JSE wields big 'axe' to censure and make an example of economist ...

Ten months after an investigation by Daily Maverick found economist Thabi Leoka’s supposed PhD did not exist, the Johannesburg Stock Exchange (JSE) has slapped her with a public censure, a R500,000 fine, and immediate disqualification from holding a directorship of a publicly listed company for five years. 

The JSE announced the penalty on Friday 15 November. 

Leoka was once a well-respected economist who held high-profile advisory positions with President Cyril Ramaphosa and former finance minister Nhlanhla Nene until a Daily Maverick investigation exposed that her claimed PhD could not be found or verified. 

Journalist Victoria O’Regan’s investigation into Leoka’s qualifications revealed her qualifications could not be found. Daily Maverick published the outcome of O’Regan’s investigation days after Business Day first published an article exposing claims against her. 

After the Business Day report, Leoka would bizarrely go onto the radio to claim Daily Maverick had cleared her in this quest for proof of her PhD. 

Read in Daily Maverick: Economist Thabi Leoka’s PhD appears to be a figment of her imagination

In the aftermath of the media reports, her membership of the Presidential Economic Advisory Council was terminated by the Presidency, as reported by Daily Maverick. She also resigned from the boards of Anglo American Platinum and MTN South Africa to attend to her health and the questions surrounding her academic qualifications. 

“On her request, Thabi Leoka has resigned from her position as a non-executive director of the company [Anglo American Platinum] and consequently the board committees she serves on, with immediate effect, in order to attend to her health and the questions she has been facing in relation to her academic qualifications,” read an Amplats company statement to shareholders at the time. 

According to the JSE, Leoka was a former independent non-executive director of Remgro Limited, Anglo American Platinum Limited, and Netcare Limited (the “Companies”), and had since resigned.

In a statement, the  JSE said that after the media coverage of the scandal, the “JSE engaged with Ms Leoka and afforded her ample time and opportunities to make submissions and respond to the JSE’s allegations regarding the authenticity of her PhD qualification”. 

Leoka was requested to confirm – with supporting documentation – that she possessed a PhD in Economics, which she claimed to have obtained from the London School of Economics and Political Science, University of London, in 2008.

According to the JSE, they afforded Leoka “numerous opportunities” to provide the JSE with confirmation that she held a PhD. “Ms Leoka failed to make any submissions or provide the JSE with any information refuting the specific claims that she made false statements by misrepresenting her qualification in her CV.”

According to the JSE, “the facts and information at the JSE’s disposal, including Ms Leoka’s failure to respond and the JSE’s efforts to verify the information, indicate that Ms Leoka’s statements that she holds a PhD in Economics were false”. 

This meant because of her false statements and representations, the companies that Leoka was part of and that were listed on the JSE published incorrect information. 

The JSE found her in breach of provisions in General Principle (v) and (vii) of the Listings Requirements, for misrepresenting her qualification in her CV to the companies and in her Schedule 13 declarations submitted to the JSE. The companies in turn published her incorrect academic qualification in the Companies’ Disclosures.

“Ms Leoka’s conduct in making false statements in her Schedule 13 declarations was exacerbated by her refusal to acknowledge or engage with regulatory correspondences, or to cooperate with the JSE’s investigation. Ms Leoka’s failure and/or refusal to respond to the JSE’s queries indicate a lack of commitment to her compliance with the Listings Requirements and is anathema to transparency and accountability, which are fundamental cornerstones of sound corporate governance, and the regulatory structure established by the Listings Requirements,” the JSE found. 

“Ms Leoka’s misrepresentation of her academic qualifications raises serious concerns about her integrity and her suitability to act as a director of companies listed on the JSE. Furthermore, her ongoing disregard of the JSE’s repeated attempts to engage with her compounds the JSE’s concerns, signalling a disconcerting lack of accountability and commitment to her obligations to the JSE, the Companies and the investing public,” the JSE said. 

Daily Maverick canvassed market watchers for their views. They said the sanctions imposed by the JSE against Leoka are somewhat “unprecedented”. 

Asief Mohamed, chief investment officer at Aeon Investment Management, said it is unusual for the JSE to impose sanctions against an individual for misrepresenting their qualifications. “Individuals or directors would normally be censured for serious issues such as insider trading, price manipulation, or even being involved in cooking a company’s financial books,” said Mohamed, whose investment career spans 34 years. 

Theo Botha, a former shareholder activist and corporate governance specialist, questioned why the human resources departments of companies didn’t properly verify Leoka’s qualifications before she was appointed. “The human resources departments and board chairpersons, who normally handpick individuals to serve on board, need to be held accountable for such lapses in governance,” said Botha.

Another asset manager, who requested anonymity, said the sanctions against Leoka reflect how “badly people feel about the saga”, as the many companies on whose boards she served didn’t correctly do their due diligence in vetting her qualifications. “So, the JSE was under pressure to hold Leoka accountable and send out a strong message,” the manager said. 

Sanctions or censures by the JSE are part of the bourse’s standard process to maintain and restore governance in the investment community. The JSE does issue fines to individuals and bar them from serving as directors for some time if they misrepresent a company’s financial situation in its financial statements. After all, investors rely on financial statements to make investment decisions. 

The most notable example is when the JSE censured former Steinhoff CEO Markus Jooste and former chief financial officer Ben la Grange for misrepresenting the company’s financial statements. The pair were largely believed to have engineered accounting fraud at Steinhoff by engaging in “fictitious and irregular transactions” worth more than R100-billion. These transactions were fed into Steinhoff’s accounts between 2009 and 2017 to boost the company’s profits artificially.

After an investigation by the JSE, the bourse slapped Jooste with a fine of R15-million and barred him from serving as a director for 20 years. On the other hand, the JSE disqualified La Grange from acting as a company director for 10 years and fined him R2-million.

Mohamed suggested that the JSE should go beyond Leoka, take a closer look at other directors, and investigate the validity of their qualifications. “The JSE has now brought out the big axe [in Leoka’s case],” Mohamed said, adding that it serves as a warning to other directors who might falsify their qualifications. 

At the time of publication, Daily Maverick was unsuccessful in its attempts to get comment from Leoka. A response will be added once it is received. DM