Gareth Stokes, FAnews Online Editor
Much has been written about the battle between the Financial Services Board (FSB) and the companies Fedbond Participation Mortgage Bond Managers and Fedbond Nominees. The FSB fired its first salvo in August 2003 when it completed an inspection of the scheme. At the time there were approximately 11 000 participants with R75m invested in properties and a further R197m in various funds to protect scheme participants.
The second salvo followed in December 2003. The FSB launched a court application to place the Fedbond businesses under the control of a curator. The FSB says it initiated this action because it was unhappy with the mix of assets in the scheme (most of Fedbond’s assets were in properties in possession rather than bonds) and felt the scheme’s properties were worth slightly less than its liabilities to investors. A mentor was appointed to the business and new fund inflows were prohibited for the duration of the court proceedings. The final hearing was argued in October 2005 and the court ruled in Fedbond’s favour in December of the same year. In July 2007 – four years after the initial investigation – the FSB finally stepped down.
Regulator emerges unscathed
Once the dust settled Fedbond was free to continue its activities, provided various FSB conditions were adhered to. The only consequence for the FSB was a brief entry in its 2008 Financial Report. Fedbond investors’ endured untold financial hardship while its management and employees’ reputations were shot to hell.
In her book A Tiger by the Tail, author Eunice Afonso tells the human side of the Fedbond story. The book is based on extensive interviews with John Field (chief executive officer of Fedgroup), various players in the financial services industry, key Fedbond employees and members of the Field family. Afonso also spent countless hours pouring through reams of court documents.
An extract from the book reads:
John Field quietly placed the phone back onto the receiver. He wasn’t sure if the conversation should have been over yet, but the ominous voice on the other end of the line had long since trailed off. John leaned back into his leather chair with his mind in turmoil, struggling to come to grips with the single phrase reverberating in his head: “The Scorpions are coming!”
A vengeful rumour of the imminent collapse of Fedbond, John’s R1.6 billion partbond company, reaches the offices of the Financial Services Board (FSB), the financial industry regulator, who decide to intervene. John is astonished to hear that the FSB wants Fedbond to be placed under curatorship, a much-maligned remedy that has killed more companies than it has cured.
And so begins John’s four-year battle with the financial industry’s watchdog (the Financial Services Board – FSB) to retain control of his R1,6 billion rand participation bond company, Fedbond, and protect his investors’ money.
Reacting to an apparent vengeful tip-off, the FSB prohibits FedBond from accepting new investments from the public pending a court order for curatorship. Allegations of dishonesty, mismanagement, unlawful conduct and gross irregularities are rife in the press - yet another Masterbond saga they all claim. The scheme is termed “terminal” and in need of “intensive care”.
Curators can damage a business beyond repair
“From Masterbond to Fidentia, the misuse of the curatorship provisions has cost investors billions. With fortitude and tenacity, John takes on the FSB, refusing to deliver his company and his investors’ savings into the hands of a curator, who would ultimately sell it off piece by piece. FedBond continues to make full interest payments to its investors and remains cash flow positive throughout without taking in any new investments. Four years later, with seven court hearings and a Supreme Court appeal ruled in his favour, John is finally vindicated, but at what price?
“A Tiger by the Tail is a story of corporate vengeance, greed and victimisation portrayed through one man’s battle to uphold his integrity, competence and personal worth.”
A Tiger by the Tail is available at Exclusive Books at a recommended retail price of R150. The publisher has kindly supplied FAnews Online with five copies of A Tiger by the Tail. We’ll send a copy of the book to the first five emails that correctly answer the following question:
Who is John Field?
Send you answer and Name, Postal Address and Contact Number to editor@fanews.co.za
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