The two former joint chief executives of LeisureNet went to ”great lengths” to cover up what the state claims is an unlawful kickback on a deal concluded by the company, the Cape High Court has been told.
The submission was made by the prosecution team in heads of argument handed in on Tuesday as it began its closing submissions in the trial of Peter Gardener and Rod Mitchell.
The two men face multiple charges of fraud, money laundering and contraventions of the Companies Act.
Part of the case against them revolves around on an amount of $254 000 they allegedly demanded as a kickback from architect Dawid Rabie after LeisureNet bought out his majority share in an architectural practice named Keystone in 1999.
The state said in its heads that Mitchell and Gardener went to great lengths both to cover up their involvement in the transaction and to mislead other parties about it.
”Each action or omission in this regard can be regarded as part of a scheme of profit-making undertaken by the accused relating to the protection of the alleged ill-gotten gains,” the state said.
The money was transferred to offshore trusts set up by the two men, but over which they claimed they had no control and of which they and their families were not beneficiaries.
However, the prosecution said, it was clear from the evidence of representatives of investment houses that the men did benefit.
The court had heard evidence that they entered into contracts in terms of which the whole of their offshore salaries were paid to the trust companies.
”As astute businessmen it is highly unlikely that the accused would have done this if they had not anticipated they would have had use of the money,” the state said.
On the nature of the transaction itself, the state said even the most unsophisticated layman would know it was not right for the CEOs to receive two thirds of the payment for an asset their company had bought without the knowledge of the company.
”To think otherwise would mean that it was perfectly permissible for the CEOs to take a percentage of whatever deal LeisureNet entered into as long as the price itself was reasonable,” the state argued.
”Thus if new gym equipment was required the CEOs would be able, once they have driven a hard bargain, to insist on a further cut, but this time paid to themselves.
”Or if a new employee is hired the CEOs would be entitled to take a percentage of his first few months salary in return for awarding the job.”
Gardener and Mitchell were discharged on a count of fraud related to the Keystone transaction after the close of the state case in August when acting Judge Dirk Uijs ruled that their agreement with Rabie had had no effect on the company’s decision-making process.
Uijs said, however, they still had to answer to the alternatives to the fraud charge, of contravening the Companies Act by failing as directors of the LeisureNet group to disclose their interest, and of theft.
LeisureNet, which operated the Health and Racquet Club, was liquidated in 2000 with liabilities of R1,2-billion and assets of only R302-million.
Gardener and Mitchell’s two co-accused, business associate Johann Moser, and Mitchell’s wife and financial manager Suzanne, were earlier discharged on money laundering charges, the only ones they faced. -‒ Sapa