Arrogance+More+Than+Greed,+Alec+Hogg,+Moneyweb

Moneyweb, radio broadcast transcript, 08 February 2007 23:02
=Arrogance More Than Greed=

Interviewer: **Alec Hogg** is a writer and broadcaster. He founded Moneyweb and is its editor-in-chief. Email: **alec@moneyweb.co.za**

Interviewee: **Derek Sumption**: Managing director, Brantam Financial Services


 * MONEYWEB:** Well, more than an imbalance was going on in a company called Fidentia. In fact, in 2005 Derek Sumption, who runs Brantam Financial Services, gave me a call, and he said, watch out, there's something smelling here. Derek's in the studio with us right now. The whole Fidentia story's now in the public domain, and we're going to be talking to a couple of our journalists in just a moment, Derek, but what got you to pick up the phone to me in the first place and say, "Hey - this smells"?


 * DEREK SUMPTION:** Alec, we were involved through a company called AOS, who were doing our administration. They were bought by Fidentia. So we suddenly, after six or so years of using AOS, suddenly had a new partner doing our administration for our business. And in July 2005 they called us in to come and meet the new shareholders from Fidentia. I went into the meeting, and I can say - I've been in business 22 years - that is probably the worst meeting I've ever had in my life. The arrogance of the man, this Mr Brown, was just unsurpassed. I've never come across that.


 * MONEYWEB:** How do you mean, arrogant? How did he present himself?


 * DEREK SUMPTION:** Well, we walked into the meeting - now, you're faced with ten people you've never met in your life before, and this chap stands up, this youngster and says...


 * MONEYWEB:** How young?


 * DEREK SUMPTION:** Oh, whatever he was, 31 or thereabouts - "I'm the executive chairman of Fidentia." Now, nobody's ever heard of Fidentia. Where is this? Why are you giving yourself a title of executive chairman at the age of 30, with no company behind you? So that just kind of put a spin on the thing. Then he said to me, "What are your concerns?" I said, "Well, I'm unhappy with the deal. The business has just been sold. We're just suddenly lumped with somebody else that we don't know - we've had no say in the matter."


 * MONEYWEB:** You're the client?


 * DEREK SUMPTION:** We're the client. He turned to me with a grin on his face, and he said, "You sound like a failed MBO candidate".


 * MONEYWEB:** And you're the client!


 * DEREK SUMPTION:** So that just kind of got the tone of the meeting set out. I had learnt before the meeting they had paid what seemed to be over the odds for this business. I couldn't establish that they had warranties, they'd done no due diligence, they'd just paid a cheque.


 * MONEYWEB:** Let's just unpack a little bit. So they'd paid more than other people were prepared to pay, and you say no due diligence? So they hadn't gone in and checked that everything that was being presented was accurate? That's most unusual!


 * DEREK SUMPTION:** That's correct. Well, that's what rings the alarm bells. Because that was told to me was that these guys had walked in, said here's a cheque, cheers. Never looked at the business or anything like that.


 * MONEYWEB:** Did anybody ask where the money came from?


 * DEREK SUMPTION:** Well, that was my next question to him. The way we were going about the meeting was not the most congenial atmosphere on the globe, but I started to attack him on the basis of, this is all great, but where did you get the money from? And I was told all sorts of stories - no you don't have to worry, we've got money, it's family money. And then a little bit later in the meeting, I said again, "Where's the money come from?" No, it's from the unions, the unions are involved in this, it's Cosatu money - and we could never get a handle. And you know, when you've been in business this long, you just get a feeling that something's not right. You're getting pulled around from pillar to post, you're not getting the information you're looking for. I got back to the office, I phoned you and said this thing stinks. I just do not like it, I don't like the deal. There's something wrong. I can't tell you what it is. Go and have a look.


 * MONEYWEB:** Now this is July 2005. So we asked our ace Cape correspondent and financial services correspondent, Jackie Cameron, to pick up the ball there. Jackie joins us now. You went off to go and meet, or at least to try and meet, the Fidentia people, Jackie?


 * JACKIE CAMERON:** I did, and they were very cagey. I eventually got to see somebody who said he was the right-hand man of Arthur Brown. I met them at their offices at Century City, which is near Canal Walk in Cape Town. Quite a kitschy sort of looking building, but quite plush inside, and the foyer, the reception area looked a little bit like one of those airport lounges - you know, lots of sweets in bowls, and free coffee, etc. Eventually I was ushered into a boardroom where there was an enormous table, and we sat at one end, what seemed to be the furthest end from the door. I later discovered that they seem to have tapped a lot of their phone calls and had like secret cameras trained on various rooms in the building, so perhaps that's why ...


