Nova Property Group vs. Business Report
This ruling is based on the written submissions of Ms Dominique Haese, CEO of Nova Property Group and those of Roy Cokayne on behalf of Business Report.
Complaint
Nova Property Group (NPG) is complaining about an article in Business Report of 14 April 2015, headlined Sharemax ex-directors win appeal – Order to repay two investors set aside.
NPG complains that the following sentences were incorrect, defamatory, baseless and unnecessarily harmful to its reputation:
· “Sharemax’s collapse in 2010 was precipitated by the findings of a registrar of banks investigation, that Sharemax’s funding model contravened the Bank Act, becoming public knowledge. This led to new investments drying up and it being unable to make monthly payments to investors”; and
· “The registrar of bank laid criminal charges against Sharemax for alleged contraventions of the Banks Act in March 2012.”
Standing
There is a dispute, though, over the question of whether NPG has the standing to lodge a complaint over the article – an issue with which I need to deal first.
On 5 June 2015 I ruled that NPG was not a third party complainant due to its direct and manifold links to the other affected parties (NPG vs. Personal Finance) and therefore had the standing to complain on its own behalf.
This time, though, NPG was not mentioned in the article.
This prompts me to state (this time) that the complainant’s arguments are rather confusing – in a letter to Sharemax investors, dated 6 August 2013, Haese stated: “Of further importance is the fact that Sharemax Investments ceased its activities relating to the erstwhile ‘Sharemax Group’ during or about July 2010 and never had, does not have and never will have anything to do with the Nova Group…In particular, the shareholding in Sharemax Investments is not owned by the Nova Group or any individual associated with the Nova Group and never will be. Similarly, Sharemax Investments have no Page 7 shareholding in and does not own any assets of the erstwhile ‘Sharemax Group’ and Sharemax Investments has no shareholding in and does not own any assets of the Nova Group, and never will.”
Even should this be technically correct, it is not consistent with the thrust of Haese’s arguments in her complaint. Nevertheless, I (again) rule that Nova does have the standing to complain (as argued above).
The text
The article, written by Cokayne, said that Sharemax Investments and four of its ex-directors have successfully appealed against two determinations by the Financial Advisory and Intermediary Services (FAIS) Ombud, which held the company and directors jointly liable for reimbursing two people who had invested in a scheme promoted and marketed by Sharemax.
Analysis
The first sentence: “Sharemax’s collapse in 2010 was precipitated by the findings of a registrar of banks investigation, that Sharemax’s funding model contravened the Bank Act, becoming public knowledge. This led to new investments drying up and it being unable to make monthly payments to investors.”
In later correspondence, Haese says there has never been a legal finding of any kind that such a Banks Act contravention has ever occurred.
She also:
· requests proof from Business Report that the matter has led to new investments drying up and it (Sharemax) being unable to make monthly payments to investors. “Monthly returns continued to be paid to investor[s] pre and post the 311 Scheme sanctioning”; and
· denies that Sharemax has ever collapsed. “[Instead], Sharemax Investments, as promoter, ceased its business operations.”
Cokayne refers me to correspondence on 7 October 2010 by the Deputy Registrar of Banks, advocate Michael Blackbeard, who stated: “I hereby confirm that as a result of an investigation by the duly appointed inspectors this Office was satisfied that the funding models of Sharemax and 33 property syndication companies were in contravention of the Banks Act, which included the Zambezi and the Villa.”
He says during the scheme of arrangement application process, he posed further questions to Blackbeard. One of these questions, in November 2011, related to Sharemax property syndication schemes being pyramid schemes. In response, Blackbeard explained that it was the funding model that was illegal and that a finding had not been made that it was a pyramid scheme.
On 14 February 2012, Blackbeard responds to Cokayne, stating, “This Office has requested the managers to inform SAPS that we were satisfied that the funding models were in contravention of the Banks Act.”
He concludes that these statements justified his reporting, as it was based on the information provided to him by the Statutory Regulator.
My considerations
The issues, as raised by Haese, are whether:
· there is a legal finding of any kind that a Banks Act contravention has ever occurred;
· there is proof that the matter has led to new investments drying up and it (Sharemax) being unable to make monthly payments to investors; and
· Sharemax has collapsed.
Legal finding
Haese’s argument (that there has never been a legal finding that such a Banks Act contravention has ever occurred) is irrelevant – the sentence in dispute does not say that. It mentions the findings of a Registrar of Banks investigation (which is not in dispute).
