– A CRY FOR ACTION FROM THE GOVERNMENT

Introduction
No one in the history of Ghana has caused more financial mess and losses by his singular action than Sam Kwesi Esson Jonah of Ashanti Goldfields (AGC). Yet, despite this rogue action by Sam K. Esson Jonah and his cronies at AGC, he continues to walk confidently through the corridors of power of the NPP administration. What Ghanaians do not know is that the largest derivative transactions which caused the highest losses in Ghana were deliberate “reckless” actions which have gone unpunished. Indeed, he has been rewarded. Because of Ghana’s pernicious habit of rewarding failure, incompetence and corruption with praise, adulation and awe, Sam Jonah, who lost $570 million, has succeeded in conning certain Ghanaians into believing that he is the Jack Welch of Ghana. By Sam Esson Jonah’s action, the share price of AGC fell by 37%.

Again, due to Ghanaian leadership’s proclivity not to act no amount of information leads to meaningful law enforcement and regulatory actions against Sam E. Jonah. The lack of enforcement and the disconnect between words and deeds is a painful failing of Ghanaian leadership. How could this happen and how can a man who lost the equivalent of ten per cent of Ghana’s total debts and the largest corporate loss in African history benefit from it and still be regarded by some as a hero or a man of substance?

AGC is virtually a bankrupt company. Its position is no different from Ghana Airways. According to AGC’s year 2000 annual reports, it has negative reserves of $270 million. Its current liabilities exceed its current assets. Indeed, at the end of year 2000, it had $185 million net current liabilities. According to AGC’s third quarter ending September 2001 financial results (latest publicly available), AGC has cash of $51 million and current liabilities (money due to be paid to its creditors) of $171 million. The problem is how AGC will pay this $171 million, if its creditors do not reschedule this debt, especially if AGC does not convince the Government to sell the golden shares, which I believe the government should not do. This is not the shining crown jewel that certain Ghanaians think AGC is.

With almost fifty percent of its reserves sold in hedging activities till the year 2013 and with the same management in place any savvy investor knows that AGC is not the place to put your money. The market is no fool! Ghanaians should not be fooled by AGC leadership’s attempt to use the restructuring necessitated by “reckless” management actions to stampede or steam roll them into giving away the golden shares, which gives the Ghana government certain veto powers on the operations of AGC in Ghana. The deliberate inclusion of this condition in the restructuring of the 5.5% Guaranteed Exchangeable Notes due 2003 MUST be flatly rejected by the government of Ghana and Sam Jonah and Lonmin plc’s bluff MUST be called! The government should then renationalize the mines and clear all those corrupt people parading in AGC.

This is not a story of the destruction of the environment in Obuasi and other places where AGC operates. This is another story in itself. It is sad and regrettable that as Sam Jonah continues to destroy the finance and mining base of Ghana, destroy the environment of Ghana and other countries in Africa and threatens and intimidates people who do not agree him, Mr. Kofi Annan of the UN, unaware of his actions has found it fit to appoint Sam Jonah as the only African member of the United Nations Secretary General’s Global Compact Advisory Council. It is sad that the Compact initiative promotes action of nine internationally accepted principles on human and labor rights and environment, the very things that are anathema of Sam Jonah’s being and style. It is equally sad that he is the Chancellor of the University of Cape Coast and a member of President Thabo Mbeki’s International Investment Advisory Council of South Africa, initiatives which are laudable but which Sam Jonah works against each day.

The Class Action Suit against Sam Jonah in the US As a result of his deplorable action, three class actions suits were commenced during the first half of year 2000 against AGC and Sam Jonah and other current and former directors including the former CFO, Mark Keatley. The suits were filed under the US Federal Securities laws in the US District Court for the Eastern District of New York. The allegations include non-disclosures and misrepresentation regarding AGC’s hedging position and hedging program. The three suits were merged into a consolidated amended Class Action complaint (CV-00-0717). On September 6, 2001, the plaintiff and defendants’ attorneys made submissions. The Judge will rule on whether the case should go forward or not. If the case goes forward, the charges may be expanded and the number of defendants and plaintiffs can be expanded as well. Meanwhile, one law firm is considering another derivative class action suit in the US. The law firm may either have a parallel suit dealing with certain classes of shareholders who are not covered by the current consolidated suit. Additionally, the attorneys may increase the charges and the defendants to include Lonmin plc, the auditors, Goldman Sachs and the then constituted board. The lawyers indicated they may also work with the lawyers in the current consolidated suit to seek unspecified damages including punitive damages.

It is important for legal experts and other interested people to read a copy of the 39 page suit which can be obtained from the internet. www.whafh.com/cases/complaint/ashanticmplt.htm .

The suit alleges that Sam Jonah and AGC orchestrated a pattern of withholding critical information from investors and enforcement authorities. Additionally, the suit alleges that Sam Jonah and his CFO converted Ashanti “…from a gold mining company into a financial entity that was speculating on future gold price volatility. It supports this allegation with a quote from Bloomberg Business News report of July 28, 1999, stating that the London branch of Investec Securities, in a report published earlier that month, had stated that: “The most remarkable feature of Ashanti is not the quality of its ore body, nor the skills of its mining team. It is the financial ability of its treasury department which has managed to construct a hedge position that insures the future of the mine well into the next century”

Again, the suit alleges that the defendants deliberately omitted data such as the strike prices and maturities of the various specific options contracts; the counterparty agreements and margin requirements; and especially the terms of the various exotic options contracts and lease swaps with embedded exotic options. Also, the suit alleges “Ashanti had not merely traded unwisely, it had materially falsely characterized its purported hedge book as a protective tool, and concealed the truth from investors. In fact, and unbeknownst to investors, Ashanti’s hedging had materially increased the company risk.”

