Gold Fields, an advocate and two convicted criminals

The interesting relationship between a mining boss and his questionable “consultants”.

JOHANNESBURG – When a company needs to put a black economic empowerment (BEE) deal together as well as secure mining rights who does it go to? An established corporate sponsor located on the top floors of a Sandton office building? Or a convicted bank robber with a questionable (if not unknown) mining history, who seemingly owns night clubs, and counts amongst his group of friends a fellow convicted fraudster with a reputation for eating sushi off half-naked women whose main enterprise happens to also be located, on the top floor of a Sandton hotel? Well if you’re Gold Fields (JSE:GFI)’s CEO Nick Holland and his board, it’s a no brainer.

On May 10 2010, Gold Fields announced that the Department of Mineral Resources (DMR) had approved the conversion of the South Deep old order to a new order mining right. Fantastic - one would have thought, having waited years to secure the mining right, things were finally going well for the gold company. But the South Deep mining rights meant a second round of BEE.

In 2004 Mvelaphanda Resources (JSE:MVL) acquired a 15% interest in Gold Fields’s South African assets (foreign assets are excluded from BEE legislation). Mvelaphanda Resources agreed to pay R4.1bn in cash, which it took years to finally pay off. In the end, it was agreed that the 15% stake in the domestic assets would be swapped for 50m new ordinary shares in Gold Fields’s listed stock. However, Gold Fields still faced the legislated target of 26% in the hands of BEE parties by 2014.

The power brokers

Early in 2010, Gold Fields “contracted” Gayton McKenzie, a convicted bank robber and self-confessed gangster to prepare proposals for a consortium of groups and individuals that could be considered for inclusion in the BEE deal. Gold Fields also “appointed” in this respect Jerome Brauns, an advocate who represented President Jacob Zuma during his rape trial.

McKenzie and business associate Kenny Kunene’s relationship with Brauns seems to have been cemented during the Jali Commission, which probed alleged corruption in South Africa prisons. Kunene relates a story of how he warned the advocate who at the time was appointed to head up the Jali Commission, that his tea was poisoned.

“The gangsters in jail gave me a pot of extremely poisonous tea to serve to Jerome Brauns and his legal team, but I had vowed never to do another crime, so I wasn't about to break that oath by committing a multiple murder," Kunene told the Mail & Guardian. "Jerome and I became friends after this incident."

Gold Fields insists that “the main attraction” in the selection was Brauns, but Moneyweb understands that both Brauns and McKenzie came as a packaged deal. The entity tasked with preparing proposals for inclusion in the BEE Consortium was Gayton McKenzie (Pty) Ltd. McKenzie confirmed his role in structuring the deal to Moneyweb admitting to “playing a major role in putting the deal together”.

Kunene, infamously known as the “sushi king” after his much publicised party which involved the eating of sushi off half-naked women, is also part of Gayton McKenzie (Pty) Ltd. Kunene is also a convicted fraudster who was caught in the middle of a pyramid scheme. Both Kunene and McKenzie were directors of Gayton McKenzie (Pty) Ltd at the time the company was contracted by Gold Fields to draw up a BEE register.

It is thus odd that Gold Fields contracted Gayton McKenzie (Pty) Ltd to do work for it as Section 218 of the Companies Act disqualifies anyone jailed for theft, fraud, forgery or perjury from being a company director, unless the High Court sets aside the disqualification. At the time the deal was struck neither McKenzie nor Kunene had such an order from the High Court or had applied. Both have subsequently resigned from directorships, claiming ignorance of the law.

In February McKenzie told the Mail & Guardian, “when you've been imprisoned, there will always be questions about your right to be a director, while it may not be entirely fair, I do understand why these questions continuously crop up. So not acting as a director spares everyone a lot of unneeded angst."

Gold Fields is not the only mining company, where the two ex-convicts who met in prison and were released in 2003, have been involved, they have also been linked to dual listed Central Rand Gold (JSE:CRD) (CRG), a company which since 2006 has raised $230m in cash from investors, of which tens of millions has been diverted to non-mining expenditure: astonishing payments to executives “other expenses” (including millions spent on “accommodation” and “travel”), and further millions on “consulting services”, paid to unidentified persons. The fate of the combined $230m that CRG has raised from investors through the stock markets is a subject of fair clarity.

Last week Moneyweb reported that by the end of 2007, the company’s balance sheet showed total assets of $162m; by end-2010, the number had shrivelled to $56m. The net cash balance plummeted from $149m at the end of 2007 to minus $4.1m by mid-2010. The cash position was improved after further calls on investors in 2010, with nearly $43m in cash rolling in. At the end of April 2011, according to latest information, CRG had $7m in cash.

