Mr Alan Mukoki, former CEO of the Land Bank against the Sunday Times

Complainant: Land Bank

Lodged by: Alan Mukoki

Article: How Fat Cats Looted Bank Billions

Date: 13 March 2008

Respondent: Sunday Times

Complaints:

Mr Alan Mukoki lodged two complaints against the Sunday Times for stories it carried on November 11 2007 and January 20 2008.

The November story was headlined How Fat Cats Looted Bank Billions and was written by Wisani wa ka Ngobeni and Mpumelelo Mkhabela.
The story said top Land Bank officials siphoned off more than R2-billion meant for farmers to fund their close friends and business associates’ luxury golf estates, a sugar mill, equestrian estates and residential developments.
Mukoki complained that:
1. “There is no factual evidence of any R2billion that has been siphoned off”;
2.  The bank’s statutory auditors, the Auditor-General had not made such discovery or finding of billions given to friends and business associates; and
3.  The report on which Sunday Times relied for its story was “subject to limitations”.
    On the bullet points in the story, he complains that:
4. It was not true that Paul Baloyi was a director of Amber Mountain;
5. Darryl Rose, his executive assistant, and Land Bank board member Sam Mkhabela had “benefited” from loans from the bank and the Sunday Times had not mentioned that the loans were done within the bank’s policy;
6. The information he gave to the Sunday Times that the bank financed only the land, not the actual developments, was not used in the story;
4. He never admitted to the journalist that he had deviated from the Land Bank’s mandate – “I said clearly that we made such loans as a strategy and tactic precisely to deliver the bank’s mandate which the Land Bank was struggling to do”;
5. He did not tell the journalist that they had made a submission to the Minister and treasury;
6. He never made a statement or admission that the beneficiaries of the loans were his business associates; and
7. It was not true that the Land Bank had given Dr Sokhela a loan to finance PSL Club Amazulu.
The January story appeared on page 15 of the newspaper and was written by Mpumelelo Mkhabela. Its headline was Land Bank Boss “must be charged”
The story said “the forensic report into corruption at the Land Bank” had recommended that former chief executive Alan Mukoki face criminal charges of “dishonesty”, “fraud” and “breach of duty”.
“The report was approved by the Cabinet, which referred it to the Scorpions, the SA Police Service and the National Prosecuting Authority for action on November 7 last year,” it said.
“But, four weeks later Cabinet withdrew it from the investigative agencies, and referred it back to Agriculture and Land Affairs Minister Lulu Xingwana for ‘internal investigation’.
“Xingwana had commissioned auditors Deloitte to investigate a suspicious loan scheme, through which Mukoki sanctioned more than R1-billion to fund land developments for golf estates, theme parks and residential property. The funds should have been directed to needy farmers.”
Mukoki says:
1. It was factually incorrect and a distortion to refer to the report as “the forensic report into corruption at the Land Bank” when it’s correct title was “the forensic audit into the financial management of the Land Bank”;
2. The report was not audited and issued with limitations;
3. Not one cent meant for poor farmers was used in this scheme and it did not fund golf developments or residences – “It only funded the land which on rezoning would enable the bank to be repaid in full the funds lent. …95% of the funds used for this scheme did not come from the government. The money came from the
    capital markets and was neither secured or guaranteed by the state”;
4. It was a misrepresentation to say that Cabinet withdrew the report from the investigating authorities because President Mbeki did not want to embarrass Minister Didiza or Minister Xingwana because they were both his allies;
5. It is both inaccurate and a distortion to say that the report says he personally approved loans of R1,1bn;
6. The Sunday Times did not accurately report the Deloitte conclusion that it had not been able independently to ascertain the exact nature of the relationship between him and Mr Abe Maduna and Mr Paul Baloyi, who were reported to have been involved in the first land finance transaction done by the Land Bank;
7. Mr Maduna was never given an advance of R10m by the Land Bank, as reported in the Sunday Times.
8. Minister Xingwana did not instruct the Land Bank and himself to enter into a mutual separation of his contract as reported in the story – “This settlement was initiated by myself as early as November 2006”;
9. Contrary to what the Sunday Times reported, the Deloitte conclusion was that the
    Board did know of the land for development loans and the confusion was
    whether it knew of the legal opinions against it.
10. The side bar that is headlined A litany of loans with little sense
      does not state in what way the loans did not make logical sense.
12. The article violates bank-client confidentiality rules and the clients’
      constitutional rights to privacy by mentioning their private business with
      the Land Bank.
13. He did not say the matter was sub judice but simply that the whole matter was before the Press ombudsman and that a hearing was already set for February 14.
Ruling
The panel deliberated on this matter against the backdrop of an important timeline that started with the government issuing a statement on November 8 2007 about the Deloitte forensic audit into the financial management of the Land Bank and announcing that the final report was being referred to the South African Police Service and the National Directorate of Public Prosecutions for further investigation and that criminal proceedings against all those who were identified in the report as having personal interest, acted inappropriately and negligently be instituted.
