The labour department has been urged to investigate the investment strategies of all sectoral training authorities after the Transport Education Training Authority (Teta) told the Standing Committee on Public Accounts on Wednesday that it had made a R250m investment in Fidentia on the advice of its lawyers.
The hearing by the National Assembly Standing Committee on Public Accounts (Scopa) saw Teta chief executive officer Piet Bothma being grilled by the committee chairperson Themba Godi, a Pan Africanist Congress Member of Parliament, and African National Congress MPs Pierre-Jean Gerber and Vincent Smith. Godi said the department should investigate the matter as "someone should be responsible for this mess" - referring to the report by the Financial Services Board that the Teta was unlikely to get its investment back from Fidentia - a black empowerment firm that has been placed under curatorship. Smith described the affair as "a seriously deficient investment strategy" on the part of Teta, while Gerber described the investment as "reckless". Gerber - who led the charge by MPs in the public finance watchdog committee - asked how it was that an investment of "a quarter of a billion rand" of public money had been made only on the advice of a company of lawyers - identified as SAB&T legal services.
Bothma replied: "We went through reference checks on the company and its directors and got legal advice on the mandate requested by Fidentia. There were checks and balances built in." Smith said that Setas were supposed to be "cost centres" and not investment or profit making institutions and suggested that it would be "crazy" if all 16 Setas had so much money on average available for investment. "Something is terribly wrong," he said. Gerber asked how the investment in Fidentia came about. "The name of the firm Fidentia didn't fall out of the air like a mosquito?" he charged. Bothma said the authority had been approached by Fidentia in "a marketing exercise". "After we looked at the proposal made... we went through reference checks on the company and its directors and got legal advice on the mandate requested by Fidentia," said Bothma.
Godi noted that what had been chosen was a newly established company and it appeared that the Teta had verified its business with Fidentia either without really looking at the detail or being caught out by the advice sought from the legal company. He posed the question why when doing a risk analysis the question of the company's track record had not been an issue.
Bothma said although there now "appeared to be gaps in that situation" the bottom line was that Teta had procured "an excellent company" - SAB&T - "that was given a mandate to do certain verifications and checks and balances". He noted that SAB&T had gone through a "three-quotation" process for this job. "They also at that stage (nearly four years ago) did work for us verifying contracts that we do for discretionary grants," he said. It emerged in the committee discussion that Fidentia offered Teta 10.5% interest on their 50-day investment against 8% from Standard Bank and Absa's 8.05%. Bothma said that Teta had last year requested a withdrawal of its funds in Fidentia - following the FSB investigation.
Godi said it appeared from the Teta's actions that it swung from "one extreme to the other" - first entrusting "such a large amount of money" in Fidentia and then suddenly after the investigation wanting to withdraw "all your monies". "This does suggest that at no point did you apply your mind," said the committee chairman.
The FSB report last week noted that it was its analysis that some R689m of some R1.5bn invested with Fidentia could not be accounted for.
Source: News 24
Wednesday, February 7, 2007
Friday, February 2, 2007
Millions missing in Fidentia scandal
Cape-based financial services and technology company Fidentia has been placed under provisional curatorship by the Cape High Court in what could be the biggest scandal to hit the financial services sector in recent years. In its application for the curatorship yesterday, the Financial Services Board told the court that its inspectors could not trace R680-million of almost R2-billion taken in from various investors by its asset management subsidiary, Fidentia Asset Management. Much of the money is owed to widows and orphans of deceased members of the Mineworkers Provident Fund.
Based on the papers before the court, the scandal could be even bigger than the Masterbond, Owen & Wiggens and FundsTrust scams that rocked Cape Town in earlier years. With hours of the successful court application, curators Dines Gihwala - a top attorney - and one of the country's outstanding forensic accountants, George Papadakis, entered the opulent Canal Walk headquarters of Fidentia to take control. In their hands was a report of an FSB inspection team which has been trying to unravel the mess for the past six months. The report which accompanied the legal papers in the court application spells out a litany of mis-management and misappropriation of investors' money; total disregard for laws protecting investors; and significant contraventions of the financial licence conditions of Fidentia Asset Management. And the executive chairman of Fidentia Holdings, Arthur Brown, is accused in the report of using millions of rands invested with Fidentia Asset Management for himself, channelling the money through various family trusts.
