Mining house Gold Fields allowed ex-con Gayton McKenzie to pack its 2010 empowerment consortium with a dizzying array of his colleagues, family, neighbours and friends – including a R61-million stake to Danny Smith, who has had serious brushes with the law.

Smith's was one of the four largest individual stakes, despite the fact that he admitted to amaBhungane that he "didn't bring any" value to the deal (see below: "Inside McKenzie's inner circle of cronies who pocketed millions" and "I'm clean, says 'gangster' Smith").

AmaBhungane's calculations show McKenzie's associates were handed benefits worth more than R330-million, a substantial part of the R2.1-billion black economic empowerment (BEE) deal. This suggests the company either did not properly vet the transaction or knowingly embraced the enrichment of its consultant's cronies.

But it is likely to have serious implications for the company in the United States, where it is listed and is already being investigated by regulatory authorities for alleged transgressions in the same deal.

It is also likely to anger Gold Fields shareholders. Although the BEE deal was deemed necessary for the company to secure the mining right it needed to work its flagship South Deep mine, it came at a great financial cost. Shareholders would be keen to know that every cent spent brought value to the company. But it is unclear how cutting in McKenzie's circle could have achieved this.

Gold Fields refused to answer questions for this article.

Benchmark deal?

Gold Fields has repeatedly advertised the ostensible benefits, for all South Africans, of its "ground-breaking" 2010 empowerment deal.

It was "broad-based in all aspects", "met the spirit and intent of black economic empowerment" and "set a benchmark for the nature and structuring of empowerment transactions", the company has boasted.

But once the deal was closed, it quickly became mired in controversy after journalists revealed that Gold Fields had hired President Jacob Zuma's one-time lawyer, Jerome Brauns, and a convicted armed robber and self-confessed former gangster, McKenzie, to help the company to obtain its mining licence from the department of mineral resources.

The resulting list of beneficiaries included political heavyweights such as ANC chairperson Baleka Mbete and some McKenzie associates.

Last year, the findings of a law firm that Gold Fields commissioned to investigate the allegations were leaked to amaBhungane after the mining house tried to suppress them. Among several issues, the investigators alleged that the company intended to "bribe" Mbete by massively increasing her stake in the consortium.

Mbete and Gold Fields denied wrongdoing, and a key witness in the investigation claimed he was misquoted.

Gold Fields was then forced to disclose that the deal was being investigated by the US Securities and Exchange Commission.

In South Africa, the Hawks are also investigating it.

But the list of McKenzie's cronies is far longer, and substantially larger by value, than was previously known. This seriously undermines Gold Fields's version that the deal "goes beyond simply ticking boxes" of BEE.

The beneficiaries include a relative of McKenzie's wife, the grandmother of his children by a different woman, a handful of henchmen and women from his nightclub ZAR, his business partners and childhood neighbours from Heidedal in Bloemfontein, where he grew up. This group includes Smith, who is remarkable both because of the sheer scale of his stake and because of his history of run-ins with the law.

Regulatory expectation

These revelations are likely to have serious legal implications for Gold Fields, which answers to the stringent terms of the Foreign Corrupt Practices Act in the US, where it is listed. These require the company to investigate potential partnerships thoroughly – to "know" its partners ­– and to identify and deal with any red flags.

A simple Google search and a few phone calls would have made it obvious to the company that it was funnelling immense riches to McKenzie's inner circle, including Smith, whose armed robbery trials were publicised.

This week, Smith told amaBhungane that the South African charges against him had been withdrawn, but said four days was too short notice for him to provide the case number and court records.

He never faced separate charges in Lesotho after successfully fighting an extradition request, he said.

Had Gold Fields conducted due diligence and discovered the allegations against Smith, it would likely have deemed him a "high-risk" partner, triggering the regulatory expectation that it conduct a deeper investigation to understand the circumstances and resolve the matter.

Although this would not necessarily have ruled Smith out as a potential partner, it would have revealed his close relationship with McKenzie and raised questions about why Gold Fields should hand Smith a stake worth tens of millions of rands and what value he brought to the deal.

'You call it cronyism'

Similarly, the size of the stakes being channelled to McKenzie's direct contacts should have prompted Gold Fields to investigate what value these people added and whether they were fronting for secret parties.

