Fidentia’s curators say they have uncovered evidence of a ”multiplicity of wrongdoings” in the troubled asset-management group.
They also say investors will face an estimated shortfall of about R1-billion once Fidentia’s affairs have been sorted out.
The revelations are contained in a report filed in the Cape High Court as part of an application for a final curatorship order.
The order, which was not opposed in court, was granted by Judge Burton Fourie on Tuesday morning.
Joint curators Dines Gihwala and George Papadakis took control of the business when it was placed under provisional curatorship on February 1 after a Financial Services Board (FSB) probe reported misappropriation of hundreds of millions of rands.
”Since assuming control and management of the business the curators have established a multiplicity of wrongdoings, both of a criminal and civil nature, on the part of directors and shareholders and other closely associated individuals and entities,” the curators say in their report.
They directly accuse Fidentia boss J Arthur Brown and company accountant Graham Maddock of theft, detailing how Brown allegedly stashed millions in what was supposed to be investors’ assets in his private bank account.
Brown and Maddock are on bail of R1-million each after being arrested by the Scorpions on March 6 on charges of fraud and theft.
In their report, the curators say they anticipate Fidentia’s assets will probably realise R400-million to R500-million, against investors’ claims of about R1,4-billion.
”There is also evidence that money has been transferred offshore,” they say.
”It is not certain whether such transfers were effected with the necessary authority. This investigation continues.”
Gihwala told journalists after the brief court hearing that finalisation of the curatorship order meant he and Papadakis could now ”act more decisively and get on with the process of establishing where the assets are”.
He said that ”optimistically” it would take two to three years to finalise the matter.
”It’s quite complicated. In terms of our preliminary findings there are any number of assets which seem to be in the names of other entities, and we still have to connect that, and there may be a fight in terms of who really owns that, and where the money came from.
”So it’s going to be a long, drawn-out process.”
He said one should not underestimate the connection between Fidentia and Ovation Services, which was also under curatorship.
Tuesday’s application was not opposed by Fidentia Asset Management, Fidentia Holdings or Branber Alternative, the three Brown-controlled companies listed as respondents.
Counsel for the FSB Ashley Binns-Ward told Fourie that notice of opposition had been filed, but that the advocate representing the three companies contacted him on Monday night and said that notwithstanding the notice, no one would appear in court to argue it.
”Matters have been sorted out directly with the curators,” Binns-Ward said.
It is understood that the notice of opposition had to do with a last-ditch attempt by Brown to have a say in the disposal of Fidentia’s assets.
Gihwala said this had been ”probably the last kicks of a dying horse”.
He said good news for beneficiaries of the funds administered by Fidentia, including mineworkers’ widows and orphans, was that this month, the curators hoped to pay them in full, and would try to pay them their January and February arrears ”so that they can have a good Easter weekend”.
Though there was no money in the kitty, the curators had managed to reverse a transaction they believed was fraudulent, and the South African Revenue Service had refunded almost R20-million in VAT.
Gihwala said they were disposing of, or using beneficially, those Fidentia assets that were not in dispute, in order to add value to the group.
”[But] having said that, there’s going to be no fire sale,” he said.
‘This is theft’
Meanwhile, Brown stashed R13-million in company funds in his private bank account, and as curatorship loomed, used R5,5-million in investors’ money to pay staff salaries.
These are two of the findings of the 14-page report by the curators, in which Brown and other key figures in Fidentia are repeatedly accused of theft and fraud.
The report was filed in the Cape High Court in support of the application for final curatorship, which was granted on Tuesday.
The curators also say it appears that substantial sums of money have been paid by Fidentia to third parties, apparently for assets purchased.
”Nevertheless, no record of such assets has been found yet,” they say.
”At this stage there is a strong suspicion that assets have been either concealed or registered in the name[s] of others to the detriment and prejudice of investors of FAM [Fidentia Asset Management].”
They confirm that a R150-million promissory note issued by PLJ Corporate Finance Namibia was ”completely valueless”, and say it appears that the note was introduced into FAM’s books ”in order to conceal the loss of investors’ funds”.
They say Fidentia insider Steve de Kock, who negotiated the note, was paid a commission of R9-million, a deal which ”cries out for investigation”.
They say an R813-million cash investment shown on FAM’s books in November last year was alleged to be an asset-swap transaction.
However, the properties intended to be swapped were not all owned by FAM, and in fact, the transaction was subsequently completely reversed.
”FAM throughout continued to represent to their clients money market/liquid investments to the value of R812 905 196,48,” they say.
Allied to this transaction, an amount of over R140-million that had earlier been ”extracted” from clients’ funds was set off as a fee charged by Fidentia Holdings, reducing investors’ claims against Holdings by that amount.
”The persons involved in this sham transaction are Brown, [company accountant Graham] Maddock and several other directors and shareholders of Holdings,” the curators say.
They say it seems Brown committed theft of at least R13-million in that that amount was paid directly into his bank account, despite it being part of a R314-million sum listed as an asset in FAM’s private equity portfolio.
Over R111-million of the R314-million was at the time irrecoverable debt.
They say that shortly before the curatorship came into effect in February, Maddock, on Brown’s instructions, transferred R5,5-million of clients’ money from a Fidentia subsidiary to Holdings to pay staff salaries and related expenses.
”This is theft,” the curators say.
They say Facets, the lifestyle centre run by Brown’s wife, was bought in 2005 with R18-million in investors’ funds, and was listed as an asset in Fidentia’s property portfolio.
However, the property was registered in the name of the Brown Family Investment Trust, with no surety to any of the group’s companies. — Sapa