMMS, a 98% subsidiary of JCI. Alibi, another Kebble-controlled account at T-Sec, was also used to launder RRL shares into cash. The sale of RRL shares in this manner, via Consolidated Investments and Alibi, continued up until July 2005, a month before Kebble was ousted from JCI, R&E and Western Areas.

In this manner, just under 11m of the RRL shares were disposed of. Over the period as a whole, roughly R1bn was raised, of which about R300m went back into R&E. Peter Gray, who took over from Kebble as CEO of R&E and JCI in August 2005, moved from T-Sec, where he had been CEO from November 2002.

Staying in court across three days of argument was tough enough. My notes exhausted the ink from a new Waterman, kept for a momentous occasion such as this. The dramatic, benchmark events that unfolded during the week in the High Court will have ramifications for months, if not years.

The privilege of having been present in Judge Blieden's court this week marks a high point. For a number of lawyers present in that court, the case could well represent pinnacles of long, industrious and illustrious legal careers. What happened in the court cannot, and will not, ever be repeated. It was recorded by one pen, and one alone.


 * From: http://www.moneyweb.co.za/mw/view/mw/en/page84?oid=88323&sn=Detail**

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