Baloyi+sheds+her+velvet+gloves,+Barry+Sergeant,+Moneyweb

Moneyweb, 20 March 2007
=Baloyi sheds her velvet gloves=

//Barry Sergeant reports on how bare knuckles are shown to Absa on the outskirts of the Fidentia meltdown.//


 * Barry Sergeant**

Danisa Baloyi, a self-confessed empowerment champion, has hit back hard enough against her sacking by Absa, South Africa’s biggest retail bank, part owned by the UK’s Barclays. Absa announced on Tuesday that Absa Group and Bank had “terminated” Baloyi’s services “following public disclosures regarding her involvement with the Fidentia matter”.

The matter involves the burn of more than R1bn in cash, owned mainly by orphans, by Fidentia under apparent Executive Chairman J Arthur Brown, who has been arrested, along with group accountant Graham Maddock. Baloyi was variously, and at various times, a shareholder and/or director of Living Hands, and a trustee of the Living Hands Umbrella Trust (LHUT). It is the latter entity, the biggest client of Living Hands, that was looted of more than R1bn in cash.

Baloyi is to seek legal recourse against Absa, protesting strongly that she stands “guilty of no offence under the Companies Act, Banks Act, or Absa’s regulations. I discharged my fiduciary duty and my duty of care and skill in a diligent manner. I was still prepared to continue in this manner until I was wrongfully removed”.

Beyond the legal terrain, Baloyi faces the hard fact that the decision to terminate her services was unanimous among all other Absa directors. The Absa statement on the issue said her termination was “in accordance with the articles of association” of Absa Group and Absa Bank. The relevant articles provide that a director may, before the expiration of his or her period of office, be removed from office “by a resolution signed by all the other directors”.

While Baloyi was clearly given the option of resigning, she states that “after much soul searching and consultations, I refused to be pushed off the Absa boards as this would have given the impression that I had done something wrong”. The mud slinging has started, all right, with Baloyi alleging that “from the beginning of this saga” – Fidentia was placed in curatorship on February 2 - Absa Chairman Danie Cronjé, “and management went about this matter in ways fully deserving of contempt”.

Instead, Baloyi continues, “of giving me the benefit of doubt – at least until they heard my side of the story – they engaged in behind the scenes, clandestine activities that exacerbated an already flammable and highly emotive issue”. Absa denies the allegation.

Baloyi has also attacked Makhosini Nkosi, newly appointed general manager of communications at Absa, who was previously spokesperson for the National Prosecuting Authority (NPA), which houses the high profile Scorpions unit. According to Baloyi, Nkosi approached the NPA “to do a back door check for the management and chairman of Absa on whether the NPA was planning to arrest and charge me”. Nkosi denies the allegations.

Baloyi alleges further that media speculation about her “impending resignation” was “fuelled by private briefings that were conducted by the Absa management behind my back”. Absa denies this as well.

The Absa directors who unanimously voted to boot Baloyi: Cronjé (chairman), Dave Brink, Steve Booysen (CEO), Dominic Bruynseels, Jacques Schindehütte, Louis von Zeuner, Attie du Plessis, Brian Connellan, Des Arnold, Franklin Sonn, Frits Seegers, Garth Griffin, Lourens Jonker, Monhla Hlahla, Naguib Kheraj, Nthobi Angel, Paul Kruger, Peter Swartz, Tokyo Sexwale, and Yolanda Cuba.

Baloyi’s intimate involvement in the Living Hands structure has disgorged over the past number of weeks. During 2003, Mantadia (later to be renamed Living Hands) yielded to pressure to complete a black economic empowerment (BEE) transaction. Angus Cruickshank, who had no interests in Mantadia, introduced Baloyi into the Mantadia equation.

In a deal worth many millions of rands, Investec financed Baloyi’s acquisition of a 50% stake in Mantadia, plus one vote. She was elected a director of Mantadia on October 31 2003. On October 15 2004, Fidentia insiders Steve de Kock, Johan de Jongh and Johan Linde started to stage the takeover of Living Hands on the back of a letter signed by Maddock.

Within weeks, Fidentia had R1,2bn in cash in its accounts, cash that belonged to LHUT. The Fidentia books of account suggest that part of the money seized from LHUT via Living Hands was used to, in fact, pay for Living Hands. Some R56m went to Investec, to extinguish Investec’s financing of Baloyi’s shareholding. Along with payments to other shareholders, R93m in cash was paid for Living Hands, now owned 100% by Fidentia.

A further R500 000 was paid to Cornerstone, an entity controlled by Cruickshank (who allegedly committed suicide in September 2006, a day after signing a deal with Fidentia). Just after Living Hands was seized, a mind-boggling “take-on fee” of R48m was paid to Arlenta and FAM, both Fidentia entities, for pains that did not exist. Brown was paid a “fee” of R4m, and R800 000 was paid in “other fees”.

Then there is an entry for R46m, classified as a “restraint”. This purportedly tax efficient “fee” was split up among several Fidentia insiders, including Brown, Maddock, Lodewyk Spies, Louis Koen, Johan Linde, Hjalmar Mulder, and Andrew Tucker. Payments were also made to self-confessed Fidentia fixer Steven Goodwin, who had masterminded the takeover of Living Hands, and its biggest client, LHUT.

While Baloyi resigned all her Living Hands-related positions after October 2004, she returned to the fray in mid-2005, and announced yet another new shareholder structure for Living Hands. SAWIH Alternative Investments, described as “an established and credible women-empowered company headed up by Dr Danisa Baloyi” would hold 35% of Living Hands.

Fidentia Holdings – “a diversified financial services group” would hold 39%, while the balance of 26% would be held by the “Fidentia Orphans Trust”, described as “a trust set-up to benefit a number of beneficiary groups including the LHUT beneficiaries”.

From there, until July 11 2006, the new-order LHUT trustees, representing Living Hands, had been Brown himself, Mulder, and Baloyi. From July 11 2006, Motsei Christine Komane replaced Brown as a trustee, while Baloyi and Mulder stayed on. Living Hands had always enjoyed the privilege of being the sole trustee of LHUT, represented by natural persons, such as Baloyi and Mulder.

A number of trustees responsible for moving trusts into LHUT raised alarm bells at various times after Fidentia seized the Living Hands structure in October 2004. In December 2005, trustees of the Mineworkers Provident Fund (MPF), the single biggest contributor to LHUT, requested KPMG’s forensic investigations department to conduct an investigation into Living Hands.

This investigation was conducted during May 2006, but only finally reported to the MPF trustees in October 2006. The KPMG report “did not highlight any significant irregularities in respect of the payment of benefits”, but KPMG was denied access to documents containing details of the investments held by LHUT on behalf of the beneficiaries. It was here that hundreds of millions of rands were being frittered away of lifestyles and bizarre business models.

In a report filed by inspectors attached to the Financial Services Board, it’s stated that the positions of Baloyi and Mulder as trustees of LHUT and as directors of various Fidentia entities “placed them in an untenable position relating to the performance of their fiduciary duties as trustees”.

The inspectors said that the “status quo exposes the trustees to a situation of conflict of interest. In our opinion they will not be able to exercise their discretion in a manner that will be to the best interest and general welfare of the beneficiaries”.

Baloyi may yet answer questions that have gone begging. Trevor Manuel, finance minister, put it this way during a speech on Tuesday evening: “What exactly do we say to the widows and orphans whose right to dignity and a sustainable livelihood has been taken away from them by the rapacious greed at Fidentia Holdings that has seen their trust monies consumed?”


 * From: http://www.moneyweb.co.za/mw/view/mw/en/page38?oid=81189&sn=Detail**

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