Connie Myburgh, Nova Property Group vs. Moneyweb
Fri, Aug 21, 2020
Complaint Number: 7804
Lodged by: Mr Connie Myburgh, Chairman: Nova Property Group (“Nova”) – he complains in his personal capacity, in his capacity as Nova’s chairperson, as well as on behalf of Nova
Date of article: 5 March 2020
Headline: Seven reasons Orthotouch’s dismal failure must be investigated – It’s critical that the roles and conduct of the decision-makers be probed
Author of article and respondent: Ryk van Niekerk, editor
Introduction: Six complaints; Unacceptable language 2
- The article 3
- Relevant sections of the Press Code 4
- The text 4
Pre-liminary remarks 4
- Introduction 4
- General remarks: the context 5
- The arguments 9
4.1 Introduction 9
4.2 First complaint: Investigation into decision-makers 9
4.2 Second complaint: Assisting Klopper 11
4.3 Third complaint: Involved in Georgiou’s scheme 13
4.4 Fourth complaint: Implicated in Klopper’s ‘failures’ 15
4.5 Fifth complaint: Untoward selling of properties 16
4.6 Sixth complaint: Loss of millions caused by Myburgh 18
4.7 Seventh complaint: Neglecting duty to take action 18
4.8 Eight complaint: Millions lost through irregular selling 20
4.9 Ninth Complaint: Sold in questionable circumstances; ‘stripped’, ‘looted’ 21
4.10 Tenth Complaint: No soft approach 22
4.11 Remarks in conclusion 23
- Finding 23
- Seriousness of breach 24
- Sanction 24
At the outset, I need to flag two issues:
Mr Connie Myburgh and Nova Property Group (“Nova”) have simultaneously lodged six complaints with the office of the Press Ombud.
The complaint numbers, headlines and dates of publication of the five other complaints are:
As all the articles complained of are about the same subject and issue, all six of the complaints and adjudications should be read in conjunction with the others. At the end of the last adjudication, I shall make some general comments in a separate addendum.
1.1 The article
1.1.1 Myburgh complains about the following statements and/or allegations and/or innuendos in the article (more detail is given during the course of this adjudication):
- First complaint: “It is critical that the roles and conduct of the decision-makers, in particular … Myburgh re investigated”;
- Second complaint: “The business rescue process of the HS companies was led by Hans Klopper… [and] was assisted by … corporate lawyer Connie Myburgh [who] is also the chairman of the Nova Property Group, the rescue vehicle of the failed Sharemax investment scheme”;
- Third complaint: “It is critical that the roles and conduct of the decision-makers, in particular Nic Georgiou, the kingpin of the schemes … and Myburgh are investigated”;
- Fourth complaint: The article implicated Myburgh in Klopper’s alleged failures and neglect, inter alia by using the word “assisted”;
- Fifth complaint: “These transactions (the sale of 42 properties to third parties) also resulted in significant accounting losses at Orthotouch, and have never been explained to investors… and Myburgh, as director of Orthotouch, authorised these sales transactions;”
- Sixth complaint: “According to Moneyweb’s calculations, Orthotouch suffered a loss of R782 million in the process [after Myburgh had approved the sale of 31 properties in December 2013 to Accelerate, the listed entity of Georgiou’s son Michael]”;
- Seventh complaint: “In another example of what may point to Klopper’s compromised position … Myburgh did not take action against Zephan … when Zephan unilaterally and in contravention of the Section 155 SOA (Scheme of Arrangement) terminated all interest payments to investors who supported the legal processes against Georgiou and related parties”;
- Eight complaint: “… sale transactions [by Nic Georgiou] resulted, according to the Moneyweb investigation, in a R507 million loss for Orthotouch… and Myburgh, as director of Orthotouch, approved the transactions”;
- Ninth complaint: “… it is clear that virtually all the properties in the HS companies were sold to third parties in questionable circumstances, and that a Section 417 investigation into the conduct of … Myburgh … seems warranted. A Section 417 inquiry is aimed at investigating events leading up to the liquidation of a company to ascertain whether any assets were stripped or looted”; and
- Tenth complaint: “The last thing investors need is a soft approach on developments listed above and the role[s] played therein by … Myburgh”.
1.1.2 Note: Some of these complaints could easily have been combined, but I have kept them apart to avoid any possible confusion.
1.1.3 Myburgh says if Moneyweb is unable to provide proper proof of all the relevant statements, allegations or innuendos, he requires the publication of rectifications, retractions and unequivocal public apologies to him in his personal capacity and as Nova’s chairman, as well as to Nova itself, and that these be published on the same platform where the 5 March article was published.
1.2 Relevant sections of the Press Code
Sections of the Press Code complained about are:
- 1.1: “The media shall take care to report news truthfully, accurately and fairly”;
- 1.2: “The media shall present news in context and in a balanced manner, without any intentional or negligent departure from the facts whether by distortion, exaggeration or misrepresentation, material omissions, or summarization”;
- 1.3: “The media shall present only what may reasonably be true as fact; opinions, allegations, rumours or suppositions shall be presented clearly as such”; and
- 3.3: “The media shall exercise care and consideration in matters involving dignity and reputation…”
- The text
2.1 The article was about the companies Orthotouch and Zephan that had been put into business rescue late last year, “effectively bringing an end to the ‘rescue process’ of the failed Highveld Syndication (HS) schemes. Van Niekerk wrote that, although a business rescue plan had not been published, it was clear that the 18 700 mostly elderly investors (to the amount of R4.6-billion) might expect to receive only a few cents in the rand.
2.2 The editor stated it was critical that the roles and conduct of the decision-makers, including Myburgh, be investigated. He then identified seven aspects regarding “Orthotouch’s dismal failure” that he believed demanded investigation.
- Pre-liminary remarks
3.1.1 Before I delve into this complaint, allow me to say that I am going to ignore statements that are irrelevant to the complaint – of which there are quite a few. It follows that I am also going to ignore responses to such statements.
3.1.2 Myburgh leaves no stone unturned to accuse the editor of bias and “utmost malice”, alleging that he was out to create “maximum damage” to him and to Nova. I shall refer to this allegation again in my addendum, after I have adjudicated all six complaints.
