FEAR & LOATHINGCorrupting a nation |
Nobody listened when Brett Kebble's menacing evil oozed out back in 1997.
JOHANNESBURG - Brett Kebble threatened me twice. The second time was when a summons, dated September 8 1997, arrived on my desk. I was being sued, in my personal capacity, by a pack of wannabe mining magnates, designated on the court papers as PETER HAMILTON FLACK, DENNIS MARK BRISTOW, RICHARD REGINALD DE VILLERS, ROGER AINSLEY RALPH KEBBLE, and, of course, ROGER BRETT KEBBLE.
Each was cited as a director of Randgold & Exploration (R&E) and Randgold Resources; each wanted R500 000 from me. I was being sued for alleged defamation. No doubt: this pack of fine individuals wanted me run out of town; better still, out of the country, and then off the edge of the world. It seemed that to these people, the world was flat.
I was immediately in touch with people who worked, in London, for Tiny Rowland, founder of Lonrho. Rowland knew how to fight anyone, even testosterone-pumped suits like these. In mid-1997 Rowland heard that the "old" JCI (JSE:JCD) might be interested in buying Anglo American (JSE:AGL)'s stake in Lonrho. At the time, Mzi Khumalo was the nominal head of JCI, but Brett Kebble's name was popping up all over the place. Competition authorities in Europe had told Anglo American to shed its Lonrho stake on the basis that a combined unit would have too much power over mining and pricing of platinum-group metals (PGMs).
Acting on part of the advice from Rowland's people, I offered news of the summons to Andi Spicer, then a journalist at Business Report. In his article published on October 9 1997, he noted that according to the summons, my original draft report, on Randgold Resources, had been sent to Standard Corporate Merchant Bank, Coronation Asset Management, Investec (JSE:INL) Asset Management, Old Mutual (JSE:OML), Liberty Life, Sanlam (JSE:SLM), Board of Executors, Hudson Sloane (New York) and Mercury Asset Management (UK). Only two of those names were correct.
Getting the summons into the public domain was, simply, the best insurance in the world. My next step was to see Philip Wessels, MD of BoE securities, where I was working, with an attorney Rowland's people had referred me to. The attorney was right next to me, like my shadow, when I arrived, unannounced, in Wessels's office, with the summons in hand. I had been deeply suspicious, but not paranoid, over BoE's possible role in this stinking affair. Whether I was right or wrong about that, Wessels agreed quickly enough that BoE would cover all my legal costs - after all, they had so-called "fidelity" insurance for just such contingencies.
My lawyers, which included Bobby Levin, a senior counsel, had great difficulty understanding why I was being sued at all, which is quite possibly why, one day before the trial was scheduled to start in 1998, the plaintiffs proposed an out-of-court settlement. I accepted, on condition that the agreement contained not even a hint or suggestion that I had apologised or backed down. If these guys had followed through with the court case, they would had their proverbial heads kicked right in, and would, no doubt, have been ejected from the courthouse as loiterers and common scoundrels.
I was later told that Brett Kebble had voluntarily agreed to pay my legal costs, on condition that Flack was never told. I left it to my lawyers to decide on the ethics of accepting Kebble's offer, or not. By that stage my attorney was Cecil Wulfson, now at Edward Nathan Sonnenberg. I had been in law school with him at the University of the Witwatersrand. He has always been bright, and tough enough.
A number of people asked why I did not counter sue. My response was always the same: "Give these guys enough rope, and they will hang themselves".
When things had settled down a little after the summons had arrived, I travelled overseas. After lunch, on a calm day, with Rowland and his wife Josie at their country home in the English countryside, I was given a crash course in how to deal with the special classification of human beings that try to silence certain people, for all time. Kebble had conducted an ominous "dry run" against me, a precursor for the more physical things that he would do in later years to try and silence people. In the court case that never happened, he also showed what kind of a coward he really was. For his part, Rowland had seen straight through Brett Kebble and made it clear that he would back my case to the hilt.
Brett Kebble's first really big heist dates to October 28 1996, when R&E, listed in Johannesburg and on the Nasdaq in the US, announced details of the acquisition of BHP Minerals Mali, from the-then BHP, a big Australian resources house. BHP would later merge with Billiton, to form the world's biggest diversified resources group.
