Christian Gouws, Shelf Company Warehouse vs. Sunday Times


Wed, Jan 30, 2019

Particulars

Date of article: 14 October 2018                                                               

Headline: Report names Matodzi’s PA as major beneficiary

Page: 4

Online: Yes

Author of article: Bongani Fuzile

Respondent: Susan Smuts, internal ombud

Complaint                                            

Gouws, a director of Shelf Company Warehouse, complains that the journalist conflated “shell” and “shelf” companies – which has created the impression that his company was responsible for whatever happened after it has sold a shelf company.

He adds that the reporter falsely and misleadingly:

  • wrote that he or his company had sold companies to the Gupta family, without properly verifying the facts. while in the process inferring that he had associated himself with corrupt persons and had facilitated corruption – which means that the journalist attempted to cast aspersions on his integrity and bona fides ;
  • reported he had said that he could not reveal the name of the buyer – creating the impression that he had been elusive and had attempted to protect persons involved in unlawful acts;
  • stated that his source was helping in the VBS investigation; and
  • portrayed him and his company in a negative light and harmed his good name and reputation as an attorney of the High Court of South Africa, as well as that of Shelf Company Warehouse.

He asks for a retraction, apology and correction to be published on the front page of the Sunday Times.

The text

The story said that Ms Takalani Veronica Mmbi, personal assistant of former VBS chair Tshifhiwa Matodzi, whose companies received payments amounting to more than R60-million, had emerged as one of the beneficiaries of the bank “heist” (according to Adv Terry Motau’s report to the South African Reserve Bank, headlined The Great Bank Heist).

Fuzile reported that the Shelf Company Warehouse was owned by Gouws, “who has previously sold shelf companies to the Gupta family”.

He added: “The five companies Mmbi bought from Gouws were registered in July 2016 with the Companies and Intellectual Property Commission, and name Gouws as a director. It is not clear why Mmbi did not remove Gouws’s name as a director when she bought the companies.”

Gouws reportedly denied that he was involved with the five companies he sold to Mmbi. “You know my business, I sell shelf companies and people buy them… It looks like this one owner has failed to remove my name as a director from all these five companies you said have benefited from this VBS bank. I honestly have nothing to do with this. If one buys a shelf company, that person has to change the directorship. It surprises me to appear in these companies as director; I’ve sold these companies … Unfortunately I can’t reveal the name of the [buyer], but they belong to one person,” he was quoted as saying.

The arguments

Background

Gouws is a practising attorney and one of the directors of eight of the twelve Shelf Company Warehouse branches. This company, he explains, registers new companies and also registers and sells shelf companies. He says since 1997 this company has registered 600 000 shelf companies and close corporations.

‘Shell’ vs. ‘shelf’ companies

Gouws says Fuzile wanted to discuss the VBS Mutual Bank matter with him, as his name appeared on some of the company documents that were named as beneficiaries in Motau’s report.

However, he says that Fuzile was conflating conflated “shell” and “shelf” companies – which has created the impression that his company was responsible for whatever happened after it has sold a shelf company.

He explains a shell company is a corporation without active business operations or significant assets. He says these types of corporations are not all necessarily illegal, but they are sometimes used illegitimately, such as to disguise business ownership from law enforcement or the public. He says legitimate reasons for a shell corporation include the business entity as a vehicle to raise funds, to conduct a hostile takeover, or to go public.

On the other hand, he says, a shelf company has had no activity. He says it is created and metaphorically put on a “shelf” to “age”. Such a company can be sold to a person or group of persons who wish to start a company without having to create a new one. He says it is not a way to disguise business ownership from law enforcement or the public, as Fica legislation makes it impossible to even open a bank account without providing a bank proof of appointment as director and other relevant documentation.  

Given the above, he emphasises that the selling company of a shelf entity has nothing to do with what happens after the latter was sold. As such, he argues it is grossly unfair to implicate the seller of a shelf company when the buyer uses that company for unlawful purposes.

He compares it to someone who buys a car, and then is caught speeding. “It is absurd [to blame the car dealer], and [this] is exactly what Fuzile did by implicating us at all in this matter,” he says.

For that very reason, he adds, neither Shelf Company Warehouse nor he was mentioned anywhere in Motau’s report. “The investigators were able to identify the persons to whom the ultimate beneficial ownership accrued. The investigators did not find it necessary to even make contact with me. There was therefore no story, and no other journalist, who had access to the same information, thought there was a story,” he says.