3.1.3 To keep the issues as simple as possible, I am:
- not going to repeat myself, as often happens in the relevant correspondence that has landed on my desk; and
- grouping together several issues that are addressed separately in the communication with this office.
3.1.4 I am cognisant of the fact that simplifying matters can be dangerous. Over-simplifications will inevitably lead to wrong interpretations and decisions. However, the intricate nature of the complaint at hand has forced me to simplify. Hopefully, I have not missed any nuances in this process. If I have, it was not intentional. The exercise was indeed all but easy.
3.1.5 Myburgh’s (and Nova’s) refusal to respond to Moneyweb’s questions is a recurring theme. He says Nova has long ago come to understand that, “to respond to Mr van Niekerk, merely provides him with another platform and opportunity, to further report his incorrect, and in the view of the Nova Group, damaging and defamatory narrative, regarding the Nova Group and its functionaries”. He adds, “To respond to every article written about the Nova Group by Mr van Niekerk in order to satiate his obsession with the Nova Group, will be a waste of time, money and resources, as the reportage is no more than sensationalist writings.”
3.1.6 On the other hand, I note (with appreciation) that the editor nevertheless persisted in giving Nova a right of reply.
3.1.7 Still, this is an extremely unhealthy situation. Given the tension between the parties (let’s be honest!), I have little hope that this adjudication will do anything to improve this situation. I am nevertheless going to try to do the seemingly impossible – to bring the parties closer to each other. But, in the end, the choice is theirs.
3.2 General remarks: the context
3.2.1 Myburg says the editor stated that the article in dispute was a follow-up of the one published the day before (headlined, Where is Hans Klopper?, about which he also lodged a complaint with the office of the Press Ombud), and merely perpetuated and embellished on the same incorrect, baseless and defamatory reporting. (This means that the two articles should be read together, he argues.)
3.2.2 This time, though, the focus is on the “decision-makers” – which included him, Myburgh says.
3.2.3 He says having drawn the readers into the view that the “decision-makers” were to be “investigated” and “probed” for wrong, improper and untoward actions, meriting “forensic investigation”, the editor proceeded to identify him – as a corporate lawyer, and as one of the “decision-makers”, who was to be “investigated” and “probed”.
3.2.4 He says the article involved him as a person, and as chairperson of Nova, to matters that have nothing to do with him or with that Group.
3.2.5 Van Niekerk asks that the background information related to Nova and Orthotouch offered in his responses to complaints about similar stories be seen as part of this response. Similarly, he says the article complained of must be read in the context of relevant previous articles, which have been hyperlinked to the current article. “That is the proper context in which readers would have understood the article,” he submits.
3.2.6 The editor says:
3.2.7 Based on the above, the editor submits that the complaint should be dealt with as a complaint by Myburgh in his personal capacity only, or alternatively as a former director of Orthotouch – there is no basis for dragging Nova into the fray in respect of this complaint. He argues, “Allowing Nova or its chairman to be the complainant would run counter to clause 1.1. of the Complaints Procedures and may well prejudice the shareholders of Nova, in that legal costs associated with these complaints would presumably be invoiced to the company and not the true complainant, being Mr Myburgh.”
3.2.8 As further background, the editor emphasises the following “facts” as they have a direct bearing on whether the Orthotouch directors fulfilled their fiducial duties:
3.2.9 Van Niekerk says the articles Myburgh complains about should be seen as part the series of articles – or rather, opinion pieces that highlighted the discrepancies the investigation revealed. These articles predominantly focused on the conduct of Klopper, who had a double fiduciary duty towards investors as business rescue practitioner and director of Orthotouch.
3.2.10 He says Myburgh’s complaints appear to be underpinned by the assumption that the reasonable reader would interpret or conceive a call for an investigation into possible misconduct, as confirmation that a wrong had been committed. The editor submits that this conclusion is not supported by case law that deals with the meaning the reasonable reader will attach to a statement that a person is under investigation or a call that a person is to be investigated. In this regard, he quotes from:
3.2.11 Myburgh also rejects each and every one of the editor’s responses, and mainly repeats his concerns and objections.
3.2.12 He especially reiterates that the BR Practitioner of Orthotouch gives the directors of Orthotouch (including himself) a clean bill of health.
3.2.13 In summary, Myburgh says “… Mr van Niekerk has been found by the Business Rescue Practitioner of Orthotouch, to have done ‘desktop’ investigations, ‘without properly interrogating’ (1) ‘the various Orthotouch transactions’, and (2) ‘the actual facts’.”
3.2.14 He adds that Orthotouch did not have the financial means to procure transfer to it of relevant properties, and to retain ownership of the properties. Properties were therefore transferred “through Orthotouch” to third parties, inter alia to procure cash flow required to pay interest and settlement of claims of investors.
3.2.15 Based on Mr Jacques du Toit’s investigation, as mentioned directly below, Myburgh rejects the editor’s bland statement as to the “failure” of the BR process (of the HS Companies). He remarks, “There was no failure, only substantial success.”
3.2.16 It seems to me the only issue on which the two parties are agreed, is that this article should be read in conjunction with other articles.
3.2.17 The Windeed report that the editor refers to, dated 10 November 2019, indeed confirms that Orthotouch had no assets at the time of the reportage. Under the heading, Property Summary: Current Properties it was stated: “No current properties to display”. The same was said under the headings, Bond Summary, Other Documents, and Property Details.
3.2.18 The Orthotouch BR Plan Myburgh refers to is dated 31 March 2020 and is headlined, Business Rescue Plan In terms of Section 150 of the Companies Act No 71 of 2008. It was prepared by senior business rescue practitioner Jacques du Toit, and was the result of BRP’s own factual investigation. This investigation entailed “a review of the property transactions between various entities, which transactions gave rise to allegations of impropriety and/or misappropriations referred to in court documentation, made by individuals and mentioned in various media publications” (sub-section 5.5 of that document).
3.2.19 Sub-section 5.6 explains that the investigation was focused on the transfer of properties from Zephan / Third Parties to Bosman & Visser (Pty) Ltd to the HS Companies, especially the comparison between the original sales price and the inflated prices from Bosman Visser to the HS Companies.
