RESILIENT: LOTS AT STAKE

There are two investigations into claims of shady goings-on at Resilient. Whether they reach the same conclusion will be intriguing

This week, former auditor-general Shauket Fakie is finalising his report on whether property group Resilient broke the rules, as its mounting body of critics claim. His findings will be a big deal, with deep implications for how SA’S property investment market is being run.

Not only did the four Resilient companies — Resilient, Fortress, Greenbay and Nepi Rockcastle — make up 40% of the JSE’S entire property index until recently, but the claims that their top brass orchestrated a sophisticated effort to manipulate the stock market cuts to the heart of SA’S corporate governance.

Already a number of research houses, including 36One Asset Management, Arqaam Capital, Navigare Securities and Mergence Investment Management, have suggested the share prices of the Resilient Group had been kept artificially high due to a series of secretive trades by people closely related to management.

If that’s true, the implication is that the value of a huge chunk of the JSE has been manipulated for months, if not years. It would be an embarrassing stain on the JSE, and would confirm the worst fears of foreign investors, already skittish after Steinhoff.

Little wonder that Resilient hired Fakie to conduct an “independent investigation” to reassure investors. Speaking to the Financial Mail this week, Fakie confirmed: “I’m hoping to get it done this week.”

But the terms of reference for Fakie’s probe have been so narrowly defined that it may fall short of providing real comfort to investors. Those terms say Fakie will “review all information available to Resilient regarding the draft report produced by 36One con- cerning suggested executive misconduct or breaches of applicable governance rules”.

However, it seems to limit Fakie’s mandate to share trades between July 1 and January 1 — a time period chosen, Resilient says, because “most of the share activity occurred in that period”.

This is important since a key pillar of the allegations is that people close to Resilient’s management have been conducting large amounts of trading for nearly a year, in order to drive up share prices.

Mergence, for example, flags four companies — all with a common director, Hendrik Oberholzer — that have traded vast amounts of shares over the past year.

Oberholzer has been a director of various companies alongside a man called Roque Hafner — a longtime business partner of Resilient’s CEO, Des de Beer. Company records also show Oberholzer is a director of a company called Comess, which shares an auditor with De Beer’s company, Holyrood Investments.

In response, Resilient has claimed that Oberholzer is a “manager of substantial private investments”, and is completely unconnected to it, or De Beer.

However, Fakie says he has “looked beyond that period”, which will be good for the legitimacy of his probe. Yet Fakie also says that while he did speak to central players in the drama — including Oberholzer and Hafner — he didn’t speak to 36One.

Cy Jacobs, the founder of 36One, says he finds it disturbing that Fakie never approached him. “They never contacted us. But I don’t understand how they can limit themselves to just a six-month period anyway, when the issues we flagged around trading by Oberholzer, for example, took place before the July cut-off date,” he says.

So it’ll be intriguing to see if Fakie’s report gets to the heart of the matter — either convincingly countering the allegations, confirming the views of the sceptics, or dodging the hot coals entirely.

But entirely separately, the Financial Services Board (FSB), now called the Financial Sector Conduct Authority (FSCA), and the JSE have been conducting their own probe into possible share manipulation and insider trading at the Resilient group for some weeks, which is likely to have deeper repercussions.

Shaun Davies, head of market regulation at the JSE, says the exchange is well aware of how critical this investigation is for the wider market.

“The FSB sees it that way too, and we’re both dealing with it as expeditiously as we can, for the integrity of the market,” he says.

Despite what some may believe, Davies says the JSE and the FSB aren’t sitting on their hands while investors panic. “We’re working with the FSB, which has investigative powers, assisting them to review the trading activities in the Resilient stable shares. The FSB is quite deep into this investigation, but I can’t say how long it will take,” he says. When the JSE and FSB finish their probe, it’ll be interesting to weigh their findings against Fakie’s report.

Shaun Davies says the JSE is well aware of how critical this investigation is for the wider market