Millions+missing+at+Fidentia,+Rob+Rose,+Business+Day

Business Day, Johannesburg, 02 February 2007
=‘Millions missing’ at Fidentia, says FSB=


 * Rob Rose, Chief Reporter**

A DEVASTATING high court application by the Financial Services Board (FSB) has exposed the “misappropriation” of hundreds of millions of client money by Cape-based asset management company Fidentia, which until now had appeared as something of a rising star in the sector.

This may prove to be one of the most damaging investment scandals since the failure of Masterbond in 1992, given that Fidentia was looking after R1,6bn of other people’s money.

Of these funds, R1,47bn came from the Living Hands Umbrella Trust, which pays out money invested with Fidentia by the Mineworkers’ Provident Fund to orphans and widows of people killed in mining accidents.

Another R245m came from Teta, the education and training authority for the transport sector.

The application follows a probe of Fidentia by a team mandated by the FSB, and it paints a bleak picture of the way the company carried out business, including references to “misrepresentation to clients”, “misappropriation of client funds”, “misrepresenting investments”, “inadequate corporate governance” and “material conflicts of interest”.

At the last count, the FSB probe concluded that R406m is the figure of “client funds unaccounted for”, which suggests that the Living Hands Trust and the transport Seta may yet lose hundreds of millions of rands.

While it is not yet possible to say how much is missing, the inspectors said “it is now evident that a lengthy disposal process (of Fidentia’s assets) will be requi-red... and the value which will be realised remains uncertain”.

At the FSB’s request, the Cape High Court placed Fidentia Holdings and its two subsidiaries, Fidentia Asset Management and Bramber, under curatorship. The curators will be Dines Gihwala, who chairs law firm Hofmeyr Herbstein and Gihwala, and accountant George Papadakis.

But the affidavit to the court, signed by the FSB’s deputy executive officer, Gerry Anderson, reveals a stark tale of how Fidentia took funds from clients ostensibly for investment purposes but then channelled the money into funding its business and buying other companies.

Anderson’s affidavit includes scathing extracts from the report by FSB inspectors hired to analyse the company.

The inspectors said “funds from clients intended for investment were utilised to defray business expenses and to acquire property and private equity investments for the Fidentia group”.

They said Fidentia’s actions broke the Financial Institutions Act as those companies “made use of client funds and gained an improper advantage for themselves to the prejudice of the clients”.

“The nature of the assets held by (Fidentia Asset Management) on behalf of clients had been artificially disguised to misrepresent the nature of the investments held on behalf of clients.”

The court ordered the curators to report back on March 27 “on any irregularities committed by either of the firms, their directors, key individuals, or management”.

Despite repeated messages left for Fidentia chairman Arthur Brown and other executives, the company had not responded by the time of going to press.


 * From: http://www.businessday.co.za/articles/topstories.aspx?ID=BD4A374314**

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