Proof
Haese asks Business Report to provide proof that new investments were drying up – while she herself provides adequate proof to this effect. She says in her complaint: “The damage continuously being caused by [Business Report’s] incorrect and misleading reporting, has far reaching negative effects on the Nova Property Group.”
That alone, to my mind, justifies this aspect of the reportage.
I have asked Cokayne to substantiate the second part of this matter, namely that Sharemax was unable to make monthly payments to investors.
His attorney (Jacques Louw) responds as follows:
“The…statement is based partly on…Cokayne’s personal understanding of the background facts, partly on various previous articles written by financial journalists who have drawn the same conclusion, but also on…Haese’s own statements under oath in the application to place Sharemax under business rescue. In this regard, on 30 November 2011, Ms Haese said the following under oath in court proceedings:
“Accordingly…Haese has under oath made substantially the same statement Mr Cokayne has mentioned in his article.” |
Cokayne adds:
| “Even before the Reserve Bank notice, [I] started receiving complaints from investors in Sharemax who did not receive payments on their debentures.
“In early September 2010, [I] asked the FAIS Ombud’s deputy if the latter’s office had received any complaints regarding non-payment of ‘dividends’. In a letter on 8 September 2010, the deputy FAIS Ombud confirmed the complaints. [I] wrote an article about these non-payments on 10 September 2010. “The Registrar of Banks issued its directive on 15 September 2010 and appointed statutory managers to Sharemax on 16 September 2010. As stated by Haese in her affidavit for the business rescue application, this led to the drying up of investments and an inability to pay investors (creditors). However, the 15 September 2010 directive was the culmination of investigation by the Registrar of Banks following complaints received by the Registrar and investments (funding) were already reducing at that stage. “I attach a copy of email correspondence between the FAIS Ombud and [me] in early September 2010 as well as [my] article of 10 September 2010, where he mentioned the non-payment to investors.” |
This provides enough evidence for me to decide that the reportage on this issue was reasonable and fair.
Collapsed
Haese says Sharemax has merely ceased its business operations; Cokayne calls it a collapse.
The difference appears to be little more than semantic, as it depends on the perspective from which one looks at the matter. The end result is the same.
The second sentence: “The registrar of bank laid criminal charges against Sharemax for alleged contraventions of the Banks Act in March 2012.”
Haese writes in later correspondence, “Firstly, this never happened. Secondly, how could criminal charges be laid on anything that is ‘alleged’.”
She states “for the record” that the opinion of the Registrar of Banks that there was a contravention of the Banks Act was taken on review by the Sharemax group of companies. It was then mutually agreed not to go to court, pending the restructuring of the syndication. “[B]y agreement, the Section 311 Scheme of Arrangement was proposed and sanctioned. There was thus NEVER a legal finding of any kind, that such a Bank Act contravention had ever occurred.”
Cokayne says that, on 14 June 2012, Blackbeard wrote to him stating, “The two appointed inspectors/managers (Jaco Spies & Neels Alant) met with Col Makhubele on 9 March 2012 and reported the matter to him…”
On 9 October 2012 he asked the DPCI: Communication of the SAPS the following question: “I understand that the Hawks are investigating the allegations of fraud against Sharemax Investments and whether it operated a pyramid or Ponzi scheme. Can you confirm?” The SAPS formally responded by saying, “Yes. We can confirm an investigation is currently under way.”
Cokayne concludes that the statement in question was based on official communication to him and was “thus justified and factually correct”.
On 11 November 2011 Blackbeard wrote to Cokayne, saying: “The report…concludes that the funding model…does not comply with the rule[s] and regulations – and hence that is in contravention of the Banks Act, ie illegal deposit taking from members of the public as a regular feature of the business by a company [that] is not registered as a bank.”
On 7 October 2010, Blackbeard informed Cokayne as follows: “Illegal deposit-taking is a criminal offence in terms of the Bank Act”.
My considerations
The reportage was clearly based on (overwhelmingly credible) information, as cited above, and the reportage was therefore justified.
Finding
Cokayne has provided me with all the correspondence to which he referred. I am satisfied that he based the disputed statements on reliable evidence and that his reportage was justified. The complaint is dismissed.
Appeal
Our 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 [email protected].
Johan Retief
Press Ombudsman