The recent column by Tony Jackman regarding Dr Iqbal Surve brought back many memories, most of them unwelcome ones.
I first met Dr Surve at Magica Roma, a superb, family run, Italian restaurant in Pinelands, along with representatives of a number of other major investors in LeisureNet. They believed that the company was in trouble but were not exactly sure why or the extent of the trouble. All they knew for sure was that the board of directors of the company was in disarray and basically fell into two camps – those who supported the founders, Messrs Gardiner and Mitchell, who subsequently went to jail for their roles in the debacle, and those opposed to them. They were not sure who or what to believe.
The next day I sat in on the most acrimonious board meeting it has ever been my misfortune to attend, as an alternate director for a major institutional investor. By late afternoon, I found myself elected to the position of chairman of the board of directors of LeisureNet, with the support of the institutional shareholders and the company’s bankers, which position soon became that of executive chairman. It was a position I was to hold for less than five weeks as the company was placed in voluntary liquidation still owing my firm, FRM Strategies, a substantial sum for our services.
For those who do not remember this far back, LeisureNet was the forerunner of the current-day Virgin Active. It was listed on the JSE, had expanded to include a golf shop, a gym equipment supplier, a chain of Imax theatres, a restaurant and, more recently, a slew of gyms, many under construction, in the UK, Germany and Australia, with more to come. And that was where the major problem lay. Although the South African assets had been drained of resources to give effect to these overseas commitments, these resources and all other sources of finance had run out.
While international gym companies were interested in buying the offshore assets, they needed time to run their due diligence exercises. In the interim, LeisureNet had its back to the wall and cash flow projections showed they would be unable to pay salaries at the end of the month. One way out was to sell the gyms already built in London for fire sale prices and use the funds to keep the company afloat while the international companies performed their due diligences.
At the time, Sir Richard Branson was just starting Virgin Active and, I seem to remember, had built three gyms in London. He seemed the obvious candidate to buy the London clubs.
I was told he was in awe of Mr Mandela and so, to open the batting, I went to see Madiba. He grasped the issues immediately and called Sir Richard that same day, a Wednesday, two days before the end of the month. Late that same day, I received a call from Sir Richard expressing his interest and the next day he phoned again at about 19:00 to say the deal was done, the lawyers were putting the finishing touches to the agreement, it would be signed that night and the money would be in the bank the following morning.
For whatever reason, the money never arrived and the board of LeisureNet had no option the next morning but to place the company in voluntary liquidation to try to preserve the assets of the company, which duly happened in no small measure due to the young, talented and dedicated management team of the gym business in South Africa.
In fact, it was the sale of these assets that, in my humble opinion, provided the funds which allowed the liquidators to embark on an extensive Section 417 enquiry into the reasons behind the voluntary liquidation which, in turn, unearthed the facts which gave rise to the successful prosecution of Messrs Gardiner and Mitchell and also the case against the directors of the company, which was settled by a substantial payment by their insurers.
Like Tony Jackman and his colleagues, I had been told by Mr Surve that he had a very close relationship with Mr Mandela and, during my meeting with him, thought it might bolster the case for his intervention with Sir Richard to mention Mr Surve’s involvement.
Mr Mandela looked puzzled and said he did not recognise the name even after I repeated it. I must confess that I was not surprised as, by then, Dr Surve’s somewhat controversial, erratic and unusual behaviour was an accepted fact.
Worse was to follow however. In the board meeting I chaired to place the company in voluntary liquidation, Dr Surve was sitting to my left and I overheard him on his mobile giving instructions to sell shares in LeisureNet during the meeting.
I remonstrated with him but it did not deter him and, subsequently, I reported this conversation to the head of the Financial Services Board and believe that a director of Sekunjalo Investments, the company chaired by Mr Surve and which had a substantial investment in LeisureNet, was fined for insider trading but, somehow, Dr Surve escaped censure. No one at the FSB ever contacted me after my initial conversation with them and I was not called on to give evidence. DM
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