My analysis of the 1996 transaction placed me in direct conflict with the directors of R&E, led by Peter Flack, Brett, his father Roger, and Mark Bristow. My analysis, roundly condemned by these fine gentlemen at the time, was a huge threat to Kebble. I had sounded the foghorn: if men of stature and influence had heeded rather than ignored (and indeed crushed) the signs at the time, corporate plunder on a scale unprecedented in South Africa might have been averted. The kind of activity that I had fallen into is known as "whistle blowing"; it is, generally speaking, one of the most fruitless and dangerous subsectors of behaviour anyone can choose to get mixed up in.
Early in the 1990s, I took a sabbatical of kinds into the world of investment banking and its first cousins, stockbroking and corporate finance. I wanted first hand evidence of just how rotten the world of finance really was. Back then, the Johannesburg stock exchange and just about every stockbroker in what was still, at its core, a mining town, could be found at 11 Diagonal Street, in a modern, glass-fronted high rise. In honour of the JSE's original location, one of the restaurants in the "new" building was named "Between the Chains", but it was to the Red Room, adjacent to "The Floor" that dealers flocked at close of business to lubricate vocal cords parched by the open outcry system. On The Floor, fortunes were made (and lost) until technology ended "the good old days". As for the Red Room, there were a good number of dealers who were in there long before the sun started sinking from its midday peak.
I went to work for Ed Hern, Rudolph Incorporated, an entrepreneurial outfit. Activity exploded after the 1994 elections, when resources companies, in particular, were keen to show off their previously hidden offshore assets.
Within a few years, I had travelled to and worked in both of the Americas, Australia, Western Europe, the United Kingdom and various parts of Africa north of the Limpopo River. I had been deep in the Amazon, frequented the strip clubs of Kalgoorlie in the Australian outback, manned dealing desks in Toronto and London, been inside the narco-economy of Colombia, cursed in the sweatlands around Timbuktu (land of the fabulous Tuareg) and slumbered in textbook-perfect Melbourne (look close enough, and you will find gangsters all over that city). I had endured the challenge of a Canadian winter, discovered the chaos of a modernising Ghana, navigated the never-ending urban sprawl of Sao Paulo, visited with hedge funds on Wall Street, lazed around the Left Bank of the Seine, had been a corporate traveller to Sioux City, Iowa, had crossed the continental divide to San Antonio, Texas, had known the madness of the Ouagadougou Grand Market in that bicycle-plagued city, had floated on the Niger River alongside Bamako, had dined in the elegant restaurants of Abidjan, had watched the girls go by at Leblon beach in Rio de Janeiro, and had cursed nonstop in that mud hole, rat infested, little country they call Suriname, known only for producing a few Dutch soccer stars.
The 1990s had kicked off with solid interest in exploration stocks and there was little doubt in my mind that West Africa needed thorough scrutiny. I spent a good amount of time in the backwaters and badlands of Ghana, in Mali, in Burkina Faso and in Côte d'Ivoire. When Ed Hern, Rudolph was sold to the Board of Executors in 1995, I was among the last to applaud, but following the democratic elections in 1994, the global brokers were moving into South Africa and buying everything in sight. BoE inherited Ed Hern, Rudolph's offshore partner at the time, NatWest Markets, which had a strong resources country partner in County NatWest, Australia.
In those days, I strung together a deal involving a portfolio of contiguous gold assets in Ghana, known today as the Ahafo project. Ownership of neighbouring properties within the project was messy, involving mainly Gencor (from South Africa), Normandy (Australia) and La Source (the commercial arm of Bureau de Recherches Géologiques et Minières, based in Paris).
My self-appointed job was to consolidate the properties into Eldorado, Gencor's Canada-based gold exploration partner, back then anyway. It was hard work that saw me calling on the good offices of County NatWest's Martin Pile in Perth and Gavin Foley, who was in BoE's London office. Pile was a phlegmatic character with a great sense of humour, but Foley took himself far too seriously. Andre du Plessis, another member of the BoE staff in London, had a painful habit of sticking his nose into things. Martin Pile was in Johannesburg just a few months back. I have not heard of Foley or Du Plessis for years.