Further, the suit alleges that ‘All of the defendants had motives to pursue a fraudulent scheme in furtherance of their common goal i.e. inflating the reported profits of Ashanti and the trading price of Ashanti shares by making false and misleading statements and concealing material adverse information. The fraudulent scheme and course of business was designed to and did (i) deceive the investing public, including plaintiffs and other Class members; (ii) artificially inflate the price of Ashanti shares during the class period; (iii) cause the plaintiffs and other members of the Class to purchase Ashanti shares at inflated prices; (iv) conceal and cover-up the individual defendants mismanagement of Ashanti”

Furthermore, the suit alleges that Sam Jonah and Mark Keatley “(a) employed schemes, and artifices to defraud; (b) made untrue statements of material facts and/or omitted to state facts necessary to make the statements not misleading; and (c) engaged in acts, practices and a course of business which operated as a fraud and deceit upon purchasers of the Company’s common shares in an effort to maintain artificially high market prices for Ashanti common stock in violation of section 10(b) of the Exchange Act and Rule 10b-5”

Finally, readers should appreciate that there is no substitute to reading the entire class action suit to appreciate and understand the nature of the activities of Sam Jonah and his CFO.

Effects of Sam Jonah’s abuses and losses

The effects of Sam Jonah’s reckless action on Ghanaians and the future of AGC are complex and continuing. The people of Ghana are paying. 2,000 miners lost their jobs in Obuasi. Another 500 casual workers were sent home. In Ghana, if one estimates that one working person supports about ten people one can conclude that 25,000 people lost their daily bread due to the deliberate reckless actions of Sam Jonah and his men. This is only one aspect of the story.

To appease the 17 banks and creditors Sam Jonah and his men gave sweetheart deals on warrants (options to buy shares) and attempted to offer AGC as a takeover target. Additionally, AGC sold half of its "jewel" the most promising gold project (Geita in Tanzania) to help pay for Sam Jonah’s follies and personal aggrandizement. By issuing 20 million warrants (equivalent to 15% of AGC) at $3, Ghana’s 20% in AGC was diluted to under 17%. Any Ghanaian who thinks Ghana owns 20% of AGC is painfully misled and sadly mistaken.

Denial by Sam Jonah

Notwithstanding the serious nature of his “reckless” actions, Sam Jonah is defiant and in denial of what happened. He is happy to cloak himself with the cloth of mismanagement rather than accept that his team operated a fraudulent scheme which turned AGC from a mining company to a financial company which its articles of incorporation do not authorize. To illustrate the still speculative nature of AGC’s hedge book more than two years after its first financial and liquidity crisis, one must look at the quarter ending September 30, 2001 financial report. For a company that produces approximately 1 million oz of gold a year, AGC purports to deliver 9.4 million oz of gold if the price hits $400. How can it realize this if this happens anytime in year 2003 to 2013? And where will it get $450 million to pay its margin call? This is the speculative and fraudulent nature of the hedging transactions undertook by AGC.

Also, he attributes the losses to mere paper losses. This is preposterous! How do we explain the lawsuit in the United States, the loss of jobs in Ghana, the exceptional write of expenses in 1999 and thereafter, the sale of part of Geita to finance the margin call, the near bankruptcy of AGC and the sweet heart deal, the issue of 20 million warrants?

Future of AGC

All these appeasements will not save AGC if the fortune of the gold price changes and a gold rally pushes the price above $350 anytime between year 2003 and 2013. The irony is that a gold producing company, AGC, hopes that the price of gold remains low from year 2003 to year 2013. If the price of gold rises above $350, AGC will be in the same soup again since its margin debts will mount again. Some have described AGC as “a prisoner on the run” while others consider AGC’s position similar to a cancer patient whose disease is in remission, but who runs the risk of the cancer reappearing. This is one of the main reasons why the price of AGC shares will not go up. This is because there is a hidden contingent liability which is not adequately disclosed to its shareholders but clearly known to the sophisticated investors in the UK, US, Canada, Australia and elsewhere. This contingent liability can run over a billion dollars if the price of gold rises to anywhere between $350 and $500. Gold prices cannot be predicted by anyone but expecting the price of gold to stay below $350 from year 2003 to year 2013 is a dangerous expectation for AGC.

Government must act!

Ghana should not wait for events to change. It must be proactive by acting. Because Lonmin plc and Sam Jonah are knowledgeable about the consequences of their actions in the coming ten years after year 2002 they will act with great alacrity. Sam Jonah and his Lonmin plc know that should gold prices go up, AGC will be bankrupt and Ghana with its golden shares and special provisions, as outlined in the 1994 prospectus, can obtain the mine lease and renationalize the company. This partly explains why Lonmin plc has tried to acquire AGC. Another strategy is to do away with golden shares and erase the provisions in the 1994 prospectus that allow Ghana to foreclose on the properties in the event of bankruptcy. This explains AGC’s current strategy of strongly persuading Kufuor and his men to do away with the golden shares. There are other ramifications on the golden shares discussed later.

Ghana’s government must end the arrangement whereby Lonmin plc manages AGC. This is because Lonmin plc has not acted in good faith or in the interest of all the shareholders, particularly Ghana. Indeed, Lonmin plc has acted against Ghana’s interest. Additionally, Ghana must remove Sam Jonah as the CEO and replace him with a more level headed quality manger who is not self–seeking, self-dealing, reckless and incompetent. Ghana must act to remove all the stock options given to Sam Jonah and his cronies as they plan to destroy Ashanti in order to enrich themselves. If Ghana fails to act, there will be serious consequences for the government.

The Golden Shares debate

The concept of the Golden Shares is not unique in Ghana or AGC for that matter. The name Golden Shares is not derived from the gold in which AGC operates either. The golden shares have been used extensively in privatizations in Singapore, Malaysia, Britain and other countries. In the sale of Malaysia Airlines, Telecom Malaysia, and other companies the Malaysian government used the golden shares concept to protect their interests. Golden shares were used in many privatizations in public offerings in Britain during the 1980s. The British government had golden shares in Jaguar and Britoil. The advantage in the golden shares is that it affords the government special rights which the government can choose not to exercise. The golden shares address political rather than legal or economic concerns. It appeases nationalistic interests.

It is important to understand that the golden shares are irrelevant and a red herring in any discussions about the share price of AGC and the ability of AGC to obtain credit if AGC is a solvent company. The veto powers embed in the golden shares provisions are of importance in discussions relating to any acquisition of AGC, a mining company whose operations have significant financial, political and environmental impact on Ghana. Gold mining is obviously an extractive industry with finite ore reserves and therefore governmental actions must be cognizant of that. If anyone believes a contrary position then the writer postulates that there is a grand design to sell AGC to either Lonmin plc for further sale for profit or to sell AGC to Termite for further sale for profit to another entity.

