Millions of rands illegally invested by two KwaZulu-Natal municipalities may never be recovered, as they appear to have disappeared into a web of companies currently being liquidated.
Earlier this month the Mail & Guardian revealed that in 2000, two municipal treasurers were persuaded to make secret loans totalling R26-million to a company called Transglobe Industrial Holdings. Former Civil Cooperation Bureau agent Joe Verster represented Transglobe.
Now the investigating attorney representing the municipalities, Anton de Swart, has told the M&G the Scorpions have become interested in the case. It has also emerged that Transglobe was controlled by the Choice Holdings group, which was placed in final liquidation in terms of a high court order in September last year. Claims against the company totalled some R38-million.
Choice Holdings was chaired by Pretoria businessman Tom van der Merwe, who personally has racked up unrelated debt judgements totalling more than R3-million. Choice is now the subject of a legal and forensic investigation by lead liquidator, Enver Motala of SBT Trust.
”We are investigating every aspect of this matter,” Motala told the M&G. ”It appears that investigations will lead to a recommendation to hold a Section 417 inquiry, and it is possible that there might be implications in terms of Section 424.”
Section 417 of the Companies Act allows for the appointment of a commissioner to hold hearings and subpoena witnesses to establish the reasons for a company failure. Section 424 provides for directors to be held personally liable in cases of fraudulent or reckless trading.
The principal asset in Choice is a frozen chicken business called Agrichicks. Agrichicks, in which the North West Development Corporation has an interest, is under judicial management.
Agrichicks has also tabled a R25-million claim against Choice, based mainly on the allegedly improper transfer of funds from Agrichicks to various companies in the Transglobe group controlled by Van der Merwe.
It is claimed that Choice raided the Agrichicks bank account until the day before it was placed under judicial management.
However, the attorney representing Van der Merwe, Flip Prinsloo, told the M&G the Choice saga was far from over. He would be bringing an application to have a 1996 rights issue rescinded, thereby allowing his clients, as former Choice shareholders, to pursue R200-million damages against the North West government. The damages arose from the alleged repudiation of a management agreement between Agrichicks and Choice.
Just as controversial is the only other apparently significant asset within the Choice group, the international patents for a material coating technology held by a company controlled by Transglobe, Balmoral Technologies.
It was these patents, supposedly valued at R40-million, which Transglobe presented as the security for its deals with the municipalities. It appears that the value of the technology inflated as it was passed from one company to the other in the group.
Transglobe sold Balmoral to Choice for R8-million, paid for with money from Agrichicks. Three months later Ernst & Young valued the same asset at R20-million, based on theoretical ”future projections”.
Prinsloo, however, maintains that the patent rights are not located within Choice and that foreign investors are ready to make payments to Transglobe creditors.
”I have received two letters from attorneys in London confirming they will make payment to various creditors totalling US$18,1-million, including $2,9-million to regional councils.”
De Swart said the municipalities would obviously be delighted if they were paid: ”But I have just seen too many promises of payment — I’m not going to hold my breath.”