About R500-million has gone missing from JCI Limited, chief executive Peter Gray said on Friday.
This emerged from the interim results of a six month forensic investigation into the affairs of the company.
Gray said claims were being formulated against the estate of former chief executive Brett Kebble and others who had benefited from the misappropriation of assets.
”The ”sheer audacity and scope of the fraud at JCI was breathtaking,” said Gray.
He succeeded Kebble who was shot dead behind the steering wheel of his car in September last year. An extensive police investigation into the killing is continuing.
It has since been reported that assets of Rand Gold & Exploration worth more than R2-billion were sold last year during Kebble’s tenure as chief executive of that company.
A forensic audit at the Rand Gold & Exploration and JCI, which Kebble quit in August, was also launched.
Gray said on Friday a ”sustained and comprehensive failure and manipulation of the company’s internal administrative, financial and management control over many years” had concealed a large number of suspect transactions.
The major misappropriations included R266-million in JCI shares issued for worthless transactions and payments of about R200-million to former directors and officers.
There was another R40-million of misappropriated Western Areas Limited shares belonging to JCI.
The group’s ”token treasury”, Consolidated Mining Management Services (CMMS), had processed cash and shares worth almost R3-billion in the three and a half years to September 2005.
Most of the revenue came from share sale transactions, some of which were illegitimate, and a significant portion of the proceeds were misspent or misappropriated.
”In fact, hundreds of millions of rands passed through CMMS, including funding for numerous suspect transactions for the benefit of certain directors and a number of related parties,” said Gray.
He was speaking after the release of the forensic audit results, the restated provisional results for the financial year ended March 2004, the long-delayed provisional results for the financial year ended March 2005, and the provisional results for the six months ended September 2005.
JCI is currently suspended from the JSE Limited for failing to report the 2005 results.
Gray said because of reputational problems, the company had difficulty raising debt-finance from financial institutions. In addition, JCI had no cash-generating assets.
This prompted the former directors to enter into complex financing structures using the assets of both JCI and R&E as collateral. When all else failed, liquid assets were sold without shareholder approval.
”The assets of JCI and related companies were managed in a most cavalier fashion. Almost 600-million JCI ordinary shares were issued for transactions that were without substance,” said Gray.
”These transactions were often for the benefit of certain directors or third parties. There was an orchestrated campaign of deceit but it was not sustainable and eventually the whole house of cards collapsed.”
Gray also referred to a transaction in which Bookmark was purported to be holding millions of Randgold Resources Limited (RRL) shares on behalf of JCI and Randgold & Exploration as part of a scrip lending arrangement.
This was a ”phantom transaction” created long after the sale of the RRL shares in an attempt to mislead auditors and shareholders, Gray said.
A forensic report by KPMG Forensics showed that between 2002 and 2005, the previous JCI directors and ”related parties” benefited directly and indirectly to the tune of more than R200-million.
”These arose from various transactions conducted through the company that were either irregular or not for fair value,” said Gray.
He said while the current JCI directors had not admitted a claim of about R1,1-billion by R&E, they had agreed to a meditation process by a specialist panel to avoid a lengthy and costly court action.
Should the recommendations of the mediators not be acceptable to shareholders, the matter would be escalated to arbitration.
Even if JCI were to settle the R&E claim, JCI would have net assets worth almost R1-billion, Gray said. – Sapa