The golden shares provisions were embedded in the prospectus to secure Ghana’s interest. By including a request from Ghana to relinquish the golden shares, AGC, Lonmin plc, the bankers and potential creditors are asking Ghana to pledge the golden shares as ‘perpetual’ collateral security to enable them grant a loan without Ghana getting any meaningful consideration in return. This request for a collateral security has become critical for the lenders because they are aware that the potential for the collapse of AGC between 2003 and 2013 is very high since gold prices may rise above $350 during this period. In fact, if gold prices rise to $500, the level of 1987, AGC will have to pay a margin call of approximately $1.317 to $1.517 billion which it will not have. With the golden shares provision in place, Ghana can immediately re-nationalize its mines, continue operations of the mines without loss of jobs and fire all those so-called technical experts and employees including the CEO.

How did I estimate $1.317 to $1.517 billion margin call? As at September 30, 2001, according to AGC’s latest financials, the mark-to-market value of AGC was a positive $40.8 million at a spot price of $291/oz. The delta of its hedge book was $6.5 million, that is, each dollar increase in the price of gold adversely affects the mark-to-market value by $6.5 million. Consequently, if the gold price increases to $500/oz from the $291/oz price at the end of September, all things being equal, its mark-to-market increases adversely by (500-291)*6.5 million to negative $1.358 billion minus the positive $40.8 million mark-to-market value at the end of September. Consequently, a gold price of $500/oz will increase mark-to-market value to negative $1.317. Additionally, AGC risk could be higher if LIBOR interest rates move from their current levels of 2% to say 4.5%, AGC mark-to-market level with a gold price of $500/oz could increase by $200 million (10*20 million) to $1.517 billion. Further, this assumes that AGC’s Delta, Gamma and Rho calculation have been conservatively estimated by AGC. It could be worse if these estimates are incorrect.

The banks and the hedge counterparties want the government to relinquish its golden shares because a substantial portion of the AGC’s hedges still make it very vulnerable to gold price volatility as these hedges literally bet against future upward movements in the price of gold. These expected upward movements would bankrupt AGC as discussed in the preceding paragraph. However, the government through its golden shares could renationalize AGC in the event of its bankruptcy. The bankers want to make sure that the government of Ghana does not have the golden shares when such an event occurs so that they can get paid and Ghana is left in the hole.

Ghana owns shares in AGC. Indeed, it is the second majority shareholder. It cannot therefore say it will not be involved in the actions of the management of AGC. While it may be correct to remove ministers of state from its board, the government must appoint board members to represent its interest in the same way as Lonmin plc has appointed the CEO and board members to represent its interest. Sam Jonah and his cronies are certainly not acting in the interest of Ghana and any action intended to give Sam Jonah free rein in what happens in AGC will have serious financial and political consequences for Kufour’s administration.

According to President Kufuor "…gold remains the cornerstone of the economy and nothing would be done to subvert the gold market.” This also means that everything must be done to prevent the subverting of the gold market by anyone including Sam Jonah, a close confident of the president. Again, President Kufuor’s mantra ‘zero tolerance for corruption” implies that all illegal activities and corrupt practices should be exposed and actions taken. It is left to be seen what President Kufuor’s administration will do to Sam Jonah and his cronies. It remains to be seen whether President Kufuor and his NPP will act!

The golden shares must remain. If the golden shares are given away it will provide the enemies of AGC opportunities to destroy AGC and then enrich themselves if it is contended that the value of AGC will go up. Currently, Sam Jonah and his friends have formed a fund called Termite. The investment strategy of Termite is to “seek opportunities in Africa with short pay back periods and high potential for returns greater than 50% in real terms”. It is no wild speculation that should the government provide the right framework Sam Jonah and his cronies will come and buy AGC for a song and then sell it off for huge profits.

Sam Jonah’s presence on this fund led to the increase in the fund amount from $100 to $200 million. Due to secrecy and the deceitful disclosures of Ashanti and Lonmin plc it is difficult to determine the extent of Sam Jonah’s wealth, which is estimated to be between $50 and $150 million. However, one can glean from what was published by Minews when Sam Jonah accepted to join Termite’s committee (of which Mr. Algy Cluff who sold Cluff Resources to Ashanti and now runs Cluff Mining is a member). Though Minews could not link Sam Jonah’s acceptance to the immediate increase of the fund to $200 million from $100 million, it is clear that he has impacted the fund and increased expectations. Where did he get $100 million? Has he paid taxes reflecting this wealth and is all his wealth legitimately acquired or is it part of the corruption and double dealing that has bedeviled Ashanti Goldfields for ages?

According to Minesite.com “...bad management and corruption have always been a problem at Ashanti’s Obuasi mine in Ghana. Way back in 1997 Canadian contractors working out there complained that money due on work done was never forthcoming from the accountants unless a suitable donation was made. And when complaints were made to management they brushed them aside, as were queries about who skimmed commissions on major plant and equipment acquired in South Africa.” It is also not out of the question to surmise that if the wealth accumulation allegation is correct then Sam Jonah may have evaded taxes.

Again, if the golden shares are removed Sam Jonah will seek to make huge gains if it is contended that AGC value will rise. After all “The Chief Executive (Sam Jonah) said that it was only when the “Golden Shares was removed that investors would do business with Ashanti on the stock market or “play the game” with Ashanti” This is because he and his board have given him performance options (in the wake of his disastrous performance which has brought the company to its knees). As of December 2,000, Sam Jonah had been given 290,000 stock options despite his poor performance. These options are worthless in so far as the stock price is pocket change. If the golden shares are removed and the provisions which allow Ghana to take over the mines in the event of bankruptcy are removed the price of AGC shares may (in the mind of Sam Jonah) rise by say $20. This means Sam Jonah can expect to reap approximately $6 million. We must not let this happen to our country and we must not let this man prosper for his incompetence and deliberate “reckless” actions!

Additionally, Sam Jonah contends that the share price of Ashanti is undervalued because of the presence of the golden shares. This is very incorrect because the presence of the golden shares did not prevent the share price reaching $27. So how can it be the factor explaining the low price of AGC? Poor management, “rogue trading” in derivatives, and the presence of a major contingency that can run over $1 billion which are some of the factors that contribute to the low share price of AGC. Unless the management structure, including the CEO, is replaced it is inconceivable that the price of AGC will appreciate significantly in the foreseeable future. One should note in passing that commodity price increases lead to corresponding increases in the share prices of companies in the mining of the relevant commodities. However, in the current state of AGC gold price increases will produce corresponding adverse or negative price movements of the share price of AGC.

