Nedbank’s CEO Mike Brown plans to mount a legal challenge to set aside a subpoena issued on May 27 calling on him to appear before a Section 417 inquiry in terms of the Companies Act.
He’s to answer questions relating to his involvement in the liquidation of Waterkloofspruit Projects in 2001. Building contractors Dennis Da Silva and Ralph Rojahn, have also been subpoenaed to appear before the inquiry.
Pretoria businessman Edward de la Pierre, trustee of the CMT Trust and director of the company Hillcrest Village, now in liquidation, claims that employees of BOE Bank (acquired by Nedcor in 2002), conspired with the Master of the Pretoria High Court, the joint liquidators, two building contractors and several other parties to defraud CMT and Hillcrest of up to R200 million.
The claim relates to the development of 211 stands in Pretoria’s Waterkloofspruit Boulevard development. BOE Bank succeeded in its application to liquidate Waterkloofspruit Projects in 2001. On March 20 in the same year, it acquired 137 stands for R100 000, or R730 a stand, in what de la Pierre claims was a sham auction intended to defraud the CMT Trust and Hillcrest Village to the benefit of the bank, the liquidators, the auction company and the contractors. One year prior to the liquidation, the stands were selling for R220 000 each.
Hillcrest Village, which provided surety for Waterkloofspruit Projects, is now being represented by liquidators Dewald Breytenbach and Simon Mahlangu who applied for and obtained the court order to hold the inquiry that recommenced on Monday this week, after being postponed in 2010.
De la Pierre is the former CEO of JSE-listed Gilboa Properties, which later changed its name to Absolute Properties and now trades on the JSE as Bauba Platinum.
The dispute, which has been dragging on since 2006, has been repeatedly delayed on technical issues. Four different judges found evidence of fraud in the Waterkloofspruit Projects liquidation, though the main case and its merits are still to be heard by the court.
De la Pierre says the Section 417 inquiry is crucial to understanding the role of Brown, BOE/Nedcor and the other players he accuses of involvement in the demise of the Waterkloofspruit development and Hillcrest.
De la Pierre has also asked for discovery of certain documents which would allow him to complete his pleadings, but says the bank has yet to comply. These documents would either implicate or exonerate the bank in the alleged fraud, he says.
In a statement, Nedbank says it suffered a loss of R7 million when Waterkloofspruit Projects defaulted on its loan. “There have been various legal proceedings related to the liquidation of Waterkloofspruit Projects, culminating with a Supreme Court decision in July 2009 that the liquidation of WKP should not be reopened.
“The Hillcrest matter has been dormant for a few years and has now surfaced again with the current subpoena. Mike was subpoenaed in his capacity as the head of BOE Property Finance at that time and has not been accused of any wrongdoing.
“At the enquiry the commissioner was advised that Nedbank will proceed with an application to set aside both the enquiry and the subpoena and on this basis Nedbank was excused from the enquiry. We have been given an opportunity until July 17 2015 to launch the application and we are proceeding accordingly.
“In line with the confidential nature of the enquiry, neither Nedbank nor Mike has any further comment about the matter but deny the allegations of wrongdoing by BOE/Nedbank,” according to the bank.
The inquiry continues
“We were informed last week by Nedbank’s attorneys Cliffe Dekker, also acting for Mike Brown, that they intend to bring an application to court to set aside the subpoena issued on him personally. They also informed us that they intend to use the same application to set aside the inquiry in toto. We will in the meantime however proceed with the inquiry to obtain the testimonies of other witnesses, including the forensic examiner who looked into the matter in 2013,” says de la Pierre.
“Should Nedbank and Mike Brown bring an application to challenge the subpoena and the inquiry as their attorneys have indicated, we will oppose the application. We find it strange that Mr. Mike Brown would go to these lengths to dodge the inquiry .It is clearly another delaying tactic”
A 2013 forensic report by Crash Data details what it calls are the “mismanagement, collusion and frauds” involved in the project. BOE Bank, which was in charge of the disbursement of the funds, over-paid the contractors. Building work was left incomplete, yet contractors were paid in full, according to the report.
“BOE’s subsequent efforts to hide the mismanagement and the actions of their unqualified staff not only caused Waterkloofspruit Projects and both the plaintiffs to suffer damages, but also led to the ultimate demise of Gilboa Properties, the best (performing) venture capital company on the JSE Securities Exchange in 2011,” says the report.
“All the Gilboa shareholders therefore suffered incalculable damages that could, if South African law catered for punitive damages (as in the USA and elsewhere), would run into billions of rands.
“If the mismanagement and the incorrect payments to BOE to the contractors did not occur in the fashion that it did, the full bond of R14.2 million and interest thereon would have been easily repaid in the allotted time.”
The forensic report also details how BOE ended up, through a general power of attorney, being able to act for both the bank and the property development company. “This dual situation allowed them to plan and execute the frauds and collusion.”
De la Pierre maintains that the bank saw an opportunity to enrich itself at the expense of Gilboa and CMT Trust by liquidating the development company. The 38-page forensic report details the extent to which all of the alleged co-conspirators benefitted from the demise of Waterkloofspruit Projects.