Gold Fields BEE deal raises US inquiry red flag
ALLEGATIONS that Gold Fields bribed ANC chairwoman Baleka Mbete to get a mining right for its South Deep mine may lead to a probe by the Securities and Exchange Commission (SEC) and the Justice Department in the US, where Gold Fields stock are listed.
Mbete is a shareholder in Invictus Gold, the empowerment company that benefited from a controversial R2.1-billion deal in 2010.
An investigation by international law firm Paul, Weiss, Rifkind, Wharton & Garrison (Paul Weiss) found that the shares allocated to Mbete constituted bribery, the Mail&Guardian reported on Friday.
The findings were presented to the Gold Fields board last month with a recommendation that the company “self-report” the matter to authorities, the M&G said.
The board decided against that, and asked Paul Weiss not to compile a final report, the paper said. Gold Fields said its board has acted in full compliance of the law, but did not comment on compliance by its employees.
The inclusion as beneficiaries of Mbete and Nicole Lucas, daughter of Eric Lucas, chairman of parliament’s mineral resources committee at the time of the deal, raises questions about compliance with the US Foreign Corrupt Practices Act (FCPA).
Companies with ties to the US have to comply with the FCPA, which makes it unlawful for companies to “make payments to foreign government officials to assist in obtaining or retaining business”.
Although Mbete is no longer an MP, her powerful position within the ANC is likely to raise a red flag should authorities investigate the deal. Violations of the FCPA can lead to civil claims and criminal prosecution.
The FCPA has a long reach. The hiring practices of JP Morgan in China, for example, are currently under investigation by US authorities to determine whether the bank hired people to benefit from their family connections to government.
“The first question you should be asking as the board is why are politicians involved in the BEE deal to begin with,” said Geoff Ever- ingham, emeritus professor of accounting at the University of Cape Town, who served on one of the committees that compiled the King report on corporate governance.
“Business can’t go around complaining about corruption in government and then go cooperating with them in the selfsame way,” Everingham said.
Mamphela Ramphele, former Gold Fields chairwoman who appointed Paul Weiss to probe the deal , told Business Day in an interview earlier this year that the department of mineral resources, which issues mining licences, had forced Gold Fields to include certain people in its list of ben- eficiaries. Gold Fields has denied the claim.
The Paul Weiss findings also raise questions about compliance with South Africa’s Prevention and Combating of Corrupt Activities Act. This law requires anyone who knows or reasonably suspects that any other person has committed an act of corruption, theft, fraud, extortion, forgery or uttering to report it to the police. Failure to do so is a criminal offence and carries a fine or imprisonment of up to 10 years.
“The Gold Fields board of directors acted deliberately and appropriately and in full compliance with the law. The board does not discuss the advice of counsel and internal privileged discussions of the board,” chairwoman Cheryl Carolus said.
Everingham said Gold Fields may have reasonable and justifiable reasons not to fully disclose the findings of its internal investigation. However, it has admitted that the investigation raised issues around good governance and best practice.
“On their own admission, there have been some failures with the deal. The default position should be full disclosure,” he said.
He was “rather puzzled” by the offer by CEO Nick Holland, and the board’s acceptance, to waive any bonus this year as a result of the law firm’s findings.
“Why is the CEO having to take the rap? I suppose the CEO brought the deal to the board, but the board ultimately carries the responsibility for it. They are the ones who signed off on it,” Everingham said.