LeisureNet accused Rodney Mitchell assigned completely arbitrary values to the work in progress of an architectural firm the LeisureNet group was buying out, the Cape High Court heard on Wednesday.
Architect Dawid Rabie, formerly majority shareholder in the firm Keystone was the first witness called in the trial of Mitchell, his joint chief executive at the now defunct LeisureNet Peter Gardener, their business associate Hans Moser, and Mitchell’s wife Suzanne.
As he went into the witness box, prosecutor Bruce Morrison told acting judge Dirk Uijs that Rabie would be asked to answer questions that could incriminate him in fraud, money laundering and tax offences.
Uijs told Rabie that if he answered all the questions frankly and honestly, he would grant him indemnity from prosecution.
Rabie told the court that the architectural firm Keystone was set up with him holding 50,1% of the shares, and LeisureNet — for which it did the bulk of its work designing health clubs — the rest.
When it was decided in 1999 that LeisureNet should buy up the remaining shares, and that he would move over to the group and draw a salary, Keystone was involved in a number of ”work in progress” projects, most of them overseas.
He had expected to be paid out for the value of these projects in the takeover.
Rabie said he sat with Mitchell to assess which projects were viable and should be on the work-in-progress list.
”And at the same time Mitchell would pen in what he considered the value of the projects. Arbitrary,” Rabie said.
The list ended up with 69 projects, valued by Mitchell at R5,7-million.
Rabie said it was in fact possible to work out exactly how much a project was worth by looking at the contract to determine how far advanced it was and what payments were contractually due.
Asked by Morrison what he felt about what Mitchell was doing, Rabie said: ”It frustrated me because I believed a lot of the value was not being unlocked.”
However the issue had not really been open to discussion, he said.
”It got to the point, ‘that’s the value, that’s how it’s going to stay’,” he said.
He had since carried out a proper scientific analysis of the projects, and by his ”conservative” estimate, they had been worth R12,8-million.
The state alleges Mitchell and Gardener entered into an under-the-table deal to siphon off money from LeisureNet by charging it for the Keystone work in progress. – Sapa