Johannesburg - Hendrik Pretorius, the man who was deployed by Absa to head liquidated luxury golf estate developer Pinnacle Point Group, received payments of R500 000 a month from both firms. This was described as an unhealthy arrangement between a bank and its client during yesterday’s hearing of the commission of inquiry into Pinnacle’s financial affairs.
Pretorius was to be an accessory to a master plan by Absa to control Pinnacle, the commission was also told.
Pinnacle only knew four months into Pretorius’s tenure as its chief executive that he was also receiving payments from Absa, which brought his monthly salary to R1 million.
Pretorius told the commission that an agreement between Absa and his own company was effective for three years. When the commission examined the agreement, it regarded Pretorius as an Absa employee.
The deal was that Absa would “compensate” Pretorius’s company for the loss of earnings if he took the job at Pinnacle as he was sole director. The remuneration package offered was R6m a year, but he wanted R12m. “Absa advised that Pinnacle was unable to afford that so it offered to pay 50 percent for 18 months,” he said.
But when he was named Pinnacle’s chief executive, the board was told his package was R6m and there was no mention of Absa’s contribution.
The disclosure was made after Pinnacle shareholder Lazarus Zim raised questions. In his defence, Pretorius said he assumed Pinnacle knew. “The meeting to discuss my remuneration with Pinnacle’s board was on 5 May. I wasn’t there… September 17 was the first full board meeting I attended where I had an opportunity to do full disclosure,” he said.
He was officially appointed chief executive on May 6, 2009.
The commission learnt that in his agreement with Absa, there was an intention to include arrangements for Absa to control Pinnacle’s voting rights through its 27 percent share in the company as well as Pretorius’ voting powers. The bank later took legal advice that this would not be possible.
The commission, which is in possession of Absa’s internal strategy documents which were shared with Pretorius on its plans to control Pinnacle Point, has yet to determine Absa’s role in the group’s fall and whether the bank’s withdrawal of promised funding was the core reason. It said it appeared that Jacques Schindehutte, the chief financial officer of Absa at the time, pulled the strings at Pinnacle.
From e-mails read out, it was clear Schindehutte shared confidential information from the inner circle at Absa, including group chief executive Maria Ramos, with Pretorius. Pinnacle said if it did not receive the funding, it would have no option but to liquidate.
One of Absa’s terms was that Pinnacle must get a certificate of occupancy for the land it wanted to develop in Lagos, Nigeria. When Pinnacle fulfilled the terms, Ramos was doubtful about the arrangement and questioned how the land was secured so quickly.
A watered-down funding proposal was tabled for a rights issue by which Absa would underwrite R95m of the share issue and then convert its loan account into shares. This was not normal as Absa wanted a chunk of what was raised.
Pinnacle announced it had a funding gap of R250m to plug to ensure its continued existence. With Absa’s change of heart, the company feared it would not be able to raise equity funding in Nigeria, where it is also listed, if investors knew the bank had lost confidence in it.
Although the equity funding was to be raised in South Africa and Nigeria, there was no appetite for Pinnacle’s issue in Nigeria, and this put the company in a bad position. At this point, Absa formed a view to consider liquidation of Pinnacle but this changed when the Trilinear Empowerment Trust – in which clothing and textile workers’ retirement funds were invested – bought Absa’s share in Pinnacle for R150m although the bank had acquired it for R931m.
The inquiry has been postponed until November 25. - Business Report