Convicted fraudsters Rodney Mitchell and Peter Gardener – who headed up the Health & Racquet Club empire which collapsed in the early 2000s - have been earning money from Virgin Active leases, News24 has established.

Mitchell and Gardener were jailed between 2011 and 2013 for fraud after they were found guilty of fraud at Leisurenet, which owned Health & Racquet Club. Leisurenet folded with R1 billion in debt, and the gym business was bought by Sir Richard Branson's Virgin Active group – following a personal appeal by the late president Nelson Mandela.

But despite their role in the near ruin of the gym group, they have continued to benefit from Virgin Active leases. Mitchell and Gardener did not respond to repeated queries about the leases.

Both men, along with their sons, were involved for R433 000 a month as part of a sub-letting arrangement.

Gardener also has direct links to a company that profited from holding the original lease on the flagship Green Point Virgin Active gym in Cape Town, and sub-letting it to Virgin Active when it took over from Health & Racquet over two decades ago.

Virgin Active was not leasing the property directly from the City of Cape Town. Rather, it was subletting the property from a private company, The Point Sporting Club (Cape Town), which lists both Gardener and his son, Brent, as active directors.

The Companies and Intellectual Properties Commission has confirmed this. The Green Point site's lease came up for renewal via auction in June this year, after a decades-long subletting arrangement with The Point Sporting Club came to an end.

Luthando Tyhalibongo, spokesperson for the City of Cape Town, confirmed the City leased the Green Point property to The Point Sporting Club. The initial lease period was for 20 years, with an option to renew for an additional 15 years. This option had been exercised with the lessee subletting the premises to Virgin Active since 2001, with consent from the city, said Tyhalibongo.

Tyhalibongo also confirmed that Virgin Active paid the company R433 000 a month. Tyhalibongo said that prior to the expiration of the lease, The Point Sporting Club had approached the City for a "lease extension period, which was declined in favour of leasing the property directly to an operator via a competitive process"

Virgin Active itself then successfully bid to secure the lease from the City of Cape Town directly, at an auction in June. The group will pay R3.7 million a month. The lease carries an annual escalation of 6% for 10 years. This is a significantly higher rental than Virgin Active was originally paying.

Witnesses claim that Mitchell and Gardener were at the auction.

Antonio Iozzo, who heads up the Bedfordviewbased Body Action Gym, and his lawyer Ricardo Teixeira, both said they saw Mitchell and Gardener at the auction, and that the men took part in the bidding.

Gardener denied to News24 that he was there. Mitchell was sent a screengrab from a video that showed he was at the auction but did not comment. He earlier said that he wanted "nothing to do" with News24.

News24 has also discovered that the lease on Virgin Active's Van Buuren Road property in Bedfordview is held by a company called William & Lourens No 1 Share Block, which previously also had direct links to both Gardener and Mitchell. The two were directors of the entity but have since resigned. At one stage, Mitchell's son, Craig, was also listed as a director, however he too has resigned.

Only Gardener's son Brent is listed as an active director.

The City of Ekurhuleni says it has been leasing the site of the Bedfordview Virgin Active gym to the company since the early 1990s.

Virgin Active said in response to questions that it had lease structures in place which pre-dated its acquisition of the Health & Racquet Club business in 2001 and would "remain in place until the leases end".

"Where Virgin Active's immediate landlord is not the ultimate landlord, the ultimate landlord is aware of the lease structure. Leases are subject to confidentiality provisions, so no further comment can be provided," it said.

Christo Wiese-backed Brait, which owns 67% of Virgin Active, declined to comment.