4/7/02 8:29:12 AM Pacific Daylight Time
Deutsche Bank Denies Rand Manipulation
South African Press Association (Johannesburg)
April 4, 2002
Posted to the web April 5, 2002
Allegations that Deutsche Bank colluded with three prominent South African companies to depreciate the rand in 2001 are unfounded, the commission investigating the rapid decline of the currency heard in Johannesburg on Thursday.
Niall Smith, a director of Deutsche Securities, a wholly owned subsidiary of Deutsche Bank, said asset swaps that the bank concluded with chemical producer Sasol, packaging group Nampak and M-Cell were completed "outside the window of the depreciation".
"The timing of the transactions was such that they clearly could not have had anything at all to do with the fall of the rand in November and December 2001," Smith said.
SA Chamber of Commerce chief executive Kevin Wakeford in his submission to the commission named Deutsche Bank as a party that may have, in transactions with chemical producer Sasol, packaging group Nampak and M-Cell, colluded to depreciate the currency.
The companies have all denied being involved in unethical or illegal transactions.
Wakeford said he based his evidence on information he had received from an unnamed reliable source.
Smith said the exchange of rands for foreign currency pursuant to the currency hedge entered into in connection with the asset swap was executed on 19 and 20 February.
"This was at least seven months before the start of the rapid depreciation of the rand in October 2001 and could not therefore have caused such a depreciation."
Smith said the transaction was executed in tranches of Euros 50-million (approximately R500-million).
"Care was taken that the market was not moved by any exchange, and this was achieved."
He said that after the Sasol asset swap was implemented, Deutsche Bank London began placing the Sasol shares with foreign investors.
The rand proceeds from the transactions were transferred to South Africa. By March R1,3-billion had been transferred to South Africa as a result of the placements.
The amount of rands offered for exchange in connection with the hedging transaction was about 0,158 percent of the total market in February 2001.
He said that on the first day the Nampak hedge was implemented, June 26, the rand was trading at R11,33 to the British pound after closing at R11,38 on June 25.
The day the second hedge was implemented, 24 July, the rand was trading at R11,61 to the pound after closing at R11,71 on July 23.
"The significant fall in the rand started in September, six weeks after the final leg of the transaction."
Smith said it was estimated that the impact of the rand in connection with the hedging of the Nampak asset swap was 0,04 percent.
The M-Cell asset swap took place in 2002, after the depreciation of the rand.
Smith said the bank had never entered into illegal or unethical transactions. "The asset swaps the bank entered into were for sound commercial purposes and all the transactions were legal and ethical.
"All three asset swaps were arranged in order to promote the commercial objectives of Deutsche Bank's clients. For example the Sasol asset swap was designed to assist Sasol in relation to its acquisition of Condea."
He emphasised to the commission that the three asset swaps were approved in advance by the SA Reserve Bank.
The R25-million commission, headed by Advocate John Myburgh, started its hearings in early March after Wakeford wrote a letter to President Thabo Mbeki on January 8, containing the allegations.
According to Wakeford his letter was only one factor that led Mbeki to establish the commission. He said the Mbeki acted after receiving information from other sources and on advice from his economic advisers.
But a former Enron employee who claims to have helped prepare that SEC filing told CFO.com that General Electric Capital Corp., Deutsche Bank, and Dresdner Bank had been identified in an early draft of the document. The source asserts that the names of those three investors were deleted from the version sent to the commission. That deletion, the ex-employee alleges, was made at the behest of William McLucas. McLucas, a former director of the SEC's enforcement division, was hired by the Houston-based energy trader on October 31 to help an Enron special board committee comply with an inquiry launched by the commission into the company's finances. McLucas is now a partner in the Washington, D.C., law firm of Wilmer, Cutler & Pickering. The former employee also claims to have received instructions to destroy the draft of the filing containing the names of the three companies.