Paw paw about to hit Newlands fan?

Thu, 17 Aug 2017 20:55

EXCLUSIVE: Aerios Chief Executive Officer Costas Constantinou sat down with rugby365 editor Jan de Koning to chat about the Newlands saga and the section 417 inquiry.

Constantinou must have a bit of Ozzy Osbourne in him, because he is simply not going away.

Western Province Rugby Union officials must have thought they had rid themselves of this 'pesky' partner when they applied for, and obtained, an order for the professional arm - Western Province Rugby (Pty) Ltd - to be declared bankrupt in the Western Cape High Court.

However, to paraphrase the lyrics from the Osbourne song 'Not Going Away':

Don't tell me I'm wrong
Don't tell me that you knew all along
I won't roll over dead
Only I know what goes on in my head

I've got nothing to hide
I'm not guilty inside
I won't give up
After all I'm still crazy

Constantinou is not crazy - although there are some people at WPRU headquarters who thinks so - but the Aerios boss is certainly NOT going away.

Not only is there a damages claim of ZAR271 million by Aerios, but there is also a section 417 inquiry starting in just over a week.

The section 417 inquiry was established to - as claimed by Aerios - determine if the affairs of the bankrupt company (WP Rugby (Pty) Ltd) were conducted in a proper manner. It will look into what happened to company's assets, or even reveal misconduct by the company's directors.

Subpoenas have already been served on the directors of WP Rugby, and more subpoenas may follow, depending on the evidence which comes to light during the inquiry.

If that is not enough to sound the alarm, it has emerged in the past week that Adidas has pulled the plug on WPRU - bringing to an end the oldest sponsorship in South African rugby.

That is not where it ends. There has also been a breakdown in relationship between WPRU and another of its benefactors, the Treble Group - a Sports Marketing and Entertainment group specialising in sponsorship.

This all follows after Johann Rupert's Remgro informed the WPRU that they will not convert a ZAR40 million-plus loan into shares in the union and that the money must be paid back.

While WPRU President Thelo Wakefield recently told rugby365 there is "no need to panic", it seems the paw paw is about to hit the proverbial fan at Newlands.

Constantinou, in an extensive and frank interview with rugby365, said the liquidation itself was a "deeply flawed" process.

"Remgro is a creditor and shareholder of WP Rugby," he said, adding: "Yet they, along with WPRU, the only other shareholder of WP Rugby, mandated PricewaterhouseCoopers to do a valuation of the assets of WP Rugby as a benchmark value for the liquidators of WP Rugby.

"This is where I believe things started to become unethical.

"The information for the valuation was provided to PwC by the WP Rugby shareholders and the valuation was done for the shareholders.

"This is very clearly then NOT an independent valuation, but rather a conflict of interest."

Constantinou pointed out that PwC found the assets to be worth ZAR8.5 million.

He also found it unfathomable that no intangible assets were included - sponsorship deals, player contracts, advertising contracts - on instruction from the shareholders.

The Aerios boss said they had done their own valuation and found it to be well in excess of ZAR100 million.

"The liquidator then took this non-independent valuation and declared that WP Rugby was the only member on the South African Rugby Union general council that was eligible to purchase the assets of WP Rugby," he said.

"The other main creditors at this stage were FNB - whom Remgro is a shareholder of- Remgro and WPRU, the latter the purchaser of the assets.

"Quite obviously, there was no objection to this valuation from Remgro or FNB, as they both have guarantees from the union, and again obviously there was no objection from the assets purchaser WPRU."

He added that the liquidator tried to pull the wool over everyone's eyes and that the audit firm, PricewaterhouseCoopers, may end up having a lot to answer for in the section 417 inquiry.

What further puzzles Constantinou is why would WPRU offer ZAR19 million for WP Rugby, when the liquidator accepted a valuation of just ZAR8.5 million.

He also said the role that SARU played in the liquidation process and what financial support - if any - they provided would be revealed during the inquiry.

Another company that may have some tough questions to answer at the inquiry is Remgro, as they may have inadvertently made themselves accomplices to whatever WPRU did to get the liquidation and asset buy-back done - because they were a shareholder and backer of WPRU's liquidation plans.

This will all be uncovered in the Section 417 Inquiry which is set to commence next week Thursday, August 24.

WPRU is in debt to the tune of - or at the very least facing claims of - ZAR316 million. That is ZAR40 million from Remgro and ZAR271 by Aerios.

That is why Wakefield's insistance that "there is no need to panic" must be questioned.

By Jan de Koning
@king365ed
@rugby365com