Writing in CRG’s 2010 annual report, Michael McMahon, chairman from April 14 2010 ( who’s also served as a non-executive at Gold Fields between 1999 and 2008) covered some of the issues that have influenced a fall of 99% in CRG’s stock price from its listing levels. On March 29 2011, CRG halted underground mining, citing rising acid water levels - a threat known on the Witwatersrand for years, if not decades. Since inception, CRG has spent $63m on actual mining capital expenditure. Its free cash flow over five years has been negative to the tune of $183m.

Another familiar face to have popped up at CRG is none other than Brauns: the advocate who apart from helping form the BEE consortium is also one of its main beneficiaries. He now serves as a non-executive director at CRG. Both McKenzie and Kunene were held in high regard at CRG. Kunene was awarded 30 000 shares on November 1 2007, and a further 20 000 in May 2008; all at a penny a share. 20 000 shares in the name of Kunene vested on May 9 2008, when the CRG stock price was around £1.10 a share.

McKenzie, however, was awarded 250 000 CRG shares on November 1 2007 (when the stock was trading around 140 pence a share) for a princely penny a share. McKenzie was awarded by far the most among “senior managers” at CRG; the next highest number of shares is 50 000. Based on this, it would seem that CRG rated an ex convict as its most valuable person, excluding those on the board of directors.

According to CRG, on December 9 2010 CRG was told that “Mr Gayton McKenzie would be leaving the full-time employ of the company in 2011, but would continue to provide services on a contract basis, and that Mr Kenny Kunene would similarly be leaving the full-time employ of the company shortly thereafter”.

Gold Fields flip-flop on the Sushi King

It’s thus hardly surprising that Gold Fields with a market value of $11.3bn wouldn’t want to broadcast the fact that it has a financial relationship with Kunene, given his colourful history but, when Moneyweb asked the company directly if it had any association with the “sushi king”, the reply was that “Kunene was never employed by Gold Fields in any capacity”.

However, just two days later, Kunene in an interview with the New York Times explained how both he and McKenzie helped Gold Fields retain its mining rights to the South Deep mine. The story quotes Sven Lunsche a Gold Fields spokesman saying it involved, “… a lot of political lobbying work”. When Moneyweb pointed out to Lunsche, that it appeared as if the company was saying one thing to us and another to the NYT, he accused the paper of taking his comments “completely out of context”.

He argued that at no point had Gold Fields denied, “… that Kenny was part of the group [Gayton McKenzie (Pty) Ltd] but [we] want to stress that Gayton and Jerome were the key people involved”. Yet again he confirmed that theirs was “… the drawing up of the BEE register”.

Kunene himself despite admitting to playing a somewhat minor role was determined not to have his name being linked to Gold Fields; he told Moneyweb, “…try to keep my name out of it, please man”.

Gold Fields’s CEO Nick Holland, McKenzie and Kunene

Moneyweb has established that during last year’s FIFA World Cup, McKenzie, Kunene and a few others were invited to Holland’s private residence in Northcilff, Johannesburg, where the South Deep BEE deal was discussed.

Gold Fields has admitted as much: “Holland in the normal course of exercising his duties as chief executive officer, regularly receives a diverse range of Gold Fields employees, business associates and other stakeholders at his personal home. This practice is an integral part of his approach to stakeholder management”.

His involvement with the ex-convicts included Gold Fields sponsoring a soccer tournament for prisoners at Diepkloof prison. At this tournament Holland was seen sporting with Kunene and McKenzie. Gold Fields has confirmed that it sponsored the tournament “as a responsible and engaged corporate citizen”. Holland’s relationship with the ex-convicts is a very personal one. Both Kunene and McKenzie have on many occasions met Holland and other Gold Fields executives at the company’s corporate office in Sandown, Johannesburg. Such visits also included the CEO taking among others both McKenzie and Kunene on a tour of the South Deep mine. According to Gold Fields, these visits only took place “as part of familiarising the advisers and proposed participants in the … consortium with the mine”.