Given the current management structure, the golden shares provide a check, a unique security, that protects Ghana’s interest. Additionally, Lonmin has been on record that it wants to be a platinum company. To achieve this, it wants to sell its 32% stake in AGC. This is impossible if it cannot take over AGC through the removal of the golden shares and the increase in the price of the shares and thereby sell AGC at a huge profit to itself. Kufour and his NPP must not let this happen since such activities would have political repercussions for the NPP administration.

Furthermore, Sam Jonah contends that if the golden shares are not removed “the mining company will not survive the mergers and acquisition in the gold industry.” The golden shares provision is specifically designed to prevent AGC from being swallowed by interests working against Ghana. For this reason the golden shares must remain.

And if all of this does not get through to the NPP administration then let me paint a vivid picture of the gloom and doom (which will make an indelible mark in the minds of my readers) of what can happen if the golden shares are relinquished. I am a poor soothsayer. Take a scenario by fast forwarding time to events at the ides of March 2004 when gold price rallies all of a sudden to $500/oz and AGC is bankrupt because it cannot get $1.5 billion to pay its margin call. The bankers and creditors arrive from Britain and elsewhere and close all the mines, sell of the assets and lay off about 11,000 miners in Obuasi, Bibiani and other places. The miners, their families, friends and sympathizers angry about the loss of their jobs and the failure of the government to protect and secure their jobs because of the relinquishing of the golden shares mount demonstrations with sticks, pick axes, shovels, knives, bows and arrows, cudgels, etc and chant war songs in the streets of Accra, Kumasi, Sekondi, Takoradi, Obuasi, Bibiani, Ayamfuri, Cape Coast, Tarkwa, Prestea, Bogoso, Aboso, Akwatia, Kibi, Kade, Nsuta, etc.

The opposition parties, in particular, the NDC, seeing “raw meat” and blood and taking advantage of the situation, the easy going tolerance of the government and the grave nature of the economy whip nationalistic sentiments and fervor which becomes a rallying cry for an immediate change. There is commotion everywhere. It is all over! It is the end! It is Argentina repeated in Africa!

Meanwhile, Mr. Sam Jonah and his cronies aware of the impending crisis have flown to Britain in a private jet and sought political asylum and refuge in Good Old Great Britain. Sam Jonah, his family and friends then watch this spectacle unfold in Ghana on British TV and CNN as they quaff expensive drinks such as Johnnie Walker black label and eat bacon and eggs in their beautiful and expensive mansions. Then again, it may not be that dramatic. But, is it far from real? President Kufuor and the top NPP administration, please watch out, because you do not want to step on a land mine. My advice is do not turn the golden shares into a hangman’s noose. This Golden share issue is like toxic waste that sits quietly and will one day contaminate the whole economic, financial and political system if not checked!

Sam Jonah’s defence

Sam Jonah has tried to explain his deliberate actions in a number of ways. First, he plays the race card to defend himself. He refuses to accept his responsibility for the largest loss in the history of Ghana by a company CEO. He says AGC was treated that way because of its “address” meaning because its offices are based in Accra, Ghana. This is nonsense! This is the man who does not fail to rub shoulders with white men and women if he can. He courts awards by choosing board members such as Lynda Chalker (UK) and Chester Crocker (US) so that they can defend him for his actions when he is in trouble. Further, this is a man whose presence at AGC is supported by his white masters, Lonmin plc!

Another weak argument by Sam Jonah for the loss due to the derivatives was that he was merely “reckless” implying he did not think through or understands his actions. This is hogwash! Sam Jonah and his board knew they were entering one-sided bets on the price of gold. Sam Jonah and his associates became aware of Barrick’s representative Peter Munk at gold conferences. Munk touted hedging for profit purposes. Barrick has been recognized as “the initiator of hedging as a profit earner, rather than as a basic form of insurance”.

The success of acting in this deliberate reckless manner led to boasts by Sam Jonah. At one point it was opined that AGC’s success was not based on its ore, or its mining team but its treasury activities. The actions of Sam Jonah and his board were in contravention of its own policies clearly stated in its 1998 annual report “hedging instruments such as forwards, swaps and options are used to achieve those objectives and the portfolio is actively managed. Maximum use is made of contracts that preserve exposure to upward gold price movements. The hedging program is subject to strict risk management controls and is reviewed closely by the board of directors.”

Ghanaian Voice raises concerns

The Ghanaian Voice in its article “AGC, What’s happening?” raised certain issues that the government of Ghana should address. Of course, it raised the issue of the Technical Services Agreement (TSA) which is flawed in the sense that it allows only Lonmin plc “to make procumbent for Ashanti – a situation that is obviously dangerous and has a high potential for abuse”. The continued presence of the TSA implies one of two things. Either Lonmin plc is using the TSA to fleece Ghana by obtaining a return on their capital and a return of their capital or Lonmin has failed to train qualified Ghanaians to take over the management of the company. Either of these scenarios implies Ghana should end this deal. What is Ghana paying approximately $2 million for? Is there any exit strategy or clause to end this awful arrangement? If Lonmin over ten years cannot train Ghanaians to run AGC then it must pack and go?

Additionally, “Lonmin’s agent also heads the Charitable Donations Committee – a slush that gives him access to monies that can be easily directed to influence others to write policy in a favorable direction and/or to overlook obvious acts that are not in the interests of the people of Ghana.” It is important for the government of Ghana to audit this committee for the past fifteen years and determine what the fund has been used for. It is important to determine who the constituent beneficiaries are and whether the committee overseeing the fund has been using this fund for its prescribed legal purposes. Allegations of payments to newspaper reporters, editors and publishers of $1,000 a month to keep mum about Sam Jonah’s activities or write positive articles about Sam Jonah and AGC as well as write negative articles about the adversaries of Sam Jonah have been made. Such allegations are troubling indeed and need investigations.

Even more troubling is the allegation made about swap agreements with Lonmin – gold for platinum swaps. The paper alleges that the swap agreement allows Lonmin to assume the risk/reward profile of owning AGC and effectively results in a back-door way to have the same benefits as owning the company. The government of Ghana must investigate this and act to remove those involved from AGC if this is found to be true. The government of Ghana has the right to act by ejecting Lonmin plc from Ghana if it is found to operate in a fraudulent way using its surrogates.