 * MONEYWEB:** They put you there!


 * JACKIE CAMERON:** It was such a strange building. And they were very charming, initially, but not at all prepared to say where they got their money from. They hinted that the money was backed by banks, and basically we didn't get a sense of where the money was coming from, except for this Living Hands Trust. You know, they had a lot of paperwork lying around and in the office. Not much substance to it, but it looked like the Living Hands Trust had a lot of money attached to it, and they were quite proud of that trust and spoke about how a big emphasis in their work was trying to trace some of the beneficiaries. In fact, it's quite possible a lot of the victims don't even know they're victims.


 * MONEYWEB:** Not yet, but they will soon. The Living Hands Trust, just to re-emphasise, is a trust that was formed for the beneficiaries of blue-collar miners who had died, either on the job or, I suppose, through illnesses like Aids during the period. There are 47 000 of these beneficiaries, many of whom are getting R200 a month. So you certainly aren't talking about people who can afford to lose anything. And it appears as though that has been the slush fund, and they have used that money to pay for the kind of transactions - and it wasn't just the transaction that Derek Sumption spoke about. There were a number of others where they paid significantly over the odds. Jackie, we did get, I think, some kind of a threatening letter from the fellows that you saw there, but at that point in time there wasn't really a whole lot more that we could do.


 * JACKIE CAMERON:** No, and in fact, they also threatened to buy Moneyweb if we got too shirty.


 * MONEYWEB:** Good luck to them! Barry Sergeant, who's our investigations editor here in Johannesburg, then was also asked to pick up the ball, and maybe to have a look at their highly prestigious legal firm, Barry. Bowman Gilfillan, who were recently in the news, I think, for other reasons, were looking after these guys' legal affairs.


 * BARRY SERGEANT:** Yes, indeed. That was early July last year. I went through on the telephone to Fidentia in Cape Town, and it seemed that Arthur Brown was untouchable. And apparently that is indeed the case, but that's another story. I was eventually put, by one of his sidekicks, onto Bowman Gilfillan in Cape Town, and I spoke with James McKinnell. Of course Bowman Gilfillan, a number of attorneys, even competitors, will tell you that that is probably //the// top legal firm in the country, and I'm sure people are going to spit and curse when I say a thing like that. But it is a highly regarded law firm, that's the bottom line.


 * MONEYWEB:** And highly respected, and you don't go to war with Bowman Gilfillan very easily.


 * BARRY SERGEANT:** Absolutely. And the key thing here is that when you speak to somebody, when you speak to one of the attorneys at Bowman Gilfillan, you are happier speaking to them rather than some hooligan attorney on the street corner who's running some kind of a chop-shop at the back of his office.


 * MONEYWEB:** Lots of class, lots of costs, though?


 * BARRY SERGEANT:** They're not cheap. And, to cut a long story short, that conversation effectively put me off the trail, which wasn't a very good decision on my part. But that was the effect of the conversation with James McKinnell.


 * MONEYWEB:** So Bowman Gilfillan basically said to you these guys are above board - not in as many words but, we know them, we've investigated them, we know they're fine, you know, back off, you don't actually know where you're going.


 * BARRY SERGEANT:** And at the same citing the normal thing, which is client confidentiality. But the gist of the conversation was enough to put me off further investigation. Earlier this week, I emailed James McKinnell, and I didn't hear from him, and then I emailed him again today. And his reply was that Bowman Gilfillan is no longer acting as attorneys for Fidentia, and it's likely that the curator of Fidentia will appoint attorneys in due course. The remarkable thing is that a firm of that stature could have acted, in hindsight - which is always 100% isn't it? - could have acted, with the hindsight we've got now, for an outfit like Fidentia.


 * MONEYWEB:** Jackie Cameron, it appears as though J Arthur Brown was drawing a salary of R400 000 a month. He had certain people on his staff who were drawing almost as much as well. He seemed to surround himself with, well, lots of luxury. The fallout that you've been able to pick up at this point in time in the Cape financial circles?


 * JACKIE CAMERON:** Well, lots of bickering behind the scenes, and it seems that he had a girlfriend and all of that dirty laundry's coming to the fore as well.