He concludes that Fuzile’s conflation of shelf and shell companies and basic ignorance of company law and related practices led him to come to uninformed, subjective conclusions that he presented as facts.

Gouws says he also explained the process of the change of directors of a company to the journalist. “I told him that the company appoints the new directors on a date specified by the company, unlike a close corporation, where the change of the members of the close corporation is only valid from the date that CIPC registers the changes,” he says.

He continues: “A company has to lodge the change of director documents with CIPC, which CIPC then places on record for public scrutiny. He says he therefore resigns from a shelf company on the date of incorporation. I told him that the fact that my name still appears on the register at CIPC, only means that the company failed to lodge the documents with CIPC…”

He argues that, if the journalist wanted to know who the people involved were, he should have investigated the bank account to see who had opened the account, as they had to comply with the Fica requirements.

Smuts denies that the article has created any confusion about shell and shelf companies.

Analysis

The question is whether Fuzile did conflate “shell” and “shelf” companies and, if so, if this had any influence on his reporting.

Gouws builds his case on the argument that his company was selling shelf (not shell) companies, which implied that the seller of the shelf company was not involved in that company or its business after the transaction took place. This, he contends, could only happen with shell companies – which he was not involved with. To his mind, the fact that the article implicated him in the companies after the conclusion of the sales can only mean that Fuzile was thinking that Shelf Company Warehouse had in fact sold a shell company.

However, that is not the only possible explanation for the reportage. Gouws’s assertion that he resigns from a shelf company on the date of incorporation, as well as his explanation as to why his name still appeared on the register at CIPC (stating that the company failed to lodge the documents with CIPC) now become important.

The simple fact of the matter is that Gouws’s name still appeared on CIPC’s register – which, surely, made it reasonable for Fuzile to have thought that the former was still involved in that specific company, or companies. It could be true that Gouws is not to be blamed for that, but by the same token it is not the journalist’s fault either.

I am therefore not convinced that Fuzile did conflate the two kinds of companies. For that very reason I am also not blaming the journalist for mentioning Gouws and his company in his story.

Gupta-linked

Gouws says the newspaper falsely inferred that he personally sold companies to the Gupta family – which created the perception that he had associated himself with corrupt persons and had facilitated corruption.

He submits:

  • As a director of the Shelf Company Warehouse, he does not personally sell companies (he says the approximately 65 staff members deal with the sale of shelf companies); and
  • A search on his accounting system shows that neither he, nor the Shelf Company Warehouse, has ever sold companies to any member of the Gupta family. 

He says he told Fuzile that his company had sold a shelf company that later became Mediosa Health (Pty) Ltd (that was said to have links with the Guptas), but he denies that it was sold to any member of the Gupta family.

He explains: “Mediosa was also one of the companies that appeared in the leaked Gupta emails. We sold a company called Dinovert (Pty) Ltd to iThemba Governance and Statutory Solutions (Pty) Ltd on 26 March 2015. They specialise in company secretarial and corporate governance services. After the sale of this company, The Shelf Company Warehouse had nothing further to do with these companies. I attach an affidavit setting out the facts, which includes a copy of the invoice. According to the CIPC records, the company name Dinovert (Pty) Ltd was changed to Cureva (Pty) Ltd on 17/07/2015 and on 20/07/2017 to Mediosa Health (Pty) Ltd. There were also a number of director changes. All of these change took place after we sold the company.”

Gouws concludes Fuzile presented facts, such as the incorrect link to the Guptas, out of context and in an unbalanced manner. He submits: “By his own admission, Fuzile confirmed that he knew that we sold shelf companies and that he also knew that Mmbi was the beneficiary. Given this, how could it ever be reasonable to insinuate any wrongdoing on my part or that of Shelf Company Warehouse? There is no story. My name and that of Shelf Company Warehouse was introduced unnecessarily and arbitrarily into this story, recklessly disregarding our right to privacy.”

He says while he has no reason to believe that Fuzile’s conduct can be ascribed to malice, his failure to properly verify the facts was most probably due to laziness, incompetence and plain and poor journalism.  

He also says, though, that the journalist mentioned the Guptas totally out of context, in an attempt to cast aspersions on his integrity and bona fides.

Smuts replies it is a fact that Gouws’s company sold shelf companies that were used by their associates to benefit the Gupta family.

