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SA’s most spectacular case of corporate capture

Chairman Connie Myburgh and CEO Dominique Haese take full voting control of the Nova Property Group.

In what must be one of the most spectacular corporate captures in South African history, Connie Myburgh and Dominique Haese, respectively the chairman and CEO of the Nova Property Group, have taken full control of the rescue vehicle of the erstwhile R4.5 billion Sharemax investment scheme.

Moneyweb can confirm the two directors, who are romantically linked according to several sources, acquired 100% of the voting rights of the company after stripping the other voting shareholders of their voting rights.

Subsequent to obtaining full voting control, Myburgh approved maximum increases of 10% for the directors for the next three years at a recent AGM, something shareholder activist Theo Botha “has never seen before”.

He added that Nova is an ideal case for a class-action suit.

100% of the vote

The Nova shareholding structure is complicated, with only the seven founding shareholders, who received their shares for free, holding any voting rights. According to this structure, each of the four directors held around 23% of the vote. The balance was held by three other individuals.

The 2 000 Sharemax investors who elected to receive Nova shares in lieu of debentures, have no voting rights.

In what may seem to be a case study in corporate capture, Myburgh and Haese annulled the voting rights of the other shareholders. This was triggered by an attempt led by Dirk Koekemoer (property director) and Rudi Badenhorst (financial director) to remove Myburgh and Haese from the board.

Myburgh and Haese foiled this attempt and instead engineered the resignations of Badenhorst and Koekemoer as directors.

From left to right: Rudi Badenhorst, Dominique Haese, Connie Myburgh and Graeme Polson. This photo was taken last year at the debenture holders’ meeting where Badenhorst claimed the listing proposal of the Nova Property Group was “daylight robbery”. It was the first public sign of significant infighting among Nova board members.

Badenhorst and Koekemoer signed a shareholders’ agreement that reduced their shareholding in the company and stripped their remaining shares of all voting rights. It is not certain why they signed this agreement.

Moneyweb has also learnt that the voting rights of the remaining minority shareholders were also rescinded.

This sequence of events left Myburgh and Haese with 100% of the voting rights in the company. According to Moneyweb calculations, their collective shareholding in Nova increased from around 46% to 60% in Nova.

Moneyweb sent questions to all the shareholders but did not receive a response.

Shareholders’ meeting

During a recent, poorly attended AGM in Pretoria, an abrasive and abrupt Myburgh acknowledged changes to the shareholding structure but refused to divulge any details, citing a confidential shareholders’ agreement.

“It is confidential information between the shareholders of the companies and I am not going to discuss that [at the AGM]. The matter has no bearing on other shareholders, nor on the affairs of the company,” he said.

Myburgh refused to answer a question on whether he and Haese obtained complete voting control of the company: “I am not going to discuss that. That is part of a confidential shareholders’ agreement.”

He later added: “I will not be cross-examined by you [the author] any further. I regard this matter as closed… The shareholding has been adequately and correctly disclosed. The company is owned by its shareholders and that is the end of the matter.”

Myburgh questioned the facts Moneyweb put to him but did not offer to provide an alternative version. He also did not respond to questions relating to the shareholding structure that were emailed to him after the AGM.

This refusal to disclose changes to the shareholding and voting rights follow the lengthy court battle between Moneyweb and Nova after Myburgh fiercely tried to keep the original shareholding secret. The Supreme Court of Appeals eventually found in Moneyweb’s favour and it was only then revealed that the founding shareholders had received 96% of the company without paying a cent.

Moneyweb will be lodging a new application to access the latest shareholder registers in terms of Section 26 of the Companies Act in due course.

Corporate capture

These events show how Myburgh completed his and Haese’s corporate capture of a company.

Myburgh’s involvement started when he penned the original Section 311 Scheme of Arrangement that was designed to “rescue” the R4.5 billion that about 18 000 mostly elderly pensioners invested in Sharemax.

Here are the key developments in this process:

  1. In 2011, Myburgh penned the original Section 311 Scheme of Arrangement after the collapse of Sharemax. This saw the transfer of all former Sharemax properties from investors to Nova.
  2. During this process, Myburgh became chairman of the Nova board.
  3. Myburgh, Haese and the remaining five founding shareholders collectively received 96% of the shares in Nova, as well as 100% of the voting rights, without paying a cent.
  4. Myburgh had a stranglehold on the company from the outset and, together with Haese, controlled 46% of the vote.
  5. In 2017, Badenhorst and Koekemoer, supported by some of the minority voting shareholders, tried to have Myburgh and Haese removed from the board. Myburgh and Haese managed to foil this attempt and later engineered Badenhorst and Koekemoer’s resignations. Their shareholding was reduced and they lost the voting rights attached to their remaining share.