In early 1997, the package of Ghana gold properties was fairly valued at around $200m. Brian Gilbertson, then CEO of Gencor, liked what he heard and saw during my final presentation and, in his usually efficient manner, gave the transaction an immediate thumbs-up. A subsequent sharp correction in the gold price had a significant impact on the outcome of the deal.
Back on the main trail, it was on October 28 1996 that R&E announced that it was to acquire BHP Minerals Mali, and vend it into Randgold Resources, then a 100% subsidiary of R&E. Given my fairly intimate knowledge of what was going on in West Africa, I had a number of problems with that information.
According to Peter Flack, as quoted by the media, Randgold Resources had purchased BHP Minerals Mali for $82m "settled in cash and through the issue of Randgold Resources shares". R&E's valuation of Randgold Resources had shot up from $0.63 a share to $25.50 a share in little more than a year. It took me months to unpack the BHP Minerals Mali transaction. It was as complicated as hell; a tasty example of the kind of snake oil that Kebble would run on for nearly a decade.
Early in 1997, I sent a draft copy of my report, intended eventually for investment managers, to one fund manager in Cape Town and another in London. It was standard procedure for investment analysts to send draft reports to key clients, who would sometimes revert with valuable comments that could then be incorporated into the final report. Instead one, or perhaps both, "leaked" my draft to R&E. Fund managers like to be seen as professionals, and paid even better, but there are also runts and vermin among their numbers.
Like a fat little Attila the Hun, Brett Kebble demanded a meeting at the R&E head office in Crown Mines, just south of Johannesburg. I asked Philip Wessels, chief executive of BoE Securities, to accompany me. Kebble met us at reception and, without warning, led us into a large boardroom occupied by some 20 people, including representatives of the company's attorneys (Bowman Gilfillan Hayman Godfrey), investment bankers (Simpson McKie James Capel) and auditors (Deloitte & Touché). It was an interesting collection of elegant suits, smelling sweetly of after shave, all backing a deal that was rotten from the outset. This was the world of high finance, running at a thousand miles an hour, leaving all kinds of debris and wreckage alongside the fast lane, running down everything and anything in its path. Squash!
Flack, in severe pinstripes as usual, waved my draft report around like a crushed rat and said, in a nutshell, that it was defamatory. How dare anyone criticise this deal, given that such esteemed experts had signed it off? It was as if he was speaking about some hyena that had dared to venture within a continent of his existence. All the highly paid, highly qualified gentlemen nodded, like sheep, in agreement. It seemed that there was a smell of lamb meat around, freshly roasted lamb meat.
I said nothing.
Flack never once looked me in the eye. Nor did Brett Kebble. None of them pointed out a single fact or figure that was wrong.
Kebble picked up the report and read a sentence aloud, then pronounced his verdict: "This is a falsehood". Brett Kebble was, of course, already a world leader in the subject of "falsehoods", as the world would eventually discover. But there was something deadly serious in Kebble's tone of voice; something that, more in the undertone, despite all his superficial elegance and below his genuine talents, carried the characteristics of a werewolf on a night hunt, baying for blood, and prepared to rip faces off. It was the first time Kebble threatened me, but I was not prepared to back off. Not yet.
The meeting was shaping up for a gangbang, but the thing was, these guys were not going to touch my butt; they were not even going to see it, at least not naked.
At this point, Wessels announced that he was going to say nothing at all, since he had not known this was to be a formal meeting. He would be back once he had briefed legal counsel. I was bitterly disappointed; I had looked forward to a fight that would have included heavy left uppercuts to more than a dozen ugly jaws, and boots sunk into as many dark and soft places as possible. If it really developed, I had noted the positioning in the quaint garden of some useful large tools.
As we drove away, Wessels was muttering about BoE's "reputational integrity". He was not concerned about the accuracy or otherwise of my report, only about BoE's name. As far as I could make out, no further evidence would be required for Wessels to declare that I was wrong, that R&E was right, and that that was to be the end of it. In the world of finance, the little guy is a piece of meat.
