8 July 2011

Musa Capital vs. CitiBusiness

2011 (Rulings), All Rulings, Ombuds' Hearings

This ruling is based on the written submissions of Mr William Jimerson, director of Musa Capital, and CitiBusiness (a section in The Citizen newspaper), as well as on an informal hearing that took place in Johannesburg on July 6, 2011. The newspaper was represented by its editor, Martin Williams, the journalist who wrote the story, Barry Sergeant, and another journalist, Pat Sidley; Musa Capital was represented by a director, William Jimerson, and two of its officials, Cynthia Parish and Moira Tuck.

COMPLAINT

Mr William Jimerson, director of Musa Capital (MC), complains about a story in The Citizen, published on January 14, 2011 and headlined FSB raids Musa Capital.

Jimerson complains that the use of the following words or phrases is untruthful and/or misleading and/or defamatory:
• raid (in both the headline and in the caption);
• by its own admissions;
• at latest;
• confidentiality;
• an alphabet soup of companies;
• some of which have been involved in cross-border transactions;
• lavish essays brimming with strange and colourful content;
• sometimes Appleton;
• anticipating that the order would be largely ignored;
• lawyers for the Bakubung;
• this was not done (twice); and
• orders (twice).

ANALYSIS

The story, written by Barry Sergeant, says that officials from Financial Services Board (FSB) and forensic experts from pwc (an accounting and consulting firm) visited Musa Capital’s head offices. The visit was reportedly described by Mr Dube Tshidi, CEO of FSB, as “fact-finding”. However, the story adds that Musa Capital (MC) has admitted that it has been involved in raising approximately R500 million in cash from “monetisation” of shares in Johannesburg-listed Wesizwe Platinum (WP). Sergeant writes that the shares were originally placed with the 33 000-strong Bakubung community “who live in difficult circumstances near Sun City”. He continues: “It is here where Wesizwe will be building a mine: just weeks ago it finalized a $877 million financing package from, mainly, China’s Jinchuan Group, a big miner, and the China Africa Development Fund.” The story ends by stating that MC was ordered to provide, by December 10, an explanation of the “monetisation process”, including the precise shareholder identity of all the relevant WP shares. However, the story says that this was not done.

I shall now consider the merits of the complaint:

‘Raid’

The word “raid” is used both in the headline (FSB raids Musa Capital) and in the caption (“RAID: Musa Capital’s offices were raided yesterday”), but not in the story itself.

MC complains that there was no “raid”, as no officers of the law or the FSB were present during the inspection. The story itself, MC continues, quotes the CEO of the FSB as saying that the visit to MC was a “fact-finding mission”. It adds: “So Sergeant’s statement that Musa Capital had been raided is a deliberate distortion of the truth.”

Sergeant says that the FSB’s raid was in the form of at least a dozen subcontracted forensic experts from pwc (previously PriceWaterhouseCoopers). He argues: “Given the heavily documented history of Musa refusing to comply with court orders to provide accounts of the Wesizwe shares, and the fact that the raid was unannounced, the incident was a raid.”

At the hearing, MC said that the FSB’s and pwc’s visit was unannounced, but argued that “unannounced” does not equal “raid”. Jimerson said that the officials told him that they were “asked to secure documents” and that he had a choice – either he co-operated, or they would get a court order to search the premises.

Jimerson said that he had complied.

He added that the visitors had asked his permission. This fact, he said, argued against the notion of a raid.

Williams justified the use of the term “raid” by saying that:
• the term is commonly used for official visits like the one in question;
• brevity is always an issue for newspapers when it comes to headlines; and
• the term should be seen in conjunction with the sub-headline, which mentions a “fact-finding mission” (as the CEO of the FSB reportedly described the visit).

His argument about brevity, of course, did not take the caption into account, where “brevity” is not so much of an issue.

The relevant clause in the Press Code is Art. 5.1 that states that headlines and captions “shall give a reasonable reflection of the contents of the report…in question”.

Note that Sergeant does not use the word “raid” in the story itself. The question, therefore, is if the heading and the caption reasonably reflect the story.

