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Report 68 Business Practices Committee

4. The Meeting with Burger, Fennie, Sadie and Van Wyk on 8 May 1998



After receiving the letter from de Beer an official called Van Wyk and requested that a meeting be arranged between officials of the Committee and the board of directors of GCI. This meeting was arranged to take place on 8 May 1998 at the offices of GCI. Van Wyk, apparently in preparation for this meeting, on 6 May 1998 wrote to the directors of GCI. In this letter he stated that the board of directors should cooperate with the Department of Trade and Industry (as was mentioned earlier, the Committee is a statutory committee within this department) and he warned Botha that a formal investigation in terms of the Act could hold in grave consequences for GCI.


Van Wyk put a wide range of questions to his colleagues. These questions related to the misleading statements referred to in section 2 of this report and who was or were responsible for these statements. It was obvious from these questions that Van Wyk did not know or was not informed about many aspects of GCl's previous conduct.


The Committee's file on GCI was made available to Botha during the morning of 7 May 1998 and he was at liberty to make photocopies of any or all of the documents contained in the file. On 8 May 1998 (the meeting of 8 May 1998) officials held discussions with Burger ("President"), Sadie (Chairman), Van Wyk (Non-executive director) and Fennie (Non-executive director). After briefly explaining the Act to those present, investigating officers started the discussion by referring to the letter dated 6 February 1998 which the Committee received from the FSB. The non-executive directors, Fennie and Van Wyk, did most of the talking and Burger and Sadie had very little to say.


Van Wyk and Fennie stated that they were unaware of the existence of the documents discussed under 2.1 to 2.7 above. They were appointed as non-executive directors on 18 January 1998. It was not possible to determine whether the documents were deliberately withheld from them. It would appear so (9). Van Wyk and Fennie were certainly amazed at some of the statements in the documents. The directors conceded that the procedure whereby the shares prices of GCI was "determined", could have prejudiced or misled GCI shareholders.


Fennie said that the activities of GCI could be split in two phases. The second phase started in February 1998 and this phase was characterised by serious efforts on the part of the board of directors, and especially the non-executive directors, to bring GCI on the right track.


A number of concerns were put to those present, such as:

a) By 31 January 1998 just more than 3 million shares were issued to "friends" and "family". The question that begged to be answered was: What were these shareholders told at the time they bought the shares and were they influenced by some of the glaring misrepresentations contained in the documents on the GCI file?
b) The Committee had reason to believe that shares were offered to the public and not to "friends" and "families" only.
c) The "calculation" of the share prices could have mislead and prejudiced shareholders. This was conceded by Fennie and Van Wyk.
d) The 400 million shares of the directors could be sold to the public at a profit of 8 899 900 per cent, assuming that they sold their shares at 89 cents each.


It was suggested to the directors of GCI that they address the Committee at its next meeting. Following from the meeting the Committee received a letter from Van Wyk, then non-executive legal director of GCI. He said that following the meeting on 8 May 1998 the board of directors of GCI met on an urgent basis on 11 May 1 998.


The result of this meeting was that inter alia:


Burger stepped down as "President" of GCI and Van Wyk appointed as "Acting President". The idea was that the title of "President" would fall away as soon as practical possible because it has no real meaning in the South African company law context.


Sadie stepped down as chairman of the board and Fennie was elected as non-executive chairman. Botha and de Beer were re-elected in their positions. It was also said that the executive staff would "... commence to attend Business School".


9) The minutes of a GCI board meeting held on 9 March 1998 indicate that Fennie said that he will not sign the prospectus because it was not done "correctly". At this meeting Van Wyk handed in an affidavit dated 8 March 1998. In this affidavit he inter alia stated: "I was appointed by the President of the company, Mr. Jay Burger. I have accepted the position on the basis that it would be an appointment as non-executive director, that is with no executive responsibilities. I believe that the prospectus is in an advanced stage. My input has not been requested and I was furthermore not invited to partake in any activity leading to the issue of a poorly drafted document, as well as an ill considered body of contents of the draft prospectus. I was never given the opportunity to inspect the books of the company or to investigate any source documentation, the pillars of a prospectus. In fact, my attempts to permit Deloitte & Touche to inspect the books were shelved as a waste of time.