 * MONEYWEB:** Lots of it on the Moneyweb website, where many anonymous posters might be doing things to perhaps put the knife in, now that the man is down. But Derek Sumption, one has to ask how this was allowed to happen in the first place? There is a Financial Services Board who had to go to war to get the curators in at last, so that now the muck is finally starting to surface. But could there be more of these happening as we sit here?


 * DEREK SUMPTION:** I don't think there's that many going on, certainly not on the scale that this one has gone on. The problem the FSB has is that, until someone brings it to their front door and says, listen there's a problem, they tend to be rather toothless in what they can do. We're governed by them. And the dealings we have with them, they don't strike you as the most professional outfit in the marketplace. So, from what I understand, somebody tipped them off, they went and had a look. They actually had to get the SAP to accompany them, otherwise they were just getting chucked out the front door. So I mean the thing got quite ugly. This was the end of last year, and that's what triggered our move. We still had R500m on that platform, we were still using AOS because it's a great system. The assets are protected because they sit inside a trust, so there's no risk to any of the clients that are on the AOS platform, because it's in a trust. But we started getting these rumours, saw that the cops had had to go in with the FSB, and that was us. We just said, thank you, we're not going to take the reputational risk of being involved with a company like ...


 * MONEYWEB:** So you took your clients' money out?


 * DEREK SUMPTION:** We moved our clients' money out. Not that we were worried about the clients' assets. That sits in a custodian trust, so they never had a risk from that point of view, but there was certainly a reputational risk to Brantam, and there was also a transaction risk. You know, if this thing had blown up and it was on that side of the business, the curator could come in and freeze the business for a year, which would leave us in schtuk street.


 * MONEYWEB:** David Shapiro, we know it's a small society in South Africa, a very small market, and where there's a smell people talk about it. But you almost have a conspiracy of silence - clearly not from Derek Sumption's perspective, but I think in other areas.


 * DAVID SHAPIRO:** I think so many people must have been sucked in, and finding themselves in a very difficult position, having been taken in by Mr J Arthur Brown. What I can't understand is how did they get their hands on Living Hands Trust? Who gave them the authority, who handed over control of that trust? Obviously that was spewing out money, and was the basis, which you called the slush fund, that gave them the money to do what they did do.


 * BARRY SERGEANT:** Alec, just this case has got so many aspects. I heard earlier today that one of the government SETAs, the Transport SETA, those are government-funded training organisations, had invested R250m with Fidentia. Has that been covered?


 * MONEYWEB:** Yes, that certainly is a fact, absolutely that is a fact, and some of that money might not be there as well.


 * BARRY SERGEANT:** That's a huge amount of money, and you don't know what an entity like that is doing investing money with //anybody// - it's a training organisation.


 * DAVID SHAPIRO:** How do people hand over money to an organisation that is brand new, with inexperienced managers? A 30-year-old? Granted, there are some very, very clever 25- or 26-year-olds, but they've never run the marathon. How does the money, R200m, get handed over?


 * MONEYWEB:** Well, R1.2bn in the case of Living Hands Trust. Derek, had you ever heard of J Arthur Brown or Fidentia two years ago?


 * DEREK SUMPTION:** No, Alec, they came out of nowhere, and that was one of the reasons that prompted me to phone you to try and find out something, because we were trying to investigate. But it's not our game, we're not journalists, we don't do that sort of thing. We were trying to find out more about who this crowd was. Their website tells you absolutely nothing, and the only thing they kept throwing back at us was: "We run the Infinity card. That's our claim to fame, we run the Infinity Card".


 * MONEYWEB:** Which is what?


 * DEREK SUMPTION:** It's all these loyalty cards, the Wild Card that you get when you go to the game reserve, and Clicks Cards and those sorts of things - they run that Infinity programme. So that was always thrown - that's who we are, that's our credentials. But outside of that, you could never ever find out a thing about Fidentia, or its directors, the people involved - nothing. You just got nothing.


 * MONEYWEB:** Jackie Cameron, are you still on the case?


 * JACKIE CAMERON:** Yes.


 * MONEYWEB:** I think you're going to be kept busy for quite some time, as is Barry Sergeant up here in Johannesburg.


 * From: http://www.moneyweb.co.za/mw/view/mw/en/page55?oid=68530&sn=Detail**

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