This brings me to a definition of the word “raid”, as the notion of a raid may be present in the story without the word actually being used. From my research, it is clear that an unexpected visit, even by a body with authority (as argued by the newspaper), cannot by definition be described as a raid. A raid is sudden and unexpected, yes, but it also contains the crucial element of taking something from a place without the owner’s consent.

This is the point: There is nothing in the story that supports the idea that anything was taken from the premises without the owner’s permission. This suggests that the story does not support either the headline or the caption.

Besides, it appears to me that the broader context of this specific story played an integral part in the use of the word “raid”. In his response to the complaint, Sergeant for example argues for the use of the word “raid” given the heavily documented history of Musa refusing to comply with court orders. At the hearing, it was also made abundantly clear that the “broader context” of this specific story should be kept in mind.

However, the reader of the story in dispute is not necessarily aware of this “broader context” or of MC’s “heavily documented history”. It is indeed an unsound journalistic practice to base a headline on “broader context”, rather than on the body of the text.

In the meantime, the story says that the CEO of the FSB described the visit as one with a “fact-finding” purpose (and not a raid). Surely, if there is one person who should know if it was a raid, it would be the CEO. And yet CitiBusiness decided that it did not matter what the CEO said – it called the visit a “raid” anyway.

The use of the words “fact-finding mission” in the sub-headline is a positive, but it does not negate the use of the word “raid” in either the headline or the caption.

‘By its own admissions’

The sentence in dispute says: “By its own admissions, Musa Capital has been involved in raising R500 million or so in cash from ‘monetisation’ of shares in Johannesburg-listed Wesizwe Platinum.”

MC complains that the expression “by its own admissions” implies it has admitted that it has been caught out in wrongdoing and underhanded activity.

The newspaper says that neither Musa nor any other party has provided audited accounts on the whereabouts of the relevant WP shares/cash, but Musa has admitted that it has raised R500 million or so in cash from ‘monetisation’ of such shares.

MC replies that the newspaper’s argument is not responsive to the complaint. It also disputes the statement that there are no audited accounts, saying that both the Bakubung Community Development Corporation and the Bakubung Economic Development Unity have audited accounts going back to 2008. It says that these documents were provided pursuant to the litigation.

At the hearing, Jimerson was adamant that MC never “admitted” to anything. He said that MC rather publicized that it was involved in raising R500 million from monetization of shares in Wesizwe Platinum.

Internet definitions of the word “admit” include some sort of confession (admitting guilt), or merely the acknowledgement of the truth. Based on that, the phrase in dispute does not necessarily imply some sort of confession or acknowledgement that there was some wrongdoing on the subject’s part.

‘At latest’

The sentence in which the words “at latest” appear reads: “The (Bakubung) traditional council teamed up with Musa Capital at latest around the end of 2007.”

MC says that the words “at latest” imply that secret activity between the Bakubung Traditional Council and itself took place before 2007.

The Citizen says that, given the lack of credible material, such as audited accounts, “at latest” simply literally means what it says.

In its reply to the newspaper’s response to its complaint, MC does not explain why the words “at latest” imply that secret activity between the Bakubung Traditional Council and itself took place before 2007. It certainly does not have that implication for me, and I suspect also not for the majority of readers.

At the hearing, I was not convinced either that this part of the complaint has any leg to stand on as I believe that the ordinary reader would probably not interpret this phrase as being sinister. I certainly do not.

‘Confidentiality’

The sentence in dispute says: “Musa Capital repeatedly cited confidentiality in refusing to disclose the whereabouts of the cash, while at the same time creating an alphabet soup of companies, some of which have been involved in cross-border transactions.”

MC complains that the use of the words “cited confidentiality” implies that it used confidentiality as a spurious reason for not supplying information. It argues that, as a financial services provider, confidentiality governs virtually all of its transactions on behalf of clients. MC says that it is a perfectly normal commercial requirement and that Sergeant distorts it to suite his purpose of “proving” that it has something to hide.

Sergeant replies that the use of “confidentiality” is described by an arbitrator as one of Musa’s “dilatory” defences. He says: “There was nothing confidential about Wesizwe donating the shares to the community.”