Over the past two years the company has bought up a diverse group of companies, ranging from the Sante Winelands Health Centre to parts of the imploded financial services company MCubed, paying amounts which, at the time of the purchases, were considered to be excessive. The purchases raised suspicions because the source of the money used by the company, which was operating out of a rented garage at the upmarket Sunset Beach development as recently as four years ago, was not apparent.The inspection team's report indicates that the money came from two main sources: R150m from the Transport Education and Training Authority and R1,4-billion from a umbrella trust fund established to pay pensions to widows and orphans of retirement fund members.
The Cape High Court placed the financial services business of Fidentia Asset Management (Pty) Ltd, Bramber Alternative (Pty) Ltd and Fidentia Holdings (Pty) Ltd under curatorship. The curators have until March 27 to report back on what they find. At that date the court will make a further decision. Russel Michaels, FSB chief communications officer, said to-day that under the provisional order, the curators must take immediate control of, manage and investigate the business and operations of the companies, with a view to conserving the business and not alienate or dispose of any of the property of the companies. "In exercising their powers, the curators have been directed to give consideration to the best interests of investors in the companies." Michaels said members of the public should not attempt to approach the curators for information, "as their time will be fully occupied by this assignment. Progress with the curatorship will from time to time be made available through the media".
The court has ordered that the curators should, at their discretion, continue to make periodical payments to the thousands of pension fund beneficiaries whose money was invested with Fidentia Asset Management. The court has authorised the curators to conduct any investigation required to track down assets and exercise powers to take control of or freeze banking accounts of all the entities involved.
Source: Business Report
Based on the papers before the court, the scandal could be even bigger than the Masterbond, Owen & Wiggens and FundsTrust scams that rocked Cape Town in earlier years. With hours of the successful court application, curators Dines Gihwala - a top attorney - and one of the country's outstanding forensic accountants, George Papadakis, entered the opulent Canal Walk headquarters of Fidentia to take control. In their hands was a report of an FSB inspection team which has been trying to unravel the mess for the past six months. The report which accompanied the legal papers in the court application spells out a litany of mis-management and misappropriation of investors' money; total disregard for laws protecting investors; and significant contraventions of the financial licence conditions of Fidentia Asset Management. And the executive chairman of Fidentia Holdings, Arthur Brown, is accused in the report of using millions of rands invested with Fidentia Asset Management for himself, channelling the money through various family trusts.
Over the past two years the company has bought up a diverse group of companies, ranging from the Sante Winelands Health Centre to parts of the imploded financial services company MCubed, paying amounts which, at the time of the purchases, were considered to be excessive. The purchases raised suspicions because the source of the money used by the company, which was operating out of a rented garage at the upmarket Sunset Beach development as recently as four years ago, was not apparent.The inspection team's report indicates that the money came from two main sources: R150m from the Transport Education and Training Authority and R1,4-billion from a umbrella trust fund established to pay pensions to widows and orphans of retirement fund members.
The Cape High Court placed the financial services business of Fidentia Asset Management (Pty) Ltd, Bramber Alternative (Pty) Ltd and Fidentia Holdings (Pty) Ltd under curatorship. The curators have until March 27 to report back on what they find. At that date the court will make a further decision. Russel Michaels, FSB chief communications officer, said to-day that under the provisional order, the curators must take immediate control of, manage and investigate the business and operations of the companies, with a view to conserving the business and not alienate or dispose of any of the property of the companies. "In exercising their powers, the curators have been directed to give consideration to the best interests of investors in the companies." Michaels said members of the public should not attempt to approach the curators for information, "as their time will be fully occupied by this assignment. Progress with the curatorship will from time to time be made available through the media".
The court has ordered that the curators should, at their discretion, continue to make periodical payments to the thousands of pension fund beneficiaries whose money was invested with Fidentia Asset Management. The court has authorised the curators to conduct any investigation required to track down assets and exercise powers to take control of or freeze banking accounts of all the entities involved.
Source: Business Report
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