Surprising twist in former Sharemax auditors’ disciplinary hearing

Legal team is to bring an application for the recusal of members of Irba’s disciplinary committee.
The surprise announcement on Friday led to the adjournment of the hearing until Monday. Image: Shutterstock

The Independent Regulatory Board for Auditors (Irba) disciplinary hearing against the former auditors of the failed Sharemax property syndication scheme has taken a surprising twist.

Advocate Mike Maritz, appearing for the three auditors, indicated on Friday that he will be filing an application for the recusal of one or more of the members of the disciplinary committee on the grounds of an actual bias relevant to these proceedings or a perceived bias.

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This led to the adjournment of the hearing until Monday for the submission of this application.

The former auditors – Jacques Andre van der Merwe, Danie Dreyer and Petrus Johannes Jacobus Bekker – are facing 340, 40 and 33 charges respectively.

They were all directors of ACT Audit Solutions Incorporated at the time they allegedly committed the offences while Van der Merwe was also the managing partner of the firm. All three previously pleaded not guilty to all the charges against them.

Read:

The planned filing of the recusal application follows Maritz last week expressing concern about some of the questions and statements that had emanated from the committee members, particularly Sorenzo Sooklal.

Maritz said they are under the impression that these proceedings are to be conducted neutrally, fairly and that the committee members will have an open mind, be independent and reserve their judgment until after conclusion of all the evidence and after hearing all the arguments.

‘Bias’

However, Maritz said it seemed to them that they are labouring under a misapprehension as far as this is concerned because Sooklal had made pronouncements which are clearly indicative of wholehearted support of certain opinions expressed by Brian Smith, the expert witness for Irba in the hearing.

Maritz earlier in the hearing also questioned Smith’s independence after it emerged that Smith was chair of Irba’s investigation committee from 2004 until 2016 and chairman of this committee from 2011 until 2016.

Read: Independence of Irba’s expert witness at Sharemax hearing questioned

Smith further admitted that during the time he was chair, this committee concluded the investigations into the conduct of the three audit practitioners, reached an opinion on their conduct and passed this on to Irba’s disciplinary advisory committee with a recommendation.

“It seems to me on any objective view of your involvement there, that you are … a cog in the Irba machinery. You are disqualified as an expert because of your obvious lack of objectivity,” Maritz said.

In regard to Sooklal, Maritz questioned if the defence team is to be confronted with a situation where mid-stream and long before the conclusion of the evidence, there is a committee member indicating acceptance of a particular witness’s evidence and rejection of any other witness’s opinion in conflict with it.

“How can that be? Then the proceedings would become farcical. And it would amount to this ‘going through the motions’ in the form of window dressing.

“It would mean that the result is a forgone conclusion and I am wasting my time here,” he said.

“This is not how court proceedings or disciplinary proceedings and particular proceedings as important as the present are to be conducted.”

Maritz said Sooklal was dismissive of many of the expert opinions expressed by Professor Harvey Wainer, a visiting Professor at the Faculty of Commerce at the University of Witwatersrand.

Wainer was appearing as an expert witness for the three auditors.

“It is most certainly at this stage our view that Mr Sooklal has disqualified himself completely from further participation in these proceedings,” Maritz said.

‘Full disclosure’ wanted

Maritz said on Friday it had now become of vital importance to demand full disclosure by each member of the disciplinary committee of any or all interactions or contact with Smith, at any stage historically, preceding, leading up to or during these proceedings and full disclosure of any committee or committees any of the present committee members in these proceedings ever sat on with Smith.

In response, disciplinary committee member Horton Griffiths confirmed that between 2007 and 1995 he was a member of the Irba investigating committee, initially as a member but subsequently as chair, and that Smith succeeded him as chair of this committee.

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I think, these auditors, ”doth protest too much”!

Indeed – but Mike’s fees would soon equal the next 5 years earnings of the auditors – if they are not removed from the list

So IRBA fell into the trap of not being independent, so much for integrity……

Obviously the auditors have professional insurance and they will be able to take IRBA to the high court for proper and fair rulings.

No wonder Mboweni dissolved the entire IRBA board two weeks ago.

Marketing brochure/material stated:

No investors funds are ever invested directly with Sharemax Investments.Investment funds are paid into the trust account of Weavind and Weavind attorneys ( Established in 1905),which falls under the protection and insurance of the Law society of South Africa, until the property is ready for transfer into the investors name”

Roy Cokayne
Sharemax and directors schemed to defraud public, says Fais ombud

By Roy Cokayne Time of article published May 24, 2013

SHAREMAX Investments, its network of financial advisers and four of its directors – Gert Goosen, Willie Botha, Dominique Haese and André Brand – were involved “in a scheme calculated to defraud members of the public”, financial advisory and intermediary services (Fais) ombud Noluntu Bam said yesterday.