MC replies that “confidentiality” is a perfectly normal commercial requirement and that it had nothing to do with “the whereabouts of the cash”.

At the hearing, the newspaper said that transparency was required in this case and that the mentioning of confidentiality was therefore appropriate.

Note that MC complains that the words “cited confidentiality” imply that it hid behind “confidentiality” to not supply information – yet, at the same time, MC argues that confidentiality is a normal commercial requirement.

MC admitted at the hearing that the phrase in dispute is factually correct, as it indeed cited confidentiality in refusing to disclose information.

‘An alphabet soup of companies’

The disputed phrase is cited in the sentence discussed above.

MC complains that the phrase in dispute implies that it has created fronting organisations to cover nefarious financial dealings. It says that the companies referred to are “special purpose vehicles” that were utilized as part of the monetisation structure (it says that these are often created as part of the normal course of business in the investment banking environment). It adds: “Sergeant knows this information, but prefers to distort the truth.”

Sergeant replies that he has listed 28 companies in one of his numerous e-mails to Musa and/or its lawyers (ENS) and sought details on its “alphabet soup of companies”.

At the hearing, Jimerson argued that the disputed phrase is “destructive language”.

Consider the following:
• MC does not complain that the disputed expression is incorrect – it merely says that it implies some underhanded actions;
• MC admits that it did create some companies; and
• the expression does not necessarily imply wrong-doing.

Again, the disputed phrase does not necessarily imply fronting organisations to cover nefarious financial dealings.

‘Some of which have been involved in cross-border transactions’

The words in question are used in the same sentence discussed above.

MC complains that the use of this phrase in the context of both the overall story and this specific paragraph seeks to give the (false) impression that the cross-border transactions are in some way illicit. It says: “But Sergeant is working to some private agenda in which the implication of malfeasance is useful to him.”

The newspaper says the information that Musa has been involved in cross-border transactions is in the public domain.

MC again does not complain that the words in dispute are false; it merely says that these words imply that cross-border transactions are in some way illicit.

At the hearing, the accuracy of the statement was not in dispute. However, Jimerson argued that this is just one example of how the journalist wanted to influence public opinion against MC.

Clearly, the statement in dispute is accurate and does not necessarily imply covered-up wrongdoing on MC’s part.

‘Lavish essays brimming with strange and colourful content’

The part of the sentence in dispute says: “This was followed by lavish essays (by MC’s media representative) brimming with strange and colourful content…” The phrase “this was followed” refers to the previous sentence stating that two major owners of MC “spent the year avoiding your correspondent, issuing, instead, threats of heavy-duty legal action”.

MC complains that the phrase in dispute is ironical and extra-ordinary, considering that all it has done regarding any media representative is to “issue media releases that provide the actual facts in relation to the monetization transaction”.

Sergeant responds quite extensively to this part of the complaint. He says that at Moneyweb (www.moneyweb.co.za) they have a “right of reply”, where they publish in full untouched material from concerned persons. He says: “We have never failed to give Musa and its proxies full and unfettered access to this practice. By ‘strange and colourful content’, I am referring to the likes of a Right of Reply received via spin merchant Simone Lipshitz on 2 December and signed ‘Antoine Johnson Will Jimerson Directors, Musa Capital’.”

(In this right of reply, MC “once again” raises its concern “…at the failure of Moneyweb’s editors to stop Barry Sergeant’s biased, one-sided, inaccurate assault on Musa’s reputation. In fact, given the tone of his public writings and private comments, he would be hard put to deny outright malice.” MC also says that Sergeant has from the start depicted it as the villain which has hidden away money belonging to the Bakubung ba Ratheo community.)

Sergeant argues that he has made numerous attempts, starting 29 January 2010, to engage ENS, Musa’s lawyers, in order for him to meet Musa’s executives – and says that they have declined. He provided our office with copies of emails that he sent on May 31, as well as other emails in which he asks MC some questions.

