Ruling by the Press Ombudsman
June 25, 2013
This ruling is based on the written submissions of Mr Gerrit Bekker, a quantitative analyst, investment consultant and portfolio manager to Interneuron (which was an investor of retirement funds), and the Business Report newspaper.
The adjudication of this complaint has been delayed due to the serious illness of the journalist who authored the story.
Mr Gerrit Bekker complains about a story in Business Report on 19 September 2012, headlined Interneuron losses from rogue deals assessed.
Bekker complains that the story inaccurately stated that:
· he was responsible for losses of some R100 million relating to the Eastern Cape Development Corporation (ECDC) and the Paper Print Wood and Allied Workers Union (PPWAWU);
· he was had moved money between ECDC and PPWAWU to cover his tracks;
· the FSB had disbarred him; and
· investment consultants Selekane blew the whistle on Rockland and Interneuron.
In later correspondence, he adds that the journalist never corroborated his information.
The story, written by Bruce Cameron, said that that Bekker could have been the cause of total losses of more than R100-million in investments of retirement funds. The reporter added that Bekker had been debarred from holding any position in the financial services industry.
Before I go into the details of the complaint, I need to record Cameron’s argument that he based the story on an application for curatorship that was made in the Western Cape High Court on 17 September 2012. “When I wrote the article I had in my possession a copy of the court papers, in particular the founding affidavit of German Emmanuel Anderson…” (at the time the COO of the Financial Services Board, the FSB). Cameeron says that he nearly exclusively relied on information that was before the court.
Here is some of the relevant correspondence of the respective parties to this office on this issue:
· Bekker argues that he can provide the necessary proof for his complaint. In his reply to the newspaper’s response to his complaint, he takes issue with the veracity of several issues in Anderson’s affidavit;
· Cameron replies that such proof is not relevant to the complaint as the story was based on a court record; and
· Bekker says that “all available information should have been consulted”. (I am not sure what this means – probably that Cameron should have verified his information, meaning that he should have checked the veracity of Anderson’s affidavit with other sources).
This is the situation: Cameron merely reported on court documents and, certainly, it is not his job to ascertain the veracity of Anderson’s statements – that is for a court, and not for a journalist, to decide. It is indeed not normal journalistic practice to ask sources for comment or to check the veracity of the content of court documents with other sources when reporting on a court case.
It certainly is a publication’s duty to follow up on a matter such as this one by publishing further information as it emerges, which is when the other side’s version should be reported – but that is a different matter that falls outside the scope of Bekker’s complaint.
My only question on this matter is if Cameron presented the contents of the affidavit as the truth (as Bekker in later correspondence alleges), or for which it was – untested statements under oath.
After carefully studying the story, I am convinced that the reporter sufficiently referred to court documents, clarifying that he did not present his information as the truth, but rather as Anderson’s contentions.
Responsible for losses of some R100-million
The story said: “…Gerrit Bekker…could be the cause of total losses of more than R100 million.” The article added that this was revealed when the FSB successfully applied to the Western Cape High Court “to place Hout Bay asset manager Interneuron (the company where Bekker had been employed) under provisional curatorship”.
Bekker complains that this is impossible as he only managed R35-million of the ECDC’s funds and accepted responsibility for a loss of R5-million. “This disclosure can be substantiated by the FSB and forensic auditors.”
I asked Cameron where he got the “more than R100-million” from. This was his response (in italics):
The problem with most applications is that it is difficult for FSB inspectors to make accurate estimates of losses. Among other reasons is that it is not known how much money may be recovered. When it comes to dealing in derivatives (as is the case with Bekker) however this money is normally not recovered.
This case is complicated because there was more than one issue – apart from the alleged Bekker excesses, money was also not being invested (on the instructions of Jonker) according to mandates, where further loss could occur.
I do not have copies of the voluminous Inspectors report at hand (I borrowed the report from the FSB lawyers using it at their offices to total up potential losses, which came to way more than R100 million.)
The Gerry Anderson ex parte application affidavit alone reflects:
· ECDC: R38 million
· PPWAWU: (para9.19 – Severe loss of R44 million of R102 invested. Para 9.22 – estimated loss of R76 million.
