A former investor in the Highveld Syndication (HS) schemes has laid criminal charges related to the alleged illegal transfer of more than R1 million due to certain former HS investors, from an attorney’s trust account to Orthotouch by the business rescue practitioner (BRP) of Orthotouch and Zephan.
Robert Black, a former HS investor, alleges in an affidavit, that Jacques du Toit, the BRP of the two companies, unlawfully authorised the transfer of approximately R1.12 million from an attorney’s trust account to Orthotouch. He alleges Du Toit had no authority to transfer the funds to Orthotouch, as the funds were due to investors and Orthotouch has no legal right or claim to the funds.
“The inevitable inference … is that there exists a clear intention of some of the roll (sic) players to misappropriate the funds,” he states.
Black filed criminal charges with the police (Douglasdale CAS 157/7/2020) and circulated his affidavit and supporting documents to various regulatory bodies.
Du Toit, via his attorney Johan Victor, vehemently denies any wrongdoing. In response to Moneyweb questions, Victor says the funds are managed and treated in terms of the provisions of the Companies Act and the business rescue proceedings of Orthotouch and Zephan. “It is clear there is an intentional smear campaign and the creation of suspicion to derail the business rescue process of the companies.”
Victor added that his client is preparing a summons for defamation and slander against Black and his attorney. (A summary of Du Toit’s response appears below. Read the full response here.)
Origin of the R1.12 million
The R1.12 million flows from a controversial 2018 decision by Zephan, owned by Nic Georgiou, to terminate all interest payments to around 4 500 investors who were deemed to support legal action against Georgiou and entities related to him, as well as the class action application.
The 4 500 investors amounted to nearly half of the 11 000 investors who were eligible for interest payments in terms of the Section 155 Scheme of Arrangement (SoA).
Derek Cohen was the receiver of the scheme at the time and had the responsibility of ensuring that investors were paid in terms of the SoA. He demanded that the interest due to the 4 500 investors be paid into an attorney’s trust account, over which he (as the official receiver) had full control.
However, Cohen resigned as the receiver in 2018. In terms of the SoA, his resignation should have compelled Zephan and Orthotouch, as the proposers of the scheme, to convene an investor meeting to appoint a new receiver. This never happened, which means there is currently no receiver.
Cohen confirmed to Moneyweb that Du Toit recently approached his attorney to release the funds. “My attorney told him I have resigned as the receiver and that only a newly-appointed receiver would be able to release the funds.”
Cohen said in his opinion there could be a breach of the scheme.
“To maintain that the funds belong to Orthotouch may be incorrect. When funds are transferred from Zephan to Orthotouch they are done so to be distributed by Orthotouch on Zephan’s behalf under the control of the receiver.”
The flow of funds and lack of disclosure
Black states in his affidavit that the money was initially held in the trust account of Carol Coetzee attorneys, but was later transferred to that of O’Donovan Attorneys.
According to Black, Du Toit instructed O’Donovan Attorneys to transfer the funds to Orthotouch; they were duly transferred on April 1 this year.
The R1.12 million is not listed as an asset in the business rescue plans.
In fact, the plans do not refer to the amount at all.
Dr Gert Holtzhause, a member of the creditors’ committee, confirmed to Moneyweb that Du Toit did not disclose the transfer of the R1.12 million to the committee. It was also not disclosed in a status report Du Toit distributed to investors.
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Black states in his affidavit that Orthotouch had no right or claim to the funds, as they belong to investors.
Black’s conclusion is that the money may have been misappropriated and demands that this matter be criminally investigated.
Response from Du Toit
Moneyweb sent detailed questions related to the transfer of the funds to Du Toit. He did not provide detailed answers to these questions but offered a generic response through his attorney, Victor.
In this response, Du Toit vehemently denies any wrongdoing. Victor says in the response “it is clear there are an intentional smear campaign and the creation of suspicion to derail the business rescue process of the companies”.
Victor emphasises that “the money has anything but disappeared and is managed and treated in terms of the provisions of the [Companies] Act”.
“But, bear in mind that if there are an alleged 18 000 claimants who want to lay claim on the R1 million, according to our calculations, each investor will receive R55 from the pot. This is to say that if a court finds that they are entitled to money, and it would be payable to all parties.”
Victor also referred Moneyweb to a legal letter he sent to Ilze Eichstädt (Black’s attorney), in which he “categorically denied that the funds were irregularly transferred to Zephan’s account”.
In a second letter to Eichstädt, Victor furthermore states “the Cohen Funds (the R1.12 million) is the property of the companies in business rescue and will be dealt with as such in terms of the provision of the Company’s Act and the published business rescue plans”.
Victor also states in the letter that: “Your preposterous allegations that our client ‘intended to steal/misappropriate the funds’ is defamatory in the extreme and the necessary steps against you will be taken unless you forthwith retract this libellous accusation.”
Victor also confirmed to Moneyweb that a summons for defamation and slander has been prepared and will be served on Eichstädt and Black in due course.
Victor added that since Black laid criminal charges, the case is now sub judice and that Du Toit “will not respond currently and does not want to become involved in public mudslinging”.
Victor also stated that the industry body Saripa (the South African Restructuring and Insolvency Practitioners Association) had requested that Du Toit respond to Black’s affidavit by August 14, which he will do.
- This article has been amended since publication to rectify an error. In the original article, it was stated that several individuals, including Hans Klopper, Connie Myburgh and Panagiotis Kleovoulou were directors of Orthotouch when funds were transferred from an attorney’s trust account to Orthotouch. This is incorrect. These individuals resigned from the board before the transfer of the funds. Moneyweb regrets the error. Klopper also sent a legal letter to Robert Black in which he cites factual inaccuracies in his affidavit. This letter can be accessed here.