The report was dated September 3. A summary of findings was presented to the board of the Land Bank on September 4. It was submitted to Cabinet on November 7, the day before the announcement.
At its final meeting for 2007 on December 5, Cabinet announced it had rescinded its earlier decision to hand over the forensic report to the police and the prosecuting authorities, pending further internal investigations by the Minister of Agriculture and Land Affairs. At a Press conference the following day, a government spokesperson said it was rescinded as some members of the board and some members of the executive had come forward with new information that had not been considered by the forensic auditors.
The Sunday Times has told us that when they wrote the November story, they had not seen a copy of the report but they had pieced the story together after interviews with a number of sources, including two employees of the Land Bank, employees in the Department of Agriculture, and members of Directorate of Public Prosecutions and the Complainant.
In other words, it was enterprising journalism for the newspaper to dig and try and answer the question What are the contents of the report that pushed the government to these lengths?
In a story where a journalist has to rely on what s/he is told by other people, s/he has to check and crosscheck to ensure that s/he has as accurate a story as possible. There is always the danger of inaccuracies creeping in.
Was the Sunday Times right to publish a story on a forensic audit report they had not seen? And what weight should they have given to the disclaimers in it?
Among the limitations that Deloitte state are:
v     “Our work did not constitute an audit..The work performed as per our brief did not constitute a statutory audit and accordingly do not express an audit opinion in accordance with Statements of South African Audit Standards.
v     “We do not guarantee the accuracy or completeness of information.
v     “Legal opinion…As a rule, we do not express legal opinions, but merely state the facts as they come to our attention. Where we do comment on matters of law, any question or uncertainty thereanent should be directed to your legal advisors.
v     “This report should not be distributed to any other party….”
 Mukoki says the Sunday Times should at least have included these limitations in its stories. The newspaper says it did reflect in its story that Mr Mukoki had said the report was unsigned.
At the time that the newspaper wrote the first story, Government had accepted and was acting on the report and it was reasonable for the Sunday Times to report on and even quote from it. Did the newspaper exercise sufficient care in dealing with the contents of the forensic report?
The headline How fat cats looted land bank billions assumes that it is true that some people “looted” – strong verb – land bank billions. The subheading “Cabinet calls for criminal charges after R2-billion is siphoned off to fund associates’ business schemes” also assumes that R2-billion was “siphoned off”.
The lead paragraph states as fact that top land bank officials siphoned off more than R2-billion meant for farmers to fund their close friends and business associates’ luxury golf estates, a sugar mill, equestrian estates and residential developments.
The source of this “information” is revealed in the next paragraph, and again accepted as gospel: “The massive fraud was revealed in a damning forensic audit by Deloitte that was handed to the Cabinet this week…”
Good practice in journalism is to treat allegations as just that until they are proved to be true in a court of law. For example, when a person is charged with rape and appears in court, news coverage assumes him to be innocent until the court pronounces him guilty. As the evidence is led in court, it is clear that these are only allegations ands his defence is given equal prominence. It is also not assumed that a rape did take place – the court might find it was consensual sex that had occurred.
Even after the person has been convicted, news stories can refer to him as a rapist only after the appeals process has been completed. A newspaper that called him a rapist before this process was completed risks a suit for defamation if he is eventually acquitted.
The findings and conclusions of forensic auditors would be led as evidence in court, if it was appropriate, and the auditors would be cross-examined to test their evidence in the normal way that courts do. Their word is not gospel.
In the November 8 statement, the government did not find anybody guilty:
v     The report was referred to the SAPS and the NDPP for further investigation (our emphasis)
v     It ordered that criminal proceedings against all those who were identified as having personal interest, acted inappropriately and acted negligently…be instituted.
There is no assumption of guilt in this statement.
The Land Bank’s statutory auditor, the Auditor-General, is also measured in his report to Parliament in the Bank’s annual report: “…circumstances exist which indicate that land for development loans have been entered into outside the mandate of the Land Bank in terms of the Land Bank Act.”
