An elderly man in a chequered shirt sat in the second row of the creditors’ meeting of Orthotouch and Zephan in November last year.
This was an obligatory meeting after former property magnate Nic Georgiou put both companies into business rescue. It was also the first official opportunity in years for investors to see anyone representing Zephan or Orthotouch face to face.
The man nervously sat on the edge of his chair, clutching a curly-paged copy of a 2014 edition of Noseweek magazine.
As business rescue practitioner (BRP) Jacques du Toit opened proceedings, the man rose and asked: “We have been here before. We have been here twice before.
“Where is Hans Klopper? Is he here?”
Du Toit did not answer the question. He politely silenced the man and said questions would be taken later.
As the man submissively sat down, he softly mumbled: “Where is Klopper? Why is Klopper not here?” These questions remained unanswered during the two-hour meeting.
Inadvertently, the elderly man had identified the elephant in the room – or rather, its startling absence. Klopper, Connie Myburgh and Nic Georgiou were conspicuous in their absence. They were the Orthotouch triumvirate who were supposed to save the R4.6 billion that around 18 700 people invested in the failed Highveld Syndication (HS) schemes.
Georgiou puts Orthotouch and Zephan into business rescue
Orthotouch BRP aims to negotiate a ‘concrete ‘ offer for investors
Investors may receive a fraction of their original HS investments
‘Former’ property magnate pleads poverty
Who are these people?
Klopper is the business rescue practitioner of the HS companies. Myburgh is a corporate lawyer and a former director of Orthotouch. He was the attorney representing HS investors on the Orthotouch board. He is also the chairman of the Nova Property Group, the rescue vehicle of the failed Sharemax investment scheme.
Interestingly, a recent Section 417 report made damning recommendations following the conduct of Klopper and Myburgh in the business rescue and liquidation process of an unrelated company, Harrison & White.
The report found significant looting of assets occurred before the company was finally liquidated, and recommended that various regulatory bodies investigate Klopper and Myburgh’s conduct.
The report even recommended to the Master of the High Court that Myburgh’s conduct be referred to the National Prosecuting Authority for further investigation.
The report found Klopper was “gravely remiss in the exercise of his functions” as a business rescue practitioner by allowing the business rescue process to continue for more than three years. Klopper denied any wrongdoing. Myburgh has never responded to the merits of the recommendations contained in the report.
The conduct of Georgiou also demands scrutiny.
He was the so-called patron or kingpin behind the rescue schemes, and seemingly the HS syndications as a whole. He not only sold virtually all the properties in the HS companies during the syndication phase, but also played a key role in the sale of the majority of the properties and the extensive litigation against investors.
It would be prudent to first investigate Klopper’s conduct. He was the point man for arguably the most disastrous business rescue process ever in South Africa.
Who is Hans Klopper?
Before Klopper’s conduct is analysed further, we need to revisit a bit of history.
Klopper was appointed the BRP of the HS companies in September 2011. When he took up his duties, he assumed control of 79 unencumbered commercial properties for which investors paid R4.6 billion.
Today, nearly 10 years later, all but two (there are claims that it may be four) of the 79 properties were sold to third parties, including to Accelerate – Georgiou’s son Michael’s listed company. Very little, if any, of the proceeds flowed to investors.
It has never been explained why these properties were sold.
The peculiar case of the Picvest billions (Part 1) (Background)
The peculiar case of the Picvest billions (Part 2) (Background)
The peculiar case of the Picvest billions (Part 3) (Overvaluation of properties)
The peculiar case of the Picvest billions (Part 4) (Property transactions prior to HS companies being put into business rescue)
The peculiar case of the Picvest billions (Part 5) (Disposal of properties contradicts the intent of the business rescue plan)
The peculiar case of the Picvest billions (Part 6) (Sale of 31 ‘Orthotouch Properties’ to Accelerate)
Interestingly, the business rescue process of the HS companies was probably the first significant such process in South Africa; it only became a reality when the new Companies Act was promulgated four months earlier, in May 2011.
At nine years and counting, it is also the country’s longest-running business rescue process.
Klopper’s appointment as BRP should have provided some comfort at the time, as he was widely regarded as one of the specialists in this field. He was an experienced lawyer, a former partner at law firm Hofmeyr Attorneys (now called Cliffe Dekker Hofmeyr). Klopper had been a director of the South African Restructuring and Insolvency Practitioners Association since 2005 and he was chairman of the restructuring subcommittee at the law society of the North Provinces.
He has subsequently also been involved in many high-profile business rescue processes, including those of CNA, the Westwood and Romansbaai golf estates, Liviero Construction and Esor Construction.
Klopper currently heads up the restructuring division of the international auditing and consulting firm BDO (BDO has repeatedly stated that Klopper performed his HS business rescue duties in his personal capacity and could not comment on his conduct).
On Klopper’s own website, he refers to himself as a “global leader in the field” due to his listing in Who’s Who Legal Restructuring & Insolvency.
These references clearly highlight Klopper’s pedigree and experience as a business rescue specialist.
What then, went wrong?
My next article will highlight seven developments worthy of investigation.