3.2.20 Du Toit summarises the outcome of his investigation (sub-section 5.7) as follows:
- Zephan / Third Parties sold property to Bosman & Visser at the then market related prices;
- The properties were then sold at inflated prices from Bosman Visser to the HS Companies;
- The HS Companies inflated the value of the properties as proposed to the investors in terms of the prospectuses well knowing that such value is nowhere near the actual market value of such properties;
- The purchase prices to be utilised for the purpose of transfer in terms of the SoA to Orthotouch, was incorrectly reflected by the Transferring Attorneys, by utilising the prospectuses’ inflated values instead of the values as in terms of the SoA as the value of the properties; whereafter
- The properties were transferred to Accelerate at the actual value.
3.2.21 In sub-sections 5.8 and 5.9 he states, “The aforementioned incorrect values being used by the transferring Attorneys for the transfer to Orthotouch resulted in creating a false perception of Orthotouch purchasing properties at a high value, either from the HS Companies or from Zephan, and then selling the properties, at a significant / substantial discount, to Accelerate. This perception is inaccurate and completely false as the incorrect values created the false perception of impropriety.”
3.2.22 Regarding “journalistic investigations” (he does not mention Moneyweb or the editor’s name) he declares, “It is clear that the allegations and journalistic investigations published did not reveal the factual information available to the public and can only be interpreted that the purported investigations were ‘desktop’ investigations without properly interrogating the various transactions and the actual facts.” (sub-section 5.10.3)
3.2.23 In sub-section 5.11 Du Toit concludes, “According to the BRP’s investigation as referred to in this Business Rescue Plan, the BRP could not find any proof of misappropriation in regard to the property transactions.”
3.2.24 I asked the editor if he ever reported the content of sub-sections 5.3 – 5.11 of this document, as it was necessary to do so to ensure balance and fairness. This he did indeed. On 28 April 2020, he published an article headlined, Orthotouch offers former HS investors only a few cents in the rand. In this story he reports the gist of Du Toit’s findings, and also provided a link to the document itself. On 11 May 2020 he followed this up with another article headlined, Georgiou, Zephan put more into Orthotouch than it received – BRP.
3.2.25 These reports satisfy me that Moneyweb did adhere to the audi alteram partem principle.
- The arguments
4.1 First complaint: Investigation into decision-makers
4.1.1 Myburgh complains that, when read in conjunction with the article that was published the day before, Nova was linked to matters that had nothing to do with the Group, via him as Nova’s chairperson – “completing his innuendo that I, in my personal capacity as a corporate lawyer and as the chairman of the Nova Group, is a person to be forensically investigated and probed for wrong, improper and untoward actions, as stated by Mr van Niekerk the 4 March article…”.
4.1.2 He denies and rejects the statement that he ought to be investigated as a “decision-maker” and alleges that the reportage was done “with utmost malice and with the intention of causing maximum embarrassment, damage and harm to me and the Nova Group”. He puts the editor to the proof of this accusation.
4.1.3 He denies that he was investigated, or that any reasons or basis exist for such an investigation, whether forensically or otherwise.
4.1.4 Van Niekerk says Myburgh indeed was an Orthotouch “decision-maker” during the period when the relevant developments occurred that the article referred to. “As a director, he had the authority and duty to be involved in all major decisions related to Orthotouch,” he submits.
4.1.5 He denies that the:
4.1.6 The editor adds that there is at least one formal investigation into Orthotouch and the conduct of its directors. This investigation is by the Serious Commercial Crime Unit of the Hawks (case number: SEOU Enquiry CAS 11/01/2019).
4.1.7 Also, in another development, a Section 417 report published late last year also recommended that Myburgh’s conduct before the liquidation of a company Harrison & White be referred to the Director of Public Prosecutions for investigation.
4.1.8 Myburgh replies the editor simplifies and limits his redacted version of what is complained of, to draw the Press Ombud’s attention away from the full and true content of the complaint.
4.1.9 He criticises the editor’s statement that the article did not suggest that he was being investigated.
4.1.10 He says the report the editor refers to, is a confidential report, which was obtained and published by him in an unlawful manner, and which is unlawful for him to have attached the report to his response to this office.
4.1.11 Myburgh adds, “It will be unlawful for the Press Ombud to have regard to this Report, as it is a confidential Report, which is to be accessed only with the written approval of the Master of the High Court, which consent Mr van Niekerk and the Press Ombud do not have.”
4.1.12 He says this report is “no more than the factually faulty and baseless views of a misguided presiding officer”.
4.1.13 The story was about why Orthotouch’s “dismal failure” had to be “investigated” (as already stated in the headline). And indeed, the article stated unequivocally, “It is critical that the roles and conduct of the decision-makers, in particular … Myburgh are investigated” – as a “decision-maker” (at Orthotouch).
4.1.14 The gist of this part of the complaint is whether these statements were justified.
4.1.15 Firstly, I am satisfied the article did not say that Myburgh should be investigated in his:
- personal capacity – from the context, it was abundantly clear that his role as a director of Orthotouch should come under scrutiny; and
- capacity as the chairman of Nova (for the same reason).
4.1.16 Furthermore, a director is per definition someone who is required to make decisions. There can be nothing wrong in stating that, as a former director of Orthotouch, Myburgh was a “decision-maker”.
4.1.17 I also need to point out that the article did not find Myburgh in his capacity of a former director of Orthotouch guilty – it merely stated that an investigation was necessary. As reasonable readers would know, an investigation can go both ways. Besides, Myburgh does not dispute the editor’s statement that the Serious Commercial Crime Unit of the Hawks (case number: SEOU Enquiry CAS 11/01/2019) was already investigating Orthotouch.
4.1.18 Regarding the other part of Myburgh’s complaint, namely that the article linked him to Nova as its chairman: I have ruled, in my previous adjudication, that Moneyweb was justified to refer to Myburgh as Nova’s chairperson. This was to give context to a story that was about Orthotouch. (Both Myburgh and the editor are correct in that this article should be read in conjunction with his second complaint – the same goes for this adjudication.)
4.1.19 Regarding Myburgh’s statement that the editor has obtained and published the confidential (Section 417) report unlawfully, that it was “unlawful for him to have attached the report to his response to this office”, and that it would be unlawful for this office to have regard to this report, I repeat what I have said in my previous adjudication (Complaint number 7795), under sub-section 3.2.40: “Keeping in mind Section 1.4 of the Press Code (‘News should be obtained legally, honestly and fairly, unless public interest dictates otherwise’ – my emphasis), I continue without hesitation.”