Mr Mukoki argued that the disclaimers by Deloitte should have been included in the story. The panel did not allow itself to be bogged down in the legalistic meanings of the disclaimers. We applied journalistic yardsticks and were convinced that if the Sunday Times had reported on the contents but treated allegations with caution, it would not have led to the sensationalist tone in the story. It was hyped up unnecessarily when the unembellished allegations were on their own very serious.
The assumption of guilt is carried into the January story. Forty-five days after government announced it had rescinded its decision to send the report to the police and the prosecuting authorities the Sunday Times reports that the Cabinet had withdrawn the report from the investigative agencies and had “referred it back to Agriculture and Land Affairs Minister Lulu Xingwana for ‘internal investigation’.”
In any story that affects a person’s reputation it is important to follow every nuance as the story unfolds, right up to the time that that person is found guilty or is cleared. The Land Bank story was important for the Sunday Times and so it should have covered the government’s December conference.
The newspaper goes on to say sources have told it the report “was withdrawn in light of the political embarrassment it could cause President Thabo Mbeki’s closest allies, Xingwana and her predecessor, Thoko Didiza, in the ANC succession battle”.
The alternative reason the newspaper offers for the rescinding of the decision suggests that the people concerned are guilty. If the newspaper had elaborated on the reasons the government had given and then proceeded to quote their sources the story might have been adequately balanced.
When the November story states that “The audit revealed that…” it continues to accept the findings of the auditors as fact, even before they are tested in a court of law.
The Sunday Times is in breach of clause 1.3 of the South African Press Code that states: “Only what may reasonably be true, having regard to the sources of the news, may be presented as fact, and such facts shall be published fairly with due regard to context and importance. Where a report is not based on facts or is founded on opinions, allegations, rumour or supposition, it shall be presented in such a manner to indicate this clearly.”
Turning to the details in Mr Mukoki’s complaint:
R2-billion
Mr Mukoki states that there was no factual evidence of any R2-billion that had been siphoned off.
The Sunday Times concedes that the Land Bank has also stated that R900-million was involved. It however goes on to say Land Bank officials have told it that while R900-million was the amount disclosed in financial statements, the total involved was much higher. It says it reflected this in a story published on November 18 2007.
The November 18 story still asserts that the audit found that bank officials siphoned off more than R2-billion to fund investments by close friends and business associates. It does however say that the Department of Agriculture and Land Affairs had put the fraud at just over R900-million.
The Sunday Times quotes anonymous sources who seem to have more information than Deloitte, who had access to documents and interviewed staff. The R2-billion is not reflected in the bank’s audited annual report for 2006/07.
The R2-billion is taken down to R1.1billion in the January 20 story without any indication that the earlier story, written before the newspaper got hold of the report, had given an exaggerated figure.
Paul Baloyi
On Mr Mukoki’s complaint that Mr Paul Baloyi was not a director of Amber Mountain the Sunday Times has pointed out that it published a correction the following week.
Darryl Rose, Mukoki’s executive assistant, and Sam Mkhabela, a former Land Bank board member
Mr Mukoki says when the Sunday Times reported that the two had “benefited” from loans from the bank it did not mention that the loans were made within the bank’s policy.
The Sunday Time’s response was that its story said Rose and Mkhabela benefited from a loan to Northern Jungle Trading and the audit report had identified the loan as suspect.
The panel does not uphold Mr Mukoki’s complaint. The Sunday Times explanation is satisfactory.
Financing land and not actual developments.
Mr Mukoki complains that the information he gave to the Sunday Times that the bank financed only the land, not the actual developments, was not used in the story.
He says he never admitted to the journalist that he had deviated from the bank’s mandate but rather told him that such loans were made as a strategy and tactic to deliver on the mandate which the Land Bank was struggling to do.
The newspaper concedes that he did tell its reporter that the Land Bank financed land deals and not actual developments but adds that “at all material times the Land Bank was aware that the land was intended to be developed as golfing estates, equestrian estates, etc.
“The Land Bank may not have funded a brick in such development but it facilitated the developments by making loans available for the land,” the newspaper says. “The audit found that this practice deviated from the bank’s mandate… Our reporting was based on the audit report.”
When Mr Mukoki gave the panel his side of the story, he repeated almost everything that the auditors said he had told them. The auditors did not accept his explanations but this does not mean that another tribunal would not find differently. At this stage it remains in the realm of allegations.
We find against the Sunday Times: Mr Mukoki’s side had to be included in the story.
Submission to Minister and the treasury
Mr Mukoki says he did not tell the journalist that they had made a submission to the Minister and treasury and the Sunday Times says a transcription of the tape with Mr Mukoki shows that it has misquoted him. The newspaper says it is willing to correct that.
 
