Johannesburg - An auditor has alerted South Africa’s tax agency to alleged fraud at Goldrich, a mine operator whose chairman is already being personally sued following the collapse of Aurora Empowerment Systems, a similar company.
Mahier Tayob, a forensic auditor working for Goldrich, alleged that fraudulent transactions and money laundering occurred at Goldrich, in an affidavit filed to the High Court of South Africa, Gauteng Division, Pretoria, and dated March 10.
Goldrich Chairman Thulani Ngubane and Director Bonginkosi Mthethwa denied the allegations in telephone interviews.
Goldrich agreed to operate the 72-year-old Blyvooruitzicht gold mine, 100 kilometres (60 miles) southwest of Johannesburg, in January after it was put into liquidation last year.
The fraud and money laundering allegations appeared in an affidavit filed by Tayob in response to an effort by Harvard Corporate Recovery Services, Blyvooruitzicht’s liquidator, to remove Goldrich from the mine because it hasn’t made the site secure and started mining, said Leigh Roering, a director at HCRS.
“In the short time of my office I discovered fraudulent transactions which I have disclosed to SARS,” Tayob said in the affidavit, referring to South Africa’s tax agency.
He did not identify the individuals responsible for the transactions.
Even though he was working for Goldrich, Tayob said he was obliged by law to disclose his findings.
Goldrich is one of a number of companies taking over aging gold mines from bigger companies in South Africa where production has shrunk by four fifths since its peak in the 1970s.
The closure of less profitable mines has been accelerated by the 16 percent decline in the gold price over the past year.
Gold traded at $1,347.82 an ounces of 9:58 a.m. in London.
It is not related to Spokane, Washington-based Goldrich Mining.
Goldrich is following the same path as Aurora, which allegedly stripped assets and fraudulently misrepresented its finances when it attempted to take over aging mines belonging to Pamodzi Group in 2009, according to the National Union of Mineworkers.
The NUM represents employees at Blyvooruitzicht who say they haven’t been paid since September.
“The same directors are in charge at Goldrich who were operating Aurora,” said Livhuwani Mammburu, a spokesman for the NUM.
“They’re stripping Blyvoor of its assets in exactly the same way.”
Goldrich and Aurora had a director in common, Ngubane, and a strategic adviser, Fazel Bhana.
After production started in 1942, Blyvooruitzicht was said to be the most profitable gold mine to date, according to the 1968 book Golden Age, chronicling South Africa’s mining industry.
Dividends of 100 percent or more were paid out for five straight years, the book said.
It was last owned by DRDGold Ltd. and last operated by Village Main Reef, which abandoned a planned rescue after the gold price dropped from its peak in 2011.
The planned sale by DRDGold to Village was never completed, according to Ferdi Dippenaar, Village’s chief executive officer.
Goldrich’s Ngubane was a director of Aurora along with Khulubuse Zuma, a nephew of President Jacob Zuma, and Zondwa Mandela, a grandson of Nelson Mandela, South Africa’s first black leader.
The three men are being sued in their personal capacities for fraud and selling Pamodzi mining assets that they didn’t own at Aurora, which has since been liquidated. Bhana is also being sued as part of the Aurora case.
Ngubane said in an interview the allegation of fraud is “ludicrous” and “definitely not true.”
He declined to comment on Aurora because of a pending court case.
Mthethwa, who is not cited in the Aurora case, said there had been no fraud at Goldrich.
Bhana, who was a management adviser at Aurora, handed in his resignation at Goldrich March 12 after the company was put into business rescue proceedings, he said in a telephone interview.
Any questions about fraud should be referred to the company’s current directors, he said.
Mandela declined to comment on the Aurora case because proceedings are pending, he said in a telephone interview.
Zuma couldn’t be reached for comment.
David Swartz, a lawyer at Phillip Silver and Associates acting for Goldrich and Aurora, didn’t return calls requesting comment. Mandela and Zuma are not involved with Goldrich.
Goldrich was placed in business rescue proceedings February 27, and Tayob was appointed to create a business plan to save the company.
Business rescue is the South African equivalent of Chapter 11 bankruptcy protection filings in the US Tayob alerted the tax agency to the transactions in compliance with the law, he said in an interview.
“A substantial amount of cash transactions and money laundering appear to have been consummated on, and by this company,” Tayob said in an e-mail to SARS dated March 6 that’s attached to the affidavit.
SARS spokesman Adrian Lackay declined to comment on whether Goldrich is under investigation, citing taxpayer confidentiality.
The situation at Blyvooruitzicht is deteriorating, the NUM said March 12.
Employees haven’t been fully paid, shafts are flooding and violence between groups of illegal miners and local residents is increasing, the NUM said.
Goldrich was placed into business rescue proceedings last month to “calm everybody down” after the company was besieged by requests for payments, Mthethwa said in an interview.
The company was facing calls for cash from workers for pay they say they are owed and from AngloGold Ashanti, which owns a neighbouring mine and was pumping water on Goldrich’s behalf for an agreed fee, he said.
Goldrich has paid workers since February 7, when it took control of Blyvooruitzicht, Mthethwa said.
The company isn’t liable for any payments before that date, and so payment requests should be referred to HCRS, Blyvooruitzicht’s liquidator, he said. - Bloomberg News