“Regrettably he was buried in Durban,” Masterbond campaigner Don Mackenzie reportedly said of one of the collapsed company’s curators. “Otherwise I’d go and piss on his grave.”
The Masterbond curatorship dragged on for more than a decade amid bitter claims that investors were milked. Its ghost hangs over the biggest South African corporate scandal of the Noughties — the Fidentia/Ovation/Common Cents meltdown.
The Fidentia curatorship moved into its second year last month and, although a repeat of the Masterbond marathon seems unlikely, some investors are in for a longish haul.
Litigation to recover more than R1-billion in vanished funds is likely to be the sticking point. The attorney overseeing the curatorship of Ovation Global Investment Services, John Levin of Mallinicks, estimated that, in Ovation’s case, this might take two or three years.
Curators are curious animals — although paid by investors in the companies they oversee, they answer to the courts, which decide whether their tenure should be extended.
In 1998, seven years after Masterbond collapsed, Business Times reported that the curators had charged close to R30-million in administrative expenses and fees while recovering R342-million.
The real killing, however, lay elsewhere. Curators Jeff Malherbe and (Durban-buried) Arnold Golombek negotiated the right to all legal work left by the Masterbond bosses, bringing in millions in litigation and restructuring and conveyancing fees.
This week Levin and Fidentia curator Dines Gihwala, of Hofmeyr, Herbstein agreed that investors’ anxieties about the Masterbond precedent were understandable.
But, Gihwala said: “When I was appointed, I was told Fidentia could be bigger than Fidentia; however, I’ve no guarantee I’ll be alive in 10 years. We’ve broken the back of this matter and I believe we’ll dispose of most of it by year-end.”
He said substantial headway had been made “in terms of interrogations” and the disposal of Fidentia’s assets, which include its Century City head office in Cape Town, Blue Horizon Bay in Port Elizabeth and a game farm near Humansdorp.
About R70-million had also been paid in stipends to beneficiaries. Major casualties of the Fidentia scandal are widows and orphans of dead miners who belonged to the Mineworkers’ Provident Fund.
However, Gihwala said claims still had to be instituted against Fidentia directors “for the repayment of moneys to which they were not entitled” and that he could not predict how long litigation would take.
Critical to finalising the curatorship was the cooperation of Fidentia Holdings executive chairperson Arthur Brown, who was still “ducking and diving”. Sequestrated last September, Brown faces fraud and money-laundering charges.
Gihwala could not say what the Fidentia curatorship has cost to date. But Levin was more forthcoming: by August last year the Ovation curators had charged R3,4-million in fees, with additional costs to the company of R14,9-million for finance and administration, R1,2-million for forensic investigation, R1,5-million in legal fees and underwriting fees of R938 000.
Ovation differs critically from Fidentia because the curators took over and had to continue running a live operation. This greatly complicated his job, Levin said, but meant that portfolio values had grown in a buoyant market.
In two or three months he believed it would be possible to free up investments frozen on the Ovation platform.
“We may have to go to court and say: we’re giving investors their money back and the curators’ fees should come from this. But even if we take a slice, investors are going to come out roughly even — a very good outcome for them, given the initial situation.”
One of the curators’ major feats had been “to operate beneath the horizon”, Levin said. “We are dealing with 17 000 people whose investments are trapped and we had to act in a manner that didn’t scare the living daylights out of them.
“We’re almost at the point of freeing the investments without panicking the market.”
For the 5% of Ovation’s investors whose money was stolen, however, matters are likely to take considerably longer.
A number of court cases are pending aimed at recovering R200-million fraudulently diverted from Ovation into a maze of companies owned by Angus Cruickshank, with the assistance of a manager at Absa’s Booysens, Johannesburg, branch. Cruikshank killed himself in 2006 as the scam began to surface — rather fittingly, it is said, with rat poison.
Levin said Absa was refusing to take responsibility for the theft on grounds that the manager had acted beyond the scope of its business. He warned: “We’re going for them.” Court action was also planned against Santam, which had insured Ovation against theft, but was now advancing the “technical” objection that full disclosure was not made when the policy was renewed.
Papers had already been served on Metropolitan, underwriters of policies issued by Ovation on its behalf, who were also disputing liability for losses caused through theft. Levin said investments could not be unfrozen before Ovation’s accounts were fully reconciled, but that the books had been brought up to date to end-December 2007.
“The last time management accounts were prepared was in June 2006. There was a move to incorporate Ovation into Fidentia, which was supposed to take over the accounts, but that never happened.”
About 140 000 back entries had to be posted and reconciled, generating 20 000 new entries.
In pursuit of missing assets Levin said Cruikshank and another businessman linked to the Ovation failure, Attie du Plooy, had been sequestrated.
Crucially, there were moves afoot to dispose of the business to a reputable financial institution. Levin said a number of proposals had been received which he was discussing these the FSB.
Drew Forrest declares his interest: he has a policy on the Ovation platform
oz protects ‘mastermind’
Stephen Goodwin, who allegedly masterminded the robbing of widows, orphans and investors at Fidentia/Ovation, is suspected of moving R80-million offshore, says Ovation curator John Levin.
He said the shadowy Goodwin enjoys the effective protection of the courts in Australia, where he has absconded, but does not have permanent residence yet.
Levin said South Africa had an extradition treaty with Australia. However, Australia’s courts had ruled against the extradition of suspects on grounds that a prison term in South Africa amounted to a death sentence. The argument was that rape, with the attendant risk of HIV infection, was common in South Africa’s jails.
A curators’ report to investors last October accuses Goodwin of being “the main brain behind the frauds perpetrated on … Fidentia and Ovation”, saying that he worked with Fidentia’s Arthur Brown and suicide Angus Cruickshank. Goodwin operated in South Africa through an outfit called Worthytrade 185, which provided financial services without authority.
According to Moneyweb, Worthytrade received kickbacks from Fidentia in respect of transactions with the latter’s biggest clients, the transport Sector Education and Training Authority and the Living Hands Umbrella Trust, which distributed the Mineworkers’ Provident Fund money. Moneyweb said Fidentia made various offshore transfers, reporting one in particular: a $300 000 (R2-million) transfer by Fidentia Asset Management director Graham Maddock to a Goodwin-owned offshore instrument, International Finance and Investments Corporation, in January 2004.
Levin said Goodwin did not appear to have any assets in South Africa. — Drew Forrest