Just wait, says Fortress of probe

• Abedian responds to institutional investors’ calls by saying internal committee will advise on need for an independent investigation

Fortress’s chairman Iraj Abedian says the property company, which is facing allegations of poor corporate governance, will respond to calls by some of SA’s largest investors for an independent probe by the end of September.

Fortress chair Iraj Abedian says the property company, which is facing allegations of poor corporate governance under his watch, will respond to calls by some of SA’s largest institutional investors for an independent investigation by month end.

A special ad hoc committee, formed on September 6 to consider the request by institutional investors such as the Public Investment Corporation, Allan Gray, Coronation and Old Mutual, is due to provide a response by the end of September, he told Business Day.

“They are currently analysing the company internally and will decide if an investigation should take place, in their opinion.

“They will ascertain the scope of the investigation and will communicate it to the investors who have raised concerns about Fortress and its operations,” he said.

The committee has no limitations on its scope, he said.

“They have full authority to investigate not only the internal matters that they are busy with but also explore the feasibility, scope and the mandate of any external investigation after they have met with all or the majority of the concerned shareholders,” Abedian said.

He said that he believed he had done everything in his power to ensure that Fortress operated above board, regardless of it being part of the Resilient stable of companies, which are at the centre of an investigation by the Financial Sector Conduct Authority.

He has been independent nonexecutive chair of Fortress since 2015. He is a former chair of Capital Property Fund. Fortress bought Capital in 2015 in the largest property merger in SA at the time.

He was professor of economics at the University of Cape Town before joining Standard Bank Group in 2000 as group chief economist. He serves as a member of the advisory board of the auditor-general.

Abedian, who is also CEO of private equity fund Pan-African Capital, has been an outspoken critic of private sector entities that have played a role in or have been connected to state capture. These include McKinsey, KPMG and Bain & Co. He has also criticised professional bodies.

Last month, SA’s largest investment managers sent a letter to the boards of Fortress, Resilient, Nepi Rockcastle and Greenbay Properties demanding an independent forensic investigation led by a “top four accounting firm” into the companies. These companies have experienced prolonged sell-offs in their shares since January.

The Financial Sector Conduct Authority has been investigating the companies since March. Its market abuse department’s probe has two aims: it is studying possible insider trading and price manipulation in the companies’ shares; and false and misleading reporting by or about the group of companies.

Abedian also responded to a newsletter sent to numerous listed property investors and other related parties last month, in which it was suggested that he and other group directors of Resilient should resign.

Hayden Bamford, MD of Alternative Real Estate Capital Management (AltRe), said in the newsletter that Resilient and Fortress had published retrospective changes to the numbers in their financial statements, suggesting there were problems at the companies that their boards had not picked up.

“Even without the investigation, the magnitude of the prior year ‘errors’ disclosed in the recently published June annual financial statements for Resilient and Fortress alone raises the question as to what the audit committees and auditors of those companies were doing,” Bamford wrote.

EXAMINATION

Abedian reiterated that he had acted fairly and that Bamford had provided no evidence of any wrongdoing on his part.

“I have nothing to hide, Fortress has nothing to hide. We are open for a fact-based discussion and examination of our actions,” he said on Tuesday.

Abedian said he had requested meetings with Bamford but these had been declined.

Bamford said last week a meeting with Abedian would be a waste of time as the chair had yet to accept the call for a forensic investigation. Abedian’s ad hoc committee was formed as a delaying tactic and an independent investigation was needed, he said.

“Alas, we are again to be disappointed by the response out of Fortress, to hear that they have rather chosen to follow the usual Resilient group line of bluster and obfuscation and announce the appointment of yet another ‘special ad hoc subcommittee’ ”, Bamford said.

“No doubt we can all look forward to a further whitewash report, exonerating all of any wrongdoing whatsoever, while the contents of which do not get released to the investor community and public at large, presumably because it cannot stand up to proper scrutiny,” the AltRe MD said.

I HAVE NOTHING TO HIDE, FORTRESS HAS NOTHING TO HIDE. WE ARE OPEN FOR A FACT-BASED DISCUSSION