Business associates
Mr Mukoki says he never made a statement or admission that the beneficiaries of the loans were his business associates.
The Sunday Times says that Mr Mukoki denies that the beneficiaries are current associates but admits that they are former associates.
This one – former colleagues, former business associates, or simply business associates – appears to be a game of semantics that does not take the matter forward. The panel finds against Mr Mukoki.
Northern Jungle
 
The Sunday Times says that in its story the detail in respect of the Northern Jungle loan is inaccurate in that it describes the loan amount as being R247 million in respect of the development in the Vaal area. According to the report the amount concerned is R186 million for a Golf Estate near Kempton Park.
The panel upholds Mr Mukoki’s complaint.
 
Dr Sokhela and Amazulu
The Sunday Times did not attribute this part of the story to Mr Mukoki or to the report. Mr Mukoki had told the reporter that he could not comment on a client’s business.
We find no wrongdoing on the part of the Sunday Times.
 
The January story presents a different set of issues. For one, the newspaper had a copy of the report to quote from and largely it attributed its statements to the report.
Government’s rescinding the decision to hand the report to the investigative agencies has already been dealt with above.
The other major issue raised by the January story was whether it was balanced and whether Mr Mukoki’s side was adequately told to maintain the balance in the coverage.
Mr Mukoki would not respond to questions because he had already laid a complaint with the Press Ombudsman. His side of the story could, however, have been gleaned from the forensic report. The auditors carry his explanations. Surely some of those explanations could have been presented in the story.
We would thus have had more balanced reporting.
Corruption
 Mr Mukoki argues that it was factually incorrect and a distortion to refer to the report as “the forensic report into corruption at the Land Bank” when its correct title was “the forensic audit into the financial management of the Land Bank”.
The Sunday Times could have called it the forensic audit into the financial management of the Land Bank, which found corruption. It however chose to elide this into “the forensic report into corruption” and this in our opinion does not change the story.
We will not uphold Mr Mukoki’s complaint.
Cents meant for poor farmers
Mr Mukoki says that not one cent meant for poor farmers was used in this scheme and it did not fund golf developments or residences – “It only funded the land which on rezoning would enable the bank to be repaid in full the funds lent. …95% of the funds used for this scheme did not come from the government. The money came from the capital markets and was neither secured or guaranteed by the state”.

Mr Mukoki did not offer this explanation to the Sunday Times when it asked him to comment. The Sunday Times refers to “needy” farmers and does not mention “poor” ones. The use of “needy farmers” is legitimate summary of the intentions behind the Land Act, as seen by the auditors.

We do not uphold Mr Mukoki’s complaint.