4.1.20 For the same reasons given in my previous adjudication, and convinced by the editor’s arguments in this complaint, I again do not fault Moneyweb on this issue – it should have been clear to reasonable readers the article said that Myburgh should be investigated in his capacity as a director of Orthotouch, and not in his capacity as the chairperson of Nova.
4.1.21 I conclude that this part of the complaint has no leg to stand on.
4.2 Second Complaint: Assisting Klopper
4.2.1 Van Niekerk reported, “The business rescue process of the HS companies was led by Hans Klopper, the current head of restructuring at the international auditing and consulting firm BDO. He was assisted by various individuals, including corporate lawyer Connie Myburgh. Myburgh is also the chairman of the Nova Property Group, the rescue vehicle of the failed Sharemax investment scheme.”
4.2.2 Myburgh complains that, by linking him to Klopper in this manner, the editor created the impression that he had assisted the former with, or was complicit in some wrong-doing, negligence and improper actions.
4.2.3 He says Moneyweb did not provide any facts or evidence to substantiate these statements. He denies and rejects the statement that he had “assisted” Klopper and alleges that the reportage was done “with utmost malice and with the intention of causing maximum embarrassment, damage and harm to me and the Nova Group”.
4.2.4 Van Niekerk says Myburgh clearly tries to distance himself from the conduct of Klopper, his fellow former Orthotouch co-director. “However, Mr Myburgh played a key role in the implementation of the business rescue plan as the plan demanded the transfer of the properties to Orthotouch, of which he was a director. Orthotouch, a shelf company, was bought and used as a ‘rescue vehicle’ with the exclusive purpose to facilitate the implementation of the business rescue plan. Mr Myburgh cannot claim he was not part of the process, and deny that he did not assist Mr Klopper. If he did not, it would have been a breach of his fiducial duty,” he submits.
4.2.5 The editor adds that Myburgh was “handsomely rewarded” for the services he rendered to implement the business rescue plan, as is evident from a memorandum forming part of the minutes of an Orthotouch board meeting and signed by Myburgh and Klopper. He says this memo indicated that in May 2015 the Georgiou Group owed Myburgh an amount R7 250 000 related to services rendered for the successful implementation of the business rescue plan.
4.2.6 He says he sent detailed questions to Myburgh relating to the memorandum, but the latter did not respond.
4.2.7 Myburgh denies that he is attempting to “distance himself from the conduct of Mr Klopper” – instead, he says, he wishes not to be tarred with the same brush the editor uses on Klopper. “There is a significant difference between the aforesaid two approaches,” he submits.
4.2.8 He says he was indeed part of the process of the implementation of the HS Companies’ BR Plan and the Scheme of Arrangement regarding Orthotouch, in a correct and competent manner, as found by the BR Practitioner of Orthotouch. However, he emphatically denies that he “assisted” Klopper in regard to the numerous alleged matters of negligence, wrongdoing and improper actions (that the editor accuses Klopper of).
4.2.9 He argues it is disingenuous to state that he (Myburgh) would have breached fiduciary duty if he did not “assist” Klopper, as it was his duty to assist Klopper in matters other than those of negligence, wrongdoing and improper actions attributed to Klopper by the editor.
4.2.10 He denies that the memorandum the editor refers to:
- formed part of the minutes of an Orthotouch board meeting. He says this memorandum was part of the recordings of discussions regarding outstanding remuneration, and record remuneration levels; and
- has any relevance to the second complaint.
4.2.11 The gist of this part of the complaint is that the article has linked Myburgh to Klopper in such a manner that the impression was created that he had assisted Klopper in wrong-doing, negligence, and improper actions.
4.2.12 The memorandum forming part of the minutes of an Orthotouch board meeting that the editor refers to was dated 20 May 2015, and was signed by Myburgh the next day. This document concerned Klopper and Myburgh – the latter “in his personal capacity and to his companies, Connie Myburgh Proprietary Limited and Connie Myburgh & Associates Inc (‘the Myburgh Group’)”.
4.2.13 It continued: “In respect of Corporate Law related advisory services rendered the Klopper Group and the Myburgh Group to the companies, Orthotouch Limited, Mr. Nic Georgiou,· companies persons and other legal entities controlled by and associated to Mr. Georgiou (‘the Georgiou Group’) from the period September 2011 to date of this Memorandum, [inter alia] in regard to Corporate Law advisory services provided in respect of the affairs of the HS Companies:
- “since September 2011 to date of this Memorandum, including services relating to the structuring and procuring the Adoption of the Business Rescue Plan in respect of the affairs of the HS Companies, Orthotouch and their relationships with the Georgiou Group;
- “since the respective dates of the approval of the Business Rescue Plan and the sanctioning of the Scheme, including services in respect of the HS Companies and Orthotouch and their relationship with HS Investors in respect of the Business Rescue Plan and the Scheme, including relationships and affairs attended to in respect of advisors and lawyers of HS Investors; and
- “Orthotouch in respect of the affairs of the HS Companies and Orthotouch in respect of day to day ongoing business conducted by and to be attended to on behalf of the HS Companies and Orthotouch, including dealing with the Investor Grouping having launched a Class Action against Orthotouch and the Georgiou Group and having applied for the setting aside of the Scheme…”
4.2.14 These paragraphs justify the editor’s conclusion that it was clear that Myburgh and Klopper were “intimately involved” with the management of the company. It is impossible for me, or for the editor, to decide what this “involvement” entailed. But that would be the point of an investigation, wouldn’t it?
4.2.15 But that is not all. In the same memorandum, under the heading, Outstanding Fees and Disbursements – Hans Klopper and Connie Myburgh – Highveld Syndication Companies and Orthotouch Limited, the following was mentioned with regard to Myburgh:
- Directors Fees – Orthotouch Limited, up to end April 2015: R450 000;
- Retainer Fees – Orthotouch / HS Companies, up to end April 2015: R9 348 000;
- Success Fees – Orthotouch / HS Companies, 2011 Restructuring, as at end April 2015: R7 250 000; and
- Total Outstanding Fees and Disbursements, excluding Retainer Fees in Excess of monthly minimum, and excluding interest on late payments and Compensation for Opportunities lost resulting from late payments, such Interest and Compensation to be agreed: R17 048 000.