· Christian Community Pension Fund: (para 13.3) R91.2 million
· Individual investor: (para 13.4) R13.6 million
· Six other individuals: (amounts from R30 000 to R300 000)
That totals well in excess of R100 million and does not include any Arwa potential losses. So the more than R100 million is to my mind is a fair and conservative reflection.
I also note the use of the phrase “could be” – which implied that Cameron did not state it as truth, but reported it as a possibility, and that elsewhere (in paragraph 7.8) Anderson stated that Bekker was “the main reason for the loss occasioned to the Interneuron Investors” (totalling more than R100-million).
Moving money to cover tracks
Bekker complains about the following sentence: “As the losses grew Bekker started switching the assets of various investors, including those of the ECDC, the Arwa Retirement Fund and the PPWAWU fund to cover his tracks.”
He says that this is incorrect, as Mr Willi Jonker was the portfolio manager on PPWAWU. He argues that he had no input into how this money was managed, nor did he have access to it – therefore, he could not have used PPWAWU’s funds to hide his losses.
I asked Cameron for some justification for the sentence in dispute.
He referred me to several paragraphs in Anderson’s affidavit, the most important of which read:
· (paragraph 7.8): “In consequence Bekker whose conduct was the main reason for the loss occasioned to the Interneuron investors, voluntarily conceded his wrongs and concealment of trading losses” (own emphasis); and
· (paragraph 9.2): “Mr Gerrit Bekker….informed us on Friday 30 March 2012 that he has been providing us with falsified statements of the portfolio since 2005”.
Even though Cameron did not point me to the words “switching the assets of various investors…to cover his tracks”, I do believe that the statement in dispute was essentially based on the affidavit and therefore that the reporter was justified in using it.
Disbarred by the FSB
The sentence in dispute read: “The FSB took immediate steps to disbar Bekker in May because he did not comply with ‘personal character qualities of honesty and integrity’.”
Bekker says that the FSB did not disbar him – Interneuron did, although he was not in their employ since 2005.
Anderson’s founding affidavit (4.6) confirmed the sentence in dispute, save for the reference to the FSB. Cameron argues that Interneuron applied to the FSB for Bekker’s disbarment, but says that “the actual registration and debarment is at the discretion of the Financial Services Board”.
I note that the FSB did investigate the matter, which makes Cameron’s argument plausible.
However, even if the reference to the FSB with regards to Bekker’s disbarment was not 100% correct, this could not have prejudiced him in any way.
Selekane blowing the whistle
The story said that investment consultants Selekane blew the whistle on both Interneuron and Rockland.
Bekker says that, in 2009, he advised PPWAWU to appoint an external property consultant to investigate the funds managed by Interneuron and Rockland on behalf of PPWAWU.
I asked Cameron for an explanation of the statement in question.
He referred me to paragraph 7.3 of Anderson’s affidavit that stated: “The inspection was prompted by a complaint received from one of the large institutional investors through Interneuron.”
The reporter added that paragraphs 7.4 and 7.5 made it clear that the institutional investor was a retirement fund. “This was supported by my knowledge of the Rockland curatorship matter (on which I also reported) and the supporting court documents in both matters, enquiries with the lawyers representing the FSB in the Interneuron and Interneuron application, the FSB itself and Selekane, which discovered the problems on becoming the PPWAWU consultant. The complaint was made by Selekane on behalf of the fund.”
Cameron also said that, to his knowledge, no mention was made in court papers that Bekker reported anything to the FSB and no one at the FSB indicated this to be the case. In fact, “Bekker admitted to the FSB inspectors that he had actively misled the FSB”.
In a letter authored by Bekker, he said the following: “I have noted above why I chose to hide the loss from Interneuron. My reason for not disclosing it to the client can only be attributed to cowardice. During the past 7 years there was not a day that I did not consider disclosing it – I never however could muster enough courage to do so.”
Unfortunately, this document is undated.
I have no reason to disbelieve the statement that the complaint against Interneuron “was made by Selekane on behalf of the fund” (as Cameron argues), which means that I do believe that he was justified in reporting that that company had blown the whistle on Interneuron.
The complaint is dismissed in its entirety.
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 Adjudication Panel, Judge Bernard Ngoepe, fully setting out the grounds of appeal. He can be contacted at Khanyim@ombudsman.org.za.