| Thu 14 Aug 2003, 11:29 | | Firstrand Limited - Firstrand Media Release |
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Firstrand Limited - Firstrand Media Release
Release Date: 14/08/2003 08:03:09 Code(s): FSR
Firstrand Limited - Firstrand Media Release
FIRSTRAND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1966/010753/06)
Share Code: FSR
ISIN: ZAE000014973
("FirstRand")
FirstRand Media Release
For immediate release Thursday 14th August 2003
The Board of FirstRand announced on Thursday 31st July that the four-month
independent enquiry into newspaper allegations of corrupt practices by Mr Mac
Maharaj, a director of the group has been concluded. The final report ("the
report"), was submitted to the Board by accountancy firm Deloitte & Touche and
attorneys Hofmeyr Herbstein & Gihwala on Wednesday 30th July 2003 and Mr Maharaj
had seven days to submit a response to the findings of the report.
Mr Maharaj offered to either resign or take a leave of absence in February when
the original allegations appeared in the Sunday Times newspaper. The Board felt
that to accept his resignation at that point would have led to a presumption of
guilt, and therefore chose the option of granting Mr Maharaj leave of absence.
The group allocated significant resources to ensure a thorough investigation.
This was done to ensure a fair hearing for Mr Maharaj, while also ensuring the
protection of the reputation and interests of the group, its shareholders, and
the various communities it serves.
Mr & Mrs Maharaj have co-operated fully throughout the investigation process.
Given the serious corporate governance issues the allegations raised, FirstRand
needed to satisfy itself and its regulators that it was not in breach of the
Bank"s Act and the Long Term Insurance Act, specifically with regard to the
requirements for Directors. These requirements are particularly rigorous for
banks and insurance companies.
The full report of Deloitte & Touche and attorneys Hofmeyr Herbstein & Gihwala
have been submitted to the group"s regulators, the Bank Supervision Department
of the South African Reserve Bank and the Financial Services Board. The Bank
Supervision Department and the Financial Services Board are also in possession
of Mr Maharaj"s response to the findings of the report and the investigating
team"s assessment of Mr Maharaj"s submission.
The initial terms of reference for the report, which were agreed with Mr
Maharaj, were as follows :
1. To investigate the accusations and implied accusations of criminality or
corruption and an alleged breach of the Parliamentary Protocol as contained
the Sunday Times article, 16 February 2003.
2. The investigation and report to FirstRand"s Board will deal with the
matters referred to in par 1 and the regulatory aspects that may flow from the
allegations.
3. FirstRand reserves the right to amend the terms of reference if a
significant issue not directly related to the investigation arises which may
negatively impact upon the relationship between Mr Maharaj and FirstRand or on
FirstRand"s image and reputation.
The investigative team was not possessed of any statutory or other powers of
enquiry and/or of obtaining evidence and information. The team could not
subpoena witnesses and/or demand the production of documents or other evidence.
The team was therefore dependent on the co-operation of the persons and entities
involved. The co-operation was obtained on the basis that the investigation and
the report would be kept confidential. In the opinion of Senior Counsel
publication of the report would be a breach of confidence and an invasion of
privacy. Accordingly, the report cannot be released to the public, without the
consent of all persons who were interviewed and those who provided private
documents to the investigative team. In addition the report also contains
documentation provided by the Directorate: Special Operations ("the DSO" also
known as the Scorpions) who are still pursuing their own investigation.
Whilst it is a known fact that the Scorpions are continuing their own
investigations, the Board is of the view that it cannot delay the conclusion of
its own process any further.
The findings of the report are outlined below. They are represented as extracts
relating to the factual findings of the investigative team.
Allegations of Corruption
With regard to the first allegation of corrupt practices by Mr Maharaj whilst he
was Minister of Transport, the investigative team liaised with the Scorpions,
who have been investigating the same allegations for a long period of time, and
were given access to a comprehensive range of documentation, but not all of the
documents in their possession.
The investigative team found as follows:
"The team did not find any evidence in the available information that Mr
Maharaj intervened with the process or influenced the awards of the N3 Toll Road
tender or the drivers licence card contract to Mr Shaik. The team did not find
evidence linking payments from Mr Shaik to Mr Maharaj with the award of this
tender."
The Payments
Both Mr Maharaj and Mr Shaik do not dispute that Mr Shaik made payments into
bank accounts held by Mr and Mrs Maharaj. Mr Shaik, Mr Maharaj and Mrs Maharaj
stated that the payments were made to Mrs Maharaj on the basis of a consultancy
agreement between Mr Shaik and Mrs Maharaj"s business Flisan Investments. The
investigative team found that the payments involved totalled R328,898. Following
interviews with Mr and Mrs Maharaj and Mr Shaik, and following a comprehensive
review of documentation pertaining to the consultancy agreement, the report
concluded as follows:
"There was some form of consultancy agreement between Mr Shaik and Mrs Maharaj.
The extent of the agreement cannot be determined; nor is it possible to express
an opinion on whether Mr Shaik indeed received value for money (in terms of the
nature and value of Mrs Maharaj"s deliverables).
Due to a lack of corroborative evidence, it is not possible to find that the
reason for all payments (and the off-sets) was in fact service in terms of the
consultancy agreement
The agreement does not appear to have been a formal, arms-length agreement
between two businesses.
The investigative team confirmed that the agreement between Nkobi Investments
and Flisan was a verbal one, and that they had been unable to find sufficient
corroborative evidence relating to the agreement.
"Although there appears to be information supporting the existence of the
consultancy, a number of questions remain unanswered."
The team could not conclude that the payments were not for consultancy work.