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Showing 23 comments

  • Once bitten twice shy
    Wake up Barry. Holland probably started with decent people as his BEE, but was compelled to use DMR "nominees" "suggested" by DMR officials. That is probably how these two criminals ended up there-I assure you, they would never have remained as BEE partners if DMR did not want them to and actively support their participation. That is the sad face of BEE in this country- the people DMR compel onto mining companies with the useful phrase "do what we want or you will not get you rights" or that the initial BEE presented to DMR is "not representative enough", allowing DMR "nominees" into the mix. This is the experience of many- the real story is to find out to whom Kunene and McKenzie are connected inside the DMR, you will probably find their influence extends right up to the Minister. Adapt or die is the choice facing Mining Executives, Holland was probably compelled to adapt, or lose Goldfields Mineral rights. What would you do, Barry?? The situation is not helped along by white "Corporate Advisors" who coattail on this nonsense, and serve us up deals like Anoraaq/ Pelawan or the latest absurdity, the Trans Hex "acquisition" of Namakwaland Mines, which in itself merits a story.
  • Petrus Theron
    So the point of this long article is that Gold Fields is doing business with Kunene. From what I've seen I don't like the guy, but then again he served his time in jail and is now free to do what he wants. If there is anything untoward the BEE deal its another story, but until such time I don't think there's reason to fuss.
  • Philip
    Holland - i never thought you were up to the CEO job. Now i know i was right. GOldfields has always been a reputable place - - no more> I shall instruct my broker to sell. It may cost me short term - but i can not have shares with these gentlemen around.
  • Mark
    This reporting is quite opportunistic and sensationalist. While Kenny and Gayton are X-Cons they have publicly declared their turnaround from a life of crime to the straight and narrow and this was long before they became wealthy (Read The Choice - The Gayton McKenzie Story). What about the story in Bloem where Gayton bust the drug operations by the guards? Why is this not mentioned?

    They are entrepreneurs who make mistakes with their endeavors to grow shareholder value. Having met them their past is something they are trying to put behind them and this tenuous link between their past and some of their failures is not a basis for quality journalism. This whole article and the one before it is all based on supposition that because they are x-cons they must still be criminals!

    Where are the facts that show Kenny or Gayton were at fault? It could have been any number of other things that caused CRG to fail (how does that ABSA advert go again? something like 90% of companies close their doors in the first 5 years of operating?).

    Please, we would like to see a little more hard reporting, not just journalists chasing air based on a past that is more than 10 years old and not linked in any way to current circumstances.
  • OtherGuest
    Mark you are correct, there is no evidence to date that Gayton and Kenny have committed any wrong doing since their release from prison.

    However. How do you expect it not to raise eyebrows when a pair of highly unqualified men (merely coincidentally ex-cons) are remunerated beyond their wildest imagination by an organisation that later turns out to be nothing but an elaborate scam?

    At best they are the unwitting benefactors of a much larger scheme that deceived and stole money from it's shareholders.

    At worst their direct involvement is far more sinister.
  • Mark
    I think you miss the point here... whilst not disputing the article may be sensationalist and opportunistic, Gold Fields unfortunately opened themselves up to this nasty can of worms by virtue of appointing individuals whom quite frankly on not qualified in any way to be in the game of mining. I am not interested at all in their history of being ex-cons and I agree with you, I dont like the reference, however what does irk is the fact that there is obviously a lot of very dirty and sordid issues going on behind the scenes at the DMR for one and similarly at Goldfields and CRG. I fully grasp the nature of the business that they are "employed" to do but please don't get precious when everyone understands the "real" function of McKenzie and Kunene! Public sentiment and perception goes a long way and this is the nature of the piece...I am very sure that there are some very experienced and very valuable BEE people out there that Goldfields could have gone with and who have lost out...are they not the ones who should be a little peeved? It seems that this happens all the time and investors in particular should know, its their money.
  • Petrus Theron
    Dear Mark. Please enlighten me on the "real function" of McKenzie and Kunene. I find it frustrating to be in the dark when "everybody knows".
  • Mark
    The Mark reply wasn't me who posted the original reply. It is now me.

    I think the other Mark is referencing the idea that Kenny and Gayton are employed to grease the operations, perhaps with government and other parties. Or even just to make the organisation BEE compliant.

    Thanks for the replies though and I agree to the comments. However I doubt that there are "many" other BEE candidates out there.
    I feel that the real symptom of the problem is more likely to be that organisations struggle to find good BEE candidates and then as a result simply end up with ones that do not know much about the industry they've been employed in. There are few super wealthy BEE candidates while most of my friends don't get those kind of opportunities. These super wealthy skip industries easily and quickly without lifting eyebrows. (how many different industries has Tokyo Sexwale been on the company board for?)

    Gayton was a motivational speaker before starting with Goldfields and I suppose that the the CEO of Goldfields saw one of his speeches, was impressed and decided that he was a upstanding citizen and hired him.