4.2.16 If anything, this justified the editor’s reference to Myburgh having been “handsomely rewarded” for services rendered.
4.2.17 In conclusion: Moneyweb provides me with evidence to substantiate its reporting; Myburgh, on the other hand, provides no evidence to support his case.
4.3 Third Complaint: Involved in Georgiou’s scheme
4.3.1 The sentences in dispute read, “[Moneyweb’s] analysis revealed the selloff of virtually all these properties without much, if any, of the proceeds flowing to investors. It is critical that the roles and conduct of the decision-makers, in particular Nic Georgiou, the kingpin of the schemes, Klopper and Myburgh are investigated.”
4.3.2 Myburgh says Moneyweb did not provide any facts or evidence to substantiate the statements that implied he had been involved in any “scheme” together with Georgiou. He denies and rejects these statements and alleges that the reportage was done “with utmost malice and with the intention of causing maximum embarrassment, damage and harm to me and the Nova Group”.
4.3.3 He asks the editor for proof of these accusations.
4.3.4 Van Niekerk says the six hyperlinks above the particular paragraph in the article referred readers to detailed information related to the identities of the properties. He says the details of the properties also appear in the Section 155 Scheme of Arrangement, which Myburgh co-wrote.
4.3.5 The editor maintains that Myburgh was indeed involved. He refers to the previous sub-section, adding the memorandum shows there were amounts due to him for the successful implementation of the Section 155 Scheme of Arrangement. “Orthotouch was the epi-centre of both schemes, and as a director of Orthotouch Mr Myburgh was a key individual with decision-making authority,” he submits.
4.3.6 Moreover, he says his investigations revealed that virtually all 79 properties were sold to third parties, without proceeds flowing to investors in terms of the schemes. “It is my honestly held opinion, based on the facts set out in the article and other articles hyperlinked to the article, that the non-transfer of the properties to Orthotouch, and the apparent failure of the directors to perform their fiduciary duties to ensure the transfer, needs to be independently investigated.”
4.3.7 The editor adds that the Orthotouch directors approved the sale of properties to third parties in so-called back-to-back transactions via Orthotouch. (A back-to-back transaction is when party A sells a property to party C, but via party B. Party B never takes ownership of the property but is a party to the financial settlement of the transaction.) He says that, according to his investigation, Georgiou and entities related to him, sold a total of 16 properties via Orthotouch to the Accelerate Property Fund through back-to-back transactions. The Orthotouch board would have approved these transactions.
4.3.8 Van Niekerk concludes, “Mr Myburgh cannot claim he wasn’t involved in the various rescue schemes or the sale of properties. He was apparently paid to implement both schemes and as an Orthotouch director had to approve the sale of the properties. These developments, and the role of directors, need to be investigated.”
4.3.9 Myburgh replies there is no point in the editor now advising, belatedly, of which properties he referred to in the article, when he did not identify them in the article. “It is irrelevant for Mr van Niekerk to go to lengths to now identify these properties to the Press Ombud. He should have done so in the article.”
4.3.10 In the article, though, he continues, the editor made the bland statement so as to create the impression that there were many properties that were sold under questionable circumstances, “without much, if any, of the proceeds flowing to investors”, and that he (Myburgh) participated in this untoward action, whilst not identifying the properties, and not putting forward a shred of evidence, regarding his statement that proceeds did not flow to investors.
4.3.11 He submits his co-writing of documentation has nothing to do with the non-identifying of the properties and the allegation that investors were not paid from the proceeds of sales of properties.
4.3.12 Myburgh says the “scheme” the editor refers to in the article, is not the “business rescue scheme” and not the “Section 155 Scheme of Arrangement”, which two
“schemes” the editor now identifies as the “schemes” he referred to in the article. In the article, he elaborates, the editor created the innuendo regarding “schemes” conducted by Mr Nic Georgiou, and his (Myburgh’s) participation therein – which denoted some form of untoward “schemes”, resulting in investors not being paid what they were entitled to, from the proceeds of the sale of the unidentified properties, and that he (Myburgh) was to be investigated in regard to such untoward “schemes”.
4.3.13 He says the BRP of Orthotouch, “being the duly appointed official, in terms of the Companies Act, duty bound to investigate the affairs of Orthotouch, found no misappropriation in regard to the property transactions of Orthotouch” (as cited above under sub-sections 3.2.18 – 3.2.22).
4.3.14 “Surely Mr van Niekerk should have overwhelmed the BRP with damming information, "facts" and evidence of impropriety, misappropriation, untoward actions by the directors of Orthotouch and the like. Mr van Niekerk did none of this,” he submits.
4.3.15 He reiterates that his involvement in the sale of properties were correct, lawful, above board and appropriate, as found by the BRP.
4.3.16 He says the editor does not put forward any facts or evidence to substantiate his reportage.
4.3.17 The central question is if Moneyweb was justified in stating or implying that Myburgh had been involved in any “scheme” with Nic Georgiou.
4.3.18 From the many references above to Georgiou, it is clear that Myburgh was indeed in some way linked to him. From that perspective, the editor’s arguments in this regard make sense.
4.3.19 The editor provides me with some evidence – while Myburgh, who asks for proof, does not provide me with any sort of evidence to substantiate his complaint.
4.4 Fourth Complaint: Implicated in Klopper’s ‘failures’
4.4.1 Under the sub-headline, The non-transfer of properties to the HS companies the article referred to alleged failures and neglect on the part of Klopper.
4.4.2 Myburgh complains that by linking him to Klopper and reporting that he “assisted” him, Moneyweb implicated him in Klopper’s alleged failures and neglect. He denies that he “assisted” Klopper regarding any matter referred to in the issues mentioned in this sub-section, and that he was in any way involved in those matters.
4.4.3 He says Moneyweb did not provide any facts or evidence to substantiate these statements. He denies and rejects these statements and alleges that the reportage was done “with utmost malice and with the intention of causing maximum embarrassment, damage and harm to me and the Nova Group”. He challenges the editor to provide proof of these accusations.
