FIDENTIA. WHO WATCHES THE WATCHERS
The post-J Arthur Brown Plunder
In Brief
- The public scrutiny that followed the placement of Fidentia under Curatorship withered soon before the conviction of J Arthur Brown
- But with the placement of the company under curatorship, the coffers of Fidentia became the cow that got milked for the benefit of outsiders
- Unexamined records reveal that the Financial Services Board (now FSCA) has been at best, sleeping on the job, or at worst culpable as Curators run amok with assets, after all it became easier to blame the plunders including those predating the appointment of curators on J Arthur Brown.
We were mistaken to think that the jailing of J Arthur Brown in December 2014, years after his brainchild, Cape Town-based Fidentia Group, was placed under curatorship by the then Financial Services Board (FSB), would be the last we were to hear of the matter.
The recent fall from grace of former Fidentia co-curator, Dines Gihwala, piqued our interest as well as of those watchers of pilferage of workers’ pension funds across the country, particularly as many historic allegations had been made of highly suspicious and questionable behavior within the Fidentia curatorship. Granted, these allegations had been made by a diverse range of people including the convicted J Arthur Brown. However, they also included a group of investors, and a forensics investigator Paul O Sullivan.
The allegations were brushed off by the curators and FSB as all part of a smear campaign orchestrated by J Arthur Brown. At the time, who wouldn’t believe such a statement. It was a question of credibility. On one side, were FSB and a lawyer, Dines Gihwala; an ex-acting judge, Chairman of one of South Africa’s largest and leading law firms (Cliffe Dekker Hofmeyer), director of multiple JSE listed companies and pillar of the community; while on the other side, was J Arthur Brown, the man who had been charged with multiple counts of theft and fraud against deceased mineworkers and their families (the widows and orphans as they infamously became known)? It was a contest of David and Goliath proportions.
The façade of Gihwalas and the FSBs respectability started to slip a year after Brown was finally convicted and sentenced at the Western Cape High Court on May 2013. Unfortunately to the utter dismay of Gihwala and friends at the FSB, Brown, who allegedly stole hundreds of millions of Rands, received a fine of R150,000 and a suspended sentence. Many authoritative figures, including SAPS and NPA, were left with serious eggs on their collective faces and an Appeal was an obvious next step.
Fast forward slightly to June 2014 and the resignation of the FSB’s Chief Financial Officer, Dawood Seedat. Unfortunately for Seedat, he was reportedly filmed placing two boxes containing R2,000,000 in cash, as part payment of an alleged bribe totaling R12,000,000, into the boot of his car, the filming of bribes being collected, despite making it to the pages of some dailies, never got much traction. And unless you are Donald Trump, videos do not lie. It was the same Seedat who had given evidence in mitigation against Brown the previous year. Later that month, (the 26th June 2014, to be exact), Gihwala was declared by the same Western Cape High Court to be a delinquent director and as a result, was forced to resign as co-curator to the Fidentia Group of Companies.
The Fidentia saga was having an unfortunate sting in the tail for the FSB. However, in December 2014 they were finally able to rejoice when the Supreme Court of Appeal overturned the previous year’s verdict against Brown and he was given a 15-year sentence, which he is presently still serving. Armed with this news, and the furore surrounding Seedat and Gihwala having obviously died down, the FSB could breathe some sigh of relief. Surely there could be no more skeletons in the Fidentia’s closet to haunt them. Or so we all thought. And weren’t we all wrong!
But nearly five years later – long enough time for a political parliamentary term, on January 29th 2019, in a scathing judgment handed down by Hon. Judges Mark Sher and Boqwana, Gihwala, was struck off the roll of attorneys. In the judgment, the learned judges found Gihwala “guilty of numerous acts of serious misconduct, committed over a period of many years, including acts which amounted to misappropriations (otherwise called ‘fraud’)”, “had unlawfully enriched himself to the tune of millions of rands” and “had been guilty of various acts of dishonesty, breach of integrity and failed in his fiduciary duties”.
We must mention that none of the aforementioned acts of theft, dishonesty and breach of integrity, were in relation to Gihwala’s tenure as co-curator of Fidentia. But as the saying goes, a leopard never changes its’ spots, hence, we thought we could give it another examination.
Fortunately for stakeholders, the original Court Order of February 2007 placing Fidentia Group under curatorship stipulated a high degree of transparency. This resulted in a requirement for regular publications of curators’ reports on the FSB (now the Financial Sector Conduct Authority or FSCA) website and the filing of the same with the Western Cape High Court. Hence, we decided to scrutinize the most recent of reports, and we were astonished at the content therein.
The curators' 16th report to the high court, dated 30th January 2017 on page 39 indicates various legal billing anomalies to such an extent the curators could have a claim against Cliffe Dekker Hofmeyer (CDH) in an amount of R12,600,000. In view of such serious allegations the remaining curators instructed Fairbridges Wertheim Bekker to write to CDH and request further documents. In response, CDH denied there had been any double accounting stating, “all transactions were fully accounted for and all payments made on the instructions of the curator (in particular Dines Gihwala – read as former chairman of our the law firms) who was attending to matters at the time.”
The 16th report indicated the staggering sums generated by the Fidentia curatorship for Gihwala and the law firm where he was the past Chairman as R16,110,111 and R49,335,008 respectively. These amounts excluded the R3,972,000 paid to Gihwala for his consultancy fee from the Bermuda registered Global Distressed Alpha Fund 3 Partnership Limited.
The 18th curators’ report, dated 29th June 2018, indicated the potential claim of R12,600,000 against CDH is still in play and the next report to the Western Cape High Court is due by May 31st 2019. We hope to be able to peak into it when the report is filed.
Considering the fall from grace of Dines Gihwala and the evidence of his dishonesty and duplicity, isn’t it conceivable the R12,6m claim against CDH could just be the tip of the iceberg? Are allegations of past sales of Fidentia assets and properties at substantial discounts to Gihwala’s acquaintances worthy of further examination? Aren’t reports in 2007 and 2008 that beneficiaries were not receiving their stipends worthy of further investigations? Have curatorship bank statements been independently examined and analysed? Why were curators allowed by the appointing authority (FSB, now FSCA) to appoint their own legal and accounting firms?
Had these happened in the public sector, we would all be screaming for some political blood to be spilt. This makes a mockery of the pledged transparency at the time of the placement of Fidentia Group under curatorship. What is surely the point of making the reports to the high court when no efforts are in place to interrogate them?
Has the FSCA fully conducted its oversight function over various curatorships and accounted to the public or is it seriously ready to inspect the behavior of curators and act upon allegations rather than shouting in unison with them that it’s all a smear campaign? All the current commissions of enquiry (State Capture, NPA, PIC and maybe more to come) were derided years ago by their architects as smear campaigns; but considering what has been unearthed by the men and women of these commissions, the alleged smear campaign deflection by FSCA and the appointed curators will not distract us from further examinations of the availed records.