Helderberg Bank Brokers Fleece Clients

Bank advisers fleece clients

October 22 2010 at 07:49am
By Craig McKune

Several well-heeled Capetonian Standard Bank clients have lost millions in crooked deals after the bank’s accredited financial advisers sold them shares in diamond mining companies in which the advisers were also directors and shareholders.

The angry Standard Bank Financial Consultancy clients include Cape Town theatre impresario Pieter Toerien, who recently won a Western Cape High Court case against one of the advisers, Arno Döckel, over a R5 million deal. Toerien is also taking the bank to court over a different R4m deal.

Standard Bank, however, implied this week that it had washed its hands of the matter and accepted no responsibility because “Standard Bank was not involved”.

Despite this response from the bank, a Cape Times investigation – including interviews and scrutiny of court papers and documents collected by shareholders in one of the mining companies – has revealed the following:

* The advisers are explicitly barred in the employment contracts they sign from selling products not authorised by the bank. They are only allowed to sell life assurance policies, unit trusts and other collective instruments. They are also not allowed to be involved in any company soliciting business from Standard Bank clients.
*While insisting that they were private deals, the bank’s former hot-shot financial adviser, Hein le Riche, who is central to the scandal, admitted in an interview this week that some of the transactions were discussed in his office at Standard Bank’s Helderberg branch – in company time.
*Le Riche also discussed at least one of the deals in an e-mail on Standard Bank stationery, according to a report by audit company Moore Stephens. Le Riche said he could not remember if there were other such instances.
*Le Riche’s superiors, to whom he said he disclosed his business interests – and who, in terms of bank policy were entrusted with oversight over his dealings on behalf of the bank – are themselves listed as shareholders in one of the companies, and Le Riche confirmed they held shares in another.
*According to an e-mail to shareholders from investor Henk van der Tak, one of these managers, Jaco Holtzhausen, even met with him and Le Riche in Le Riche’s office, where they “told me of the opportunities” in one of the companies.

Holtzhausen still works at Standard Bank Financial Consultancy, where he heads the Western Cape branch.

*Van der Tak, who invested R7m, and Wendy Mitford, who invested at least R21.3m of her retirement money with Le Riche, have said that they were led to believe the investments they made were supported by Standard Bank as an institution. The bank, however, denies that this was the case.

Le Riche is a former director and shareholder in the three companies concerned: Kimberley Consolidated Mining (KCM) the shell company for the deal, as well as one of its components, Channal Mining, and Phoenix Diamond Holdings.

He said the plan was that Phoenix would merge with Channal, with the new entity then merging with a further KCM company, styled as Kimberley Consolidated Mining and Exploration (KCME).

Once this complex reversing procedure was complete, KCM – in the financial game plan at least – would list on the Johannesburg Stock Exchange (JSE).

In the event, Phoenix was liquidated, while the other two companies did merge to form KCM, which duly listed on the JSE’s alternative exchange AltX in May 2008.

Investors were told the share prices would rocket after listing, but instead they plummeted against expectations and the company was suspended a year later over non-compliance. Among other derelictions of corporate governance, it failed to submit its 2009 and 2010 financial statements.

It is in the process of being delisted.

Leading up to the listing, Le Riche raised funds for the company through people such as Van der Tak, Mitford, Toerien and Robert Masson. These investors either made out cheques directly to him, Channal or Phoenix.

In some cases the investors were issued Phoenix shares against their hard cash, but throughout, the understanding was that he would give them KCM shares once it listed.

Toerien was told by Standard Bank consultant Döckel – also a major shareholder in KCM – that once listed the JSE share price “would be no less than R3”, but the shares now have a market value of only R0.09 per share, according to court papers.

Van der Tak lost out when he gave Le Riche R7m and was ultimately given 7 million KCM shares worth R0.00001 each.

Toerien invested R9m, Mitford invested R21.3m, and Masson R480 000.

However, Le Riche was adamant this week that all of the deals he was involved in were made in his personal capacity and had nothing to do with Standard Bank.

He said there was no ethical breach, no breach of contract and no conflict of interest.

“I disclosed all my outside investments to my directors, Jaco Holtzhausen and Keith Ferguson.”

But both Standard Bank directors are listed as KCM shareholders, and Le Riche admitted they had also been Channal shareholders before the merger.

In total, six Standard Bank Financial Consultancy managers and advisers are invested in KCM, the bank has admitted.

Questioned on the matter, Standard Bank failed to explain how the apparent conflict of interest was allowed to continue.

Mitford did sign at least two documents, appearing to relate to R6m of her investments, which stated the transactions were “private” and not related to Standard Bank.

Le Riche said there were similar documents for all the transactions, but he only sent the Cape Times one of Mitford’s; the other was sourced elsewhere.

Le Riche said he had met Mitford at her house in Somerset West to discuss the investments, but he later admitted they had also discussed them at Standard Bank’s Helderberg branch.

Mitford, however, said: “He came to my house the first time, but all the other advice was taken on the bank’s premises.”

Standard Bank was sent 24 specific questions, to which it responded with a generalised statement, admitting that Le Riche and Döckel “were precluded from acting as intermediaries in the sale of either listed or unlisted shares”.

But the bank referred to seven unnamed Standard Bank Financial Consultancy clients who had invested in KCM “in terms of private contracts” with Le Riche and Döckel.

“The transactions … would all have been identified and prevented in the normal course of business had they been conducted under the banner of Standard Bank.

“Standard Bank Financial Consultancy subjects all transactions to meticulous scrutiny by its advice, product and planning evaluation process.”

But the bank did not explain how its advisers, apparently bound by contract “(extending) to include the concepts of honesty and integrity”, could solicit payments from Standard Bank clients for their own personal business interests.

Döckel was contacted by phone, but asked for questions to be sent by e-mail: “I’ll see if I can answer them.”

He never did. - Cape Times