Ex-chief executives of LeisureNet found guilty of fraud to the tune of R12 million

Thomas McLachlan

Thomas McLachlan

After the marathon trial of the former joint chief executives of LeisureNet, the two could face stiff jail sentences. Both executives were found guilty on charges of fraud involving a total of R12 million, the Cape high court ruled yesterday.

Acting Judge Dirk Uijs said Peter Gardener and Rod Mitchell were found to have concealed their interest in a German gym operation that LeisureNet bought out in 1999 for 10 million deutschmarks.

National Prosecuting Authority (NPA) officials said the amount involved in the fraud conviction meant that under minimum sentencing rules Gardener and Mitchell could be facing 15-year jail terms.

In June 2005 Gardener was fined R2,9 million on 14 counts of tax fraud and one count of insider trading, and given a suspended jail sentence after a plea bargain with the Scorpions. As a result of these previous convictions, the NPA said it was possible that he would face more years in prison than his fellow fraudster.

Uijs acquitted the two on all the other charges they faced, including counts under the Prevention of Organised Crime Act, the Income Tax Act, and a Companies Act charge of reckless trading related to LeisureNet's collapse.

When the group, which owned the Health & Racquet Club chain of gyms, was liquidated seven years ago it had liabilities of R1,2 billion and assets of only R302 million. But the judge said he did not believe that this was an indication of recklessness, adding that it had been a full board of directors, not just Gardener and Mitchell, who were conducting the business.

Gardener and Mitchell each had a 20percent interest in the Dalmore gym-building operation set up in Germany by businessman Hans Moser, an interest that they acquired by "oral agreement" with Moser in 1996, in return for their expertise.

This resulted in a profit of R6 million each when LeisureNet took over Dalmore as part of an overseas expansion programme.

The case was postponed to April 11 after lead prosecutor Bruce Morrison said he needed time to arrange the manner in which asset forfeiture should take place. The Asset Forfeiture Unit has already appointed an advocate to launch the application.

Their bail of R500 000 each was extended. - With Sapa