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ABIL - AGREEMENT BETWEEN GILT EDGED MANAGEMENT SERVICES (PTY) LIMITED AND THE
DIRECTORATE OF SPECIAL OPERATIONS
AFRICAN BANK INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registered bank controlling company)
(Registration number 1946/021193/06)
(Share code: ABL)
(ISIN code: ZAE000030060)
(`ABIL`)
Agreement between Gilt Edged Management Services (Pty) Limited (`GEMS`) and the
Directorate of Special Operations
GEMS, a discontinued business in the Theta Investments Group, which is a
subsidiary of ABIL, reached agreement today with the Directorate of Special
Operations (`DSO`) regarding certain charges against the company. This agreement
followed two years of investigation by the DSO into transgressions by certain
officers of GEMS during a period from 1999-2002. The transgressions involved
payments to officials of South African Municipal Workers Union (`SAMWU`) for
assistance provided in the sourcing of loan business with union members for the
company.
GEMS has, in terms of the plea bargain agreement reached with the State, pleaded
guilty to two counts of corruption, as the officials concerned committed the
offences in their capacity as employees of the company. In terms of the
agreement, GEMS agreed to pay a fine of R5 million.
Prior to the ABIL Group becoming aware of the DSO`s allegations, the decision
had already been taken to close the GEMS business down and the process of
winding down the GEMS operation had been initiated. ABIL took the following
steps after being made aware of the allegations under the Act by the DSO:
- All payment arrangements between GEMS and union officials were terminated
with immediate effect;
- A new management team was put in place, and
- The business has since been closed down.
As certain GEMS clients may have taken loans on potentially less favourable
terms from GEMS than competitive offers available to them at the time from SAMWU
preferred providers, GEMS has further agreed to compensate all municipal clients
who had taken out loans during the period based on interest rate differentials
ruling at the time. The matter involves 34 000 clients and a potential
cumulative claim over the past 5 years of R60,1 million. GEMS has an net asset
value of R23 million and will therefore not have sufficient financial resources
to deal with the entire claim and in the interest of justice to consumers, ABIL
will ensure that it covers GEMS` obligations to the extent necessary. ABIL has
approximately 1,5 million clients on a group-wide basis.
CEO of ABIL, Leon Kirkinis, comments, `This plea bargain was entered into by
GEMS because evidence of wrongdoing by certain ex-GEMS employees and SAMWU
officials emerged from the DSO investigation. Even though no criminal conduct
was authorised, we concluded that GEMS remains responsible for the actions of
its employees and officers in that capacity. The plea bargain was structured to
ensure that any clients who may have been prejudiced by the illegal activities
of the GEMS staff, are compensated.`
In terms of the agreement between GEMS and the State all affected customers will
be approached on an individual basis to claim their compensation, in accordance
with agreed procedures. Compensation will first be set off against any
indebtedness the customer may have with GEMS or any other ABIL subsidiary. Any
balance remaining will be paid out to the customer. The process will commence in
January 2005 and is expected to be largely completed within the next 20 months.
Clients are encouraged to call a dedicated call centre set up for this purpose
at 011 256 9106, to register their interest.
Kirkinis said that the actions by the ex-employees of GEMS were in direct
conflict with the way the group conducts its business. The group strongly
condemns the actions of these ex-employees and will provide its continuing full
cooperation to authorities in any prosecution of the individuals involved.
ABIL is due to release its financial results for the 2004 financial year on 15
November. The financial impact of this settlement will not affect the group`s
previously stated targeted return on equity of 30% and return on assets of 10%
for the current financial year, and will not have a material effect on these
returns in the future.
Sandton
10 November 2004
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
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