    Business is simple like that. Sure people try to make as much money for themselves as possible in the mean time, but don't we all? I always push for as high a raise as I think I can get.
  • Dilawar
    One question comes to mind: W.W.W.D.[ What Would Warren Do ?] And what would Ol' Charlie say? Simples. I doubt the Berkshire gurus would consort with robbers and fraudsters [ let's leave aside advocates for the moment ] . Reputational risk,Goldfields ??? Off my list of Investibles she goes.
  • Burtfred
    Very disappointed to hear that Nic Holland is chummy with these lowlife.
    Even though he is under ANC pressure to hand a piece of the pie to their members, I thought he was above dealing with ex-cons and arrogant cadres.
    I will be selling my shares in Goldfields.
  • Sehlorabrokers
    It is sad to see the comments of "concerned", get your ass out of your behind, you appear to revere mediocrity, thievery,fraud,deviousness and under peformance. Explain "They were taken on tours to familiarise them with the operation" when they were the advisors. The bulk of R 200m is gone, these *uckers have been spending it, how much have you invested in their operations? Phone them and tell them you need to be relieved of your cash.The advocate link, a few bucks for abandoning your moral and ethical principles. To stupid to understand that you cant take it with you.
  • Theking1
    More like "Draai The Beloved Country". SA is being devoured by a few fat crooks, aided and abetted by corporate SA...
  • Dirk
    naai the beloved cuntry...
  • Sipho
    Hmmm.......I sense double standards. Because it is a major corporation that is implicated in this saga people are quick to come to its defence. I wonder if the reaction would be the same if the Department of Monerals and Energy was was implicated. This is tokenism at its worst. Why did they try to deny the fact that they had dealing with these guys? Good investigative journalism. These mining houses are just as corrupt as the government at the end of the day. You should see what they are doing to communities in Limpopo. They have no ethics at all.
  • Robertdddvs
    How long does moderators approval take? Who is this moderator. Why does he (mabe it's a woman) need email addresses? let us know
  • Guest
    Tried to offer praise, but told comment had to be cleared by a moderator B4 publication. Who is the moderator?
  • Mordred
    Well... I don't know. Barry/Lindo, what a great story. Show ll the crooks up for what they are. Alec must be very proud of you both, bringing such indepth reporting and analysis. he has trained you very well and must take some of the kudos himself. You both deserve raises and Alec should be pulled in by Rhodes journalism department to run a course on courage in reporting and how to give investigative journalists their heads. OBviously he and you dont feel threatened by the money grubbers at Goldfields. Give Barry and Lindo a raise Alec -- they deserve it.




  • Jacques
    And I thought that Ian Cockerill was teflon slimy but he would not have countenanced or approved of these goings on. Nick Holland isn't quite as urbane and suave and his true colours shine through. Goldfields has been on downward slide for quite some time and they keep on fudging the figures. When will this house of cards fall because like Harmony fall it must? And who will they blame? SAP?

    Well done Barry in exposing this sorry lot of crooks.
  • Mr P
    Madiba and various other current MPs, also ex cons! So why the fuss or do we condemn all to eternity? If they did their job and achieved the required results, why this vendetta? Surely, Gold Fields (Nick Holland) and the Board applied good governance to achieve results! Why do the journalists not concentrate on more important issues such as mine deaths and resultant closure of operations for one or two deaths vs the 18000 deaths in SA where most loss of life due to crime , taxis or busses. Still waiting to hear that the Department of Transport have suspended all operations of a taxi or bus company pending a full investigation. The same applies to services by SAPS and local traffic cops. It is much easier to target a mine for closure than to concentrate on areas where bigger problems are rife! Just think about the corruption and non service delivery of the majority of Local Goverments and Municipalities. Why do Lindo Xulu and Barry Sergeant not apply their minds and special investigations on these much more lucrative areas for creatvie journalism?
  • Genie
    Great article!!! I makes you think and ponder about ethical issues and public relations. I also suspect as suggested in other comments that they (the ex-cons) have buddies everywhere (including DMR) and are therefore obviously well-connected. It is really really sad what is happening in South Africa's businesses and government today, but it is not unexpected.
  • Sudesh
    Time to dump Goldfield shares as well as the Holland. One a person sleeps with 'pigs' you become part of the organization. I wonder, something like another Kebble!
  • concerned
    I find it quite worrying that the media seems to concentrate only on the fact that these oakes are ex-convicts. what about the fact that these men decided to leave the criminal way of life and actually make something of themselves and in the process inspired our youth? who exactly is supposed to get these deals? the minority that still refuses to transform? leave the men alone, we need to see some positive reporting about people like these instead of the bashing of character that we constantly witness in our media. I say well done Kenny and McKenzie!
  • Duncan
    A storm over a piece of Sushi...

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