She says a search on:

  • Lodidox, which Mzwanele Manyi used to buy ANN7 and The New Age from the Guptas using vendor finance, still lists Gouws as an active director; and
  • Mediosa shows that he resigned as a director of the company (then under a different name) before new directors were listed. These directors included Anita Roy (who authored a document proposing the scheme, which was sent to Tony Gupta) and Kubentheran Gupta (who notoriously contributed to the purchase of Optimum by the Guptas through his company Albatime). Roy and Moodley have also since resigned, although the current directors are closely implicated in the Mediosa scandal.

Smuts denies that the article:

  • alleged that Gouws did anything untoward by selling shelf companies to Gupta associates – merely selling a shelf company to someone who was later implicated in state capture does not indicate any unethical or unlawful conduct on the part of the seller; and
  • did not state or imply that Gouws or his company had been named in Motau’s report – the story clearly focused on Mmbi.

Gouws maintains the Guptas had nothing to do with the matter. He adds there is no proof that the company had previously sold companies to the Guptas. “Even the companies that Susan conveniently introduced ex post facto in her response, were not sold to the Guptas,” he concludes.

Analysis

The story said: “The Shelf Company Warehouse is owned by Christian Gouws, who has previously sold shelf companies to the Gupta family.”

The first question is obvious: Is it true that Shelf Company Warehouse, or Gouws, for that matter, has previously sold shelf companies to the Guptas?

Gouws argues there is no evidence to this effect. Smuts, on her part, does not provide any concrete evidence to this effect either, except for arguing that shelf companies sold by Shelf Company Warehouse were used “by their associates” to benefit the Gupta family.

While I accept this argument, taking into account the evidence Smuts did put before me, I believe the reportage went one bridge too far – it is one thing to say that “associates” (as the primary buyers) involved the Guptas (as the secondary receivers), but quite another to state that the Guptas themselves bought the companies. As far as I can make out, it can only be said that Gouws’s company sold shelf companies to people who then afterwards did some business with the Guptas.

If it is incorrect to state that Gouws’s business sold shelf companies to the Guptas, it follows that it is equally incorrect to indicate that he himself sold such companies to that family. I note the use of the word “who” in the sentence cited above – that points to a person, and not to an entity.

Having said that, I am not too concerned that this spin on the ball could justifiably have caused Gouws and his business undue harm.

This is why: Nobody who understands what a shelf company is would come to the conclusion that Gouws had associated himself with corrupt people and had facilitated corruption. His argument about the selling of a car and a speeding fine afterwards by the driver holds water because it compares apples with apples – a seller can never be held responsible for what a buyer does after a sale has been completed.

If the Guptas enter a shopping mall and buy some clothes, it cannot be said that that shop facilitated corruption. A shelf company is just that – a product that can be sold, without any responsibility or involvement following that sale.

This means that, if there was a perception that Gouws had “associated” him with corruption by selling shelf companies to the Gupta family, that perception was a fata morgana and could not have had any credibility.

I therefore accept Smuts’s argument in this regard – merely selling a shelf company to someone who was later implicated in state capture does indeed not indicate any unethical or unlawful conduct on the part of the seller.

I also note in this regard that Gouws does not dispute Smuts’s statement that he was still listed as a director of Lodidox (the company that Manyi used to buy ANN7 and The New Age from the Guptas).

In so far as there was a link between Gouws and Lodidox, I am satisfied that Fuzile was justified in mentioning the Guptas and Gouws in one breath (even though the statement that Gouw’s business had sold shelf companies to the Guptas did go too far).

Lastly, I find it somewhat confusing that Gouws can say, on the one hand, that he has no reason to believe that Fuzile’s conduct can be ascribed to malice, yet he also states that the journalist attempted to cast aspersions on his integrity and bona fides. If one attempts to cast aspersions on somebody else’s integrity, that, in my book, boils down to malice (i.e. the intention to harm).

Not revealing buyer’s name

The story said: “ ‘Unfortunately I can’t reveal the name of the (buyer), but they belong to the same person,’ said Gouws”.

Gouws says the reporter informed him that a number of his company’s shelf companies appeared on the list of beneficiaries (according to Motau’s report).

He says one of his personnel immediately conducted a search to see to whom that specific shelf company had been sold. He adds: “I told [Fuzile] that although I generally do not give out client's information, in this instance, given the gravity of the allegations and theft of old people's money, I will be his anonymous source, and will give him the information.”

He adds he also confirmed that all the other relevant companies had been sold to the very same person on the very same day and all the companies appeared on the very same invoice.

Gouws says he gave Fuzile the name and telephone number of the buyer of the shelf company. He therefore calls it a “blatant lie” that he refused to give the journalist the name of the buyer.

