BEE shareholder asks court to put Tubular Construction in business rescue

Accuses company of fronting after receiving no dividends.
The applicant says there is a reasonable prospect of saving the company – due primarily to R410m still owed to it by Eskom. Image: Moneyweb

Brian Bestenbier, a black economic empowerment (BEE) shareholder in Tubular Construction Projects, has applied to the Pretoria High Court to place the company in business rescue.

Tubular Construction was a contractor at Eskom’s Kusile power plant and has been accused by forensic investigator Paul O’Sullivan of having been a major factor in the energy utility’s financial quagmire, as well as its inability to deliver electricity.

Read: Vintage Paul O’Sullivan confrontation outside magistrate’s court

Read: The crisis at Kusile and Medupi continues …

Tubular Construction CEO Tony Trindade has been accused in court papers of having paid R55 million in bribes to a company owned by former Eskom contracts manager Frans Hlakudi. This was purportedly to secure work at Eskom’s massively over-budget Kusile Power Station in Mpumalanga.

Bestenbier says he was brought in as a BEE shareholder to assist the company in winning contracts, but he received nothing in the way of dividends. Tubular is owed about R410 million by Eskom. Its assets amount to R451 million and liabilities R481 million, of which R460 million is purportedly owing to group companies.

Tubular Construction is 65% owned by Tubular Technical Construction and 35% by Bestenbier’s company SB Investment Holdings.

“The intention was, however, never to benefit the black shareholder, but to create a vehicle through which lucrative contracts, like the Eskom contract, could be secured for the benefit of the Tubular Group of Companies,” says Bestenbier’s affidavit. This amounts to BEE fronting, he adds.

Due to the fact that Tubular Construction is “factually insolvent and financially distressed”, it should be placed in business rescue rather than wound up, as there is a reasonable prospect of saving the company due primarily to the R410 million still owed to it by Eskom.

Read: SA approves R59bn bailout for debt-laden Eskom

Bestenbier has asked the court to appoint Thomas Samons of Restructuring SA as interim business rescue practitioner. The Broad-Based Black Economic Empowerment (B-BBEE) Commission has also been cited as a respondent.

In terms of a shareholders’ agreement, Bestenbier’s company was entitled to 35% of at least half of distributable profits.

He was also entitled to receive annual strategic plans, operating and financial budgets, and statements, but these were never supplied.

“Despite the fact that I was appointed as [a] director [of Tubular Construction] on or about 18 August 2008, I never enjoyed a fair participation in the affairs of the [company] and I was sidelined by my co-directors. The executive committee envisaged in the shareholders’ agreement was ever established, subcontractors were not appointed subject to the instructions, policy and directions of an executive committee….” Bestenbier’s affidavit states.

Bestenbier says he raised his concerns about various financial irregularities at the company, such as the practice of funnelling overhead costs incurred by other group companies through Tubular Construction, and extending financial assistance to directors. These concerns were not addressed by his fellow directors, and Bestenbier says he conditionally approved the 2015 financial statements. 

Projects he introduced to Tubular Construction were subsequently diverted to other group companies, with no benefit flowing to himself.

Irregular payments

Auditor Moore Stephens issued a qualified audit report in 2017 after material irregular payments were made to a close corporation “where the sole member was the head of contracts at a government organisation, whose member was linked to a significant contract that the company had been awarded”. This refers to the alleged bribes to Hlakudi. Bestenbier says he had no knowledge of these payments at the time, although the same was subsequently pointed out to him by O’Sullivan.

Several attempts were made by Bestenbier to resolve these financial irregularities with Trindade, to no avail.

In an emailed response to Bestenbier dated November 19, 2018, Trindade writes: “Not only did you fail to attend [management meetings] to raise concerns, you signed off various documents thereafter, including the AFS [annual financial statements], without raising concerns. To now allege that you signed on provisos is blatantly untrue and inconsistent with the duties imposed upon you as a director in terms of the Companies Act.”

In a separate case, O’Sullivan and Trindade squared off a second time in the Germiston magistrates’ court last month, with more harsh words passing between O’Sullivan and Trindade’s legal team at the in-camera hearing.

Read: Vintage Paul O’Sullivan confrontation outside magistrate’s court

Trindade was asking the court to interdict O’Sullivan from contacting him and his family. O’Sullivan agreed to this, saying he had no need to contact Trindade again and the magistrate made it an order of court. Trindade also wanted O’Sullivan to be charged with contempt and to pay legal costs, but the court did not entertain that part of the application.  

“Trindade is going to jail,” says O’Sullivan. “He is the person more than anyone else who sank Eskom.”

Trindade’s attorney Robert Kanarek says the business rescue application will be vigorously opposed.

On the consent interdict against O’Sullivan, he says: “Funnily enough, when the application was launched the reporters were at court at the instance of O’Sullivan, but when the order was obtained against him, no reporter was in sight.”

The court hearing was held in camera, which means reporters and members of the public were barred from entry.

O’Sullivan has accused Kanarak of living off the proceeds of crime and says he has written to Standard Bank, requesting it to freeze Trindade’s accounts.

Listen to Nompu Siziba’s interview with Eskom CFO Calib Cassim:

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“Bestenbier says he was brought in as a BEE shareholder to assist the company in winning contracts”

Just shows how rotten this whole BBBEE business is. How does a guy “ASSIST” in getting contracts?

Does it not go out to tender?

This “Practice” is going to be the downfall of this country.

Mmmm, exactly! What role did he play in obtaining contracts? What I wanted to say about him in a previous few posts had been all been deleted by the moderators of MW.

BBBEE and transformation are the reasons why South Africa’s economy is in the state that it is. Their removal is long overdue.

My comment to this article was also deleted.
Censorship and suppression of free speech alive and well in SA

Greed, corruption, the extreme love of money! Put the bad guys in jail.

One wonders how much Mr.Bestenbier paid for his 35% shares?

Bugger all. These BEE shareholding structures are designed to use dividends to pay for the BEE shares.

Mr Bestenbier is simply greedy and wants “money for jam” simply for the privilege of having his name on the letterhead, so typical of BEE.

A better basis would be to have the IDC as the BEE shareholder. The IDC would then use profits accrued to finance SME’s.

“Tubular Construction CEO Tony Trindade has been accused in court papers of having paid R55 million in bribes to a company owned by former Eskom contracts manager Frans Hlakudi.”

Do not pay the debt until an audit is done on work performed and whether the contractual goal was achieved.

In the real world, companies not allowed to fund their own share purchases (with the exception of buyback of buyback of course). BEE is economically a whim, a fantasy, something that should not exist and the way it is operated, cannot exist; and that it where the economic downturn has its advantages where reality kicks in and BEE can be pushed back.

Tough, Bestenbier, you lie down with dogs, you get fleas….suck it up!

End of comments.

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