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Orthotouch receiver turns to the courts

Follows decision by Zephan to withhold interest payments to around 4 500 investors.

The receiver of the Orthotouch scheme, Derek Cohen, is on the verge of applying for a court order to compel Zephan, owned by property magnate Nic Georgiou and the financial underwriter of the scheme, to punctually pay investors the monthly interest due to them.

Cohen said in an interview with Moneyweb this week he has no alternative but to turn to the courts after Zephan did not pay interest due to around 4 500 of the investors in July, which is in contravention of the conditions of the scheme.

Cohen said he is aware that the payment of interest was withheld from those investors who haven’t yet completed a form issued either by Orthotouch or Zephan to indicate their support or rejection of the legal challenges against the scheme and Georgiou.

Cohen also revealed that he notified Zephan and Georgiou on numerous occasions since March last year when the monthly interest due to investors was not paid punctually by the 7th of the month as prescribed by the scheme of arrangement. These notifications were via numerous lawyers letters.

Derek Cohen has years of experience in banking and finance. He was also one of the founders of Mercantile Lisbon Bank in South Africa, as well as its managing director. He is a director of Regal Treasury Bank, Octodec, and several other companies. Cohen also runs his own consultancy DP Cohen and Associates which specialises in mergers, acquisitions, and corporate finance related issues. He is the receiver of Orthotouch.

Georgiou response

Before publication, Moneyweb sent questions related to the non-payment of interest to investors to Nic Georgiou who controls Orthotouch and Zephan. Georgiou responded that he didn’t have sufficient time to answer the questions, but stated that: “I am also concerned that as to the questions asked, in that it would appear as the questions are being posed to achieve some or other stratagem, in support of litigants in the various litigation matters. To be frank, the questions make no sense in the context in which they are being posed.”

Moneyweb offered Georgiou additional time to provide answers to the questions, but he did not respond. Read his full response here.

Months of uncertainty

Cohen, who has a finance and banking background, was nominated to become the receiver by Connie Myburgh, a director of Orthotouch and the chairman of Nova, the rescue vehicle of the failed Sharemax investment scheme. Cohen was appointed as the receiver when investors approved the scheme of arrangement. He is also the trustee of the Nova Debenture Trust. During the interview, Cohen described how his role as receiver became challenging in the extreme.

“It started with the numerous legal actions against the scheme, which if successful, will affect the integrity of the scheme. Added to this has been the issue of late monthly interest payments and more recently when Zephan unilaterally decided to withhold interest payments to investors who, inter alia, support the legal challenges of the Highveld Syndication Action Group (HSAG) and advocate Louis Bolt.”

(The HSAG is seeking certification for a class action and the rescission of the scheme, while Bolt applied for the liquidation of Zephan. This application follows several default judgments, which compelled Zephan to repay the capital and interest to individual investors in terms of their original Highveld Syndication investment contracts.)

Hans Klopper, director of Orthotouch and the business rescue practitioner of the HS Syndication companies.

Duties and responsibilities of the receiver

Cohen explained that his role as receiver is simply to ensure the implementation of the scheme, which includes that the monthly payment of interest and the agreed capital repayments due to investors under the scheme are paid and to protect the integrity of the scheme.

“My job is purely administrative. I am not a director of Orthotouch, Zephan or any of the operating companies who must generate cash to pay the investors. I have no insights into their financial position and have no fiduciary duties,” Cohen said.

Flow of funds

In terms of the scheme, Zephan through Orthotouch needs to make monthly interest payments to investors. The directors of Orthotouch are Nic Georgiou, Myburgh, and Hans Klopper, the business rescue practitioner of the HS Syndication companies. Zephan is the underwriter of the scheme. Georgiou owns the company and is the only director.

Late payment of interest

In terms of the scheme of arrangement, payments must be made before the 7th of the month, but since March last year, the majority of payments were made after this date. In some cases, investors only received their interest as late as the 20th of the particular month.