Wessels wasted no time calling on Gerhard Kemp, a gold analyst, and assigning him to the R&E issue. Kemp had been a mine surveyor with Anglo American for many years on the West Rand, but his knowledge of West African gold mining was just about non-existent.
I was incensed. Many weeks later, Kemp produced an adulterated version of my original report. I refused to pick it up, never mind read it. I was not the only sceptic. In March, the Financial Mail published an article that focused on a report by Smith Borkum Hare investment analysts Bobby Craig and Gavin van der Wath, who had raised certain questions over Randgold Resources. Flack said the report was "misleading" because it double-counted the debt in Syama. Craig stood by his assessment.
Bristow told the media: "Randgold Resources has to be compared with its Canadian and Australian peers. When you do that, you find our valuations are conservative and realistic". Flack said Randgold Resources would raise money to accomplish its expansion plans and that "we will not jeopardise those plans by trying to fool the market with a load of rubbish".
In July 1997, Randgold Resources listed in London at $15.50 a share, just above half the price that Flack and his cohorts had crowed, if not dictated.
In the background, in Johannesburg, R&E's stock price was tanking.
It was clear that my days at BoE were numbered. It was hard to believe that anyone at the firm had even read my original draft report before it was trampled on by Wessels and gutted by Kemp. Far from wanting to support your humble correspondent, these fine gentlemen wanted me run out of town, and better still, out of the country. But what they really wanted was business from the great man himself.
BoE desperately wanted to do business with Kebble and his cohorts. In due course, BoE became one of many "respected names" appearing on corporate tombstones in connection with various Kebble-related deals, including (the original) Gem Diamonds, the sale of Prestea (Ghana), and, alas, the Randfontein debacle. Criminal indictments were served on the Kebbles and their financial director, Hennie Buitendag, in December 2002, three years after the infamous "raid on Randfontein".
I called Kemp early in 2006, when he was at Rand Merchant Bank. He told me that he had valued Randgold Resources at $13.50 a share, which he considered pretty accurate, given that it had listed in London within a few months (back in 1997) at $15.50 a share. Kemp appeared to have forgotten that just one year after Randgold Resources first listed in London, it was selling fresh shares at a lowly $1 each. Now that was a figure that came close to the valuation in my report. That is, before the report was gutted.
I also called Wessels and asked him why BoE had been so keen to get Kebble's business after the gang of five sued me with the underlying intention of ruining me. He said he didn't know, since by then, he had moved to BoE's London office.
Attempts to talk to Tom Boardman, a senior BoE executive at the time, who went on to become CEO of Nedcor, one of South Africa's "big-four" banks, failed. I tried, specifically telling his aide that I wanted to see him about Kebble. Tom Boardman never returned my calls, which was most unlike him. He retired recently.
Coincidentally, it was in Nedcor's 2004 annual report that I finally understood what Wessels had been muttering about back in 1997. So-called "reputational risk" covers a wide range of ills: all risks; communications; stakeholder relations; disclosure; ethics; corporate governance; outsourcing services; fiduciary relationships; directors' responsibilities and alliances' corporate governance. It says nothing about the ethics of procuring business from possible gangsters, so I guess that means everyone's off the hook.
When my draft report hit the market in March 1997, R&E was trading at around R40.50 a share, its all-time peak closing price, recorded on February 24 1997. On December 10 1997, the stock closed at 379c a share, a decline of 91% from the peak earlier in the year. Towards the end of the period, I was sued by five good men who wanted to grind me into hamburger meat. It seemed that what could have been the truth was just impossible for them to swallow; like a pack of heroes, they decided to "shoot the messenger".
The good news is that the Ahafo project went on to become the single biggest global development project of Newmont, a Tier 1 global gold producer. I was there at the discovery of the Yamfo concession, the Ntotoroso anomaly, and on other properties that would one day comprise the Ahafo project. In those days, no one, outside of a few members of the Gencor exploration team, had heard any of those names. It was good to be out there. I figured that what would become known as Ahafo, a part of the Sefwi gold belt, would one day develop into a world class gold province, with a chain of mines applying best of breed in all departments.
These were significant discoveries, not only in terms of size and quality, but also because this was virgin gold. This is different to so many other so-called "new" gold mines in West and East Africa, which are really old mines that have been "rediscovered". Ahafo had been hardly touched, if at all, by artisanal or other miners over the centuries.
