Fidentia bosses stole R5,5m, says charge sheet

Former Fidentia boss J Arthur Brown and financial director Graham Maddock used R5,5-million in Infinity loyalty-programme funds to pay salaries and other expenses in other Fidentia companies, according to prosecutors.

The two men appeared briefly in the Cape Town Magistrate’s Court on Friday on two charges of fraud, one of theft and three under the Prevention of Organised Crime Act.

According to the charge sheet, on January 24 this year Maddock instructed Infinity’s general manager to transfer R5,5-million from Infinity’s so-called “settlement” account, which included money due to members of the programme, to its current account the same day.

He promised to return the funds by the end of the month.

The funds were then transferred to another company in the Fidentia group, Bramber Alternative.

The charge sheet says Brown was informed of the transaction beforehand.

It says that Maddock and Brown entered an arrangement “whereby the said proceeds of unlawful activities are used to make funds available to pay the salaries and/or other expenses of the group of companies”.

The charge sheet also alleges the two men swindled a company named Fundi Projects of R3-million.

It says that in 2002 Fundi ran into difficulties, which meant it could not meet its obligations to supply chemicals, including ammonia, phosphate and pot-ash, to a Zambian firm.

Brown told Fundi director Leon Grobbelaar that he could solve Fundi’s predicament by means of financial gearing and structuring, which would give Fundi a monthly income, capital guarantees and growth, and allow it to meet its obligations to the Zambians.

Brown said Fundi’s cash would be invested with Brown Brothers Investment Management Services, a company of which he later became a director.

At the time of the initial deal with Fundi, former rugby player Louis Kone was Brown Brothers’s sole director, but Grobbelaar believed Brown was “the director and/or owner”.

Brown also said the investment would be secured, and Fundi would receive a monthly income of 1,9% of the capital amount, or 12 times the initial investments. At the end of a year, Fundi would get its initial investment back, plus 25%.

In December that year, in terms of a written agreement with Brown Brothers, Fundi transferred R8-million to the trust account of Maddock’s chartered accounting firm, Maddock Incorporated.
From there it was supposed to be moved to and invested with Brown Brothers.

Maddock, Grobbelaar had been told, was Brown Brothers’s “independent auditor”.

“BBIMS [Brown Brothers] failed to pay the monthly interest in an amount of 1,9% or any interest at all to Fundi,” the charge sheet says.

Though Fundi had demanded repayment of its money, R3-million was never handed back.

Nor was R1,5-million Fundi handed over to cover the cost of a financial guarantee from a top bank to serve as insurance for the delivery of the goods to the Zambian firm.

Instead, Brown used R800 000 of the cash to make a deposit on a property at Cape Town’s upmarket Sunset Beach, where he lives.

Fundi, the charge sheet said, has since launched a civil claim against Brown Brothers and Maddock’s firm.

At Friday’s court appearance, prosecutor Bruce Morrison told magistrate Jesthree Steyn that their trials were to be separated. Brown’s case was transferred to the Cape Town Regional Court and Maddock’s to the Specialised Commercial Crimes Court in Bellville.

Morrison said Brown will be informed of his trial date at his first regional court appearance on January 21. Maddock’s first appearance in the commercial court will be on February 1.

The two men were arrested for alleged fraud and theft related in March, and again in August on fresh fraud and theft charges. It was on the second group of charges that they appeared in court on Friday.

At the request of Brown’s attorney, William Booth, his bail conditions were changed to allow him to go on holiday to Mossel Bay later this month. He will have to report regularly to the Klein Brak River police station while on holiday.

He and Maddock are on bail of R1-million each.

They will appear on the first group of fraud and theft charges, with co-accused Piet Bothma—the suspended chief executive of the Transport Education Training Authority—on February 12.—Sapa

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