This effectively means Myburgh and Haese have full voting control and own 60% of the 20 remaining Sharemax properties, which according to the latest financial statements are valued at nearly R2.5 billion. Total assets amount to R2.87 billion, while total liabilities stand at R2.62 billion.

Theo Botha response

In response to these developments, shareholder activist Botha said Nova represents an ideal case for a class action. “Where is our judicial system in all of this? Where are our A-grade attorneys who would take this on risk and take on the directors? This is a prime class-action case because people have lost their rights. There is significant value in the properties of the company and this should be returned to investors.”

10% salary increase for three years

The AGM also saw Myburgh, who was appointed as proxy for all shareholders with voting rights, approve all normal and special resolutions. The most controversial was the approval of salary increases of 10% per annum for three years.

The remuneration structure of the non-executive directors that was approved at the Nova AGM.

This is on top of the exorbitant salaries the directors already receive, and the approval of financial statements that were significantly restated due to the previously massive overvaluation of two properties, and the filing of two reportable irregularities (RI) at the Independent Regulatory Board for Auditors (Irba).

In response to Moneyweb questions, Botha said he had never seen anything like this. “Investors should ask why the board would want increases in advance. We don’t know where inflation is going. It doesn’t make any economic sense for shareholders to approve this. An increase of 10% is well above inflation and a 30% increase over three years makes no sense for shareholders to approve.”

Write-down of R1.3 billion valuation of Villa and Zambezi

In response to a question, Myburgh said no disciplinary action was taken against any of the directors related to the restatement of overvalued properties and the unlawful composition of Nova’s audit committee.

Moneyweb earlier raised these transgressions with auditor BDO. In reaction BDO launched an extensive investigation into the allegations, which resulted in the restatement of the financial statements.

This restatement includes a write-down of more than R1.3 billion of an overvaluation of the Villa and Zambezi properties in a process where an independent valuer’s valuation was seemingly ignored.

Unlawful composition of Nova’s audit committee

BDO also reported another reportable irregularity with Irba in relation to the unlawful composition of Nova’s audit committee. This was rectified by the appointment of five new directors to the board, after which the IR was withdrawn.

Myburgh said in response to a question related to the audit committee: “All the years that position was expressly explained and dealt with every single year and at every single AGM as to why the situation existed.  The reasons for this were accepted. This situation was rectified mid last year (2017).”

He denied that this was only done after it was found to be in contravention of the Companies Act. “Your facts are incorrect… I am not going to elaborate. I don’t want to elaborate. You can speculate if you so wish. The position was rectified in consultation with the auditors.”

BDO resigned as Nova’s auditor after signing the 2017 statements citing inadequate capacity to continue as auditor.

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COMMENTS   23

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This most spectacular case of corporate capture started with Nic Georgio and his sons, who should be sitting in jail alongside the Guptas and Shabir Shaik.

The obstruction of justice in South Africa by suppressing reports, methinks seems to have become a very successful practice, as the JLMC were in effect, all that the NPA needed in terms of the fact-seeking section of an investigation into the Brett Kebble frauds.
The links between Western Areas and Investec were always deeply-almost completely-concealed from the public as well.
According to the late Barry Sergeant (N..week 199) – Investec perfected the capture game long before the Guptas landed – Kebblegate set a precedent for Institutional take-overs.
The quantum of the scam (now put over R 38 billion), the highest post-theft vale of the shares stolen by JCI from Randgold. These reports by JLMC to this day remains unchallenged.

The Investec Board need to be sitting in jail alongside the Georgios and the Shaiks etc.

Wow, I did not know Barry is late already. His analysis on the rand collapse a few years back was “capturing”, to say the least. R.I.P Mnr Sergeant.

Well at least this situation where unsophisticated investors teamed up with unsophisticated financial advisers to invest in unsophisticated property investment schemes clearly demonstrates the value of using better informed financial advisers to invest in sophisticated (listed property) companies which are ruled not by their respective board members alone, but by the big investment managers as share-holders.

People who invested in property syndicates, as well as their advisers never read Moneyweb. Every single one of them decided to invest in property syndicates because their advisers told them that “listed property are shares, and shares are high risk”. The destructive implosion of the property syndicates proves the relative safety of JSE-listed opportunities.

We have situations like Nova on a smaller scale every day, where individuals invest their life savings, inheritance, pension savings or bond their house to invest in a unlisted investment opportunity. Of these, 90% end up in a similar disaster as Nova.

