'Millions missing' at Fidentia

[duncan drennan]

An example of how NOT to use a trust

As this thing unfolds the blatant fraud that has occurred becomes clearer and clearer,

Also implicated in the scandal this week is Andrew Tucker – who has two Cape Town residential addresses, one in Table View and the other in Milnerton, and is a trustee of the Brown family trust along with Arthur and Susan.

The capital beneficiaries of the trust, meanwhile, are Brown, his wife and Brown’s descendants.

The trust bought Facets for R24,5m with “investor funds which were misappropriated from Fidentia Asset Management (FAM)”, said the papers.

The bank account used to buy the building was the account of Fidentia Capitalwise Securities.

Brown, meanwhile, was a director of FAM and Fidentia Capitalwise Securities, controlling them and treating them as “one company”.

Capitalwise, previously known as Brown Brothers Securities (Pty) Ltd, was a subsidiary of Fidentia Holdings.

The curators said that as they could not “establish the existence of any real, autonomous and/or independent existence of the trust”, they had come to the “inescapable conclusion” the trust is Brown’s alter ego.

“Brown registered the property into his family trust in circumstances which were both fraudulent and in flagrant breach of Brown’s obligations to FAM and Capitalwise as a director of both companies.”

Brown also controlled the trust, with the help of his wife, and is also its primary capital beneficiary.

Full story on MoneyWeb

[Dave A]

It makes you wonder about just how much protection by separation trusts really offer nowadays.

[duncan drennan]

Well, it doesn't matter what structures you have in place, if money was obtained criminally (as was the case) then no protection is provided (and none should be).

[Dave A]

But then why this statement:

The curators said that as they could not “establish the existence of any real, autonomous and/or independent existence of the trust”, they had come to the “inescapable conclusion” the trust is Brown’s alter ego.

I understand when we're talking about criminal activites, the culprits should not be hiding behind trusts. But on the flip side trusts can't be held accountable for the actions of their trustees either.

[duncan drennan]

I hear you. The structure that many people are pushing is this one with trustee plus independent trustee (which he had), but it is definitely open for abuse. I suppose it rests on the strength of the independent trustee, and the documentation.

I suppose in the case where a trust has been used like this for legitimate reasons, and all the signed resolutions and minutes are available, then, if nothing else, it makes it far more difficult for a creditor to try to liquidate. First they have to prove the trust was not autonomous, which costs a lot. It may (even if the trust is not autonomous) at least buy some time, or leverage.

The whole situation does bring into question the structures that have been sold to many people (including myself). Maybe the important thing here is to get a really worthwhile independent trustee, rather than just appoint the lawyer who set it up for you.

[duncan drennan]

It seems that the curators have figured out where R100mil of the money has gone....

This was said by co-curator George Papadakis, who told Moneyweb this week: "We know where every cent is and who has got it. Some have offered to repay; others are choosing to fight us."

While much of the R1,6bn belonging to widows and orphans whose funds were entrusted to Fidentia was spent in an extravagant corporate spending spree, more than R100m "found its way to people who shouldn't" have accessed it, he said.

So far, about R300m has been repaid to investors, said Papadakis.

Full article on MoneyWeb

[Graeme]

Public Investment Commisioner

BEE and the State Pension Fund

The Public Investment Corporation plans to withdraw a further ninety thousand million rand, or a quarter of its assets in pension fund and other monies, from asset managers such as Sanlam, Old Mutual, Stanlib and others. This was announced yesterday by the state pension manager (Mercury 25-09-2007). The reason given was to reassign this staggering amount of other peoples’ money to investment managers that had greater ownership and participation by black people. The present investment fund managers will be given the opportunity to re-apply under new mandates. Yawellnofine.

The announcement just happened to be made on Heritage Day, one of the more politically emotive occasions that are to be found in the South African calendar.

The new mandates which are to be introduced will, of course, make before/after comparisons impossible and whether the new arrangements will turn out in the end to be more or less favourable for the million-plus state pension fund members, together with state pensioners and their dependants cannot be known right now but I doubt if in a few years down the line anyone will be able to unscramble it all and work out if the change produced the best investment outcome. Investing large sums of money to best advantage is an extraordinarily intricate business and pension funds, both private and public, are notoriously secretive about these outcomes. Whilst private-sector investment managers may be dragged through the courts to establish just precisely what happened on their watch (vide Alexander Forbes), try taking the PIC to court!

The investment of Pension Fund assets should be distributed amongst managers on a competitive and transparent basis - it really is the only way. With the PIC will we ever know?