Comparison of AGC losses with the losses of Enron in United States The losses in AGC were the largest in Ghana and African history. The Enron collapse is the largest in US history. The US Justice Department has started criminal investigations against Enron’s top echelons. No criminal investigations have been undertaken against Sam Jonah and his cronies. I strongly urge the Attorney General and the Minister of Justice Nana Akuffo Addo and the President of Ghana, John Agyekum Kuffuor to start criminal prosecutions against Sam Jonah and all who were participants in this “reckless” action. The laws of Ghana must be enforced. Again, I ask the NPP dominated parliament to start hearings about criminal activities related to the debacle in AGC. In order to realize its objectives, parliament should sequester documentations and information from Sam Jonah, AGC and any person who has prepared any report on AGC.

No criminal investigations in AGC can be complete unless a full investigation into certain activities in AGC. In particular, the charitable donations fund discussed earlier should be investigated to determine if it is an arm of corruption in AGC. Additionally, all major contracts, capital expenditures and contracts for consulting services and materials and supplies of AGC for the past 15 years should be investigated to determine their performance, legality and absence of conflict of interests. Again, the government should investigate all contracts between AGC and Kwesi Ndoum and Deloitte and Touche to determine whether contracts were performed or not. Specifically, the government should investigate a purported $5 million contract for information systems which is alleged not to have been performed or poorly performed by Kwesi Ndoum despite payments being made. It is important to determine who has been awarded contracts, if they are foreign companies, who are the agents, were commissions paid and to whom were they paid, were taxes paid on these commissions and were these agents and companies’ fronts of Sam Jonah and his cronies. There is a need to follow the money paper trail to determine allegations of self-dealing and conflicts of interests which is not reported in accordance with the law of countries where AGC is listed.

The people of Ghana are watching to determine if President Kufour is engaged in electioneering slogan when he talks about “zero tolerance for corruption” or whether he means business. No amount of tough talk and lip service to issues of morality, integrity and the rule of law will get in the heads of Ghanaians if it is seen that certain well-placed Ghanaians like Sam Jonah and his cronies can flout the law with impunity and believe they are untouchable and above the law. The essence of the rule of law is that no one is above the law and no one is below the law. For certain citizens to be left free because of their connections and associations derived from their alleged ill-gotten gains makes any talk of “zero tolerance for corruption” hollow. The President of Ghana and the Attorney General and Minister of Justice must enforce the law without consideration to personalities! We musty strive to be a “land of laws” not a “land of men”.

The Bet (CHA CHA)

Mr. Sam Jonah played “cha cha” with the people of Ashanti Goldfield’s money. This is a classic case of moral hazard and what one calls deliberate reckless use of OPM (Other people’s money). True to Sam Jonah’s form, he was on both sides of the transaction. He moved swiftly to the political corridors of NPP to become a pillar of influence and destruction again. Today, he sits with Kufour and recommends board members, cabinet level appointments and holds veto powers on appointments of people of integrity he is afraid will expose his alleged fraudulent dealings.

Ghana Airways

Sam Jonah is now Chairman of Ghana Airways after his appointment by President Kufuor. Sam Jonah will do to Ghana Airways what he has done for AGC which was in a far better shape when he took over. And it is his intention to destroy this airline (which Rawlings prevented him from doing when Sam Jonah previously served as Chairman.) In United States and in certain European countries, including Britain, Sam Jonah would have been banned for life for holding any directorship in any public company or holding any public office as a result of his actions. In Ghana, however, the position is painfully different. To Sam Jonah, the change in government means he has a new pal. Instead of Rawlings who plucked him from the obscurity of the deep mines of Obuasi he now has President Kufuor who he helped to complete the roof of his political house after failing to support him to complete the foundation and the walls.

Attention must be drawn to the fact that Ghana Airways is in trouble partly created by Mr. Sam Jonah when he was Chairman of the board of Ghana Airways. He is back again like the vulture to finish off the carcass. Sam Jonah has gone around telling people that President Kufuor forced him to take over this responsibility. Further research showed that he asked to be put there for giving money to the President’s campaign during the 2000 elections, something he refused to do in the 1996 election when he was eating and drinking with Jerry Rawlings, his former pal turned political foe.

The SFO Report

While these dealings are going on, Sam Jonah and his cronies in AGC have been given a clean bill of health by the Special Fraud Office, (SFO). SFO has become an arm of the criminal elements of Ghana. They have a price. This is an organization which is alleged to have cleared P. V. Obeng of any impropriety in the P(NDC) and their wanton destruction and kleptomaniac actions of the past two decades. Any serious professional will discard any statements or reports from this outfit since they only produce documents of fraud. To all intents and purposes, this is a fraudulent organization which needs to be shut down and Mr. B. A. Sapati and his cronies sent packing to jail! The reports they produce are questionable and are not credible. It is a big stretch for the SFO to “exonerate the management of AGC from any act that could have led to financial loss to the state.” The so-called lack of “evidence of collusion or criminal intent to commit fraud by the company” can only deceive the minds of the ill-educated over whose eyes they intend to pull wool.

According to a former employee, “He negotiates with himself.” This means he is on both sides of agreements or contracts. He sells to himself and therefore fixes his price and takes the profits with collusion from several operatives. This is the alleged stock in trade of Sam Jonah. Sam Jonah’s activities are supported and known by Lonmin plc as well as even the external auditors, Deloitte and Touche employed by Ashanti Gold. More of that later.

Overwhelming Case for Criminal and Civil Case Action

There is an overwhelming and compelling case for both civil and criminal actions against Sam Jonah, the Board of Directors of Ashanti Goldfields, Lonmin plc, Goldman Sachs and Deloitte & Touche, the accountants. Additionally, there is the opportunity to recover the $570 million and place Sam Jonah and his friends in bad jails. NPP and President Kufuor came to power with zero tolerance for corruption as their mantra. If President Kufuor and his government attempt to shirk their fiduciary responsibility to pursue this case, President Kufour and his NPP will be perceived as inept, negligent, and incompetent. President Kufuor, by his election, became the number one public servant of the nation. The people have entrusted him with the responsibility to safeguard the assets and wealth of the nation.

