Lerala boss faces 20 years for �deceiving investors�
Mbongeni Mguni | Friday January 26, 2018 17:40
Government and Lerala Mine’s owner, Kimberley Diamonds are presently tussling in a Belgian court over a parcel of 53,000 carats authorities here believe was spirited out of the country just before Lerala’s closure last year. Creditors, who are demanding the stones’ return, say they have evidence the parcel was sold grossly below value in order to hurry them out of the country, to sidestep creditor obligations.
Lerala Mine closed on May 29 last year, citing weak sales and rendering at least 130 workers unemployed. Liquidators working to recover creditors’ dues found that the parcel of diamonds had been sold at the last minute for US$22 per carat, when a previous sale fetched US$45 per carat.
This week, it emerged Kimberley Diamonds chair and principal shareholder, Alex Alexander had charges pending in Central Local Court in Sydney for four counts of “issuing false and misleading statements to investors over a period of five months”. At the time, Kimberley Diamonds owned and operated Ellendale Mine in Western Australia, which at its peak produced half of the world’s rare fancy yellow diamonds.
For each of the four counts, Russia-born Alexander faces five years in jail and/or a fine of P252,000. According to filings by Australia’s Securities and Investments Commission, Alexander was first arrested at Sydney Airport in September 2015 while returning from London and has since appeared in court several times. Investigators say in his capacity as chair, Alexander issued statements inflating the company’s earnings forecast.
In April last year, the jury was unable to reach a decision on Alexander after a seven-day deliberation, leading the court to order a retrial, which is due for May 7 this year.
Court filings, Australian Securities Exchange documents and other open data sources paint a complex web of transactions around Lerala Mine’s parent company, with Alexander and his relatives holding majority equity in various companies and entities involved in different transactions around Kimberley Diamonds.
The documents also reveal that Kimberley Diamonds’ creditors at Ellendale Mine sued for P172 million and also accused the company of spiriting away a parcel of diamonds shortly after the mine’s closure in June 2015.
Ellendale Mine, owned by Kimberley Diamonds’ wholly owned subsidiary, Kimberley Diamond Company, left 100 workers unpaid and unemployed as well as more than P490 million in claims by creditors and others. Kimberley Diamonds, according to its own filings, was owed US$3.64 million (P35 million) at the time of the closure and laid claim to the unsold stones, auctioning them and repaying itself US$2.24 million (P21.5 million).
Creditors challenged the diamond sale but Kimberley Diamonds cited its “secured creditor” status. Liquidators however say the privileged status was only registered weeks before the Mine’s closure, when Kimberley Diamonds would have anticipated imminent closure.
Other creditors accuse the parent group of hiding Ellendale’s insolvency for months, in order to position itself to recoup as much of its investment as possible, ahead of other creditors. Curiously, the stones seized from Ellendale were auctioned through DDA Trading, the same Alex Alexander-majority owned entity that Lerala’s stones were sent to Belgium through.
Australian creditors sued for voiding of the auction, an action local creditors are seeking for the Lerala transaction. This week, efforts to several efforts to contact Alexander proved fruitless, while emails to Jirsch Sutherland, Ellendale’s liquidator, went unanswered.
Another diamond trading company in which Alexander has a controlling stake in, has offered to pay the Botswana government US$100,000 for unpaid royalties and US$250,000 for workers packages in return for withdrawing the court case over the 53,000 carats.