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Randgold survives “massive fraud” Posted: Fri, 31 Mar 2006 [miningmx.com] -- RANDGOLD & Exploration (RG&E) was subject to “massive fraud”, but is estimated to be worth between R19 and R20/share, equal to net assets of R1.5bn, said CEO Peter Gray. This is the outcome of a six- month forensic investigation into the 2004 and 2005 annual financial statements of RG&E, and its interim results to September 2005. At the time when RG&E was suspended from the JSE, the company was trading at about R9/share. The details of the forensic investigation, made public in a statement to the JSE Securities Exchange (JSE) today shows that former CEO, the late Brett Kebble, had embarked on an odyssey of misappropriation, forged documents, and imprudent dealmaking. The publication of the financial statements of RG&E’s sister company, JCI, remain undisclosed after last minute hitches derailed their publication. However, it is understood that JCI, which owns 17% of RG&E, will announce next week that it is also solvent. Crucially, the two companies have agreed to arbitrate claims against each other in preference to a protracted court battle. This has raised the prospect that RG&E and JCI might be consolidated into a single company. Already, Matodzi Resources has been made a 58.8% subsidiary of JCI after the former bought preference shares in JCI and JCI converted preference shares in Matodzi. “The new board opened a veritable Pandora’s Box,” said Gray in a statement. “When we lifted one layer of transactions, we found layer after layer of misrepresentation." “Some of these structures turned out to be legitimate but unwise while others were fronts for the misappropriation of shareholders’ assets. In almost all cases the value of the underlying assets had been overstated,” Gray said. Included in the forensic investigation is the disclosure that RG&E sold its entire 48.2% stake in Randgold Resources, worth about R1.8bn, from about 2002. “This was not always with shareholder approval and most of the proceeds were misappropriated,” said Gray. Of the R1.8bn in Randgold Resources shares that were sold, R419m was booked by RG&E. The balance when to JCI (R606m), Societe Generale (R412m) in a share lending agreement with JCI, and R367m to another grouping termed 'Other' by the forensic auditor, Umbono Financial Advisory Services. Commenting on the forensic report, Neal Froneman, CEO of sxr Uranium One told Bloomberg News: "The sheer scale must make it one of the biggest frauds in South Africa's corporate history''. Uranium One owns 12% of RG&E's stock. "It's time to recover the money." RG&E has started liquidation proceedings against five entities: Tuscan Mood, BNC Investments Investage, Equitant, Itsuseng Strategic Investments and Viking Pony Properties, specially created shelf companies that benefited from the misappropriation of RG&E’s assets. Court actions to liquidate, in terms of the Companies Act, would be initiated against Tuscan Mood, BNC and Viking. The forensic investigation shows that Tuscan Mood received R34.6m; BNC (R49.4m); Equitant (R260m); Itsuseng (R19.9m) and Viking (R119m).Free news alerts: click here to subscribe
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