Hein le Riche, the former Standard Bank financial adviser who sold his clients shares in his own struggling diamond mining company, has been fingered in a leaked auditors’ report, allegedly for taking R16m of these investments for himself.
But Le Riche – chief executive of Kimberley Consolidated Mining (KCM) until March this year – says the auditors are confused and this was money owed to him by the company.
The Cape Times reported on Friday that various Standard Bank Financial Consultancy (SBFC) advisers and managers, including Le Riche, owned shares in KCM, and some were involved in selling KCM shares to SBFC clients.
Auditors Moore Stephens recently conducted a special investigation into the loan account movements and share dealings of Le Riche in KCM and the company’s predecessor Channal Mining.
Handed to KCM’s directors in August this year, this confidential report was based in part on a disclosure by former KCM director Johann Cilliers to board chairman Ranthoko Rakgoale early last year.
In his report, Cilliers stated that transfers to Le Riche’s account had left the company on its knees with only R22 364 in its bank account – too little to fund basic operations and pay creditors – just six weeks after it listed on the Johannesburg Stock Exchange’s (JSE) parallel market AltX in May 2008. Cilliers claimed that a “total lack of governance” at the company threatened its ability to continue as a going concern.
By the end of that year, the cash crunch had forced KCM to stop mining alluvial diamonds at its Bo-Karoo site in the Northern Cape.
The company then failed to submit its financial statements, as required by the JSE, which suspended KCM the following July. Now the JSE is in the process of delisting KCM.
Le Riche and current KCM chief executive Phemelo Sehunelo have blamed crashing markets and trade union Nehawu’s investment arm Nehawu Investment Holdings, which they say defaulted on a R21m investment deal, apparently kick-starting the cash-flow troubles.
Supported by shareholder and director Trevor Pikwane, KCM recently re-started operations at Bo-Kaap, but the JSE confirmed last week that it is going ahead with the delisting procedure.
Moore Stephens reported the following:
* Le Riche claimed that the Channal board resolved at a meeting that he would sell his own shares to raise capital for the company, but there was no evidence for this in the meeting’s minutes.
* Le Riche claimed to have advanced R41m to Channal, crediting his loan account, but this was investor’s money “held by him as custodian, and in regard to which he had no proprietorship/ownership, except as a conduit”. Moore Stephens stated he was supposed to safeguard the funds, and then pay the purchase price for KCM shares once the company registered.
* Le Riche “withdrew” R16.1m between February 24, 2006 and October 6, 2007, which was “in effect third part monies to which Le Riche had no right”.
* Some R12.2m in shareholders’ investments had not been paid to KCM, “impoverishing” the company and its shareholders.
* “KCM may well have a claim against the shareholders concerned to pay the balance due and owing… we would advise that the KCM board take legal opinion on the matter.”
Le Riche’s responses to these points were as follows:
* He said he had a signed board resolution by which it was agreed he could sell his shares and he would send it to the CapeTimes. He didn’t but later referred the newspaper to KCM’s former chief of finance Koos Pieterse – currently Media24’s chief of finance – who said on Friday he could not comment in time for the article’s deadline yesterday.
* On the assertions that he had unrightfully claimed investor’s money, Le Riche said: “That’s absolutely ridiculous, to say the least… Moore Stephens are confused. They don’t know the real story.” He said the agreement with all the investors had always been that they would pay him, Channal or another of his companies called Phoenix Diamond Holdings, and when these companies had merged and listed, he would give them his own shares.
Until then, the investments would be advanced to Channal, crediting Le Riche’s loan account. “The question is simple: Am I allowed to sell my own shares, yes or no?”
* He called the R12.2m, reportedly owed to KCM “a calculating error”.
Sehunelo was contacted early last week by phone, but asked for questions to be sent by e-mail. to which he did not respond. He did not answer his phone thereafter.
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