Bam reached this conclusion in her latest determination on a complaint lodged by a 73-year-old female pensioner from Heidelberg in the Western Cape against financial adviser Edward Carter-Smith after investing R490 000 in the Zambezi Retail Park on Carter-Smith’s advice.

Sharemax promoted and marketed the Zambezi Retail Park property syndication.

Bam ordered Carter-Smith, Sharemax Investments, FSP Network (a network of brokers set up to market Sharemax schemes), Goosen, Botha, Haese and Brand jointly and severally to repay the complainant.

Carter-Smith complained that he had been misled by the directors of Sharemax and called them “liars”.

In an earlier determination Bam said Sharemax was “nothing more than a Ponzi scheme” in which investors were paid interest out of their own funds.

Business Report confirmed in October last year that the Hawks were investigating allegations that Sharemax committed fraud and operated a pyramid or Ponzi scheme.

About 40 000 people invested about R4.5 billion in the various schemes promoted and marketed by Sharemax.

It defaulted on monthly payments to investors in August 2010 when a decision by the registrar of banks that Sharemax’s funding model contravened the Banks Act became public knowledge.

ACT Audit Solution told the ombud that it had concluded after seeking a legal opinion that the transfer of investor funds from the trust account of Sharemax attorneys Weavind & Weavind to the investment property companies in The Villa and Zambezi schemes, prior to the registration of transfer of the property to investment property companies, “may constitute a reportable irregularity on a proper interpretation of the prospectuses”.

However, Sharemax directors claimed no reportable irregularity occurred because a bona fide “copy and paste” mistake had occurred during the drafting of the prospectuses.

Bam said this claim by the directors of Sharemax was “disingenuous and against the probabilities”.

She said her office was in possession of promotional pamphlets produced and distributed by Sharemax in 2010 that also stated investors’ funds would be paid into the trust account of Weavind & Weavind attorneys until the property was ready for transfer into the investors’ names.

Bam said Sharemax, FSP Network and the four Sharemax directors on their own version knew at the time of producing this pamphlet that they were “wilfully and deliberately misleading members of the public” because of the “cut and paste error” and the prospectus was subject to rectification.

They failed to explain why this “error” was only discovered after the Reserve Bank intervened in 2010 and after the scheme had already collapsed. They also failed to explain why Weavind & Weavind, which allegedly made the mistake, did not file any papers or correspondence in support of the “cut and paste error” version.

Bam said Weavind & Weavind had further failed to explain why it did not inform investors there was an error before it started paying the funds out of its trust account.

She said Weavind & Weavind had never supported the notion of an error in the prospectus. The law firm was of the opinion that the government notice on property syndications did not apply to this scheme and it was therefore not illegal to pay the money from the trust.

Letters sent to each investor by Sharemax, acknowledging the investment and stating that their investment had been deposited into Weavind & Weavind’s trust account, and kept there until the investment amount was processed and the property was transferred, were “equally untrue and misleading” because on Sharemax’s version this was a mistake.

Bam said these letters of confirmation were still being written to investors after the “mistake” was discovered.

“The only reasonable conclusion to be drawn… is that the second to seventh respondents [Sharemax, FSP Network and the four Sharemax directors] were involved in a scheme calculated to defraud members of the public,” she said. 2013

1. The Ombud Noluntu Bam made a lot of mistakes. She also ruled that Botha and Brand should repay investors and this ruling was eventually set aside by Judge NB Tuchten on 20 Feb 2017 in the High Court. The Ombud had to pay the legal fees of Botha and Brand.
2. The cut and paste mistake that Weavind & Weavind made was the only point that was raised regarding the transfer of funds by Weavind prior to registration of the property. This mistake was only made in one of 19 prospectusses. Thy Law Society also investigated this issue and Eckard Le Roux from Weavind was found not guilty of any wrongdoing. There were more than ten other paragraphs and points in that prospectus that pointed to the funds being used for the development.
3. The SARB retracted their initial administrative finding against Sharemax , the directors and the property companies on 8 Feb 2012. There is currently no finding from the SARB against Sharemax directors and the property companies.
4. All the shopping centers(going concerns) that was bought by the original directors as promotors for the investors were unbonded. The investors received all the interest that was projected. Each and every property that was resold years later provided the investors with their capital and capital growth.
5. The Villa was a development project that was build with investor funds. 60% if the shopping mall was lett by the time that the SARB stopped the project. Thereafter Sharemax changed their structure to comply with the SARB interpretations and then a journalist wrote in the Sunday Rapport that Sharemax investors might loose all their money. This is how the investments stopped to the detrement of the investors and other people involved.

Seems Prof Harvey Weiner’s testimony not the first time being questioned … A gun for hire ?

“Judge Siraj Desai dismissed these arguments when he delivered his judgment on Friday.

He found that testimony from one of the plaintiffs’ key witnesses, forensic accountant Harvey Wainer, was “fundamentally flawed in significant aspects”.”

https://www.iol.co.za/news/south-africa/ex-cna-director-in-the-clear-443661

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