Sergeant says that he finally got an email in which it is stated that “our ethical duties prevent us from commenting…”

He adds that when he finally published an introductory article on issues in and around MC, “it (MC’s lawyers) reacted by instructing ENS issue a slew of Nazi threats”.

After outlining its dissatisfaction with Sergeant and his article, the lawyers demanded that:
• the article be removed from website by 17:00 on 4 June 2010;
• Moneyweb and Mineweb, in collaboration with their clients, issue a statement via the electronic media indicating that the article has been retracted and apologizing for the publication thereof;
• a written undertaking be provided by 16:00 on 4 June 2010 that Moneyweb/Sergeant will comply with the demands as set out in this letter and will refrain from repeating the allegations in question and making further defamatory and/or injurious statements regarding their clients; and
• should the above demands not be complied with, proceedings may be instituted in the High Court (adding that all MC’s rights are reserved, including specifically the right to claim damages).

At the hearing, Jimerson denied that there were any “essays” and argued that the phrase “strange and colourful content” is concocted and factually untrue.

Sergeant explained that “essays” referred to MC’s replies on the web and said that the phrase “strange and colourful content” merely refers to “bad writing”.

It may be argued that the phrase “strange and colourful content” is “ironical” and “extra-ordinary”, as MC did, but I cannot see how that can be in breach of the Press Code.

However, I should also say that the use of this phrase was unnecessary as it does not materially add to the story. Phrases like this only serve to fuel MC’s belief that the journalist is biased.

‘Sometimes Appleton’

Sergeant reports that Lipschitz sometimes goes by the name of Appleton.

MC complains that this exploits the fact that Lipschitz has been through a divorce and that she consequently reverted to her maiden name. It adds: “Sergeant portrays this as though Ms Lipshitz is using an alternative name for wrongful purposes.”

It is a fact that she switched from the one to the other, which makes the reportage factually correct. However, now that he knows what the situation is, it is to be expected that he respects this situation in future and refrains from again referring to “Appleton”.

But again, in the same vein as above, I find this reference unnecessary.

‘Anticipating that the order would be largely ignored’

The story says: “Anticipating that the order would be largely ignored, lawyers for the Bakubung also ensured that the court orders included compulsion that the merits of the case can go to arbitration in the event of none-compliance.”

MC asks: “How does Mr Sergeant know what the lawyers anticipated?”

Sergeant says what he knows about what the lawyers anticipate is his business. He adds: “It can be noted that the arbitrator’s orders contain a deadlock clause, in anticipation that Musa would not comply. This is exactly what has happened.”

At the hearing, Jimerson said that the sentence in question is an exaggeration.

Sergeant replied that he had no comment, as it was his business from where he got his information.

How the reporter knew what the lawyers anticipated, I do not know. I suspect that he must have communicated with them. He cannot be in breach of the Code for that.

‘Lawyers for the Bakubung’

The story refers to “lawyers for the Bakubung” (mentioned in the sentence above).

MC complains that this is a deliberate exaggeration and distortion of the truth. It says that the Bakubung Ba Ratheo are represented by their Traditional Council, “which has appointed lawyers to defend itself against the claims of a minority within the community (some thirty people among just over 30 000), known as the Concerned Group, who wish to unseat the Traditional Council”. MC says the lawyers that Sergeant refers to are those acting for the Concerned Group and not for the Bakubung. It adds: “Once again, Sergeant misrepresents the facts in order to imply that Musa has disobeyed the instructions of the courts.”

Sergeant says that he does not understand this point. He adds: “In the main case, there are three applicants and 27 respondents, fuelling one of 2010’s most lucrative cases for lawyers.” And: “The Bakubung have been represented by Bell Dewar and Cliffe Dekker; Musa by ENS, and the Royal Family and Concerned group by Webber Wentzel.”

At the hearing, it appeared that the reference to the “lawyers for the Bakubung” refers to three members of the tribe’s royal family, which consist of approximately 100 people.

Sergeant said that these members represented the tribe and that the phrase in dispute was therefore accurate.

Jimerson argued that the phrase in dispute strengthens the impression that Sergeant was trying to create, namely that MC was fighting the Bakubung. He said that these three members did not represent the tribe, but that they were individuals who were acting on their own behalf.

