Two thirds of Fidentia fraudsters find a home in jail

Gareth Stokes, FAnews Online Editor

It’s almost three years since the Financial Services Board (FSB) first got wind of troubles at Fidentia Asset Management (FAM) and there’s still no resolution for the thousands of widows and orphans affected by the fraud. Despite numerous media reports, four arrests and two convictions we’re still in the dark as to how much money actually went missing. Will the curators ever publish a full account, we wonder?

In July 2006 FAM managed in the region of R1.63 billion for a variety of clients, including R1.287 billion on behalf of the Living Hands Trust. At the time the FSB said “an estimated R689 million of client funds were unaccounted for,” adding that the funds “were utilised for disbursements by the Fidentia Group [and principle accused Arthur Brown] and for the purchase of other assets not disclosed as part of the client portfolio!” In early 2007 the courts acted. Fidentia was placed under the control of curators and various arrests were made.

Two strikes for the justice system – and one pitch to go

Graham Maddock, the former Fidentia financial director, was the first to have his day in court. In early February 2008 he entered a plea bargain in which he agreed to testify in future court matters against Fidentia boss (Brown) and any other accused in the matter. Maddock was sentenced to 49 years – of which he will have to serve seven – after pleading guilty to 109 charges of theft, fraud, money laundering, conducting the business of a company recklessly or fraudulently and contraventions of the Financial Intelligence Centre Act. He also agreed to pay back the personal proceeds from his crimes – a mere R6.3m – to the Fidentia curators.

A year later, on 21 April 2009, former Fidentia director Steve Goodwin became the second high profile conviction in the ongoing saga. He was convicted on 36 counts of fraud, corruption and money laundering and sentenced to a total of 50 years in jail. According to the National Prosecuting Authority Goodwin will spend at least 10 years in jail after entering a plea bargain agreement ratified by the Western Cape High Court. Reports on Goodwin’s conviction include details of his flight to Australia in 2007 and his subsequent arrest and detention in the United States in April last year. Goodwin spent almost a year in detention in that country while the local prosecuting authorities fought for his extradition to face criminal charges at home. The 12-months he spent in detention in the US will count as part of this jail time.

We have three questions for South Africa’s legal minds. The first is why a person who fled from the South African legal process is treated with kid gloves by the South African courts. The second question goes to the amount Goodwin allegedly pocketed for his part in the crime. Experts say he might have benefited by as much as R32m, so why didn’t he have to pay any fines like his colleague in the first plea bargain? And the third: “If Goodwin, one of the masterminds of the Fidentia fraud, is only guilty of laundering R90m of investor funds, where did the rest of the alleged R1.4bn go?” Goodwin claims to have made full disclosures to secure a ‘soft’ sentence; but something in this matter doesn’t add up!

Brown waits his turn

All that remains is to see how kingpin of the operation, Brown, fares in court. To date little progress has been made despite his frequent court appearances. The curator of the Fidentia group of companies, Dines Gihwala is on record that Brown “lives like a lord here in Cape Town, [driving] around in a R2 million car, [living] in a multi- million rand house [with his] new girlfriend.” He says Brown “will definitely be prosecuted, and the beneficiaries will be paid out. It won’t be nearly as much as what they were entitled to, but they’ll get something.” Commenting after the Goodwin sentencing, Marius du Toit, director of Du Toit Attorneys, said Brown could end up with a 25-year sentence. “If you are the kingpin, you get a heavier sentence,” he said.

We will have to wait a while longer to learn Brown’s fate. Earlier this month the Western Cape Magistrates Court postponed the hearing on Brown’s Fundi and Infinity fraud and theft charges 13 August this year. Brown is currently petitioning the High Court to have all charges against him dropped – or for the consolidation of all charges into a single case. We trust the latter request will be granted.

Once the dust settles we hope the curators in this case publish a full account of the financial impropriety at the Fidentia (and related) companies along with a detailed breakdown of their billings for more than two years service. We’re sure such disclosure will bring another tear to the collective eye of the ‘long suffering’ widows and orphans…

Editor’s thoughts:
Whatever happens in this case we can’t help conclude that the larger the fraud the easier it is to ‘buy’ a stay of execution. High profile criminals either turn state’s witness to avoid hard jail time – or spend millions of their ill gotten gains smothering the courts with an array of legal challenges. Do you agree with a criminal justice system that allows high profile fraudsters to reduce sentences through plea bargaining? Add your comment below, or send it to gareth@fanews.co.za