A Brief History
of the
Corpcapital Saga

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    The fourth step: Formation of Netainment (which became Cytech)
    A complex offshore structure had been set up for Cytech. See Complex Cytech structure and related entities (Ms Word 45kb), and Structural evolution of Cytech (Ms Word 401kb), Collet SAB&T forensic report (Ms Word 1283kb). See also Letter of Intent to set up Cytech 290798 (Adobe Acrobat 2 162kb).
    In 1999 the share price of Corpcapital declined from 170 cents to 70 cents. Worse, acquisitions were not producing the desired bottom line and the 2000 profit outlook appeared to be disastrous. This was not welcome news to Liebesman and the executives. A loss would prejudice the future of the group and the well-being of the executives, whose fortunes were closely tied to the success of Corpcapital. Creative and aggressive accounting came to the rescue. Cytech would be revalued and the revaluation surplus taken into Corpcapital as profit by way of a year-end bookkeeping entry adjustment. The technique had many of the hallmarks of the Enron corporate scandal.

    Through these mechanisms Cytech was dramatically revalued upwards and the increase in valuation recognized as profit in the income statement of Corpcapital, converting a significant decline in earnings into huge reported profits. Readers are invited to visit the Corpcapital Limited 2000 Annual Report (Ms Word 677kb) to assess the level of disclosure of this seminal issue. Liebesman, Liebmann, and Sacks, as directors of Corpcapital, were directly engaged in the setting up of Cytech, as well as the valuations and accounting methods.
    In 2001 the same aggressive accounting methods were applied. This was the year of the merger of Corpgro, Corpcapital and Corpcapital Bank to form Corpcapital. The merger accounts provided a confusing picture, and no disclosure on the history of the group�s �star�, Cytech. See Corpcapital Limited 2001 Annual Report (Ms Word 901kb). Fancy and unrealistic valuations cannot be sustained forever, however. What mark-to-market gives to profits on the upwards revaluation it takes away on the downward revaluation. Faced with this sobering reality the executives proposed a change in accounting policy, one that would disguise any downward revaluations. In 2002, Cytech was revalued downwards dramatically by more than R100 million. See Corpcapital Limited 2002 Annual Report (Ms Word 1 972kb).
    In the period 1999 and 2000 the executives were paid some R60 million in compensation (salaries, bonuses, and sign-on fees) largely on the back of the Cytech valuations which had boosted Corpcapital�s profits. The executive compensation took the form of performance bonuses and signing-on fees. Lazarus, who joined the company at that time, and was to play a major role as the drama unfolded, was a major beneficiary, having been paid R8.25 million to join Corpcapital. See Corpcapital executive benefits 1999-2001 (Adobe Acrobat 2 540kb).