In collusion with accountants and consultants? – The outside auditors may be liable Sam Jonah’s affair with Deloitte and Touche gained some notoriety when Kwesi Ndoum was their top consultant in Accra. One must note that Kwesi Ndoum is not an accountant. There is evidence where Kwesi Ndoum was both a board member and a consultant of Ghana Airways when Sam Jonah was Chairman of Ghana Airways under Rawlings. An SFO report has described the problems of Kwesi Ndoum. The relationship has endured to the point that even though Kwesi is ‘no more there’, the cozy relationship continues to exist.

A look at the auditor’s 2000 report shows the presence of either obvious corruption or gross incompetence and neglect. The future of Ashanti Goldfields as a going concern became questionable after the deliberate “reckless” action of Sam Jonah and Mark Keatley, his CFO in the derivatives transactions. The auditors decided to draw readers’ attention to this issue under “Uncertainty relating to banking arrangements” in their report. “In arriving at our review conclusions, we have considered the adequacy of the disclosures made in note 1 to the financial information concerning the uncertainty as to the Group meeting its commitments under the terms of its banking arrangements. In view of the significance of the uncertainty, we consider that it should be drawn to your attention, but our review conclusion does not require modification in this report.”

This is a deliberately badly worded report. There are two things wrong with this report. Though disclosure is very important in accounting, what needs to be commented upon by the accountants is the reasonableness of the assumptions underlying the cash flow projections without which the going concern principle is not applicable. Auditors are loathe to qualify accounts using the going concern principle since it is a self-fulfilling prophecy. However, in this case, it would have been appropriate to have assured shareholders, who include Ghana, that the assumptions underlying the cash flow projections are reasonable and that the company will be able to meet its cash obligations when they fall due. Commenting on this disclosure either deliberately missed the mark or was an act of incompetence or at worst corruption. Are the auditors saying their silence means they are happy with the assumptions?

Again, to the layman it is not clear what the auditors mean by “modification in this report” and what report the auditors are talking about. Are they talking about issuing a going concern qualification in their audit report or are they talking about providing the results of Ashanti on break up values if the going concern principle is not applicable? The auditors failed woefully and they should be removed since on the face of it they are compromised or incompetent.

Additionally, the auditors should have drawn the attention to the readers of the annual report of AGC to the hidden contingent liability in the event that gold prices rise over $350. As stated earlier, if gold prices rise above $350, AGC will be bankrupt. The material aspects of the financial position of AGC was either deliberately or negligently left out of the auditors’ report and discussions on Forward Looking Statements fail to discuss.

Further, the disclosure in the forward looking statements is woefully inadequate. It is a discussion of general issues affecting any mining business. The accountants and the auditors could not present forward looking statements that reflect the specific experience of Ashanti Goldfields. And yet there are several issues in the report that need to be discussed in the forward looking statement including the special effects of the hedging, the cash flow projections, the effects of a gold rally sending the price of gold above $350, etc. It is understandable that the current CFO may be as inexperienced as the former; however, it is the ultimate responsibility of the auditors to improve the presentation and the disclosure of information for the benefit of their client.

The author has argued that the auditors are liable for civil action for their part played in the derivatives scandal. This is because the notes to the financial statements of 1998 which they audited stated ““hedging instruments such as forwards, swaps and options are used to achieve those objectives and the portfolio is actively managed. Maximum use is made of contracts that preserve exposure to upward gold price movements. The hedging program is subject to strict risk management controls and is reviewed closely by the board of directors.” This statement is not correct since the derivatives were used as speculative instruments and not as insurance. Thus, the audit report is incorrect and misleading. A legal action against the outside auditors is therefore in order. They should have informed the shareholders of the consequences of the price of gold going up due to the execution of one-sided bets on the price of gold. It is correct to say that the external auditors can be faulted for faulty auditing and dubious assurance.

Goldman Sachs may be liable

There have been many articles about the role of Goldman Sachs in the derivatives debacle which almost sunk and may ultimately sink AGC. The Financial Times of London wrote an article about this affair under “How Goldman ruined and savaged Ashanti”. Another outfit writes “GATA believes that Ghana’s gold mines are more that country’s patrimony that prey for Goldman Sachs and its colleagues in conflict of interest, plunder, and fraud.” The efforts of Goldman Sachs to keep AGC afloat is to prevent the Ghanaian government’s exercising its right under the 1994 prospectus which allows it to take over its mine lease and thereby renationalize the mine and rebuild it without Lonmin plc.

Goldman Sachs played a role in putting AGC in the mess and then “made a bundle bailing the company out, minus a good deal of its innards”. “Goldman Sachs multiple roles as corporate adviser to Ashanti, seller of over-the-counter financial derivatives, and trader in the bullion market raises some ethical questions. Though they admit “with hindsight some of the derivatives it sold Ashanti may not have been ideal for a heavily-indebted company” they have failed to share any of the losses of the company. It is my humble opinion that Goldman Sachs role should also be investigated.

Lonmin plc’s may be culpable

Lonmin plc is vicariously responsible for events in Ashanti Goldfields perpetrated by Sam Jonah. This is because Sam Jonah is an employee and board member of Lonmin plc. Indeed, Sam Jonah is tied at the hip with Lonmin plc. How else will you explain Lonmin’s continuously paying performance and other bonuses to Sam Jonah for his disastrous performance? How else does one explain Lonmin plc’s action in deceiving and defrauding shareholders of Ashanti and Lonmin plc by not accurately disclosing the constituent elements of the total emoluments of Sam Jonah in accordance with British laws? How else does one explain Lonmin’s refusal to fire Sam Jonah for his deliberate reckless actions? Despite credible concerns of investors, Lonmin plc continues to have confidence in Sam Jonah. Is that the way companies are run in Britain and South Africa? Lonmin plc by its actions has become an engine or a vehicle of fraud and corruption against Ashanti Goldfields’ interest and the interest of Ghana.