Indeed, the investigators later commissioned by Gold Fields alleged there were instances of fronting by unrelated beneficiaries.

Either Gold Fields did not conduct a thorough due diligence, as directed by the Act, or it would need to justify the stakes handed to these beneficiaries. This is among the issues Gold Fields refuses to discuss.

But why would a New York-listed company allow McKenzie's associates to land an estimated 16% of the R2.1-billion BEE deal, risking criminal scrutiny?

Previous statements by Gold Fields chief executive Nick Holland and former chairperson Mamphela Ramphele suggest the company believed the department of mineral resources was holding a BEE gun to its head. Instead of crying foul, the company brought in McKenzie and his gang to even up the firepower.

The result suggests that Gold Fields gave McKenzie carte blanche to cut in whoever he pleased. It appears that the company thumbed its nose at, rather than "met", the spirit of BEE.

McKenzie and his friend, Quentin Eister, one of those given a cut of the deal, appear to be unapologetic about this status quo.

"You call it cronyism, but I say it's precedented – it's been done. There are no clear-cut rules about how BEE gets done," Eister said.

In an interview with Business Day, McKenzie echoed this sentiment: "You can't blame me for all of this. I didn't write the Mining Charter and it's not my fault that it is so vague." He did not respond to amaBhungane's questions.

Inside McKenzie's inner circle of cronies who pocketed millions

According to Gold Fields's financial statements, its 2010 black economic empowerment deal cost shareholders R2.1-billion.

Of this, R1.2-billion was allocated to employees. The remainder was funnelled, through a complex regime of share handouts and guaranteed dividend flows, to two community trusts and 72 "broad-based" beneficiaries, whose shares were housed in six shell companies.

Using the shell company share registers (accessed by investigative journalism programme Carte Blanche) and Gold Fields's valuation at the time of the deal, ­amaBhungane calculated that benefits flowing to associates of former convict Gayton McKenzie cost the company more than R330-million – 16% of the deal and well over a third of the non-staff portion.

Gold Fields refused to comment on this figure or to provide its own breakdown.

AmaBhungane calculates that these McKenzie cronies were given stakes with the following values:

Danny Smith (R61.4-million)

Smith describes McKenzie as "a friend that I grew up with in Heidedal [outside Bloemfontein]". A 2012 report in the New Age names him as "head of operations" at ZAR, the nightclub belonging to McKenzie and former fellow prisoner Kenny Kunene.

Smith admitted in interviews that Gold Fields gave him his stake on the basis of his relationship with McKenzie: "I don't know what criteria he used."

Asked what value he brought, he said: "I didn't bring anything to the table. I signed some documents and I saw that I was given shares."

He said he was not fronting for anyone: "As far as I know the shares are for me, not someone else."

Rhona Dawson (R30.7-million)

Dawson is a hairdresser in Riverlea, a poor Johannesburg suburb.

McKenzie's memoir, much of which he says was written at Dawson's home, reveals how he fell in love with her daughter, Kim.

While shearing an amaBhungane reporter's head recently, Dawson confirmed that her daughter had borne McKenzie's children. She defended her stake, saying she was "active in the community".

Pamela Leitch (R6.7-million)

In a 2012 exposé, Leitch told Carte Blanche that McKenzie is her "son-in-law". AmaBhungane could not reach Leitch, but contacted Moloko McKenzie, understood to be Gayton's wife. She said Leitch is "my aunt" but would not answer any more questions.

Zandi Twayi (R6.7-million)

Twayi, an elderly businessman from Heidedal, said: "Gayton grew up in my area and we have always taken care of him. Whenever there were problems, we would help him."

Twayi said he was given a stake "for that reason", but said: "I think I deserve to be empowered." He said his stake was for his own benefit.

Ashwin Willemse ­(R61.4-million) and Jerome Brauns (R61.4-million)

Willemse, a former Springbok rugby player, and Brauns were McKenzie's business partners and helped Gold Fields to structure its 2010 empowerment deal.

Numerous sources said McKenzie had stayed at Willemse's house while they worked on the deal.