Already in the 1990s, assets were being recycled. When I read about the BHP Minerals Mali transaction, along with everyone in West Africa who knew the first thing about what was happening on the ground, the clamour went out. There was a heavy consensus that Syama, apparently the key asset in the BHP Minerals Mali transaction, was a piece of junk.
Today we can only weep for those who conspired to butcher my original report. They played an integral, if unwitting, role in the creation of South Africa's biggest and most chaotic corporate Götterdämmerung. Perhaps, one day, they will confront the demons they helped to foster.
Brett Kebble never acted alone. He couldn't have, but it was he who paid the ultimate price. After Kebble offered to settle my legal fees, back in 1998, I recognised that he had at least some remnant characteristics, no matter how few, of a member of the human species. I knew that he was headed for disaster, one way or another, and that he would be taking lots of people down with him. He ended up dead, something that nobody would have wished on him. He was always a good contact, one of the best, and far too dangerous to cultivate as a friend. Kebble seemed to enjoy calling me to come around and listen to his latest yarns. It seemed that he needed enemies, and he found them aplenty. He was an interesting study; these days, people are really interested.
He introduced me to interesting people. There was John "Turtle" Stratton, his confidante, and one of the most twisted people who ever walked on planet earth. Stratton was a bully, and encouraged Kebble to use all kinds of nasty tactics to get what he wanted. This was no small game. By the end of 1998, Kebble was worth R1.5bn, up from practically zero just a few years before. He was worth R1.5bn, on paper. He reached this peak by flipping assets, just as he had done in the case that he sued me for. The basic technique was not that complicated: take underlying assets (such as a gold mine), and sell it to a listed company, at a heavily inflated price, for millions, or hundreds of millions of shares, and then maintain the hype around the story. When you can, sell shares, and bank the cash. In some cases the story went from weird trash to extreme bullshit. Rawas, Indonesia, was apparently a gold mine. What demonstrably happened around 1999 and 2000 was that DRDGOLD (JSE:DRD), under the control of Roger Kebble, issued hundreds of millions of rands worth of DRDGold shares to "buy" Rawas. If there had once been a gold mine there, it had since either been stolen, or swallowed into the maw of mother earth.
One of the few entities that have survived the Kebble era is Randgold Resources, which has a current market value of $8.25bn. The main reason is that while Syama turned out to be a dog, Morila, another original component of BHP Minerals Mali, turned out to be a great sleeper. Bristow has been CEO of Randgold Resources since its creation in 1996.
Then there was Roger Kebble, a man of few words, with what felt like a lurking, menacing presence, like that of a battle worn vampire looking for his next meal. And Charles Cornwall, who floated around like a forlorn lover in an English country garden.
Brett Kebble's criminality was there from the beginning. He delighted in looting all and sundry, and suppressed his excessively dangerous physical gangster tendencies until the last year or two of his tortured life. According to summarised forensic reports published by R&E, now in the public domain, R&E was looted by Kebble and his cronies of R1.9bn in cash, by way of shares stolen from R&E and then sold on the open markets for cash. According to R&E, it was effectively looted of a further R1bn in other ways, such as selling fresh shares in R&E for cash, and allocating the cash for looting. The sum total of R2.9bn excludes significant further value that ended up in criminal sewage farms. The Kebble era adds up to the biggest composite crime in South African history. Erstwhile national South African Police Commissioner Jackie Selebi was recently convicted for corruption, mainly for receiving Kebble monies that Kebble had looted, and routed to Selebi via Glenn Agliotti, a convicted drug trafficker. This is to say nothing of various politicians that Kebble held in his hand. An entire nation has been corrupted; it continues to fight for breath.
As the country watched on this week, Agliotti's murder trial kicked off on Monday in Johannesburg, with the surprise addition of conspiracy-to-murder charges. Agliotti, charged with the murder of Brett Kebble on September 27 2005, also now faces conspiracy murder charges in respect of four living people, Mark Wellesley-Wood, Mark Bristow, Jean Nortier, and Stephen Mildenhall.
Write to Barry Sergeant: barry@moneyweb.co.za
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