Its when unsophisticated investors, teamed up with unsophisticated financial advisers, who then work with Greeks bearing gifts, that all goes south.

Agree. Besides the fact that investors not doing enough research, a lot has to do with GREED in the simplest of terms.

(Have heard in my lifetime people slamming the bank’s interest-bearing investments as “they’re paying too little interest”, or equity/UT investors got burnt as result of short-term losses, and not sticking to a long-tern strategy. Then these exotic schemes sound like manna from heaven…)

Ryk
Thank you for keeping us updated (I have no financial interest in the matter, other than to see how an old colleague is acting)
I agree 100% with Theo Botha – a class action is the way to go.
I also agree – where are the hoards of A-class SA attorneys who always talk about capture and corruption – help the people!!
Any action instituted would be bolstered by delving into the past of the two main drivers – this in itself should assist with showing a court who they really are.
Please keep up the reports and keep digging.

Surely this is an ideal opportunity for the Public Protector to try and redeem herself

I’d think it’s outside her mandate, since no public money is involved as far as I know

Shameless, arrogant and corrupt. Just another day in corporate SA as it is in the public sector.

2011-04-14 00:00
Vic de Klerk
Picvest’s announcement, last week, that it would immediately cut the cash interest payments on all its property syndicates from the previous 10% and even 12,5% to 6,5%/year is only the beginning of the pain for many a senior citizen who so eagerly invested in the scheme over recent years. The value of the investment – if it can indeed still be realised – is probably not worth more than 40c in the rand on the free market. But that’s still much more than the hoped-for 20c in the rand investors in the Sharemax syndicates will realise under the best of circumstances.

A written request by advocate Michael Blackbeard, Deputy Registrar of Banks, for PICvest to visit him on 15 April for more than just a cup of tea was the death knell for the house of cards of property syndicates and cross-guarantees, the seams of which were already beginning to unravel.

For Bloemfontein property magnate Nic Georgiou it was a golden opportunity to turn his back on his guarantees regarding interest to investors derived from overhead leases, as well as the guaranteed buying back of properties he’d in most instances sold to the PICvest schemes at inflated prices.

The real transaction involving Highveld 15 – one of the first schemes in the current PICvest portfolio – is probably the best illustration for investors as to how the scheme “worked” and also made the SA Reserve Bank see red. It also explains why the Georgiou Group was rather pleased at the apparently legitimate reason to be able to walk away from its guarantees.

In a letter/contract dated 3 September 2009, on a PIC Syndications letterhead addressed to Zelpy (Pty) Ltd (the company in the Georgiou Group providing the guarantees), the following transaction was agreed to:

Highveld Syndication No 15 Ltd

* Syndicate value R253m. This is the amount for which the property was sold to investors.

* Actual net annual rental income R14,4m – a real return of 5,7%.

* Actual value of buildings in the syndicate at a discount rate of 10%/year is R144m, or only 57% of the syndicated value.

Zelpy’s offer was to guarantee investors’ interest at 8,7% from the effective date, while Zelpy guaranteed it would buy back the buildings in the syndicate after no more than five years for R253m, which was also the syndicated value.

In short, Zelpy – and therefore the Georgiou Group – guaranteed the investor a return of 8,7%/year and 100% of his capital back in five years. The true situation was/is that the buildings earned rentals of only 5,7% while the true market value of the buildings in Syndicate No 15 is only R144m, against the “syndicated value” of R253m.

Investors – and particularly financial advisers who were so keen to sell the investment to elderly people – should now be the judge. Just answer one question: Is it an investment in property – PICvest’s motto is: “Where property is the basis of wealth” – or is it simply a deposit at an interest rate of 8,7%, repayable after five years?

Blackbeard and his team have apparently decided on the latter while PICvest CE Rikus Myburgh still believes it’s a property investment. But PICvest has no stomach for a fight with Blackbeard and has therefore opted for the new scheme.

The new scheme, which we believe will also have difficulty in getting past Blackbeard’s office, is that the name Zelpy as the guarantor, overhead lessee and ultimate buyer of the properties be replaced by a new company – Ortotouch Ltd. The guarantees for the syndicates remain at 100% of the current syndicate value, but the annual interest is now reduced to an effective 6%/year.

In the case of Sharemax, Blackbeard has already indicated he doesn’t favour that option, insisting only the actual net rental income – in some cases already as little as 1%/year – be paid to investors.