Brauns, who once served as President Jacob Zuma's lawyer, knew McKenzie from when they were involved in the Jali commission on prison corruption. Brauns was an investigator for the commission, at which McKenzie testified.

McKenzie and Brauns maintained a working relationship at least until the end of 2010, when the Gold Fields deal was completed.

Neither Brauns nor Willemse responded to questions.

Quentin Eister (R2.8-million)

McKenzie wrote that Eister had trained him as a motivational speaker after he left prison. Eister confirmed this and their friendship: "I was his best man at his wedding."

He defended McKenzie's dishing out of shares to friends: "You call it cronyism, but I say it's precedented – it's been done. There are no clear-cut rules about how BEE gets done."

He said he was not fronting for third parties.

Paul Helepi (R61.4-million)

Helepi is close to McKenzie and Kunene. Gold Fields has denied that Kunene worked as a consultant on its BEE deal, but the company previously confirmed that he had accompanied McKenzie to "various meetings and visits".

An impeccable source said Kunene had been "involved in the Gold Fields deal since inception".

Helepi, a commissioner at the public service commission in Bloemfontein, refused to answer questions, but numerous sources confirmed that he had regularly visited Kunene in prison. These sources insisted the two are related.

Helepi is pictured on his Facebook page in a brotherly embrace with McKenzie and Kunene. Kunene said he knows Helepi, but denied they are related.

Veron Watson (R6.7-million), Vuyani Gaga (R2.8-million) and Lerato Kholoanyane (R30.7-million)

Watson and Gaga were ZAR's general manager and head of events, respectively. Kholoanyane describes herself on Twitter as "manager to" McKenzie and Kunene and lists ZAR Online as her website. She is also the media officer for their Patriotic Alliance party.

The three did not respond to questions. – Craig McKune, Sam Sole and Tabelo Timse

I'm clean, says 'gangster' Danny Smith

When Danny Smith was arrested for his alleged role in two violent cash-in-transit heists late in 1998, his alibi was that he was elsewhere trading illegal gold, according to media reports.

When Smith stood in a Bloemfontein dock that December, the judge heard he was already on bail for another case involving the illegal possession of a cache of weapons, including an AK-47, two R4s, an Uzi, a 9mm pistol and a hand grenade. He was also under investigation for murder, and his record was marked with two convictions for illegally selling alcohol.

According to Smith, the state withdrew the cash heist and murder-related charges. On the murder charge, he said: "The state withdrew it after the main state witness indicated that he was paid to fabricate his evidence. "I was never convicted of illegal arms possession as the state withdrew the case, and as a result I was never afforded the opportunity to test the state's case." On his "gold smuggling" alibi, Smith told amaBhungane:

"It was not smuggling – as such. I put two people together in a gold deal. They were not smugglers – they were legal buyers." Two years later Smith was back in the news, this time because the Lesotho government wanted to extradite him to face charges for his alleged role in an armed robbery in Maseru. But he said he had also faced this down: "I obtained a high court judgment against extradition.

As a result I do not have any insight into the merits of the Lesotho allegations." He did not provide the court records, which amaBhungane has been unable to source independently. Smith said he believes his trouble with the law is "political". "I am from a family that owned businesses in Lesotho, Botswana and Swaziland, as well as South Africa. My family, through their businesses, supported and aided the progressive movement against apartheid," said Smith.

"Our known opposition to the tricameral parliamentary system led to harassment by local special branch police, the liquor squad and the murder and robbery police." He said his family, which owned the popular Bloemfontein nightclub Mingles, promoted sports and hosted the country's top football bosses in the 1980s. "So my family has a history of decades of business, social and political activism in Bloemfontein."

AmaBhungane met a number of sources, including convicted criminals, who grew up in Heidedal alongside McKenzie and Smith. Claimed one: "Danny was our mentor when it comes to doing crime. He was an icon and an elder brother to us." But Smith disputes this: "I was a responsible and locally engaged businessman.

I was never a gangster nor involved in gangster activities. I have never been found guilty of any violent crimes or robbery." In a written response to questions, Smith said: "I have contributed both morally and materially to the attainment of our democracy, and believe I bring value as any other shareholder to the [Gold Fields] deal." – Craig McKune, Sam Sole and Tabelo Timse

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