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No evidence of market manipulation, says former AG on Resilient

Further suspicions around the relationship between the Hafner Family Trust and Mr Oberholzer.

WARREN THOMPSON:  Following the announcement last night that Shauket Fakie, former auditor-general and chair of Resilient’s independent review, had concluded his report into the allegations that had been made against the company in the Resilient stable, he joins me now on the phone to discuss these things. Good afternoon, Mr Fakie.

SHAUKET FAKIE:  Good afternoon to you Warren, and good afternoon to the listeners as well.

WARREN THOMPSON:  Perhaps we can just start with the scope. Can you just give us what the scope was of the review and what you were tasked to look at, and why you agreed to it?

SHAUKET FAKIE:  Okay. First off, the report that was issued last night essentially covered a period of January 1 2017 to February 28 2018. This is a 14-month period. The terms of reference given to me spoke about the possible six months from June to December, and so I’ve decided to extend that term because of the activities that have taken place over this period.

Secondly, the scope was predominantly to cover the allegations that were contained in the four reports that were circulated early in the year. But when I looked at the four reports, there were a number of commentaries and allegations made in those reports, but in essence when you go to the heart of the issues that have been put into the reports, the allegations revolve around the high valuation of the company that arose from…insider-related transactions in the group company shares to deliberately influence the share price and volumes that were traded. And the second part of it was to look at whether there was any sort of misconduct on the part of the executives.

There were other issues that were also raised in the allegations report, but we did not look at that – for example, the issues around the net asset value, the accounting treatment of the Siyakha  Trust. Our view on that was that those matters are best dealt with because the books of the company get audited and the auditors have issues and audit opinion on those things. So if there was an irregularity they would have picked it up. So we didn’t cover those aspects.

WARREN THOMPSON:  I understand that the 36ONE report was the initial focus of the review. You indicated on Friday that you were going to attempt to meet with 36ONE. Did that happen?

SHAUKET FAKIE:  No. It didn’t happen. But we’ve been exchanging communication between myself and the director of 36ONE. Basically I proposed a meeting for Monday because I needed to finalise the report by Tuesday. There was a board meeting yesterday and I needed to make sure that I’d got the report ready for the board. As you would know, there was already an expectation that this report would be finalised last week on Friday, and it had to be extended as well. So the director of 36ONE wanted to bring his senior counsel to the meeting for the interview, and I’d agreed to that, but the senior counsel was not available until Thursday this week. So I indicated to him last night that I’m still happy to meet up with him if the senior counsel is available, to hear what the additional information they have. And if they bring something substantial then I can take that to the board and ask them to reconsider.

We didn’t meet on Monday, but my doors are still open.

WARREN THOMPSON:  But I understand you’ve finalised this review now. So if you learn something at that meeting that would change your mind, how would you then amend the review?

SHAUKET FAKIE:  I finalised the review, but if you look at the statements that’ve been made in the statement as well, if there is anybody, not only 36ONE, that have anything significant that’s not been covered in that report – because we’ve looked at all the issues covered in those reports – if there is anything significant to add that wasn’t covered in the report, then I’m happy to engage them. They must bring that evidence through to me and then I will take that to the board and tell them look, while my report has been finalised, it’s been finalised on the information that more information has now come to the fore and I do believe you people need to consider that.

WARREN THOMPSON:  Just to be clear, are you scheduled to meet with 36ONE at the moment?

SHAUKET FAKIE:  I put the request through to them yesterday by an email, saying that I will make myself available on Thursday as they originally proposed. I’m still waiting for the confirmation. I haven’t received any confirmation yet.

WARREN THOMPSON:  Just coming round to these “K” companies, Mr Fakie, because this was quite interesting – and certainly we covered it as well – I wanted to understand this relationship between the Mr Hafner and Mr Oberholzer, because following enquiries that we made, we understand that Mr Oberholzer was the sole director of these four K2012 companies. To me it appears that Mr Roque Hafner appears to be the person providing the funding to these K companies. What were your findings there?

