The sensational judgment declaring the 2019 sale of The Campus to have been illegal and void is a teaching moment.
“This is a uniquely South African story,” begins the scathing 75-page judgment by Judge J Fisher which sent shockwaves through the country’s business community this week.
It comes complete with “protagonists” who “dominate the narrative” and “many other dramatis personae who are central thereto”.
And a gripping story it is. Gripping, and damning. The judge, who has clearly done her homework, minced no words.
The protagonists are Jeremy Ord, the co-founder and legendary executive chairman of Dimension Data (Didata); his colleagues, Bruce “Doc” Watson, Jason Goodall, Grant Bodley, and Athanasios Missaikos; a corporate advisor, Steven Nathan; and a stooge, Martin Epstein.
Together, these once-lauded captains of industry secretly conspired to subvert a R1.4 billion black economic empowerment (BEE) transaction, by which The Campus, the company’s office park in Bryanston, was sold in 2019. Instead of selling it to a consortium of black women, as they claimed to have done, they clandestinely sold it to themselves.
In doing so, they defrauded the owner of Dimension Data, Japan’s NTT, by negotiating a price below market value, and acting both as the secret buyers and as directors who approved the deal on behalf of the seller.
This is, to quote the judge, not only illegal, but “brazen and dishonest”.
Travesty
“If this kind of flouting of foundational and universal commercial values remains unchecked and unpunished this would represent a travesty of South Africa’s commitment nationally and internationally to the upholding of the values of honesty and integrity which are so intrinsic to proper commercial relationships,” Judge Fisher wrote, adding, “From a South African Black empowerment perspective, it is of grave concern that these White Captains of Industry have subverted the empowerment legislation for their own benefit.”
For an overview of the case, read this story by Duncan McLeod, editor of TechCentral.
The respondents, Ord and company, denied that they had any beneficial control over the assets sold. They also offered to reverse the transaction to placate NTT. If the former is true, the latter cannot be possible, and if the latter is possible, the former cannot be true.
There are many other reasons to believe that the scheme was deliberately and secretly concocted to minimise the sale price of The Campus and associated assets, including a golf course and an art collection, to conceal the identity of the true buyers and their glaring conflict of interest from the seller, and to secure for Dimension Data a substantially improved BEE rating which it did not merit because the buyers turned out to be white as the driven snow.
The judgment sets aside the entire sale and restores The Campus and its associated property to NTT.
The 83s
Unless the protagonists are able to overturn the judgment on appeal – and reading the judgment, the chance is slim – they should all face criminal charges and spend some quality time getting to know the shadier denizens who enjoy the hospitality of the Department of Correctional Services. Maybe they can start their own gang and call themselves The 83s, for the year in which Didata was founded.
The same goes for the attorneys from Werksmans and Webber Wentzel who helped to construct this fraud.
It’s a sad day for South African industry when key executives of perhaps the most successful and storied technology firm in the country’s history turn out to be little more than greedy skollies.
Perhaps we shouldn’t be surprised. These leading lights of the old boys club spent decades in an industry that was as famous for its innovation and stellar financial gains as it was infamous for the villains it spawned.
In my time as a technology journalist, in the years before and after the dot com boom at the turn of the 21st century, I not only interviewed some of the “dramatis personae” of this story about their corporate strategy, but also worked on stories about the industry’s criminals. I recall co-writing one particularly gratifying cover story entitled “Rogue’s Gallery”, profiling the industry’s dozen or so most scandalous blackguards.
Where business booms, fraud is rarely far behind.
The technology industry was famous, too, for its larger-than-life personalities and big egos. It seems Ord and the others were so used to thinking they were the smartest guys in the room, that they thought they could get away with a fraudulent fronting scheme that benefited nobody but themselves.
But the private sector…
In the public discourse, and perhaps the corridors of power, the exposure of crime and corruption in corporate circles often prompts the observation that government is not alone in its corruption; the private sector can be just as corrupt and dishonest.
This is true. Everyone is human, people are greedy, and there’s nothing that inherently makes a private businessperson more ethical than a civil servant or a politician.
There are important differences, however. In the private sector, the victims of corporate fraud are usually limited to investors who choose to put their money at risk. Private sector corruption does not fleece every single taxpayer and every single citizen who should be benefiting from government expenditure.
In the private sector, investors themselves (such as NTT in this case), and the media (such as TechCentral, which was the first to break this particular story in January 2022), play a central part in holding the guilty to account.
Victims have recourse through the courts. Even if there are no criminal convictions (yet), there are civil judgments that attempt to make the victims of fraud whole.
That the media delights in exposing such corporate malfeasance should also put paid to the trope that journalists are anti-government because they’re in the pockets of corporate interests. They aren’t, and they take just as much pride in breaking stories of private sector crime as they do stories of government corruption.
Consequences
The good news from this affair is that, unlike with the prosecutions for government corruption, which we’re still waiting for two and a half years after the delivery of the six-volume report of the Commission of Inquiry into State Capture, there are usually consequences for private sector corruption.
People make mistakes and commit crimes, no matter whether they work in the public sector or the private sector. The market is far from perfect, but its great advantage is that it is fairly good at self-correcting. The market does not tolerate fraud and waste and will move to excise malfeasance as soon as it is discovered.
The same cannot be said for government, because unlike with the private sector, the harms in government corruption are diffuse. We’re all victims, to a small degree, of a particular act of fraud or bribery in government, but none of us can justify the time and expense of challenging it in court, as the victim of a private fraud is likely to do.
Reassuring investors
The other good news is that Judge Fisher has done an excellent job of reassuring investors in South Africa that the justice system is able to act against fraud and delinquency on the part of our captains of industry. That there are consequences preserves trust in South Africa’s market institutions.
It does expose a glaring weakness, though. South Africa’s BEE laws are byzantine. If you want to get a feel for exactly how complex and arcane they are, read McLeod’s 2022 exposé, which goes into the details of how the transaction was structured. Even that is a simplified overview.
The way BEE laws are structured makes it business critical even to companies that do not rely on government tenders. It is also largely undesirable to corporate investors because it forces them to part with potential future value streams, often at a discount.
This creates a motive to circumvent or undermine these laws. That they are also highly arcane and complex creates a lot of opportunity to satisfy this motive.
When simple fronting deals were outlawed, it gave rise to opaque and tangled webs of deceit that take corporate lawyers and consultants months or years to construct. It takes a committed judge to try to penetrate the self-serving misdirection of corporate miscreants.
This just adds to the reasons why it should be sunset time for BEE.
But first, let’s see the protagonists of Judge Fisher’s story in a criminal dock. If they’re as guilty as they look, they deserve to be locked away for a long time.
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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Image: Sunset at Dimension Data’s iconic office park, The Campus, in Bryanston, Johannesburg. Photo: LYT Architects.