Blue Label off the hook

By Kimberly Guest for Blue Label Telecoms
Johannesburg, 15 Apr 2008

Controversy surrounding Blue Label Telecoms' (BLT's) irregular stock dealings has reached its end, with the JSE finding three company directors guilty.

Speaking last night, BLT joint CEO Mark Levy said the team was relieved the process was finally concluded.

"This has obviously been a very embarrassing period for us, but we accept the ruling and are happy that we have come through it. Now we can focus all our concentration on delivering the returns we promised to our shareholders," he commented.

The JSE and BLT issued statements within minutes of each other yesterday afternoon, explaining the outcome of the JSE's investigation into the dealings.

The bourse found "Selwyn Diamond and his spouse, the spouse of Sean Kaplan and Graeme Prosser" guilty of breaching four, two and two paragraphs of its listing requirements, respectively. Kaplan and Prosser were privately censured, but Diamond was publicly censured and a fine of R100 000 was imposed. Of this, R60 000 has been conditionally suspended for one year.

Any further breaches of the JSE's listings requirements by Diamond will result in the suspended fine becoming payable immediately "with possible further action being taken by the JSE", the bourse said yesterday.

An analyst, who cannot be named, says this ruling was little more than a slap on the wrist.

"I agree completely with the JSE's decision; this was a relatively minor issue and the directors got all that they deserved. They traded shares that they were allowed to trade, it was in an open period, and there were no announcements following these trades to suggest the company was going to perform better or worse than expected. It was simply an administrative error."

Maintaining order

Levy explained that, in addition to the JSE investigation, BLT appointed a committee of non-executive directors to do an internal investigation.

"Without taking away from the damage that was done to BLT, this team decided it was not in the best interest of the company and our shareholders to terminate their employment or directorships," he said.

However, the company has taken up the JSE on its offer to attend a workshop on SA's listing requirements, revealed Levy. All BLT directors will attend the course later this week. Additional measures have also been instituted within the company "to ensure that all directors are aware of their compliance obligations".

"This was not insider trading or malicious activity. The company was not in a closed period when the deals took place; quite simply the couples did not get the necessary permissions from the responsible director - which we would have granted - and did not inform the JSE timeously of the trades."

Adds Levy: "The sad part is that the company's fundamentals did not change, yet shareholders reacted with alarm. In our view, much of the heat that was generated around this issue was exaggerated. But we have learnt from the process and no doubt other companies will also learn from our mistakes. Personally, I urge all other CEOs to read the fine detail in the JSE's listing requirements."

The analyst agrees the situation was blown out of proportion: "I feel very sad for the team at BLT; they have received a lot of sensationalised coverage in the media which has made the issue out to be bigger than it actually is. But a close look at the JSE's ruling should put things back into perspective for investors."