SHAUKET FAKIE:  That’s what we found is that he is providing the funding for the K companies. But what we’ve also picked up is the ultimate beneficiary of these companies, these K companies, is the Hafna family. So he is the shareholder of those companies and Mr Oberholzer is a director of this company. Not he himself – his family trust is the ultimate beneficiary of this company.

Our focus with that engagement was to allow … to make sure that there was no funding either being provided by Resilient directors or associated directors, people associated with Resilient.

WARREN THOMPSON:  Just to get this right, you are saying the Hafner family trust controlled by Mr Hafner was the sole shareholder in those K companies?

SHAUKET FAKIE:  The ultimate beneficiary. That’s correct.

WARREN THOMPSON:  That contrasts quite starkly with what Mr Oberholzer told us himself. He said he was the sole shareholder of those companies.

SHAUKET FAKIE:  Well, that’s what we’ve picked up, so you need to take that up with Mr Oberholzer.

WARREN THOMPSON:  Okay, I’ll do that. Just on Mr Hafner, this name appears now. Who is he and what, if any, links does he have to Des de Beer and executives of Resilient?

SHAUKET FAKIE:  Again, they had a longstanding relationship from the past, but we couldn’t pick up anything when it comes to the issue of either insider information being provided to Hafner or any funding being given to Hafner to trade with these K companies. We couldn’t pick up any evidence to that effect. But yes, Mr Hafner has had a longstanding business relationship with the CEOs here and that kind of thing, but we didn’t pick up anything else that confirms that there has been funding that has been taking place, insider information that’s been transferred and we’ve got confirmatory affidavits to this effect from all sides.

WARREN THOMPSON:  Just coming back, I think in the review you said that Mr Hafner had supplied lending to Mr Oberholzer in the K companies, and now you are saying that Mr Hafner’s family trust was the sole shareholder in the companies.

SHAUKET FAKIE:  No, I’m saying to you that Mr Hafner, through the RCG company that he owns, provided finance into the K companies. Right? And what I’m telling you is the ultimate beneficiary is of the Hafner associated entity, which is the RCG company, the ultimate beneficiary of that RCG company is the family trust. Mr Hafner, through RCG, has provided funding to the K companies and we also looked to see who the beneficiaries of the K companies were, and who the beneficiaries of RCB were. So what I’m telling you, the ultimate beneficiary of the Hafner associated entity, which is RCG, is the family trust.

WARREN THOMPSON:  Okay, I’ve got that. Did you not think it was suspicious though that this Mr Hafner would lend literally billions of rands worth to Mr Oberholzer, who I understand was at one time employed as a groundsman at the Kyalami Schools Group?

SHAUKET FAKIE:  Look, we’ve asked the question and those were personal reasons that was provided to us, which are not privy to be shared in the public domain as to why he used those K companies and Mr Oberholzer…

WARREN THOMPSON:  Mr Fakie, I think we’ve been round the block a couple of times. To me this looks like a blatant fronting and, if I worked at the FIC or Sars, I would suggest that this was perhaps something to do with tax evasion or money laundering.

SHAUKET FAKIE:  But that’s my purview to as large extent as I indicated to you – the scope of my investigation was to look at whether there has been any association either with Resilient or with the executives at Resilient, or the associates that had been involved in this team. And that’s not my focus. I think the aspect that you are referring to was not within the scope of my review. I mean Sars has to take that up, and take it up as I have provided that information in my report.

WARREN THOMPSON:  Mr Hafner – does he have close personal ties to Des de Beer, the CEO of Resilient?

SHAUKET FAKIE:  Not anymore. He used to have that in the past, but not anymore since I think around 2013 they have not had any business relationship.

WARREN THOMPSON:  What we have learnt is that the K2012 companies, ultimately the beneficial owner of control is the Roque Hafner Family Trust. Did you find that the K2012 companies participated regularly in the bookbuilds of the Resilient stable during the course of the year?