[Marq]

The pro's and con's of having a pension fund.
I'll stick investment managers and political threat on the con's side.
It's rather heavy on that side.

Perhaps a quick debate on what you would do for a pension scheme these days would be interesting.

I don't have one at the moment and have been wondering whether I should

• spend some time playing the stock market myself
• get a passive income going properly now
• buy property for future rental income
• cash in the bank
• cash under the mattress
• bury gold bars in the garden.

What does one do these days given fidentia, Liberty, Sanlam, empty gravy train pockets, greedy sars officials, hungry non working class etc.?

I certainly don't feel like working till I drop and I am hoping that I can still squeeze a few years out allthought our odds in sa appear to be dropping.

[Graeme]

Pension Scheme - Quick debate

Marq - I offer the following comments regarding your post about retirement funding investment alternatives:

You mention "playing the stock market" - by this I assume you mean speculation rather than investment. Don't do it; unless you have an ongoing source of truly excellent inside information you are unlikely to win in the long run, any more than you would win in the long run against the casino. And SARS treats profits from speculation as income taxable at marginal rate instead of taxable as capital gains (max 10%). Much, much better to invest in blue chip equities, in businesses you understand and can monitor, and stay with for the long haul.

"Buy property for future rental income" - Apart from owning your own home, I have never liked property as an investment because it takes too long to sell (with shares you can be out in hours), there are too many taxes on property and it's getting worse, a bad tenant can be a nightmare, and property owners can/will increasingly become a target for the homeless and the hungry.

[World_Of_Elites]

Only in South Africa, can you get a Licence to Loot and still recieve a Diploma for Job Creation. The Lotto is also a Scam, with Job Creation as a Front, Discovery Medical Aid are being taken to court to pay-up R645 Million for Wrongful Debits to their Clients, they will recover this amount in a matter of Days, and just today Jackie Selebi denied that he is Interpol's Crime Boss operating in South Africa.......Hey, Don't Worry, It's all in the name of Job Creation and Re-Distribution of Wealth.

[Dave A]

Fidentia chief executive J Arthur Brown has been arrested on charges of theft, fraud and money laundering, the NPA said on Friday.

"J Arthur Brown was arrested on the strength of a warrant following the investigation that was carried out on a separate leg of the bigger Fidentia investigation," said National Prosecuting Authority spokesman Tlali Tlali.

He was arrested in Cape Town's central business district on Friday afternoon and appeared in court.

The case was postponed to Monday and Brown would remain in police custody until he appeared in court.

"We should be able to disclose before court [on Monday] the reasons and circumstances that led to the arrest," Tlali said.
full story from IOL here

[Dave A]

Fidentia boss allegedly raped in police van

Fraud suspect J Arthur Brown was allegedly raped in the back of a police van last week, the Sunday Times reported.

Brown's attorney, William Booth, said the former Fidentia boss -- accused of theft and fraud involving hundreds of millions of rands -- suffered an "extremely humiliating" sexual assault in a jam-packed prison van taking him from the Cape Town Magistrate's Court to Pollsmoor on Monday.

He said Brown is now under police guard in a private Cape Town hospital that has special expertise in treating Aids patients.

"He's been seen by a psychiatrist, he's had a couple of procedures and he's on antiretrovirals. His mental state is not good."
full story from M&G here

Not on! This is ridiculous!

[Debbiedle]

Oh please! I do not believe it for a moment - WTH, this man stole from old people and orphans - this is another scam by him to get transferred to some cushy 5 star hotel awaiting trial. He wants sympathy for being "humiliated"?

How humiliating must it not be for all those pensioners who now have to depend on their families for the REST OF THEIR LIVES for food?

This kind of hypocrisy gets right up my nose! How dare he?

*okay, okay I will get off my soap box now!*

[Dave A]

At least justice seems to be grinding on in the Fidentia case.

A key figure in the Fidentia saga, Steve Goodwin, has been convicted of fraud and corruption, and of money laundering involving about R93 million.

In terms of a plea agreement endorsed by the Cape High Court on Monday morning, he has been sentenced to an effective 10 years in jail.

Part of the deal is that he will testify in criminal proceedings against his former associate, ex-Fidentia boss Arthur Brown.
full story from Business Report here

[Frankincense]

...eeerhhhmm...I do see Injustice grinding more swiftly at this stage...

http://turnerradionetwork.blogspot.com/2009/04/leaked-bank-stress-test-reults.html

Talk about putting money under the bed....?

The comments below the report are RAW..not for the faint hearted...

It's not about who's being held accountable...I wouldn't get to happy just yet...it's the people who will pay...you and your families....