Investec dealt blows in corporate feud

Investec has received two blows in its heated feud with provisionally liquidated construction company MKB.

The first came at the beginning of March when the Master of the South Gauteng High Court ruled in favour of an application brought by MKB at the end of 2010 to remove the joint liquidators appointed to wind up MKB’s estate.

In the application MKB claimed the liquidators had not been forthcoming with details about MKB’s assets and the sale of those assets.

The Hyde Park property

At issue is a Hyde Park property MKB bought in 2008 from Xeedan Property Limited, a company that formed part of property tycoon Zunaid Moti’s Abalengani group.

MKB also claimed that one of the joint liquidators, Allan Pellow, had a conflict of interest arising from his directorship of liquidation managers Westrust, which is half-owned by Investec. It also argued that Investec had a relationship with Moti and that formed part of this conflict.

Both Pellow and Investec have denied any conflict. Pellow’s attorney, Alec Brooks, told the Mail & Guardian the liquidators would bring a review application challenging the removal of the liquidators.

The second blow came shortly before the liquidators were removed, when former MKB director Jonathan Molyneux-Killik laid a complaint against Investec at the Sandton police station in February.

The commercial crimes unit is now investigating an allegation of fraud, the Sandton police told the M&G this week.
Investec denies wrongdoing.

The feud’s origins

The feud between MKB and Investec began at the end of 2008, when Xeedan allegedly stalled on signing the transfer on the Hyde Park property, at 44 Morsim Road, to MKB, which had bought it for R10-million.

Before the transfer had gone through, Investec brought an application for the liquidation of MKB Companies. In December 2008 the Master of the High Court put MKB into provisional liquidation.

The application for liquidation was brought shortly after Investec had granted MKB a loan of R40-million to develop four clusters on the Morsim property MKB had bought from Moti.

It later emerged in news reports that Moti owed Investec about R1.5-billion and was unable to meet his commitments. He reached a settlement deal with Investec whereby the bank took over most of his assets.

According to Molyneux-Killik’s affidavit before the South Gauteng High Court in MKB’s application to remove the joint liquidators, the alleged fraud arose when the Morsim property was taken out of the liquidation pool of MKB’s estate.

It was then transferred into a shelf company belonging to Investec, called TP Hentiq 6159 Pty Limited, the affidavit said.

MKB claimed in court that the Morsim property was illegally transferred because Investec knew MKB had in fact bought the property in 2008.

A deeds search conducted by the M&G showed that Morsim Road was transferred to Investec on January 28 2010 at a price of R6.17-million.

In response to the M&G‘s queries on Wednesday, Investec’s head of investor relations, Ursula Nobrega, said: “The commercial arrangements entered into between Investec, Xeedan Property Investments (Pty) Ltd and TP Hentiq 6159 (Pty) Ltd cannot be disclosed due to bank-customer confidentiality.”

But it was “common market knowledge” that the bank had “acquired a number of property assets from Xeedan Property Investments (Pty) Ltd [Moti’s company] on an arms-length basis”, Nobrega said.

The Morsim Road property formed part of this portfolio of properties which helped settle Moti’s loans, Nobrega said.

Both the liquidators and Investec have previously denied—as did Nobrega again this week to the M&G—that the property ever belonged to MKB and have claimed it was therefore never part of the liquidated estate.

Pellow’s attorney Brooks told the M&G: “The Morsim property was not, at the date of liquidation of the MKB Group, an asset in the group.”

Brooks said that, in fact, in February 2009, former MKB director Andrew Botha “confirmed to one of the liquidators that they ‘were looking at acquiring the property’ but the deal never went through”.

Molyneux-Killik told the M&G this was not true.

MKB’s court application to have the liquidators removed by the Master claimed that the joint liquidators had not acted in the “best interest of creditors and our clients in particular”. The liquidators were “having regard only to the best interest of Investec Bank”, the application said.

These claims are also included in the allegations of fraud the police’s commercial crimes unit is investigating since Molyneux-Killik laid his complaint against Investec with the police in late February.

Molyneux-Killik’s affidavit said MKB bought and paid for the Morsim Road property and this was evident from the signed agreement of sale and the signed “rearrangement agreement” between Moti and MKB in June 2008. In documents the M&G has seen this “rearrangement agreement” was reaffirmed in a further agreement in August 2008.

Did Investec know?

Correspondence the M&G has seen suggests Investec knew about the rearrangement deal and a delay on Xeedan’s side in signing the transfer.

But Investec’s Nobrega told the M&G: “It is clear that MKB Property Developments (Pty) Ltd was not the owner of 44 Morsim Road at the date of liquidation.”

She said information from the liquidators suggested Investec was advised by former MKB director Andrew Botha that “the Morsim Road transaction did not proceed and that the property accordingly could not be transferred to MKB”.

But in an email dated October 14 2008, copied to Investec’s Annabelle Currie, Investec’s bond attorneys, Strauss Scher Attorneys, wrote: “In view of the fact that there are no guarantees to be issued, I am waiting for the seller [Xeedan] to settle the amount owing under the existing bond in favour of Investec bank. I am also waiting on them to sign the transfer documents.”

A Government Gazette notice dated September 5 2008 said that “Xeedan Property Investments (Pty) Limited at 44 Morsim Road, Hyde Park, hereby gives notice of the sale and transfer 30 (thirty) days after publication hereof to MKB Property Developments (Pty) Limited”.

Nobrega categorically denied that Investec or any agent, director or employee of Investec had acted improperly in any manner whatsoever. “The allegations of fraud are untrue, defamatory and wholly unsupported by any facts,” Nobrega said.

The M&G Centre for Investigative Journalism, supported by M&G Media and the Open Society Foundation for South Africa, produced this story. All views are the centre’s. www.amabhungane.co.za.

Sally Evans

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