Gold Fields’ BEE scandal claims first victim

2014-01-26 14:00

The scandal surrounding Gold Fields’ empowerment deal appeared to claim its first casualty this week, with legal boss Michael Fleischer quitting his post on Monday.

The mining company announced that Fleischer would leave at the end of the month.

It said it was “committed to hiring a person who could help implement the changes noted in the board’s announcement relating to the South Deep black economic empowerment transaction”, hinting that Fleischer’s resignation was related to the deal struck almost four years ago.

But the Public Investment Corporation, Gold Fields’ second-largest shareholder through the Government Employees Pension Fund, does not believe Fleischer’s decision had anything to do with the deal.

“We are not under the impression that the general counsel has resigned under a cloud,” said Daniel Matjila, its chief investment officer. “Therefore, his resignation is taken more as a personal decision that we respect. It is our understanding that if the need arises and if he has anything to answer for, he will be available to the authorities for questioning.”

Another fund manager with shares in Gold Fields, who declined to be named as his company generally does not comment on ongoing engagements, would not say if Fleischer was the right person to go.

“In general, shareholders prefer BEE that is broad based and allocated transparently,” he said, adding that the Gold Fields deal appeared not to be so.

Gold Fields spokesperson Sven Lunsche said the company would not comment further and Fleischer himself said he did not intend to explain the reasons for his resignation.

Media reports have exposed the involvement of politically connected individuals in the empowerment deal, a condition of its new licence to mine South Deep.

The deal was put together by ex-convict Gayton McKenzie, whose friends and family were also cut into the empowerment consortium that participated in the three-part deal.

In September, it attracted the attention of the Securities and Exchange Commission in the US, where Gold Fields is traded through depositary receipts.

“When news of the investigation came out, the share price reacted negatively,” said Matjila.

According to Bloomberg data, Gold Fields closed at R52.25 a share on September 9 2013, the day before it informed markets of the US regulatory probe. When markets closed the next day, the price fell to R51.70. On September 11, it was down to R50.40.

By Thursday this week, it was at about R36, which Matjila attributed to the dollar gold price, which is in freefall.

Gold Fields retained New York law firm Paul, Weiss, Rifkind, Wharton & Garrison to probe the empowerment deal.

By Gold Fields’ own admission, the results of this investigation – which have still not been made public — showed the deal did not consistently meet standards.

According to the Mail & Guardian, Paul, Weiss found various breaches of anticorruption laws by senior management.

It also found that Fleischer, along with Gold Fields boss Nick Holland, acted inappropriately and without credibility.

The newspaper also said Fleischer reviewed a list put together by McKenzie, which made it clear that certain people who had used their influence to push for the awarding of the mining licence would be cut into the deal.

Fleischer’s conduct, according to the law firm, “showed no concern about lobbying”.

This week, Lunsche said: “The Paul, Weiss report is a confidential board document, so we cannot comment on the accuracy of its contents.”

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