Former LeisureNet boss Peter Gardener on Monday conceded that he should have disclosed his interest in a German gym operation that LeisureNet bought out.
Gardener was being cross-examined in the Cape High Court on issues of corporate governance in LeisureNet and its previous incarnation, the Health and Racquet Club Group, after giving evidence in chief over three days last week.
He and his fellow accused, Rod Mitchell, were joint chief executives and board members of LeisureNet, which was provisionally liquidated in 2000.
Gardener told advocate Rudi van Rooyen, for the state, that it was really only after businessman Joe Pamensky joined the board in 1995 that ”things were put into a more formal structure” when it came to the issue of board members’ disclosure on ”related party” transactions.
”Were you aware that the Companies Act in fact makes disclosure obligatory?” asked acting Judge Dirk Uijs.
”Yes,” replied Gardener.
Gardener testified last week that after LeisureNet granted a German gym franchise to businessman Hans Moser, through a verbal agreement with Moser he and Mitchell each acquired a 20% share in the operation in return for their expertise.
LeisureNet later entered into a joint venture with Moser’s company Dalmore, then bought out Dalmore’s share, a deal that netted Gardener and Mitchell two million Deutsche Marks each.
Van Rooyen questioned Gardener on Monday on a set of board minutes from May 1999, which listed on the agenda the approval of an internal audit charter meant to ensure the integrity of the group’s financial statements, the recently concluded Dalmore deal and then an opportunity for disclosure of interests.
Asked why he did not make a disclosure in the German operation then, Gardener said: ”At that meeting as far as I was concerned it was a done deal. The results of the German deal were noted. We didn’t discuss it at length.”
He and Mitchell had negotiated a very favourable deal for LeisureNet, he said. ”Further than that it didn’t cross my mind.”
Asked whether, on reflection, he thought he should have disclosed his interest, he replied: ”Yes.”
But when Van Rooyen put it to him that he knew even then that he should have made the disclosure, Gardener said: ”At the meeting it didn’t even cross my mind.”
Gardener said that when Krok Brothers Holdings took a 40% share in LeisureNet in the early 1990s, he and Mitchell were asked to sign a restraint of trade agreement.
LeisureNet paid him R600 000 for signing the agreement.
When he was questioned by Van Rooyen on correspondence with the South African Revenue Service (Sars), it emerged that he did not initially declare the payment in his annual tax return.
However, he later told Sars it should have been declared, as a capital amount of a non-taxable nature.
Mitchell also received a restraint of trade payout.
The two men have pleaded not guilty to multiple charges of fraud, money laundering and contraventions of the Companies Act.
LeisureNet was the owner of the Health and Racquet Club chain of fitness centres. — Sapa