Cohen said this changed his role significantly. “I became a litigator, which I never wanted to be. I have become a policeman because I had to instruct my attorneys to regularly write letters to the responsible parties to place them on terms to try and ensure compliance. Thankfully these letters had the desired effect because until July all interest was paid despite sometimes being late.

“It is a huge dilemma. I have the authority to go to court and ask a judge to collapse the scheme due to the non-compliance by the responsible parties for not meeting the condition to pay the interest by the 7th or capital on due dates. The other option was to use my discretion and wait until the monthly interest was paid. The interest may have been late, but at least it was paid.”

Cohen stated that these actions prove he “always acted independently never acted on behalf of Orthotouch, Zephan or Nic Georgiou. …When HSAG in its latest newsletter claims that I am in cahoots with Nic Georgiou and others, it is unsubstantiated rubbish.”

Connie Myburgh, director of Orthotouch and chairman of the Nova Property Group.

Non-payment of interest

According to Cohen, the situation changed dramatically in May when Zephan sent a form to investors to complete to formally indicate their support for the HSAG and the actions of Bolt.

Cohen said Zephan made it clear to him that the supporters of the legal challenges would not receive any further monthly interest payments, as it was deemed to be unfair towards the investors who support the scheme and that those who support the legal challenges should not benefit from interest payments.

Cohen said he informed Zephan that the scheme doesn’t allow for interest payments to be withheld, and that the interest due to investors who support the legal challenges should be paid into a trust account under his control subject to an advocate’s opinion. This proposal was accepted and the opinion received.

Peculiar letterhead

But in July the situation escalated even further. On July 10, a letter on an Orthotouch letterhead informed investors that interest payments for July would be delayed due to the administrative process involved in verifying which investors supported the legal challenges and which didn’t. It also stated that investors who didn’t complete the form would not receive interest.

However, Orthotouch issued another statement two days later, which bizarrely insisted that the letter of July 10 was “incorrectly and erroneously” distributed on an Orthotouch letterhead. Orthotouch didn’t offer any reason for this or clarify under whose authority the letter was sent. An SMS sent to investors a few days later, apparently from Zephan, confirmed the core message of the July 10 letter.

Investors of the HS Syndication attending the shareholder meeting to vote on the proposed Section 155 Scheme of Arrangement in November 2014.

Cohen said he was not informed beforehand about the letter of July 10 or the SMS. “I was never consulted about this. The delay in the payment of the July interest was an arbitrary decision taken presumably by Orthotouch and or Zephan without my prior approval or knowledge.” He added that this triggered another legal letter in which Cohen put Orthotouch and Zephan “on notice” to pay the outstanding interest in July.

Derek Cohen (right) at the shareholders meeting in Irene held in November 2014 where the Section 155 Scheme of Arrangement was approved.

Interest due to investors who did not fill out the form

The situation deteriorated even more when Cohen realised that the interest payments due to investors who did not complete the form were not only withheld but were also not paid into the designated trust account.

“This is an entirely different scenario,” said Cohen. “Before, the interest was just paid late. Now money is being withheld. In addition, my advocates are now drafting papers to obtain a court order to compel Zephan to pay the funds into the trust account.”

It is unknown how many investors did not complete the form. Cohen says it is a number of around 4 500 investors. Cohen confirmed that the July interest due to investors who completed the form in May or June was indeed paid into the trust account.

Jacques Theron, legal representative of the HSAG.

HSAG response

Jacques Theron of Theron and Partners, who acts on behalf of the HSAG, said the threat to withhold payments is blackmail and that the HSAG will go to court if needed. “Cohen and Orthotouch are obliged to make payments under the scheme of arrangement. They cannot unilaterally change the terms, especially on the excuse that some investors are litigating against them.”

Theron also disputed that the payment of interest into a trust account under Cohen’s control would remedy the situation. “The obligation under the arrangement is to make payment to the investor. To pay the money into a trust account, which Cohen allegedly controls, is not payment to the investor. It is non-payment.”

