Industrialist Natie Kirsh has lost millions on a fraudulent second-hand insurance policy operation. Now he’s gunning for his business partner, writes Belinda Anderson
Nathan (Natie) Kirsh is suing his long-time confidant and business partner, Charles Stride, for millions. This follows the mother of all bust-ups after a business venture involving the sale of second-hand endowment policies went sour.
Reams of affidavits now before the court leave little to the imagination. The two high-profile personalities, who were house friends and shared the same offices for years, are engaged in a battle royal. The basis of the litigation is intricate. In essence, thievery on a grand scale is alleged. Kirsh is out of pocket by at least R250-million.
The court action has its roots in a meeting held in early 1998 at which Stride introduced Kirsh to one David Alexander, a small-time entrepreneur with interests ranging from technology companies to an insurance brokerage. It was Alexander’s ability to find second-hand insurance policies for sale at below their true value that acted like a magnet for Stride and Kirsh. It was to prove a costly attraction.
Insurance policies have many hidden benefits, especially as they rise in value the closer they get to achieving tax-free status, which is five years after the policy began. As ownership of policies is negotiable, it usually benefits the person who paid the premiums to sell the asset on the second-hand market rather than cash it in with the insurance company.
This is because insurance companies allow new owners of second-hand policies to continue paying premiums but as the five-year term will already have expired, investment returns are tax free. There are many policyholders who do not appreciate this benefit, enabling the likes of Alexander to “arbitrage” the second-hand policy market.
Court papers suggest Kirsh and Stride were quick to seize on another one-off opportunity that became available through the pending listing of Old Mutual and Sanlam. The vehicle the three set up, KNA Insurance Brokers, focused mainly on buying second-hand Old Mutual policies (and a few from Sanlam) with Kirsh’s money. That way, not only did KNA stand to enjoy the arbitrage benefit, but it would also be entitled to all of the free Old Mutual shares issued to policy owners in the demutualisation process.
The structure was quite simple. Alexander was the managing director of KNA, Stride the chairperson. KNA earned a straight 5% commission on all policies bought with the R250-million cash that Kirsh injected. To protect himself, Kirsh insisted that accounting firm KPMG audit the policies. It seemed foolproof. Excepting, as court papers now show, there was no way for Kirsh to gauge Alexander’s integrity. For this he blames Stride, because he made the introduction.
When KNA was put into final liquidation in October last year the judge found that Kirsh was owed a total of up to R354-million. The court also heard that Alexander admitted to Kirsh in person that he had defrauded him (the conversation was recorded). Alexander could not explain why he had done so, simply offering: “It just got absolutely out of control. I was just completely out of my head … I mean, its lunacy. I’ve ruined my life over nothing … I can’t explain it.”
The judge has ordered a secret Section 417 Inquiry into what had happened hoping, he said, to help “put money into applicant’s pocket”. Whatever that may yield for Kirsh is by the way. The court action that has now blown the whole matter open is a lawsuit by Kirsh against Stride and Alexander. He wants R17,5-million from them to repay money he claims they personally stole.
At the same time Kirsh is taking on German-owned International Bank, which holds policies worth more than R20-million ceded as security by another second-hand policy broking company called Cambourne. Stride and Alexander own this business. Kirsh says the policies are his and wants them back. Stride and Alexander’s company claim Kirsh was “negligent”. By agreeing that KNA would act as his agent, Kirsh apparently also allowed KNA to sell his policies to an “innocent third party”.
An indication of how nasty things threaten to become was shown in the KNA liquidation matter. Part of Alexander’s defence was that Kirsh had circumvented exchange control regulations and was guilty of money laundering. The judge did not agree.
The players
Nathan Kirsh is best remembered for his ill-fated venture into retailing during the 1980s. A buying spree landed him the venerable Greatermans chain and with it, the leading national retail chain of the time, Checkers. Responsible for bringing former judge and corporate governance guru Mervyn King into the business world (they were partners for years) Kirsh moved out of the spotlight following the delisting of Kirsh Industries, which had sold its major assets to Christo Wiese’s Shoprite. Kirsh is the brother of Primedia founder and former chairperson Issie Kirsh (and uncle of Primedia CEO William). He is a Swazi citizen and most of his business interests are now based abroad. Kirsh is rumoured to be fabulously wealthy.
Charles Stride is well known in South African business and political circles. He was most recently in the news when appointed as the new chairperson to turn around battling snacks business Afribrand. Stride was previously senior partner at accountants Fisher Hoffman Stride (now Sithole) and is the non-executive chairperson of JSE Securities Exchange-listed Magnum Global Funds. He is well connected in the public sector having served as a special adviser to the Ministry of Finance after 1994, and has played a leading role in various tax and other technical commissions. He, too, has a link to the media world through his son, James, the founder and chief executive of penny stock E-Data.
Third player in the piece is David Alexander who had his initial 15 minutes of television fame last year when he was arrested and property including luxury vehicles and game farms was seized by the police. Out on bail, he awaits trial for his role as managing director of KNA Insurance, the company brokered to buy second-hand policies on Kirsh’s behalf. Since January last year, Willie Hofmeyer’s asset forfeiture unit has attached insurance policies worth R54-million and R10-million cash from Alexander. There have been other attempts to seize assets such as his 4×4 and two properties including a well-stocked game farm in Warmbaths and a property in Kenton- on-Sea.