The guarantee Ortotouch will buy back the syndication in five years at the so-called syndication value – that is, the price at which the money is invested – appears a gimmick. Whoever may be right, investors in the PICvest syndicate should remember Zelpy’s previous guarantees are now worthless. Don’t put too much faith in the new Ortotouch undertakings.

The final part of the PICvest plan is apparently to now gather all the syndicates into one basket. The syndicate value – at which it was sold to investors – is apparently about R4,5bn. Perhaps new investment instruments such as that will be traded or even listed. It gives investors the hope of having an opportunity to realise their investments before the new five-year term. But at what price?

Unlike the case of Sharemax, the respective Highveld Syndicates consist mainly of income- or rental-producing buildings and it would be possible to place a value on them from a properly consolidated statement of the condition of the buildings.

Our guess – especially because many of the buildings have apparently recently been partly mortgaged under the Zelpy agreement – is the syndicated value of 40% of what’s been invested may be achievable.

Well done Moneyweb.

Greed and bodily desires – they should be ashamed.

And to think this is old people’s money they are putting in their pockets. Unbelievable that they initially said they would ‘rescue’ the scheme old people invested into.

Just give them enough rope!!

how much more….there is just so much rope (fishing gut) then they will get away. Big fish already lost = ZumaGuptas 😉

take any rescue , liquidation , judicial management or sequestration that you know of over any number of years and establish how much investors were paid out -for some or other reason unknown to anyone they all turn out to fall in this category of “SA’s most spectacular case of corporate capture’ – zuma learnt over many years exactly how these people operate

Hopefully an unbiased and well researched article, but I have not seen any mention in any of the editor’s related articles of the Sharemax investors who have, apparently, already received full payment of their initial investments. Balanced reporting?

Rucks & Mauls:Behind the Renn Moore letters
2004-05-06 08:08
Deon Basson

The Sharemax-factor again Cape Town – The Pretoria property group Sharemax is part of the inspiration behind a long letter from a Heidelberg auditor that was published in Sake, sister publication of Finance24, last Wednesday.

Sharemax handed court documents of a case before the Pretoria High Court, through which it wants to silence several people, to the auditor, Renn Moore. Moore, who is acting on behalf of certain investors in the bankrupt Krion estate, raised the question in his letter that prompted me to write about the controversial liquidator, Enver Motala, in my column. He also questioned my agenda.

In fact, I warned against Motala’s activities on May 19 last year under the heading “Wolves and shepherds” after his appointment as liquidator of Shawcell Holdings.

Moore is the only shareholder and a director of a private company called Wellgro Financial Advisory Services which operates from a smallholding in Unitaspark, Vereeniging. Wellgro markets, among other things, investments in Sharemax companies and a competitive property scheme, PIC Investments.

In February, Motala was one of two new co-liquidators appointed by the Master of the High Court to investigate complaints from Moore and others about the way the estate was handled. Moore apparently acted pro bono on behalf of certain investors in the Krion estate.

I visited Moore at his office in Heidelberg on Monday. In an open, but calm conversation that took place in good spirits, Moore admitted that he had not read all the columns and reports I wrote for Sake and the magazine Finansies & Tegniek over the past six weeks.

During our conversation, he admitted that if he was wrong about Motala, he apologised. He said his only aim was to protect Krion investors.

When he read the first column, he had already received the Sharemax court documents in which one of the company’s directors, Willie Botha, alleged that I was colluding with certain people to facilitate a so-called run on Sharemax.

The irony is that Motala phoned me earlier this year in connection with Sharemax and suggested that we should “co-operate”. I turned down his request.

Neither Sake, Beeld, Finansies & Tegniek, these publications’ holding company, Media24, nor I are respondents in the Sharemax case and therefore did not answer in court documents to Botha’s allegations.

Sharemax had the court documents delivered to Sake and Finansies & Tegniek in December, but the two publications’ legal representatives judged that it was not necessary to reply formally.

One of the original respondents in the Sharemax case was a lawyer from Pretoria, Henk Strydom, who also acted on behalf of the Krion liquidators. Moore said he had heard from “someone” in the Master’s offices that I was co-operating with Strydom. Although I have known who Strydom is for years, I have never met him or Bester. I did phone him this week to check certain facts.

When Moore read a few of the columns on Motala, apart from the court documents, he phoned Motala who denied everything. Moore added two and two together and constructed a grotesque conspiracy theory.

The first respondent in the Sharemax action is Patrick Herron, who has been involved in “forensic” investigations into Sharemax for some time. The second respondent is Erli Bester, a Pretoria liquidator. Strydom was initially the third respondent, but Sharemax later withdrew the case against him after Strydom indicated that he would oppose them. A former investment consultant of Sharemax, Mariaan Sieberhagen, is the fourth respondent but she is not opposing Sharemax’s application to have her gagged.