Lonmin plc’s dealings in AGC lack the transparency that a shareholder accorded a good faith de facto manager of its mines by a poor government interested in harnessing its extractive resources of unique importance must possess. The lack of transparency breeds serious credibility problems for Lonmin plc. Again, Lonmin plc’s dealings appear to continue the ruthless nonchalant attitude of Tiny Rowland of yesteryears. Lonmin plc’s commitment to AGC is at best as a gold digger in an actual and literal sense and at worst as a blatant mercenary. It is highly disconcerting that a quoted company of this stature can stoop to operate in another country with impunity and little or no respect for its people, land, laws and elected officials. Lonmin’s actions provoke only one feeling or reaction from any patriotic Ghanaian – a complete and absolute lack of confidence and contempt for its machinations. All protestations about “technical and service charges” are a sham way to transfer value and resources from AGC to Lonmin plc and its prot?g? Sam Jonah. It is a calculated action by Lonmin plc to treat Ghana and its people with utter disrespect and contempt.

The strategy of Sam Jonah and Lonmin plc.

I have argued elsewhere that Sam Jonah and his bosses knew the implications of the one-way bet. To Sam Jonah and Lonmin plc it was a win-win affair. They could not lose. This is the grand strategy. If the price stays down, Sam Jonah wins because he can obtain great praises and adulation for being the best manager in Africa. If the price went up, which it did, he and Lonmin plc can buy AGC for a small price and then extract gold with no control out of Ghana. This grand design and strategy will only work if Ghana gets rid of the golden shares.

Disclosure of total emoluments in accordance with British laws

In accordance with British laws, all directors’ emoluments including salary and fees must be disclosed and itemized. In Lonmin’s annual report, “Mr. Jonah was paid no fees as a Director of the company. He is an employee of Lonmin plc, but is also Chief Executive of Ashanti Goldfields Company Limited, which company reimburses Lonmin plc all his remuneration and benefits and would reimburse any termination payments made to him.” The amounts which are reimbursable should have been itemized and disclosed. While it is possible that no fees are paid, it is obvious that a salary is paid to him and reimbursed by Ashanti. However, Lonmin plc refuses to disclose this in accordance with British disclosure provisions. In fact, Lonmin plc lied by stating that the salary and fees are zero. If that is correct then all the salary reimbursed by Ashanti must be returned.

Additionally, Lonmin has instituted a contingent liability on AGC which acts like the proverbial Damocles sword. Should Ashanti Goldfields decide to terminate Mr. Jonah, God help Ghana for the golden handshake which will make Ashanti rethink ever firing him! This is a classic golden handcuff. Lonmin plc is forcing Sam Jonah on Ashanti and this is entirely improper. If Sam Jonah is an employee of Lonmin and if Ashanti does not want his services, he should be removed with no recourse to AGC. It must be Lonmin’s responsibility to find him another job to do or compensate him if they so deem. If he is not worth anything to Lonmin plc when he leaves AGC it tells a lot of what they think of Sam Jonah.

Further, one needs to state in passing that the realization of any gains abroad and the payment arrangements between AGC and Lonmin plc may have certain tax implication for Ghana and may be of interest to the Internal Revenue. There is a high probability that Ghana’s tax laws may have been broken by Sam Jonah and Lonmin plc due to the awkward arrangement and the lack of transparency by Lonmin plc in disclosing the salary of Sam Jonah.

By this financial trickery and creative accounting Lonmin plc and Sam Jonah are able to deceive Ashanti Goldfields and Ghana about the total emoluments of Sam Jonah. Ashanti and Lonmin plc do not disclose this amount since Ashanti embed this in their disclosure of related party transactions. “The company’s principal shareholder is Lonmin (32%) which provides technical services and the services of Mr. S. E. Jonah to the group for which it received US$1.8 million (1999: US$1.8 million) for the year. Meanwhile as these shenanigans continue, Sam Jonah, who does not believe in what he preaches or who has come to believe his own lies, speaks of the current ‘...government’s commitment to transparency, support for the private sector and its determination to work with AGC, the company would reciprocate by working in partnership to ensure the maximum value from AGC.” This blows the minds of honest citizens. Who is this guy speaking?

Lonmin plc’s rewards to Sam Jonah

For doing the work of Lonmin plc, Sam Jonah has been paid Lonmin stock options. Apart from the AGC options, Lonmin plc also pays Sam options. As at November ending, 2000, Sam Jonah had 184,817 stock options which had not been exercised. This is after exercising his options of 7,732 shares and gaining in excess of 35,517 pounds sterling. Of course approximately, 11,993 options expired and were not exercised by Sam Jonah. These options are handsome payments for fronting the activities of Lonmin plc. It is therefore not surprising when a stock broker in Ghana said of Sam Jonah, “Who does he think he works for. Ghana?” And by the way did Sam Jonah pay taxes on these gains?

Due to the reckless actions of Sam Jonah the share price of AGC is pocket change. Thus, stock options issued by the AGC to themselves are in the water. Massive stock options which dilute Ghana’s interest continue to be heaped upon board members and certain exclusive employees. In order to prevent the loss of the stock options due to the low price of the shares resulting from the board’s own actions and inactions, the board in May 2001 cancelled the stock options given to themselves and certain management and reissued approximately 470,000 stock options to replace them at the low price of about 2 dollars. Sam Jonah received 260,000 options. This means that should the share price reach say its highest of $27 Sam Jonah would receive $6.5 million and the board and management would receive approximately $12 million. Sam Jonah, the board and the management should not be allowed to reward themselves for their poor performance. The action of canceling and reissuing stock options at a lower price defeats the whole purpose of the stock options.

Directorships

Sam Jonah is a member of several boards. These include First Atlantic Merchant Bank, Limestone Products and Lonmin plc. He has interests in MetLife, General Leasing and Sterling. Sam Jonah, Dr. Danso of Zimbabwe and Mark Keatley own Met Lab. Jonah on the advisory board of Modern Africa, a growth and investment limited liability company, established to invest in Sub-Saharan Africa, with Dr. Chester A. Crocker, a board member of AGC, Ellen Johnson Sirleaf and C. Payne Lucas of Washington DC.

Modern Africa now owns Phyto-Riker Pharmaceuticals, previously GIHOC. Dr. Fred Boadu, mentioned in the famous Serlomey case is Executive Vice President, Global Agriculture.

Modern Africa has investments in Databank Limited, Liquid Africa Holdings Limited, NetAfrica Limited, Warsun International Communications Corporation, Flamingo Holdings Limited, Africa Broadcast Network Limited, Afsat Communications Limited and Cora de Comsar, S. A.

Also, Sam Jonah is a member of the Termite Fund which is discussed elsewhere in this article. Additionally, he is a director of Ecobank (ETI), Camborne School of Mines, (CSM), (Exeter University) Trust; New Africa investment limited (NAIL) and the Commonwealth African investment Fund (COMAFIN).

