Cape Town -
Confusion was deliberately created by alleged embezzler J Arthur Brown to solicit investments in his network of illegal pyramid schemes, the Western Cape High Court on Monday.
“(Brown) orchestrated a huge exercise of inflated assets, the back-dating of documents and asset-swop agreements in an effort to defeat the attempts of the Financial Services Board to investigate and uncover the true picture,” prosecutor Jannie van Vuuren said.
“This smoke-and-mirror play was designed to play for time, and stall the uncovering of fraud, in an attempt to escape responsibility for his actions.”
Brown faces four counts of fraud, two of corruption, two of theft and one of money laundering.
In pyramid schemes, unsuspecting investors are falsely promised unrealistically high returns on their investments. However, the monies are not invested and the returns are paid from other investments.
The fraud charges involve the four entities Fundi Projects, Antheru Trust, the state-owned Transport, Education and Training Authority (Teta) and Matco.
Fundi Projects invested R9 million with Fidentia.
It is alleged that Brown falsely informed Fundi that the investment would give Fundi a monthly income, capital guarantees, and growth that would enable Fundi to fulfil its obligations to the Zambian company, Nitrogen Chemicals.
It is alleged that Brown used some of the R9 million as a deposit for a beach property for himself and his family and that Fidentia was unable to repay the investment when called upon to do so.
It is alleged that Brown solicited a R200 million investment from Teta by giving chief executive Piet Bothma a R6 million bribe.
Brown allegedly used more than R3 million of the Teta money for the purchase of four luxury 4x4 vehicles for himself and his co-directors, and he used Teta money to buy two more beach properties for himself and his family.
He allegedly also solicited a R44 million five-year investment from the Antheru Trust.
Brown used the Antheru, Teta and other investments monies to repay investment capital, and make interest payments to Antheru investors.
Matco controlled a trust that had more than R1.2 billion in pension and provident funds under administration and investment with Old Mutual on behalf of beneficiaries.
Matco also had R70 million available in its current bank account for the payment of monthly beneficiary-related obligations.
It is alleged that Brown acquired Matco but orchestrated the transaction so as to gain full control of the company before full payment of the purchase price.
Brown allegedly stole the R70 million to finance the balance of the Matco purchase price.
“He in fact used Matco's own money, to buy Matco,” Van Vuuren alleged in court.
Brown also allegedly produced Standard Bank “Letters of Comfort”, to give the Matco Board the false impression that Fidentia had the funds and meant to purchase the company.
Once in control of Matco, Brown allegedly ordered the transfer of the R1.13 billion beneficiary funds, invested with the Old Mutual, to Fidentia.
It is alleged that Brown attempted to obtain R150 million from the Old Mutual, but the Old Mutual declined due to improper authorisation from Matco.
It is alleged that these funds were nevertheless systematically depleted, and that only R500 million remained as potentially recoverable at the time that the FSB stopped the Brown operations.
On the theft count, the State alleges that Fidentia bought the company Infinity, and that Brown stole R5 million from Infinity, to pay Fidentia salaries.
On the second theft count, Brown is alleged to have stolen R12.6 million of Antheru funds for the purchase of an Eastern Cape farm, Thaba Manzi.
The two corruption counts relate to the alleged R6 million bribe given to Bothma for the R200 million investment in Fidentia.
The money-laundering charge relates to amounts totalling R93 802 652, that formed the proceeds of Brown's alleged unlawful activities. - Sapa