SHAUKET FAKIE:  They participated in open-market trade as well as bookbuild. So they only participated in the bookbuilds only, but participated in everything. We’ve looked at the bookbuild process, by the way, as a result, and I know where the question is coming from, and you’ll find that in my report. You have also to cover the other angle – look through the bookbuild process to make sure that that process was sound and not open any undue manipulation. And we are comfortable that the bookbuild process was run independently by Zelda Patterson and that focus is quite current now.

WARREN THOMPSON:  So the K2012 companies would have got allocations to bookbuilds during the course of the year, but you say that was all above board?

SHAUKET FAKIE:  They would not have gone directly through to Java, they would have done it through a stockbroker because Java didn’t allocate directly to them.

WARREN THOMPSON:  Did you know Mr Oberholzer was in fact employed at one time at the Kyalami Schools?

SHAUKET FAKIE:  No, I’m not aware of that.

WARREN THOMPSON:  And then, is the full report going to be made available?

SHAUKET FAKIE:  No, I don’t think the full report will be made available. I think what the President [?] has provided here is a summary and an extract of the report itself, and that’s what we put out into the public domain. My responsibilities and my mandate were to issue a report to the board, not to the public, and that’s what I’ve done.

WARREN THOMPSON:  Just one other question. You said that the share activity figures mentioned in the reports as share-trading activities – and these are obviously the reports compiled by 36ONE Arqaam and Navigare are not correct. How did you get to that conclusion? Why were they incorrect?

SHAUKET FAKIE:  The reason why they were incorrect is because we  verified all the share movements to be broken … and we’ve gone through quite a bit of detail and we’ve reconciled all the share movements and activities by the companies. I can’t tell you how the three reports and particularly the Arqaam report, which made a statement of R122 billion – that clearly is outrageous in terms of the number that’s been quoted, and clearly we can turn round and say that those figures that have been quoted there are not in line with what we’ve picked up, and therefore they are not correct.

WARREN THOMPSON:  Yes, but I think I’m asking how did you make that conclusion?

SHAUKET FAKIE:  Because of the very … of this internally, Arqaam verified on the movement internally. I’m just saying that my verification must not be … numbers and the figures that have been quoted in those three reports. I can’t see how they compiled it. I think that what they have done is they may have taken some share movements as share trades, and that’s my find that I’m trying to make. But we can confirm that the share trades, and we’ve looked at the share register as well, and we can confirm that the numbers that I’ve got in my report do not tie back to the numbers that have been quoted in that. I’m concluding on that and I’m very … by these numbers. I don’t know how they’ve compiled their numbers, but you need to go back to them and ask them how they compiled their numbers. But I can tell you as far as share trades are concerned, those numbers don’t tie up at all. There were a lot of movements, and movements taking place for good business reasons, and I’m not sure if that’s been identified as a share trade in their calculations.

WARREN THOMPSON:  It’s a bit tough for the public investor, Mr Fakie, because we basically have to take your word for it, because you are not going to be releasing that information or the report, whereas Arqaam for instance has. I would have thought that part of your job in this review was to review those reports and form a very detailed response to why they would have been misguided or overestimated or incorrect in their assumptions.

SHAUKET FAKIE:  I have no further comment to make on that.

WARREN THOMPSON:  Okay, then let’s just round out the interview. I think we’ve run out of time here. You indicate you’d be making recommendations to the board of the company. Could you give us a bit of insight as to what those recommendations are?

SHAUKET FAKIE:  Those recommendations are predominantly around the issues of crossholding and those kind of things between Fortress – which is very alive in the public domain at the moment – and some of the concerns that are coming through. We haven’t picked up anything irregular there. But what you are saying is that from a cleaning up of the company it may be appropriate for them to consider the crossholding between Fortress and Resilient. They need to also clean up the crossholding shareholding within the Siyakha Trust and that kind of thing. From what I could gather that that there have been actual … at a board meeting to try and tidy up some of those things.

