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Durban - Business partners John Ellis, his wife, Kathy, and Jan Louw are fighting claims that they cheated investors in their Aids nutrition business out of R70-million.
“The accusations of fraud are frivolous and devoid of substance,” Ellis said in an affidavit filed late last week in the Durban High Court.
The matter was brought to court by South African and British investors in the Durban-based Edge to Edge Global Investments who want to liquidate the company to establish where their money has gone.
In South African law, shareholders have to seek court permission before bringing a liquidation application.
But this is being opposed by Ellis and Louw who brought on board a new attorney - the fourth since the dispute with shareholders began last month - when it came before court on Friday.
The matter was put in the hands of Judge Esther Steyn who set tight deadlines for the filing of further affidavits and ruled that she would hear argument early next month.
In the meantime, Ellis and Louw are not allowed to trade any shares in the public company.
The shareholders say they bought into the company on assurances by the directors that their money would be used to develop a “life-changing” Aids nutrition pack which would be sold across Africa.
They say they were told that the company had a patent on the water purifying drops in the pack - which they have now discovered is not true - and that the pack was to be clinically tested in Abidjan by Nobel prizewinner Professor Luc Montagnier, who is credited with the discovery of HIV.
These trials have never happened.
And with the business office shut down and staff unpaid, they believe the company is now insolvent and their money has been used to prop up the directors’ luxury lifestyles. But Ellis says this is not true.
He says the shareholders involved in the court dispute, including GWM chairman Tony Pinfold, represent less than 2 percent of shareholding, comprising only 10 of the existing 78 shareholders. And, he says, most of them did not buy shares from him but from other shareholders.
He claims the shareholders only invested R31m, not R70m, and he lists “trials phase one”, “African Forum”, “Prof Luc Montagnier consulting” and “Abidjan trial” as some of the expenditure incurred, saying: “These expenses alone exceeded R31m mentioned”.
“No funds were ever misapplied or wasted. In fact from March 2007 to March 2009, more than R9m was paid into the banking account by Louw and me.”
Regarding allegations that the company funded his daughter’s R2.4m wedding, he said the entire event was paid for by his wife and the Ellis Family Trust. Kathy Ellis, in her affidavit, says the funds came from the sale of some of her personal assets.
One of the applicants, chartered accountant and former chief finance officer of the company, Jennifer Etchells, agrees that most of the shares in the company are owned by the directors or parties related to them but says the venture has been almost entirely funded by the minority shareholders.
She says the directors have still not answered questions posed to them by shareholders.