The Fidentia saga drags on
True to financial scandals of this magnitude, the Fidentia debacle continues to play out in South Africa’s courtrooms almost a year after the massive fraud first unfolded in the media. Although some arrests have been made, the kingpins behind the scheme have yet to be brought to book.
So far ex Fidentia boss J Arthur Brown and his financial director Gordon Maddock have appeared in court on a variety of charges. These include allegations of fraud and theft as well as contraventions of a number of Acts – the Companies Act and the FAIS Act among others. They are currently out on bail of R1 million each. ‘Accomplices’ have been identified and charged too. Case in point is the arrest of TETA head Piet Bothma, who allegedly solicited payments of approximately R5 million in return for investing TETA funds with Fidentia. Bothma is cooperating with the state and is also out on bail.
The real worry is that the state is still trying to ‘talk’ to a key figure believed to be the mastermind behind the scheme. Steven Goodwin is the man behind a company called Worthytrade which acted as a vehicle for a number of Fidentia’s questionable financial transactions. Goodwin left for Australia shortly after the scandal broke and subsequently flew to London instead of returning to South Africa.
Going after Brown’s personal assets
Since February 2007 Fidentia curators George Papadakis and Dines Ginwala have made significant progress in tracking the missing millions. They are on record that they now know where every cent has gone – and that apart from the millions blown on lavish corporate events and wages – are in negotiations to ensure they recover as much as possible. Unfortunately some parties are less willing to cooperate than others.
The latest development in the case is that the curators have obtained a Cape Town high court order for the sequestration of the joint estate of Brown and his wife Susan. The order was granted yesterday in response to the curators assertions that the Browns owe Fidentia more than R24 million in their personal capacities.
Ruling on the matter, Judge Dennis Davis stated that the Fidentia case provided “an exemplary case” where provisional sequestration would advantage creditors. He noted that Brown had not explained the alleged debt (owed by Brown to Fidentia), nor proved that there were no loan accounts in his name on Fidentia’s books. Davis’ ruling is based on the reasonable assumption (in the absences of evidence to the contrary) that Brown’s estate was in fact insolvent. The court order thus secures what remains of the estate for Brown’s creditors – namely Fidentia.
Network investment schemes cash also invested
And today FinWeek weighed in with an interesting story on network marketing company Baltron. This company encouraged savers to invest either R200 or R500 per month through a product called Savetron, which contributions automatically escalated by 10% per annum. Contributions were consolidated and invested to provide savers with a reasonable return.
It has since emerged that Baltron invested in the region of R45 million of Savetron funds with Fidentia in 2004. The funds had previously been invested with BOE. This has resulted in a number of Savetron investors being unable to access their savings, as the Fidentia group is under curatorship. Although FinWeek was unable to obtain conclusive answers from Baltron management, it appears new deposits to Savetron are being pooled and invested with Metropolitan.
Much has been written about the Fidentia scam and the curator’s valiant efforts to retrieve funds for the many affected widows and orphans. What concerns us is nothing has been written about the long-term impact of the scandal. It hardly matters that the curators are scraping together enough loot to honour the fund’s monthly commitments when the capital is largely gone. No matter how much they recover, the long-term intended objectives of the fund will never be achieved.
Editor’s thoughts:
Recovering Fidentia’s lost millions is fine and well. But these funds needed to be gainfully invested to ensure continued payments to the intended beneficiaries. Are the curators doing enough to re-invest recovered funds to provide long-term payments to the beneficiaries of the Living Hands Trust? Post your comments online or send your comments to [email protected]
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