Curators confirm that a massive Fidentia loss is inevitable

The curators in charge piecing together what remains of investors money at Fidentia had sobering news for the Parliaments standing committee on public accounts earlier this week. Dines Gihwala and George Papadakis confirmed that despite their best efforts

of the funds they entrusted to Fidentia Asset Management.  When the final accounts are tallied, the total loss to South African investors could approach R1 billion, making the Fidentia fiasco one of the biggest financial scandals in the country's history.

Papadakis told the committee that distributions of recovered funds would start in January 2008 and would probably only be finalised by December of the following year. Apart from the certainty of a significant loss, investors can be sure of a long wait before receiving their share of the recovered funds.

Limited success in tracing assets

FAnews Online marvels at how easy it is to make money disappear in the twenty first century. It appears the masterminds behind the Fidentia affair have simply whisked the misappropriated funds into the murky world of numbered accounts using a combination of fund transfers and a mix of local and offshore corporate structures. Despite the raft of modern technologies available to forensic auditors the curators have indicated that the majority of funds are untraceable.

Unable to trace the money which has obviously made its way offshore, the curators are left snatching at the relatively insignificant assets which remain in South Africa. An example is Gihwala's recent attempt to seize two Sunset Beach properties which were allegedly purchased by Brown using Fidentia funds. The court ruled against the curator and the properties remain in Brown's possession for now. Even so, the R20 million Gihwala hopes to recover by attaching these properties is a drop in the ocean when compared to the total loss.

And in chasing such scraps the curators are incurring huge administrative and legal fees. The committee was told that costs for the four months to June 2007 had already reached R4 million rand. The seeming lack of cooperation from Brown, his co-accused Maddock and suspended TETA chief executive Piet Bothma means that additional legal costs are inevitable. And if the curators need till December 2009 to wind up the company's affairs, investors will ultimately foot close to R30 million more for Brown and associates alleged indiscretions.

Even knowing where the scraps are is of limited use

Papadakis recently told MoneyWeb that the curators "know where every cent is and who has got it. Some have offered to repay; others are choosing to fight us." On closer inspection Papadakis is referring to only R100 million or so of the missing funds. The suggestion is the rest of the money has already been spent on lavish entertainment and corporate spending sprees. Our contention is that apart from having burned the money, there is no way that close to R1 billion has been frittered away. Surely it should be possible to trace and recover well in excess of R100 million from individual transgressors?

While Brown, Maddock and Bothma face the music in South Africa, another alleged kingpin in the Fidentia operation is hiding out, possibly in Australia. Both the National Prosecuting Agency and curators are eager to question Steve Goodwin in connection with various financial transgressions.

Goodwin was involved in many of the close corporations and shell companies that later formed part of the Fidentia group. His company Worthytrade 185 (Pty) Ltd received a number of commission payments from Fidentia group companies, some in excess of R10 million. It appears these commissions were quickly whisked offshore.

Some way to go in the fight for global morality

A final thought is whether or not individuals should still be allowed the financial freedom to benefit so easily from illegally obtained funds. Numerous instances of graft, bribery, fraud and corruption are indicative of how many international countries still hold the sanctity of financial transactions over the rights of the victims of crime.

Until these countries are pressured to cooperate with international investigators the opportunity exists for perpetrators to stash away their ill gotten gains to enjoy at their leisure later in life.

Editor's thoughts:
Early indications from the curators appointed to run and manage the Fidentia group of companies indicate that as much as R1 billion is unrecoverable. The curators appear to know the identities of people who hold a tenth of this amount. Do you believe that the remaining R900 million has been spent on lavish corporate lifestyles? Or has this money been creatively laundered and tucked away in offshore accounts belonging to the accused and other un-named individuals? Send your comments to gareth@fanews.co.za