Payments not identified by The Sunday Times
Mr Maharaj contended in his affidavit that the Milsek Trust (Maharaj"s family
trust) never had a bank account. On 24 June 2003, Mr Maharaj"s attorneys
informed the team that he (Mr Maharaj) remembered that the Milsek Trust did have
a bank account that was now closed.
The report states
"It subsequently transpired that there was in fact a bank account into which two
deposits of R100 000,00 each were made in the latter part of 1996.
It appears from the accounting records of Nkobi Holdings that one of these
deposits was made by a company in the Nkobi Group. Neither party could explain
the reason for the accounting entry, or the payment. Mr Shaik undertook to
investigate the matter at his bank and revert to the team. However, pending the
possible receipt of further information from Mr Shaik, no opinion is expressed
at this time."
At the time of finalisation of the report Mr Shaik had not reverted to the
investigative team.
The Computer Equipment
With regard to the installation of the computer equipment (as mentioned in the
Sunday Times article), the Maharajs" and Mr Shaik both stated that the cost of
the computer was R15,000, not the R49,857 as alleged, and that this was paid as
set off against consultancy services. This amount of R15,000 is included in the
total R328,898.00
The investigative team found as follows: "The Maharajs" version that Nkobi only
paid for a computer of about R15,000 and not R49,857 as alleged, is
corroborated. The team did not find corroborative evidence that the amount of
R15,000 was actually set off against the debt owned by Flisan".
The US Trip
In the original Sunday Times article it was alleged that Mr Shaik arranged a
trip for the Maharaj family to Disneyland (the trip was actually to Disneyworld,
Orlando, Florida). The investigative team interviewed Mr Maharaj and Mr Shaik
regarding this trip and Mr Maharaj believes that he paid for the trip himself
whilst Mr Shaik stated that he paid for transport and accommodation to the value
of R15,642.
The investigative team was given access to a number of documents from which the
following facts were evident:
Mr Shaik requested engineering company Brown & Root to assist with the
arrangements of hotel accommodation and transport for the Maharaj family in
Orlando, Florida. In his letter he stated that this was of "strategic
importance" to both Brown & Root and Nkobi.
Brown & Root agreed to assist on the basis that Nkobi would reimburse them, and
on the basis that Mr Maharaj would reimburse Mr Shaik.
The Maharaj family stayed in the hotel from 13th to 17th July 1996.
The hotel bill shows that the accommodation was paid with an American Express
card which was found not to be activated whilst the Maharajs" paid the sundries.
Brown & Root invoiced Nkobi Holdings for the accommodation and Nkobi Holdings
reimbursed Brown & Root. The invoices included the costs of a car and driver
relating to a visitor to the Maharajs" at the hotel.
After examining the evidence, the investigative team concluded "It is clear from
the available information that not only did Mr Shaik arrange for the trip to
Orlando, but that he, through Nkobi Holdings, ultimately paid for the Maharajs"
stay.
Parliamentary Disclosure
On the issue of disclosure of payments and or gifts to parliament the
investigative team summarised as follows;
"In the view of the team, Nkobi Holdings" payment of the accommodation in
Orlando was a substantial gift and should have been disclosed in the Public Part
of the Register. In view of the Maharajs" contention that Mr Shaik did not pay
for the hotel accommodation, the team accepts that this was not disclosed in the
Confidential Part. It is therefore the finding of the team that Mr Maharaj
breached the code of conduct by not disclosing this payment in the register".
"As far as the consultancy income is concerned, the team was unable to establish
whether this was in fact disclosed in the Confidential Part of the register, due
to the fact that the records concerned were destroyed". NB: It was policy to
destroy these records once members had left parliament. The 1996 to 1998 records
were destroyed following the 1999 election.
Mr Maharaj"s Response
Mr Maharaj registered his concerns about the process of the investigation,
which, amongst other things, include that he was not given access by the
investigating team to all the gathered evidence and documents and that the
investigating team denied him his proper right to be heard before it arrived at
its conclusions.
Both FirstRand and the investigating team believe that the process was fair.
Be that as it may, Mr Maharaj has welcomed the finding of the report and the
Board that it did not find any evidence to substantiate allegations of
corruption on his part in the awarding of the N3 Toll Road and Drivers" Licence
contracts and did not find evidence linking the payments received and the
awarding of these contracts.
As regards the allegations Mr Maharaj remains confident that there is no
corruption, criminality or impropriety on his part. He awaits the Scorpion"s
report, which he has reason to believe will be made very soon.
The Board"s Decision
The Board has accepted the report"s finding that the investigative team did not
find any evidence to substantiate allegations of corruption and did not find any
evidence linking payments from Mr Shaik to Mr Maharaj or Mrs Maharaj to the
awards of the N3 Toll Roads and Drivers Licence contracts.
Mr Maharaj believes however that given the current emotional debate being
publicly waged around his personal affairs, his continued association with
FirstRand may lead to further negative publicity for the group. Mr Maharaj has
consequently submitted his resignation, which will be effective 31 August 2003.
Under the circumstances the Board has accepted his resignation as a director and
employee of the FirstRand Group and as a director of the seven subsidiary boards
on which he served
The Board has approved that an amount of R1, 091, 827 which comprises pay in
lieu of notice, leave pay, and pro-rata bonus for the year ending 30 June 2003
was due to Mr Maharaj. This payment represents what Mr Maharaj is legally owed
by all the companies in the FirstRand Group of which he was a director, and as
an employee of FirstRand Bank.
The Board would like to thank Mr Maharaj for his contribution to the group
whilst he was a director. His sense of team spirit, his wisdom and strategic
thinking was invaluable.
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
CORPORATE FINANCE
