Fidentia rot revealed in court

The revelations, writes E-Brief News, coincided with leading businesswoman Danisa Baloyi, a director of Fidentia and one of the people at the centre of the scandal, taking the drastic measure of quitting all of her public positions.

Curators Dines Gihwala and George Papadakis said in their report that ‘since assuming control and management of Fidentia’, they had ‘established a multiplicity of wrongdoing, both of a criminal and civil nature’. Directors, shareholders and ‘other closely associated individuals and entities’ have been fingered for the evils, though not all the individuals are named in this report, notes Moneyweb. Among the litany of alleged irregularities noted was that Fidentia Holdings used R94m of Living Hands money to pay for Living Hands (Pty) Ltd – a move which meant the administration company was acquired with stolen money. The transport skills education training authority (Teta) investment is only recorded in Fam’s books as an amount of R100m, but R200.3m was ‘actually received into director Graham Maddock’s trust bank account’. It is uncertain whether the full amount is the property of Teta. However, only R100m was later transferred to Fam. Company boss J Arthur Brown is believed to have stolen at least R13m directly from an amount reflected as an asset in the ‘private-equity portfolio’ as the money was paid straight into his bank account. Shortly before curatorship, Maddock – on the instructions of Brown – transferred R5.5m of clients’ money from one subsidiary to pay Holdings’ staff salaries and related expenses. ‘This is theft,’ said the curators. Brown, it appears, allegedly committed theft and fraud when Facets was bought for R18m using investors’ funds for a business run by his wife, Susan. Both Brown and Maddock have been released on bail after appearing in court on fraud and theft charges. Full Moneyweb report

The report was presented in court where a curatorship order against Fidentia was made final by the judge, according to a report on the IoL site. The company was placed under provisional curatorship at the beginning of last month, after a Financial Services Board (FSB) probe reported alleged misappropriation of hundreds of millions of rands. ‘The curatorship order is made final now, which means we can act more decisively and get on with the process of establishing where the assets are,’ Gihwala said. ‘It\'s quite complicated. In terms of our preliminary findings there are any number of assets which seem to be in the names of other entities, and we still have to connect that, and there may be a fight in terms of who really owns what, and where the money came from. Full report on the IoL site

Gihwala also revealed that beneficiaries of the looted Living Hands fund, who include widows and orphans of miners, will be paid in full this month. This is possible because the South African Revenue Service (SARS) agreed to repay R20m in VAT. This came after the curators managed to reverse an alleged fraudulent transaction. The VAT was paid as a way to ‘legitimise’ an alleged unlawful asset swap transaction, so SARS has agreed to the refund. Full Moneyweb report

Details have emerged about how a corrupt Absa employee helped launder many millions of rands allegedly belonging to clients of Fidentia, Ovation and Common Cents have come to the fore in court documents, says a report on the Moneyweb site. According to the papers, filed in support of the sequestration of the estate of former Milkworx chairperson Angus Cruickshank this week, the investigations of curators of Fidentia say they believe a former employee was bribed to help launder R219m through three Absa accounts in the second half of 2005. Full report on the Moneyweb site

Investors would face an estimated shortfall of about R1bn once Fidentia’s affairs have been sorted out, according to a report in The Citizen. The curators say they anticipate Fidentia’s assets will probably realise R400 to R500m, against investors’ claims of about R1.4bn. ‘There is also evidence that money has been transferred offshore,’ they say. ‘It is not certain whether such transfers were effected with the necessary authority. This investigation continues.’ Gihwala said that ‘optimistically’ it would take two to three years to finalise the matter. ‘It’s going to be a long, drawn-out process.’ Full report in The Citizen

One of the personalities at the centre of the scandal, businesswoman Danisa Baloyi, has quit all her public positions with immediate effect. A report by the Financial Services Board (FSB) in January fingered Baloyi for a ‘material conflict of interest’ as she was a shareholder and official of Fidentia, as well as a trustee of Fidentia’s largest client, the Living Hands Trust. Baloyi in effect owns 10% of Fidentia. Last week, banking group Absa fired Baloyi over the scandal, and on Tuesday Baloyi quit four more JSE-listed companies – Set Point, Metrofile, Enterprise Risk Management and hotel chain the Don Group, notes Business Day. Baloyi said in a statement that she would be totally withdrawing from public life until the Fidentia matter was resolved. Besides the four JSE-listed companies of which she is a director, she is also the chairperson of the Advertising Standards Authority, the National Skills Authority, the share trust for Telkom employees, and Medikredit. She also sits on the board of SA Tourism, the Southern African Enterprise Development Fund and the South African Council on HIV/AIDS. Baloyi’s resignation also comes in the wake of a report on the ITInews site which cast doubt on Baloyi’s claim that she has a doctorate in education from Columbia University in the US. While Columbia confirmed to ITInews that Baloyi had enrolled in the doctorate programme, the university said it had no record of her having completed it. Full Business Day report Read Danisa Baloyi’s letter of resignation on Moneyweb site

But the Baloyi saga has also put the spotlight on company directors and how seriously they take their fiduciary duties. Baloyi’s decision to take legal action against the Absa has raised a host of issues relating to the responsibilities of company directors in SA, notes Business Day. Among the reasons for her dismissal was the obvious conflict of interest: According to the registrar of companies, Baloyi was listed as a director of more than 70 companies. She also served, on the boards of several listed companies other than Absa. When would she have had the time to apply her mind to Absa’s business, asks the editorial. Fiduciary duties need to be taken seriously; if companies cannot ensure that happens voluntarily, the next step is regulation of directorships and severe penalties for those who shirk their responsibilities. Full Business Day editorial