Kebble and the truth: it’s ’much worse than Enron’

Articles: Kebble and the truth: it’s ’much worse than Enron’

Posted by admin on Saturday, April 01, 2006 - 08:16 PM

THE massive extent of the fraud perpetrated by the late Brett Kebble has been revealed for the first time with Randgold & Exploration (R&E) CEO Peter Gray claiming the extent of the theft was “in some ways, far worse than Enron".
ROB ROSE

R&E on Friday night revealed findings from a forensic probe that forced it to complete rewrite its financials, laying bare a maze of “fictitious deals", forged documents and outright lies that helped Kebble siphon more than R1bn out of the gold mining company. Another forensic report into JCI is due for release next week, and according to Gray, “the extent and scale of the fraud in JCI is perhaps even worse than that at R&E". The reports yesterday showed that assets worth more than R1,2bn were sold since the last audited set of financial results without shareholder approval, and much of this money disappeared. The financials show a company pillaged by many of Kebble’s fraudulent deals and peppered with “fictitious profits" and false losses. For example, while the original accounts signed by Kebble and auditors PricewaterhouseCoopers claimed R&E made a profit of R177m in 2003, the revised figures show this was actually a loss of R159m — a R300m error. The financials confirmed that R&E’s entire shareholding in the London-listed Randgold Resources, now worth R2,3bn, was sold without shareholders permission, plundering the company’s assets — and most of this cash has since disappeared. Much of this money went to Kebble’s other company, JCI, after which it disappeared in a number of directions, including into Kebble’s pocket. Also, while R&E said it owned shares worth R1,8bn at the end of 2002, this was a lie, and the company’s investments were only R1,6bn. More than half these assets were sold on Kebble’s watch and now, R&E only holds shares worth R674m. Although preliminary drafts of the forensic reports — leaked to the media last week — said R&E’s auditors PricewaterhouseCoopers should face criminal sanction along with the board of the company, Gray said the company would not be releasing the report to the public. Instead, excerpts from the forensic report were included in the financial results, detailing the numerous frauds apparently strung together by the man who was gunned down in September last year by assailants that remain unidentified. “We will allow shareholders to view it at a later date, but we will not make it public," Gray said. The forensic reports are understood to name people who made off with millions belonging to shareholders, and the companies would also want to pursue these people. Gray and a team of auditors have been working flat out since last week to prepare R&E’s blood-splattered financials for release on Friday. While Kebble is understood to be the main party who put the shady deals together, there were others at the company who assisted him. “In some ways this was as bad as Enron, but in some ways, it was far worse than Enron," Gray said on Friday night. The obvious example is that brokers notes showing share purchases were blatantly forged, with people within JCI simply photocopying previous notes, erasing the details, and inserting new numbers. In addition, bank documents were also forged in that false bank balances were simply inserted on letterheads in an effort to present incorrect cash on hand. All of this was done to pull the wool over the auditors’ eyes and make them believe R&E was in a far better position than it really was. Now, even though the forensic reports finger certain individuals, such as the former directors of R&E, Gray says the company is forwarding all the reports “and the working papers" to the relevant prosecuting authority. Those in the immediate firing line would appear to be Brett’s father, Roger, who chaired and R&E JCI, former financial director Hennie Buitendag as well as the board members including audit committee chairwoman Brenda Madumise. Whether PricewaterhouseCoopers will face criminal prosecution for its role in signing off accounts that were materially incorrect remains to be seen. Gray says that was “this was a well-orchestrated fraud where those involved covered all the bases, and deliberately lied to the auditors". In one instance, R&E hid a R40,7m payment it made to a company called Kabusha by telling shareholders the money was for the “acquisition of mineral rights in Sierra Leone". Instead, R&E bought nothing but a pile of dirt in the west African country. Besides that, so-called transactions were put in place where R&E paid money, but never received any shares. As an example, one of R&E “empowerment deals” with a group led by ANC Youth League leaders Andile Nkuhlu, Songezo Mjongile and Lunga Ncwana was a “simulated transaction", where the company got no value despite forking out R268m. In that deal, R&E paid the R268m for a company called Viking Pony that supposedly held a bundle of shares in Anglo Platinum, Harmony and Afrikander Lease. But the forensic showed “fictitious investments in these companies had been created in the accounting records of Viking Pony, supported by false broker notes". It said “the non-existence of these shares was disguised in scrip lending agreements and by way of false broker confirmations and false legal agreements". Gray said R&E would now be making claims against a number of parties to reclaim some of this money. This includes a R1,1bn claim against JCI, as well as a claim against Kebble’s estate. Given that the value of Kebble’s estate was put at roughly R40m, and he already faces a R183m tax claim, it is unlikely that R&E will recover much.

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