No end to Randgold, JCI imbroglio

[] — JUST when you think the Brett Kebble saga couldn’t get worse, it does, with the news on September 13 that, while JCI has dropped any claims against Randgold & Exploration, Randgold’s claim against JCI has ballooned from R1.1bn to R5bn (a surprisingly neat round number).

This is indeed staggering, considering that the forensic report into JCI put total asset flows through its notorious treasury unit, CMMS, at only about R3bn in the three-and-a-half years to September 2005.

One wonders how additional depredations of this magnitude can have been possible. Now clearly Randgold’s lawyers will have followed the kitchen sink principle of claiming for everything in sight, and we are told that “some” claims have been framed on alternative bases, so it’s also possible that there may be an element of double counting.

Considering the almost R4bn hike in the claim, it’s a pity that the terse joint announcement by Randgold and JCI doesn’t give more detail on how the claim has been inflated.

But even on the scanty information available, we can draw some conclusions.

No assets to meet claims

Firstly, on the basis of claims of R1.1bn, the forensic report and provisional financial statements gave JCI a notional net worth of R810m. Even if a fraction of the additional claim can be substantiated, JCI’s net worth will be wiped out.

With other claims (like Quinton George’s Trinity group’s R116m) against JCI being much smaller, Randgold is in effect saying that whatever of JCI’s assets remain after SA Revenue Service had had its bite, it wants.

Ironically, though, in a sense the bigger Randgold’s claim, the less proportionately it is likely to get. However valid the claims – and inevitably they will in due course be watered down – there is a stage when it’s pointless to increase them, because there are just no more assets to meet them.

Secondly, those who have already, been critical of Investec’s role, and its handsome rewards, will be raising their voices again. Sure, Investec may have been instrumental in the recovery of substantial assets, but it looks increasingly as if it, not JCI’s creditors, will turn out to be the major beneficiary.

Conflict of interest

Thirdly, the dual role of Peter Gray as boss of both Randgold and JCI again comes seriously into question. He has always taken the view that as long as mediation is in progress, there is no conflict of interests; should that change, he will resign.

He may argue that that is still the case. And should shareholders of either Randgold or JCI reject the mediators’ recommendations, they’ve already agreed to go for arbitration.

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That is all true, but as the scale of Randgold’s claim escalates, it must become increasingly impossible for Gray to remain in Olympian detachment above the fray.

Finally, but perhaps least surprisingly, the whole saga is being dragged out even further. The original hope was that the mediation process would be completed this month. I’m now prepared to bet that won’t be achieved this year, and the odds of arbitration then having to follow are shortening.

So don’t worry, there’ll be plenty more financial horror stories before the Kebble saga can finally be laid to rest.