London Stock Exchange-listed Umuthi Healthcare Solutions CEO Gert Viljoen (42) and Connie van Nieuwkerk (52) were arrested last week and appeared in the Palm Ridge Magistrate Court, south of Johannesburg, on charges of fraud.
It is alleged shareholders were defrauded of millions of rands between March 2019 and May 2021 after being enticed to purchase shares that in many cases did not exist. Shareholders claim 28 million shares are missing.
Though the company was listed on the LSE, the two arrested executives are South African, as are the majority of shareholders who say they have been defrauded.
Viljoen was released on R20 000 bail, and his hearing was postponed to December 1, 2021.
Moneyweb understands that Van Nieuwkerk, who also goes under the name Connie van Vliet, remains in custody, and her bail hearing has been postponed to November. She was previously arrested on a R5.5 million fraud charge that pre-dated the alleged sale of these shares in Umuthi. She was formerly a director and CFO of African Dawn and Alliance Mining. In March 2020, she was fined a total of R46 million by the Financial Sector Conduct Authority (FSCA) for misrepresenting the African Dawn’s financial statements by R274 million, and for similar financial deceptions at Alliance Mining. Van Nieuwkerk then moved on to Umuthi Healthcare Solutions and was in charge of the London listing process.
Shareholders were given bank accounts where the monies were to be deposited, which turned out to be the suspects’ personal bank accounts.
Thirty shareholders lost R50 million due to misrepresentation, says the SAPS.
The matter was reported to the Hawks’ Serious Commercial Crime Investigation team in Johannesburg for investigation.
The SAPS says its investigations are continuing and more arrests are imminent.
Umuthi was listed on the Standard Board of the London Stock Exchange (LSE) in March, but trading in the shares was suspended six days later, after questions were raised about alleged misrepresentations in the listing prospectus.
Potential investors were apparently enticed by promises of a £4 listing price, but the shares ended up trading at less than a tenth of this.
The listing was bedevilled by mishaps and resignations. The company has cycled through two CFOs in the last six months, Pieter Grimes and Phillip van Huyssteen. It currently sits without a CFO, according to a Regulatory News Announcement (RNS – the London equivalent of Sens) issued this week, though the hunt is on for a suitably experienced UK-based replacement “to take the restructured business forward upon restoration of the listing.”
UK-based director Colin Bloom recently resigned, and Memery Crystal, listed in the prospectus as solicitors to Umuthi, issued a statement saying that it had terminated its engagement with Umuthi in December 2020. There was also a change in auditor soon after the March 2021 listing, when PKF Littlejohn raised concerns about certain statements in the prospectus. Jeffreys Henry then took over as auditor.
Moneyweb is in possession of emails purportedly written by Umuthi CEO Viljoen to Van Nieuwkerk where he accuses her fraud, and of threatening him and his family. Viljoen also accuses her of selling shares she does not have and forcing the company to a standstill.
The RNS issued this week informs shareholders of Viljoen’s arrest, but says charges have not formally been put to him, “though the allegations appear to relate to over-the-counter sale of Umuthi shares, transactions over which the Company and Mr. Viljoen had no control or involvement.”
Anthony Morris, the mandated representative of the largest shareholder group which collectively owns 40 million shares out of 92 million in issue, says the Umuthi listing on the LSE was a catastrophic failure at multiple levels: from the banks that allowed millions of rands in share sale revenue to be deposited in the personal bank accounts of Viljoen and Van Nieuwkerk, to the alleged misrepresentations that managed to slip past the LSE.
The principal asset in Umuthi is pharmaceutical supplier Lems, which the prospectus says generated revenue of £447 831 and a gross profit of £13 971 for the period ended February 29, 2020.
Doubts have been cast by some investors as to the authenticity of the financial figures presented in the prospectus, particularly the revenue figure (which is covered by the international accounting standard known as IFRS 15).
Lems, the key source of this revenue, supposedly operates out of a warehouse in Johannesburg, but when Umuthi shareholders went to verify this, they found a deserted building that had apparently been unoccupied for months. In the RNS issued this week, Umuthi says “the warehouse was temporarily closed from early 2020 due Covid 19 Lockdown regulations and cost efficiencies.”
Umuthi’s online prospectus also claims that Lems holds a licence with the Medicines Control Council (MCC), yet Morris says there is no evidence of this when the licence number is entered on the MCC website.
The Umuthi RNS issued this week advises shareholders that the company is undergoing management restructuring and working on a business plan for the future.
It also advises that management is working on securing financing from shareholders and remains confident of the viability of the company “with their continued support.”
As for the going concern status of the company, Umuthi chairperson Shaun Gresse, says: “The board of directors would like to highlight that as a result uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern without shareholders continued support.”
Morris says this wording is setting up shareholders for blame for the collapse of the listing.
In response to questions sent by Moneyweb surrounding the arrests and the background to Umuthi’s suspended listing, Viljoen replied that he could not comment as the matter is sub judice.
According to Daily Maverick, Viljoen denied the charges of fraud as claimed by SharePropets.com, a market-related website, and others. He claims the listing went through a rigorous verification process and was scrutinised by the UK regulator, the Financial Conduct Authority (FCA).
Morris claims that various members of their group have irrefutable evidence that the FCA’s systems and processes were completely compromised throughout the Umuthi engagement. A shareholder group’s Facebook page will go live in the coming week where evidence of alleged wrongdoing at Umuthi will reportedly be displayed.
To be continued.