WARREN THOMPSON:  Okay. I appreciate your time, Mr Fakie. Perhaps I could make request that you do consider making that report available, so that obviously everyone sitting with reports from Arqaam and 36ONE on one side and your review on the other…

SHAUKET FAKIE:  You’ve got a good summary from the report. I don’t know how much more you need. There is a lot of personal information in my detailed report and I have also inspected a lot of stuff that people have given to me in confidence and I can’t just make the report available to the public. And what we’ve decided to do is give you the information that we believe will provide some comfort to the public in terms of the scope of the work that I’ve done, what I’ve covered in the work and what the finding are. I think to me that’s sufficient for the public to know that the work that has been completed is still open for people to bring more evidence. And in fact I’ve just received an email from the director of 36ONE, essentially saying that he’s decided he’s not going to meet up. So my door is till open, but I have to do what I have to do as far as the report is concerned, and get the report out. … that meeting to delay … on that report. If you’ve got something substantial, and I’ve offered to him over the weekend, I told him that if you’ve got anything substantial, I know his senior counsel is not available. I’ve asked him to send something by email through to me and I’ll definitely consider that before I finalise my report – and he chose not to send anything through to me either. He was insisting on a meeting. I sent him an email yesterday asking him to meet tomorrow, and he’s just sent me an email now that he is not interested in meeting up. That’s the message that we got now.

WARREN THOMPSON:  I think obviously the problem is these reports are highly technical, very comprehensive, and what I’ve been left with from this interview is that we basically just have to take your word that those guys are wrong and that your assumptions and calculations are correct.

SHAUKET FAKIE:  All I’m saying there, Warren, is that some of the numbers that are bandied around in their reports, I’m saying the reader doesn’t understand the difference between share movements, share trades and bookbuild, and how bookbuild processes work and where there has been a new allocation of shares I think it was in the place of Siyakha. I think it’s misleading, that people will think that that’s the number of shares that were traded with the intention of manipulating the market and moving the market. That’s all I’m trying to say – that should have been put into correct context because it’s predominantly the share … traded in the market that we believe has got any potential to move the market or to influence the market.

WARREN THOMPSON:  I understand your position. It’s just trying to understand the quantum. So if it’s not R125 billion, is it R100 billion, is it R50 billion, is it R30 billion?

SHAUKET FAKIE:  The bottom line is whatever this number is, my report is saying that there was no intention to manipulate, there was no manipulation of the market. And I think that’s the bottom line. As to what quantum is, there have been some movements – and we verified those movements and we are happy with the reasons provided for those movements. So all I’m say is what the reason is to be … that we went through a proper process to interrogate and verify those movements and that there was no manipulation in the market. That’s the ultimate thing – that the impression that was created that those share trades in actual fact boosted the market and moved the market, and we saying we could find absolutely no evidence to that effect. And to me that’s the critical outcome, otherwise you are going to start looking at this and making your call, making my call, and I think that’s important. If you look at my conclusion that’s what I summarised in this.

WARREN THOMPSON:  Okay. I appreciate that. It’s just tough – we’ve got some very clever people at some of these institutions looking at this thing with the same sort of public information. But thank you very much for your time today, Mr Fakie.

SHAUKET FAKIE:  No problem, Warren. Thanks for the call and we wish you all the best as well.

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” To me this looks like a blatant fronting and, if I worked at the FIC or Sars, I would suggest that this was perhaps something to do with tax evasion or money laundering” Oh really?

This share methinks is a major SELL !

Which also begs the question: MR Fakie – did you report this to the authorities ?

All the regulatory exams I did, and courses I did at the financial institution (Bank) with regards to money laundering quite simply tell you one thing: I’s a criminal offense not to report (even if you only think!!!!) , any suspicious looking transaction, directly (without even going through to your pears/seniors), to FIC and other regulatory institutions!…

Did you report this, and if you didn’t, why not?

What is the company’s core business with all this ridiculous cross-shareholding?

Methinks, money laundering and tax evasion, like the good CA said!

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