Theron confirmed that some HSAG members who did not complete the forms received their interest in July.

In response to Cohen’s denial that he is associated with Georgiou and Zephan, Theron said Cohen appears to be assisting Georgiou by applying to set aside the judgments granted against Zephan and Georgiou in several of Bolt’s cases in the High Court in Pretoria. “What real interest does Cohen have in these judgments as Receiver?”

Advocate Louis Bolt

Bolt response

Bolt responded that if interest payment is made subject to the completion of the form, it amounts to blackmail and is “absolutely unacceptable”.

He added that Cohen has no authority to litigate against Georgiou and Zephan. “There is no provision in the Companies Act for the position of a Receiver. He is a position created by Georgiou. Cohen is remunerated by Zephan for his services.”

Bolt said Orthotouch is the party that should litigate against Georgiou and Zephan, as it is compelled to pay interest to investors.” This is however unlikely to happen as Georgiou is Orthotouch’s managing director and such litigation would mean that Georgiou litigates against himself.

Interpleader application

Cohen said he has corresponded with Theron to get clarity as to whether the payment of interest into a trust account constitutes payment under the scheme of arrangement.

“I have a legal opinion that says the money can be placed in trust, and Theron has another point of view. I wrote to Theron and asked him to provide a legal opinion on the matter. I told him that if he gave me a contradictory opinion I would consider changing my mind and pay the money to investors. But he refused.”

Cohen says he now wants to bring an interpleader application to have a court provide clarification on the matter and allow Zephan and Theron to argue their opinions.

In response, Theron said the scheme as certified by court order is unambiguous and does not give a discretion to Cohen or Georgiou. “On whose behalf is Cohen now holding the money?”

COMMENTS   22

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I am an Investor. I was not paid interest for July 2018 to date. However I was bombarded with threats via emails and a sms from various roleplayers operating under the control/umbrella of Nic Georgiou/Orthotouch.
Nic Georgiou, his family and Elna Visagie visited me at my home in Cape Town last year offering me a settlement and get me to help him in getting the HSAG CA group of his back. I said *NO THANKS*.
I want my capital plus interest back. I want my interest paid to me as per the court ordered 155 Aggreement.
NIC GEORGIOU/ORTHOTOUCH IS IN CONTEMPT OF COURT.

My elderly other-in-law has also been at the receiving end of the Georgiou scams and, of course, has received those threatening & illegal sms messages.

She would also like the capital – which she invested after saving for 30 years – plus interest back (it was virtually all she had in the world) AND she also requires this gang to continue paying the (minimal!) interest as ordered by the court in the 155 agreement.

Interesting actors in this game. So, Derek Cohen is fighting for the investors. Derek Cohen a director of Regal Treasury Bank that was placed into curatorship by the Reserve Bank. Also founder and MD (former perhaps) of Mercantile Lisbon Bank which sued for fraud.
One has little doubt a bit of info searching of the others will reveal similar background.

Perhaps you should get your facts correct before you shoot off your mouth. I put Regal Bank into curatorship not the SARB. Please provide me with the summons where Mecantile Lisbon Bank sued me for fraud because I haven’t seen it. In fact provide me with any judgments where I have been successfully sued for fraud. Perhaps you should ask someone the meaning of the word defammation .

This Nic Georgiou is just one legal deception after the next and should sit in jail.

That grinning face, I need a shower. Also, having crossed paths with Mr Connie Myburgh, I may need to have a full exfoliation …

My Mom of 80+ and myself are investors and had not received any interest whatsoever for July.I’ve sent an e-mail to Georgiou & Co whereby I’ve informed them that should the interest not be paid before close of business on 29 July 2018 then the Hawks will receive another complaint. Investor’s within the Class Action group, such as us, who had sent similar e-mails for demand of interest payment have received the form from Orthotouch to be completed and the promise that upon receipt of the completed form Georgiou will pay their interest. As at 12h40 on 27 July 2018 we’ve not received any response from Orthotouch and co-hordes and no form had been forthcoming. We’ll be discussing this with the Hawks as ALL COURT ORDERS to date hereof had been ignored by Georgiou and Co and the ‘so-called’ ‘business rescuer’. Our viewpoint: Our money was stolen as per Court Orders and by withholding interest payment another docket should be opened by the Hawks as this also amounts to theft.

