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No way out for Leisurenet duo

Mar 20 2011 15:45
Adri van Zyl

Johannesburg - The prison doors will slam shut behind Peter Gardener and Rod Mitchell, former joint chief executives of Leisurenet, almost three years after they were originally sentenced.

Last week the Supreme Court of Appeal set aside Gardener and Mitchell’s initially suspended sentences and imposed a seven-year prison term on each.

The National Director of Public Prosecutions simultaneously won his appeal against a high court decision that it could not seize the proceeds of crime.

Even though Gardener and Mitchell had each paid R6m back to the Leisurenet liquidator, the appeal court determined that they had made much more from a fraudulent deal.

Gardener was ordered to repay R6.58m, adjusted for inflation back to June 30 2007, and Mitchell R3.59m, adjusted for inflation back to June 30 2003.

Gardener and Mitchell had played an instrumental role in the October 2000 demise of listed company Leisurenet.

LeisureNet was the operator of the Health & Racquet gymnasiums.

In April 2007 both men were found guilty on charges of fraud involving R12m, which arose from a stake in German gymnasiums that Leisurenet had bought in 1999. Gardener and Mitchell’s interest in these gymnasiums was not disclosed to the board.

Gardener and Mitchell had each received R6m from the transaction and had benefited from a rise in the value of their shares in the German facilities.

When Leisurenet was placed in provisional liquidation in October 2000, it had R1.2bn in liabilities and R302m worth of assets. By the time it was liquidated four years later the company was hopelessly insolvent.

Gardener and Mitchell had originally been sentenced to 12 years imprisonment each, suspended for four and five years respectively.

But on Thursday the appeal court decided that there was no justification for a suspended sentence and sentenced the two to seven years’ imprisonment each.

An attachment order was granted as they had made more than R6m from the particular transaction.

The Health & Racquet gymnasiums have meanwhile been taken over by the Virgin Group owned by British entrepreneur Sir Richard Branson, which has been operating them very successfully as Virgin Active.

- Sake24

For business news in Afrikaans, go to Sake24.com.

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