4.4.4 Van Niekerk says that, while Myburgh was involved in the business rescue process, as indicated by the above-mentioned memorandum, the text he complains about did not refer to him in any capacity – instead, it focussed on Klopper’s conduct. He says he therefore does not understand how the particular paragraph, which is factual, could cause Nova any harm or embarrassment.
4.4.5 Essentially, Myburgh says the editor’s response to his complain is irrelevant and “an attempt to confuse and draw the attention of the Press Ombud away from the true nature and content of the Fourth Complaint”.
4.4.6 Under the sub-headline, The non-transfer of properties to the HS companies the editor listed the first of his seven reasons why Orthotouch should be investigated. Myburgh’s name did not appear in this sub-section, and neither did that of Nova. I therefore find this part of the complaint rather odd.
4.5 Fifth Complaint: Untoward selling of properties
4.5.1 Under the sub-headline, The sale of the 42 properties to third parties the editor wrote, “… Georgiou sold the 42 non-transferred properties to third parties. This means Georgiou sold the properties twice: first to investors through the successful syndication of the properties, and second to third parties, including his son’s listed company, Accelerate. These transactions also resulted in significant accounting losses at Orthotouch, and have never been explained to investors… Klopper and Myburgh, as directors of Orthotouch, authorised these sales transactions.”
4.5.2 Myburgh complains this created the impression that something was untoward with the sales, and that he had authorized such incorrect actions.
4.5.3 He says Moneyweb did not provide any facts or evidence to substantiate these statements. He denies and rejects these statements and alleges that the reportage was done “with utmost malice and with the intention of causing maximum embarrassment, damage and harm to me and the Nova Group”. He puts the editor to the proof of these accusations.
4.5.4 “The effect on me … is the innuendo that I, in my personal capacity and as chairman of the Nova Group, participated in or caused the alleged losses, which innuendo I deny and reject,” he says.
4.5.5 Van Niekerk says Moneyweb’s investigation into the sales transactions related to the 79 properties originally syndicated to the HS companies was primarily based on analyses of more than 150 title deeds pertaining to the properties. “The 42 properties referred to were syndicated by Mr Georgiou, or entities related to him, to the HS companies for R3.4 billion, and represented the bulk of the 79 properties. However, despite investors paying R3.4 billion for the properties, they were never transferred to the HS companies.”
4.5.6 He submits the reference to Orthotouch’s accounting losses stemmed from the sale of 16 properties by Georgiou (or entities related to him) to his son’s company Accelerate via Orthotouch. He says that, according to his investigation, these transactions resulted in an accounting loss of R782 279 065 for Orthotouch – as indicated in a spreadsheet detailing the transactions. He adds that the information was also fully disclosed in the article headlined, The peculiar case of the Picvest billions: Part 6 and readers were aware of that context. “So is Mr Myburgh, yet he seems to ignore all that was published before by claiming I did not provide ‘a single shred of evidence’,” he says.
4.5.7 The editor says he put detailed questions to Orthotouch regarding these transactions throughout the investigation, but never received a response.
4.5.8 He also denies the reportage suggested that Myburgh “participated in” or “caused” the losses in his personal capacity and his capacity as chairman of Nova. Instead, he argues, the section in dispute highlighted that Myburgh authorised the transactions as a director of Orthotouch (and not Nova).
4.5.9 Myburgh disputes the above. He inter alia submits that:
18.104.22.168According to the BRP, the editor did “desktop investigations”, without properly interrogating either the various transactions or the actual facts;
22.214.171.124 the transfer of properties (or lack thereof), prior to the HS’s BRP, has nothing to do with him, as he was not involved with any of the affairs of the HS Companies;
126.96.36.199 no “accounting losses” were suffered. “The BRP did a comprehensive investigation into the sale and transfer of the properties sold to Accelerate, and found no such losses”; and
188.8.131.52 the editor does not produce any credible evidence of any kind.
4.5.10 The gist of the complaint is that the article created the false impression that something was untoward regarding Georgiou’s sale of 42 non-transferable properties (to third parties) – and that Myburgh had authorised “dubious” (my word) transactions.
4.5.11 The spreadsheet that the editor is referring to listed the total amount of properties Sold to Orthotouch as R1 490 792 873; Sold to Accelerate as R708 513 808; and Loss to Orthotouch as R782 279 065 (as mentioned by Moneyweb). A “loss” of such a huge amount (R782-million) was sure to raise some eyebrows, to say the least. The impression that something “untoward” took place, was therefore not misplaced.
4.5.12 Moreover, the statement in the article that Myburgh had authorised the deals, was reasonable – he was a director of Orthotouch at the time.
4.5.13 It is not clear if Myburgh denies that he authorised the deals, or just the implication that the deals that he did authorise were “dubious”. Either way, he has no leg to stand on.
4.5.14 Also, Myburgh did not provide me with any evidence to the contrary of what the article stated.
4.6 Sixth Complaint: Loss of millions caused by Myburgh
4.6.1 Under the sub-headline, The sale of the 31 properties to Accelerate the editor reported, “Klopper and Myburgh also approved the sale of 31 properties in December 2013 to Accelerate … for R1.3 billion. The sale resulted in only R30 million flowing to Orthotouch. According to Moneyweb’s calculations, Orthotouch suffered a loss of R782 million in the process.”
4.6.2 Myburgh complains this reportage implied that he was responsible for a loss of R782-million to Orthotouch. He says Moneyweb did not provide any facts or evidence to substantiate these statements. He denies and rejects this statement and alleges that the reportage was done “with utmost malice and with the intention of causing maximum embarrassment, damage and harm to me and the Nova Group”.
4.6.3 Van Niekerk refers to his argument above which addressed the sale of the 16 properties. He adds that Myburgh was a member of the board of Orthotouch at the time “and would have authorised the transactions”.
4.6.4 Myburgh denies that Orthotouch suffered any losses because of him.
4.6.5 This part of the complaint is materially the same than the one discussed above (sub-section 3.6). The same complaint, the same arguments – and the same outcome.