Herron and Bester are contesting the case. I am watching the court case closely and will write about it again at a later stage.

I will not repeat what I wrote about Sharemax and Motala. This is on record on the website of Sake and Finansies & Tegniek at http://www.sake.co.za and for members at http://www.fnt.co.za. I stand by it.

Moore said he also has questions about Sharemax that he put to the group. All I want to reiterate is that there is a price risk attached to investment in Sharemax. Krion victims especially have to be careful now and should seek independent advice before making such an investment.

In the case of Sharemax and Motala, the list of documented sources, often public documents, is several pages long. The Sharemax sources include documents that I requested from the company. In this way, for example, I analysed the financial statements of several properties after visiting Sharemax for a second time especially to get hold of these.

Regarding the attempt to gag people, I wrote in Finansies & Tegniek in December that Sharemax would have done better if it employed South Africa’s controversial chief censor of the seventies, Jannie Kruger, to declare the financial statements of several properties to be banned documents.

Meanwhile, new information and documents about Motala’s activities are flooding in from various sources. I am analysing these documents and will keep readers up to date.

Basson’s internet address: http://www.deonbasson.co.za

Related columns and articles

Deon Basson Research ?Deon Basson Research (Pty) Ltd – subscribe on http://www.deonbasson.co.za for free copy
Motala’s liquidation scam, 23 March 2004

Finance24 http://www.finance24.co.za ?Deon Basson Research (Pty) Ltd – free to air

New Rucks & Mauls column: Madunagate: What should happen after the election?, 15 April 2004
Will the real Mo(o)tala please stand up?, 22 April 2004

Finance Week http://www.fw.co.za ?Media24 Bpk – subscribers only

Woolf over the sheep’s eyes, 19 May 2003
Simon says, 4 June 2003
Goodwill’s new name, 22 October 2003
The wrong balance sheet, 29 October 2003
The Sharemax questions, 9 November 2003
The consequences of Bloem, 10 December 2003
Everyone wants a high priest, 17 December 2003
The Motala power factor, 17 March 2004
The arrogance of power, 7 April 2002
Maduna, the Supermaster, 14 April 2004
Peneull Maduna’s swansong, 14 April 2004
My letter to the Minister and his response, 14 April 2004
Master’s new political heads, 5 May 2004

Finansies & Tegniek http://www.fnt.co.za ?Media24 Bpk – net intekenare

Waarom Norman Simon geskors is, 4 Junie 2003
Die Sharemax-roomkan, 22 Oktober 2003
Die verkeerde balansstaat, 29 Oktober 2003
Die Sharemax-vrae, 9 November 2003
Die gevolge van Bloemfontein, 10 Desember 2003
Everyone wants a high priest, 17 Desember 2003
Die Motala-magsfaktor, 17 Maart 2004
Die arrogansie van mag, 7 April 2004
Maduna hou sy lyf supermeester, 14 April 2004
Peneull Maduna se swanesang, 14 April 2004
My brief aan die minister en sy reaksie, 14 April 2004
Meester se nuwe politieke base, 5 Mei 2004

Sake (Beeld, Die Burger, Volksblad) http://www.sake.co.za ?Media24 Bpk – gratis

Sharemax gaan sy ongewone struktuur verander, 16 September 2003
Beleggers moet dalk sekerheid kry, 23 September 2003
Oorweeg reputasie van direkteure, 26 November 2003
Brian van Rooyen se sakevriend, 4 Februarie 2004
Digterlike vryheid met gebou se waarde…en hoe Sharemax graag landswette eerbiedig, 18 Februarie 2004
Einde van Labat se Square One-droom, 11 Februarie 2004
Wat van Gary Porritt se bates?, 25 Februarie 2004
Die kruispad van Comaro Crossing, 3 Maart 2004
Die likwidasie-oerwoud, 10 Maart 2004
Enver Motala se Middelburg-kaskenades, 24 Maart 2004
Katnes van vriendelike krediteure, 31 Maart 2004
Leon Lategan – Enver Motala se beskermengel, 7 April 2004
Madunagate – wat na die verkiesing moet gebeur, 14 April 2004
Sal die regte Mo(o)tala asseblief opstaan?, 21 April 2004
Weer die Sharemax-faktor, 5 Mei 2004

Register and order your free copy of the Deon Basson Research Catalogue on http://www.deonbasson.co.za

Rest in eternal peace Deon Basson !

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