He says in this process the journalist has falsely and misleadingly created the impression that he had been elusive and had attempted to protect persons involved in unlawful acts.

Analysis

The question is if it was true that Gouws refused to reveal the buyer’s name to Fuzile (as stated in the story).

In her response to the complaint, Smuts remarks: “To all intents and purposes, he confirmed [the name of the buyer] when he named the person who had bought each of the companies as Mmbi.” (My emphasis.)

By the internal ombud’s own testimony, therefore, Gouws did not refuse to reveal the buyer’s name (Mmbi) to the journalist. I am at a loss as to just why Fuzile would report the way he did.

In this regard, I take Gouws’s argument seriously that this (false) statement could easily have created the impression that he had been elusive and had attempted to protect persons involved in unlawful acts.

Anonymous source

Fuzile reported:  “A person who is helping in the investigation of VBS, who asked not to be identified, said suspicions were aroused by Mmbi's purchase of five companies in a single week.”

Gouws refutes the statement that the journalist’s source was involved in the VBS investigation as he says he, himself, was the source.

Smuts says Gouws was not the newspaper’s primary anonymous source on the identity of the person who bought the shelf companies from him. She says that information came from someone within VBS who was indeed assisting in the investigation – Gouws merely corroborated this information to the reporter.

 

“At no stage did we identify Mr Gouws as the source of the information. The quotes which Mr Gouws believes were attributed (anonymously) to him were in fact made by the other person. At no stage did we say or imply that Mr Gouws personally had dealings with the clients or that he personally sold the companies to them,” she submits.

She adds that the reporter conducted a search on the companies and discovered that Gouws was still registered as a director – which is why Fuzile approached Gouws for comment.

The internal ombud says the fact that Gouws confirmed information obtained from another source was not recorded in the story, since he had agreed only to confirm this information off the record.

Analysis

Gouws refutes the statement that the journalist’s source was involved in the VBS investigation as he says he, himself, was the source.

Gouws does not have a leg to stand on regarding this part of the complaint – the newspaper says it had a primary source, and Gouws is in no position to say that that is not true (as he has no way of knowing that, and has no evidence to this effect).

Dignity, reputation tarnished

Gouws complains that the article falsely portrayed him and his company in a negative light and harmed his good name and reputation as an attorney of the High Court of South Africa, as well as that of Shelf Company Warehouse.

Analysis

Having decided the (possible) perception that Gouws was involved in corruption was without any merit, it follows that I am also not in a position to decide that his dignity and reputation were unnecessarily tarnished.

Finding

‘Shell’ vs. ‘shelf’ companies

This part of the complaint is dismissed.

Gupta-linked

The statement that Gouws, or his company, had previously sold shelf companies to the Guptas, was inaccurate and in breach of Section 1.1 of the Press Code that says: “The media shall take care to report news truthfully [and] accurately…”

The complaint that the reportage has created the perception that Gouws had associated himself with corrupt persons and had facilitated corruption is dismissed.

The complaint that Fuzile “attempted” to cast aspersions on Gouws’s integrity and bona fides is dismissed.

Not revealing buyer’s name

The statement that Gouws said he could not reveal the name of the buyer was false, and in breach of Section 1.1 of the Code – creating the impression that he had been elusive and had attempted to protect persons involved in unlawful acts.

Anonymous source

This part of the complaint is dismissed.

Dignity, reputation tarnished

This part of the complaint is dismissed.

Seriousness of breaches                                              

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).                                            

The breaches of the Press Code as indicated above are both Tier 2 offences.

Sanction

Sunday Times is directed to apologise to Gouws for inaccurately reporting that he had:

  • previously sold shelf companies to the Guptas; and
  • refused to reveal the name of the buyer of some companies to the journalist – creating the impression that he had been elusive and had attempted to protect persons involved in unlawful acts.

The newspaper is directed to publish the apology at the top of page 4, with a headline containing the words “apology” or “apologises”, and “Gouws”.

If the newspaper re-publishes the story on its website, the same apology and headline should appear at the top of that page.

The text should:

  • be published at the earliest opportunity after the time for an application for leave to appeal has lapsed or, in the event of such an application, after that ruling;
  • refer to the complaint that was lodged with this office;
  • end with the sentence, “Visit www.presscouncil.org.za for the full finding”;
  • be published with the logo of the Press Council (attached); and
  • be prepared by the publication and be approved by me.

Appeal

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.

Johan Retief

Press Ombud