Personally approved
Mr Mukoki says it is both inaccurate and a distortion to say that the report says he personally approved loans of R1,1-billion.
The forensic report alleges that Mukoki personally approved loans totaling R532.9 million and records the loan book for the land for development product as being R1.1 billion, of which R371,9 million had been disbursed.
Some coercion of bank officials by Mr Mukoki is also alleged in the report.
The sentence “The 200-page report details how Mukoki in some instances ‘coerced’ the bank’s officials, and on occasion ‘personally approved’ land development finance deals to the tune of R1.1-billion, in contravention of several statutes” is at worst a clumsy construction. It is not deviating materially from what the report alleges.
The panel does not uphold Mr Mukoki’s complaint.
Mr Abe Maduna and Paul Baloyi
Mr Mukoki complains that the Sunday Times did not accurately report the Deloitte conclusion that it had not been able independently to ascertain the exact nature of the relationship between him and Mr Abe Maduna and Mr Paul Baloyi, who were reported to have been involved in the first land finance transaction done by the Land Bank.
The same arguments hold here as they did when we dealt with the November report.
The panel does not find against the newspaper.
 R10-million for Maduna
Mr Mukoki argues that Mr Maduna was never given an advance of R10-million by the Land Bank, as reported in the Sunday Times.
The Sunday Times is quoting from the forensic report, which alleges that Mr Maduna received R10-million, according to a shareholders agreement in the Land Bank files. The regular use of quotation marks in this story again shows that the Sunday Times was quoting from the forensic report.
Mr Mukoki’s complaint is not upheld.
 
Separation settlement
Mr Mukoki complains that Minister Xingwana did not instruct the Land Bank and himself to enter into a mutual separation of his contract as reported in the Sunday Times – “This settlement was initiated by myself as early as November 2006.”
On this one we run into the problem of the subject of a story not having been asked for comment – a breach of the Press Code, which says: “A publication should usually seek the views of the subject of serious critical reportage in advance of publication…”
There is no indication that Mr Mukoki was asked about his separation settlement.
Mr Mukoki’s complaint is upheld.
Board of directors
Mr Mukoki complains that contrary to what the Sunday Times reported, the Deloitte conclusion was that the board did know of the land for development loans and the only confusion was whether it knew of the legal opinions against it.
In the section Conclusions with respect to Mr Mukoki, the auditors say: “It is evident that the LDF product was not approved by the Board and that the members of the Board, whom we have interviewed, would not have approved the concept had they known about the regulatory risks for the Land Bank in respect of the LDF product.”
Clearly Mr Mukoki is wrong and this complaint is not upheld.
A litany of loans
Mr Mukoki complains that the side bar that is headlined A litany of loans with little sensedoes not state in what way the loans did not make logical sense.
The passage in the forensic report where logical business sense is used provides a specific context and gives an example.
The report states: “In certain scenarios, the Land Bank’s loan applicants formed companies as special vehicles (SPV) for the acquisition of the property in question. Some of these transactions were structured in such a way that they lacked logical business sense i.e. where the purchaser and seller of the property were essentially the same person/entity.”
The Sunday Times was wrong to apply the phrase to all the transactions they listed in their January story.
Bank-client confidentiality
Mr Mukoki complains that the article violates bank-client confidentiality rules and the clients’ constitutional rights to privacy by mentioning their private business with
the Land Bank.
The bank is bound by the bank-client confidentiality rules but journalists may break them if it is in the public interest.
Mr Mukoki’s complaint is not upheld.
Sub judice
Mr Mukoki complains that he did not say the matter was sub judice but simply that the whole matter was before the Press ombudsman and that a hearing was already set for February 14.
There is no material difference between you cannot comment because a matter is sub judice and you cannot comment because the matter is being handled by a tribunal other than the courts.
The panel will not uphold Mr Mukoki’s complaint.
Sanction: Because of the complexity of the issues, the panel decided that the Sunday Times carry an edited version of this judgment, which sets out the findings against the newspaper as well as Mr Mukoki’s complaints that were dismissed.
In terms of the Complaints Procedures, “within seven days of receipt of this decision, any one of the parties may apply for leave to appeal to the chairman of the Press Appeals Panel, Judge Ralph Zulman, and the grounds of appeal shall be fully set.
Press Ombudsman, Joe Thloloe, sitting with Press Appeals Panel members Ronnie Taurog (public representative) and Peter Mann (press representative).
Mr Mukoki appeared for himself and was assisted by Ms Nicqui Galaktiou of Brian Kahn Attorneys at the hearing on February 13, 2008.
Mr Eric van den Berg of Bell Dewar and Hall appeared for the Sunday Times. Ms Susan Smuts, Sunday Times Managing Editor, and Mr Wisani wa ka Ngobeni were also in attendance.

 

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