Derek Cohen’s business also did the valuation of the ex Sharemax properties for Nova. Nice work if you can get it.

What you fail to disclose is that BDO Corporate Finance undertook an independent fair and reasonable on the valuations and found them to be fair and reasonable in terms of the then prevailing market conditions. Read the Scheme of Arrangement document Income Plans 13 of the Explanatory Document and Appendix B6.

Ironic or co-incidence that BDO Coroorate Finance are also one of the companies that Hans Klopper has an interest in. How independant can that be??? Same with Ortotouch where Klopper is a director Mmmmm very interesting

you guys should rather join my church.

just send me your seed money, and your wealth will grow.

do not know why you hang out with these people, they will not
even send you a blessing if you sneeze.

There is a saying….”show me your friends and I will tell you who you are”….

When will this merry go round stop?? Most people should know by now that the Georgios are master tactic time players Time is their best friend dragging feet with answers to questions asked says it all.Bolt has the guts to file for liquidation like any other debt payment refusal So be it let the culprits pay for Pete’s sake REMEMBER WITH THIS INVESTIGATIONS WILL COME AND THE GEORGIOS KNOW THIS. SO GIVE BACK THE MONEY FERRARI DRIVERS !!! What a shame old people are dying and starving because of lack of money Elna Visagie or Mother Theresa jumped the ship for money offered by Ortotouch must stop persuading investors to join the miracle plan of the Georgios They have been struggling to pay the past years how can they be trusted for the future??? Hopefully ALL the banks and judges have taken notice of this scam by now Cohen and Hans Klopper do you job and be relenless like Bolt These emotionless Greeks has been given enough rope !!!

In the article it is made clear that I am initiating legal proceedings in respect of the non payment of interest.

Derek

We have not received any interest payments for July 2018. My mom had to sell her house because of this whole debacle. I need here interest money to be paid immediately.

You help would be appreciated

Dear Maralize

I agree this is a debacle. Unfortunately my hands are tied. If Zephan doesn’t pay your mother’s monthly interest to Orthotouch then a problem is created because Orthotouch doesn’t have the funds to pay your mother. This is what happened. This morning I once again spoke to Zephan to implore them to pay the outstanding interest. Hopefully this time my pleas did not fall on deaf ears. Meanwhile I am initiating legal proceedings against Orthotouch and Zephan this week. Please send your mother’s details to my attorney who is handling queries. Her email address is Leonardatt@gmail.com.

The proof is in the pudding Mr Cohen Righteousness is the key word now for many old people suffering because of some role players arrogance that they are above the law. Hopefully the court doors are in sight where this scam will be exposed. There facts and not money will prevail and yes papertrails cannot be erased or bribed

Derek – I have read all of your comments with much interest. Could you please confirm that you have never received or are currently receiving any form of monetary compensation from either Zephan or Nic Georgiou personally or any of his affiliated companies and secondly could you confirm as the Receiver of SoA155 who exactly it is that has issued the instruction not to pay the latest interest payments to certain investors – not a company name but the individual who issued the instruction? It appears from the latest Zephan organigram that Nic Georgiou is the only listed director and one can only assume he is the responsible person for this unilateral decision – please confirm, more especially as you are acting as the Receiver and should have the investors interests as your prime motivation? I and many others look forward to your response

Logic why don’t you bother to get your facts straight before making misleading statements. BDO Corporate Finance undertook the Nova fair and reasonable exercise some SIX years ago. As I understand it Mr Klopper’s company joined BDO THIS YEAR. What is sinister about this?

Mr Cohen I put it to you Did you resign as “receiver?” And if you did why….

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