Additionally, he serves on the Governing Body of the School of Oriental and African Studies of the University of London (SOAS) and the advisory board of the Africa Regional Advisory Board of London Business School. Further, he is the Chancellor of University of Cape Coast and a member of President Thabo Mbeki’s International Investment Advisory Council of South Africa. Furthermore, he is a member of the UN Secretary General’s Global Compact Advisory Council. Again, he serves on a board created by Asantehene. Finally, Sam Jonah is the Chief Executive officer of AGC and Chairman of Ghana Airways, two of Ghana’s ailing companies.

The legitimate questions my readers must ask are simple. Does this man have the time, energy, focus, attention and let alone the genuine interest to run AGC and Ghana Airways (which interestingly does not have any substantive CEO), two companies which are virtually bankrupt? Is it in Ghana’s interest to allow a person who has admitted to being “reckless” in the management of one of Ghana’s crown jewels, AGC run any Ghanaian company let alone the two ailing crown jewels? Is it proper to allow Sam Jonah to monopolize and commandeer two very critical and important areas of the Ghanaian economy; a man who is very willing to accept that he ‘mismanaged” AGC, a man who some believe is fraudulent and has cost Ghana dearly? Can we allow a man who is so extended to look at the interests of two very critical companies; companies which to all intents and purposes are the only windows of Ghana to the corporate world?

Recently, he resigned his membership of another board because he wanted to concentrate on AGC due to its ailing status. It is therefore not clear to many why he then took over the Chairmanship of Ghana Airways, Ghana’s ailing crown jewel. Is it because he is only interested in ailing outfits or is it part of his grand design to control all the important facets of Ghana’s economy. The control freak argument is supported by anecdotal remarks by many Ghanaians that Sam Jonah now has control of many of the leading newspapers in Ghana. All his involvements may not have been covered since Sam Jonah sometimes uses fronts and we are able to verify only the publicly available information.

Again, the control freak argument gathers momentum if one considers his influence now over the King of Asante and the President of Ghana. S. E. Jonah’s proximity to both Asantehene and President Kufour should raise concerns among their advisors, given what has been discussed in this paper. To show his power and influence he ensures that board representations by Kufour have his man or woman. He ensures that even any board created by the King of Ashanti has his foot print. All this is part of his calculated action to run for President in 2008. Under which party? God only knows. Remember, there was an Ackah Blay-Miezeh who purported to have millions of pounds and started a party. There was a Gbedemah who purported to be rich and tried to carry the mantle of Nkrumah. Do you remember Nyanteh who wanted to change Ghana’s currency into pounds sterling on becoming President? All these men failed miserably despite their purported wealth. Well, Sam Jonah wants to be the first to be successful by fair or foul means.

How does Sam Jonah get away with this?

Sam Jonah is able to get way with his strategy of being an influence peddler and an insider of Rawlings’ and Kufour’s governments by doing little things. He will provide you the goodies you want. You want to have fun? I will provide the resource. Are you on your way to Kumasi for a funeral? Please use my private jet. This is the bribe which many people have unwittingly become accustomed to. You are returning from a celebration in Kumasi which Sam Jonah also attended. Can you join me on my jet to Accra? This man runs his private life through AGC. This includes paying for all types of services including dubious entertainment through AGC and no one checks him. It is for this reason that some said ASHANTI is an acronym or mnemonic for “Always Sam Has Appropriated Numerous Tantalizing Interests.”

It is about time Kufour and his men act by taxing him and by making the AGC board fully accountable so that AGC does not continue to be his private fiefdom. Enough is enough! For every cedi stolen from AGC to bribe anyone, Sam Jonah gets returns in excess of hundreds of cedis for himself. You should bear in mind that it is no different from what we have heard of Rawlings inviting Maya Angelo or Stevie Wonder in a Ghana government plane on a fan tour. We complained about that. It is time to act on it! It is about time Ghana and Ghanaians stop this pernicious habit of rewarding failure and corruption with praise, honor and awe. Let us rekindle the spirit of meritocracy.

Sam Jonah uses the stick and carrot approach to get his way. If you want to expose him he may offer you a job. If you refuse, he will then issue threats. Despite the fact that this author has been concerned about the activities of Sam Jonah since 1998, when he discussed his concern with an AGC official at Harvard Business School, Sam Jonah would like the author and others to believe that it is his reluctance to appoint the author to the position of CEO of Ghana Airways which is the motive for exposing Sam Jonah’s activities. Infact, the opposite is true. The author has resisted efforts by Sam Jonah silence him in exchange for an appointment. In April 2001, Sam, Jonah called the author in the United States and issued a quid pro quo demand in an attempt to silence the author’s concerns about Sam Jonah’s and Kwesi Ndoum’s activities in exchange for his appointment. The author vigorously resisted it. Others have asked him to do so and he has resisted.

True to Sam Jonah’s form he has issued veiled threats in the form of “a raft of libel cases”. Indeed, Sam Jonah writes in an email to the author on January 10, 2002, that “…many of the other individuals and organizations that you cast serious aspersions against without proof might make your life even more unpleasant than Sam Jonah ever would or could” I have been advised by people who have worked with and known Sam Jonah at various stages of his life that he is capable of vicious and violent actions, including murder, against me because of my exposing him. It was therefore no surprise to me when he did actually issue these threats on paper in cryptic form and coded language. He believes he is above the law.

The author has taken the threats seriously and has sought legal help. This is because the author now believes all that has been said about Sam Jonah with respect to his machinations and Machiavellian style of operations. In particular, they have made him to believe that he can exact bodily harm and injuries including murdering. My belief is based on the following facts. Sam Jonah operates in a mining industry which tends to attract a violent set of people. Additionally, Lonmin plc is an offshoot of Lonhro, a company that used to hire mercenaries to protect its interest. Lonmin plc is a South African company and South Africa did experience violence during the bad old days of the apartheid. Thus, it is very important for anyone dealing with such “individuals and organizations” to treat their threats with the utmost seriousness. While law enforcement is lax in Ghana, one would hope that this will be an opportunity for President Kufuor to step up to the plate. In the United States the story is different, since his influence is minimal and the law usually not always catches criminal acts.

Part II