4.7 Seventh Complaint: Neglecting duty to take action
4.7.1 Under the sub-headline, Conflict of interest? the article stated, “In another example of what may point to Klopper’s compromised position, Klopper and Myburgh did not take action against Zephan, as the underwriter of the scheme, when Zephan unilaterally and in contravention of the Section 155 SOA (Scheme of Arrangement) terminated all interest payments to investors who supported the legal processes against Georgiou and related parties.”
4.7.2 Myburgh complains this reportage falsely implied his was dutybound to take action against Zephan, but neglected to do so – and that he, in that process, had supported Klopper in his “compromised position”.
4.7.3 He says Moneyweb did not provide any facts or evidence to substantiate these statements. He denies and rejects it and alleges that the reportage was done “with utmost malice and with the intention of causing maximum embarrassment, damage and harm to me and the Nova Group”.
4.7.4 He also calls upon the editor to prove the statement about his support of Klopper’s “compromised position”, and to provide the legal and factual basis upon which he alleged that he had such duty.
4.7.5 Van Niekerk says the article explained in detail the context of the conflict of interest. Section 76 of the Companies Act of 2008 clearly defines the fiduciary responsibilities of a director. Section 76(3)(a) and 76(3)(b) state a director of a company must exercise the powers and perform the functions of a director (a) in good faith and for a proper purpose and (b) in the best interests of the company.
4.7.6 The editor submits that these conditions placed onerous fiduciary responsibilities on directors to always act in the best interest of all stakeholders. In the case of Orthotouch, the most important stakeholders were the 18 700 investors who invested R4.6-billion in the Highveld Syndication (HS) schemes. He says that, when the schemes failed, Orthotouch was created to “save” their investments through two rescue processes – the first was a business rescue process of the HS companies, and when this failed, a subsequent restructuring in terms of Section 155 of the Companies Act followed (as reported earlier in, The peculiar case of the Picvest billions: Part 1 and 2).
4.7.7 He says Myburgh was a director of Orthotouch at the time, and it was his fiduciary duty to implement the Section 155 Scheme of Arrangement. “Zephan’s decision not to pay interest to some individual investors was a contravention of the scheme conditions, and Mr Myburgh should have instituted an action to rectify the situation. He did not,” he argues.
4.7.8 The editor adds the paragraph in dispute did not allege that Myburgh had anything to do with Kloppers’s compromised position.
4.7.9 Myburgh replies that the editor’s “lament” about Klopper’s “conflict of interest” has no relevance to him, adding that he cannot be criticized in regard to any conflict of interest on Klopper’s part. He says the complaint is about the reportage that he “supported Mr Klopper in his ‘compromised position’.”
4.7.10 He argues that Zephan’s decision to not pay interest to certain investors was based on sound legal advice, which militated against the taking of any action against Zephan.
4.7.11 He submits that the non-payment of interest to “some individual investors” pales into insignificance when the overall interest payments is taken into account – and adds that the editor did not deal with the nub of his complaint.
4.7.12 This part of the complaint is that Myburgh should have, but did not, take action against Zephan – and that he, in that process, had supported Klopper in his “compromised position”.
4.7.13 Again, it is not clear if Myburgh denies that he took action against Zephan, or if he argues it was not his duty to do so.
4.7.14 These are my considerations:
- If Myburgh denies he took action against Zephan, I am sure he would be able to prove it by providing some documentation to this effect. This, he did not do;
- If he denies it was his duty to take action against that company, he needs to explain why he, as a director, believed that that was the case. This also did not happen; and
- Instead, the editor provides me with credible arguments that it was indeed Myburgh’s duty as a director to take some kind of action.
4.8 Eighth Complaint: Millions lost through irregular selling
4.8.1 Under the sub-headline, Sale of properties to Delta Property Group, the article stated that Georgiou sold certain properties to the Delta Property Group which should have been transferred to Orthotouch, and added: “These sale transactions resulted, according to the Moneyweb investigation, in a R507 million loss for Orthotouch. Klopper and Myburgh, as directors of Orthotouch, approved the transactions”.
4.8.2 Myburgh complains that Moneyweb did not provide any facts or evidence to substantiate these statements. He denies and rejects all of the above, puts the editor to the proof thereof, and alleges that the reportage was done “with utmost malice and with the intention of causing maximum embarrassment, damage and harm to me and the Nova Group”.
4.8.3 Van Niekerk says the Section 155 Scheme of Arrangement specified that Georgiou, or entities related to him, would transfer some properties to Orthotouch to enhance the company’s asset base. “This did not happen. Rather, these properties were sold to the Delta Property Fund via back-to-back transactions, which included Orthotouch.” He provides this office with Delta’s SENS statement, dated 2 June 2015, “confirming the transactions”.
4.8.4 He submits Moneyweb analysed the title deeds of the properties and calculated that Orthotouch suffered a significant accounting loss. In the original article, the accounting loss was stated to be R507-million. However, this was the amount the Georgiou entities sold the properties to Delta for. The actual accounting loss was approximately R272.9-million. The article was corrected when this error was discovered.
4.8.5 The editor adds that:
4.8.6 Myburgh refers to paragraphs 5.6 – 5.10 of the Orthotouch BRP, which show that the property transactions regarding Orthotouch “were conducted in a correct and proper manner, with no misappropriation occurring”, adding that there was no “accounting loss” – and stating that the editor did not provide proof that he had been involved with causing the loss.
4.8.7 Myburgh denies the editor’s statements that:
- Georgiou sold certain properties to the Delta Property Group which should have been transferred to Orthotouch;
- those transactions resulted in a R507-million loss for Orthotouch; and
- he, as director of Orthotouch, had approved the transactions.
4.8.8 However, he does not provide me with any documentation to substantiate his denials.
4.8.9 In the Delta document, as provided by Moneyweb, the introductory sentence read as follows: “Delta shareholders are advised that Delta (‘the Purchaser’), has entered into various agreements with Orthotouch Limited (“the Vendor”) for the acquisition of 15 property letting enterprises (“the Acquisition”) together with their related immovable properties (“the Properties”) as detailed … below.”
4.8.10 The spreadsheet that the editor provided me with, also checked out – it indeed shows a loss of approximately R272.9-million for Orthotouch.
4.8.11 It is difficult to find for a party who does not provide this office with any evidence. A bland denial of statements is not likely to convince any adjudicator.