As I am not in a position to decide who represents the Bakubung and who not, I cannot come to a definite finding in this regard. The one thing that I’ll not do is to guess.

‘This was not done’ (twice)

Sergeant twice states that “this was not done”. This phrase relates to an “order” for MC to provide:
• all relevant bank accounts by December 10; and
• an explanation of the “monetisation process”, by the same date.

Regarding the first instance, MC says that it is an outright lie. It says that the second one is an “outright misrepresentation” as the document was made available.

Sergeant says it is clear from Dlamini’s recent report that he has been unable to trace tens of millions of rands of Bakubung cash. For Musa to claim that it has supplied documents bona fide meaningful to explaining where the hunderds of millions have gone is pure gibberish.”

Again, I am not in a position to decide whether MC did or did not comply, and therefore again cannot determine if this reportage is accurate or not.

However, that is not the end of this story. Note that at the hearing:
• Jimerson said that he had clean audits to prove that MC did comply – a fact that the newspaper did not contest (at the hearing);
• Sergeant based his information on a report entitled The Administrator Progress Report. However, this report is dated March 17, 2011 – more than three months after the publication of the story in dispute;
• I therefore asked the reporter what other documentation he can provide that he based his information on – there was no such documentation; and
• Sergeant was hesitant when I asked him if he had sources who gave him this information. I had to ask several times before he eventually said that he had “two or three” sources (the identity of which he chose not to reveal).

Note that the story presents it as a fact that MC did not comply, but it does not attribute this information to any source.

I also keep in mind that the allegation (presented as a fact) of non-compliance is a serious one. I believe that there was reason to doubt if this reportage was accurate and that this information therefore should have been verified. If it was not possible to verify it, it should have been mentioned in the story, as required in Art. 1.4 of the Press Code.

‘Orders’ (twice)

The story says that there was an “order” to provide bank statements, as well as an “order” to explain the monetisation process.

MC complains that, given the level of the reporter’s access to lawyers for one of the factions of the Bakubung community, Sergeant should know that both “orders” to which he refers were in fact negotiated agreements between the parties.

Sergeant says that “access” is his business and that Musa has an unhealthy obsession with him. He adds: “During the early weeks of December, Musa somehow managed to persuade the IDC to let go of hundreds of millions of rands in cash belonging to the Bakubung. As anyone by now would imagine, the cash went to anyone but the Bakubung. Musa has, as usual, refused to comment on my request to explain the deal, and no doubt wishes me dead. There are court orders against any further alienation of Bakubung assets, so this IDC matter is yet another instance of Musa being in contempt of court.”

He adds: “Orders, from negotiations or otherwise, are orders. In any event, Musa and its lawyers capitulated, as the arbitrator, John Myburgh SC, has made patently clear, and did not ‘negotiate’ in the normal sense of the word.”

At the hearing, Jimerson argued that the reference to court orders was a misrepresentation, as there were no court orders, only negotiated agreements.

However, it appeared that these “negotiated agreements” became a court order after they were negotiated successfully. This makes the reference to “orders” factually correct.

General comments

In conclusion, I need to say the following:
• The “communication” between Sergeant and MC has clearly been extremely poor, to say the least. The journalist is frustrated because MC does not reply to his communications; Jimerson does not want to reply as, according to him, Sergeant’s tone is degrading. I can only express my sincere hope that this situation will improve, as poor communication is bad for both parties and it does not serve the greater good, namely the free flow of information.
• At the hearing, Jimerson had consistently accused Sergeant, who does not work for CitiBusiness anymore, of biased reporting. He said that, when taken in isolation, most parts of the story that he complains about may be acceptable; however, when seen in context, and taking the history between the two parties into account, he said that he had detected a trend of bias against MC. I cannot say “yes” or “no” to this allegation, as I have had only one story to go on.

FINDING

‘Raid’

CitiBusiness is in breach of Art. 5.1 of the Press Code that states: “Headlines and captions to pictures shall give a reasonable reflection of the contents of the report…in question.”

‘By its own admissions’