4.8.12 I accept that Moneweb, when the inaccurate figure of R507-million came to its attention, promptly corrected it to read approximately R272.9-million.
4.9 Ninth Complaint: Sold in questionable circumstances; ‘stripped’, ‘looted’
4.9.1 Under the sub-headline, Why are the HS companies not in liquidation? the article stated, “From Moneyweb’s investigation, it is clear that virtually all the properties in the HS companies were sold to third parties in questionable circumstances, and that a Section 417 investigation into the conduct of Klopper, Myburgh and Georgiou seems warranted. A Section 417 inquiry is aimed at investigating events leading up to the liquidation of a company to ascertain whether any assets were stripped or looted.”
4.9.2 Myburgh complains that the editor did not provide any facts or a single shred of evidence to substantiate these statements.
4.9.3 He adds these statements suggested that such investigation should relate to “the stripping and looting of assets” for which he allegedly had been responsible – without providing any facts or evidence.
4.9.4 He denies and rejects all of the above, puts the editor to the proof thereof, and alleges that the reportage was done “with utmost malice and with the intention of causing maximum embarrassment, damage and harm to me and the Nova Group”.
4.9.5 Van Niekerk replies his investigation revealed that when the HS companies were put into business rescue in 2011, they owned (or should have owned if all properties were transferred) 79 unencumbered properties. However, “when Orthotouch was put into business rescue last year, it did not own a single property. Based on the ‘questionable circumstances’ related to disposal of assets (elaborated upon in previous articles hyperlinked to the one complained of) I expressed the view that a section 417 investigation into the key role players at the time ‘seems warranted’. This is an honestly-held view which I believe is justified,” he says.
4.9.6 The editor adds that these sections complained of did not infer to Nova.
4.9.7 Myburgh replies that the editor’s investigations “mean nothing”, and that his reportage in previous articles “similarly mean nothing, and is not proof of anything”. He adds that the “questionable circumstances” to which the editor refers were non-existent.
4.9.8 This, he submits, is clear from the Orthotouch BRP. He adds that the ownership of properties by Orthotouch and the disposal of properties by Orthotouch, as well as the correctness of such ownership and disposal, had been proved by the BRP.
4.9.9 By this time, the refrain has become clear – am I confronted with denials, without any substantiation or evidence, while Moneyweb inundates me with (credible) documentation to prove its point.
4.10 Tenth Complaint: No soft approach
4.10.1 Under the sub-headline, Klopper approached Jacques du Toit to become BRP of Zephan and Orthotouch the article said, “The last thing investors need is a soft approach on developments listed above and the roles played therein by Georgiou, Klopper and Myburgh”.
4.10.2 Myburgh complains this suggested that he needed to be dealt with harshly for his alleged role – “without providing any facts and not a single shred of evidence, and with utmost malice and with the intention of causing maximum embarrassment, damage and harm to me and the Nova Group”.
4.10.3 He denies that he has played any role in any of the relevant matters and puts the editor to the proof of these statements and innuendos.
4.10.4 Van Niekerk says that Klopper approached Du Toit, the business rescue practitioner of Orthotouch, to fulfil that role. This, he argues, created valid concerns over his independence. The editor concludes the sentence in dispute was relevant “as it is critical that the suspicious transactions and developments highlighted in the article, be independently investigated”.
4.10.5 He adds that the article did not allege unlawful conduct on Myburgh’s part.
4.10.6 Myburgh argues that the editor has no proof of any concerns regarding the impartiality of Mr du Toit.
4.10.7 He denies that any “suspicious transactions and developments” existed.
4.10.8 Given all of the above, I certainly cannot blame the editor for warning against a “soft approach” in any investigation that is to come. This, I believe, requires no further argument.
4.11 Remarks in conclusion
4.11.1 Van Niekerk says the Moneyweb investigation revealed significant suspicious transactions and developments at Orthotouch, which led to the non-implementation of the two rescue plans. The directors of Orthotouch were responsible for the implementation of the plans. Their inability to do so has resulted in dire prospects for the 18 700 investors to recover the R4.6 billion they invested in the HS companies.
4.11.2 “It is therefore critical that an independent forensic investigation analyse all the transactions, the actual flow of cash and the conduct of the directors to see what happened and whether there was any unlawful conduct,” he argues.
4.11.3 And concludes: “What is telling of this complaint, as with all of the other complaints relating to Moneyweb’s reportage, is that Mr Myburgh never once engages with the facts. Never once does he put forward an alternative version, or an explanation, that deals with the substance of my articles. This is consistent with the way in which Mr Myburgh has for a long time dealt with Moneyweb’s pre-publication questions. All Mr Myburgh’s complaints boil down to one thing only: broad denials without any factual engagement, coupled with baseless accusations of malice on my and Moneyweb’s part. It amounts to nothing more than slinging mud, with the hope that something sticks.”
4.11.4 Myburgh says there are no circumstances which could warrant or sustain “forensic investigation”.
4.11.5 I agree with the editor’s reasoning above and do not think it is necessary to belabour this point any further.
5.1 Regarding the eight complaint (Millions lost through irregular selling): The statement that Orthotouch lost R507-million from sales transactions was in breach of Section 1.1 of the Press Code that says, “The media shall take care to report news … accurately …”
5.2 The rest of the complaint is dismissed.
- Seriousness of breach
6.1 Under the headline Hierarchy of sanctions, Section 8 of the Complaints Procedures distinguishes between minor breaches (Tier 1 – minor errors which do not change the thrust of the story), serious breaches (Tier 2), and serious misconduct (Tier 3).
6.2 The breach of the Press Code as indicated above is a Tier 1 offence as it did not change the thrust of the article.
6.1 I have been confronted with such a situation (an inaccuracy, that was already rectified) many times before – and each time I have decided to take no further action. The publication has already acknowledged its mistake, and it will serve no purpose to ask it to rectify it again.
6.2 There is no sanction.
The Complaints Procedures lay down that within seven working days of receipt of this decision, either party may apply for leave to appeal to the Chairperson of the SA Press Appeals Panel, Judge Bernard Ngoepe, fully setting out the grounds of appeal. He can be contacted at Khanyim@ombudsman.org.za.
Acting Assistant Press Ombud