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People who made “super-profits” from investments they made in disgraced Durban attorney Colin Cowan’s “pyramid scheme” are being sued by the trustee of his insolvent deceased estate in an attempt to recover money for creditors.
Already summons has been served on Saha Investments Pty Ltd – a financial services company – for R2 million which, it is alleged, Cowan paid out in interest on a R6m “investment” the public company made through him in January 2007.
Former iTalk Cellular boss Eshu Seevnaryan is listed as one of the directors of the company, as is high-profile businessman Narend Pattundeen of Palm Stationary Manufacturers, who has previously been involved in litigation regarding “investments” he made through Cowan.
Their attorney, David Randles, said the legal action was being opposed.
Rahim Khan, the court-appointed trustee dealing with the sequestration of Cowan’s estate, confirmed that about 10 other summonses would soon be served, some for amounts higher than that being claimed from Saha Investments.
He said the actions were based on allegations that Cowan’s scheme was illegal.
He confirmed that the inquiry into Cowan’s conduct and his finances was almost at an end.
“It is an extremely lengthy process. But we are presently consulting with counsel and are beginning the process of fund recovery,” he said.
“Creditors will get something, but to what extent they will recover their money, I cannot give you a figure.”
He said only about eight creditors had proved claims against the estate and were collectively claiming about R50m.
The biggest creditor was Topspec Investments – which brought the sequestration application against Cowan’s estate, claiming about R30m.
A provisional investigation report into Cowan’s assets, submitted to the court during the sequestration application, revealed that for a man who had practised law successfully his whole life, he had relatively little. It listed assets valued at about R8m, mainly in insurance policies.
Khan said his own investigations had shown that Cowan was not living “a high life”.
“There is no way he could have spent all that money (that was invested with him). A large portion of it went to investors as profits and returns.
“And we believe we are entitled to recover this for the benefit of all creditors.”
Cowan, an executive consultant with law firm Garlicke and Bousfield, shot himself at his Morningside home in November 2010 aged 71, admitting in a suicide note that he had committed fraud.
The law firm had denied any knowledge of the “bridging finance” scheme he operated from its offices.
But about eight investors are also holding the firm responsible – suing for about R50m – claiming all correspondence was on the firm’s letterhead and, in some instances, undertakings were signed by directors of the firm.
These are being defended by the firm on the basis that Cowan had no authority to sign any letters and he ran the scheme for his own dishonest purposes.
It has brought successful third party claims against a local accounting firm, PKF (Durban) Incorporated, and a financial adviser, Patrick Robert, and now they can also be held liable for investors’ losses.
Garlicke and Bousfield director Christine Seger told The Mercury that the firm’s insurers had also been joined as third parties.
The matters were still pending before the court.
“From evidence apparently given by scheme participants at the insolvency inquiry, a picture seems to have emerged that the ‘profits’ lie not with the firm but certain participants who benefited for several years purportedly earning returns of up to 48 percent,” she said.
She said Khan had indicated that these “super-profits” would be recovered for the benefit of proved creditors of the insolvent deceased estate.
She said it was also evident that Cowan had been running his scheme for more than 15 years – long before he had joined the firm.
In December 2010, the KZN Law Society gave an assurance that it had launched a transparent investigation into the affair.
On Tuesday, it said a report was being finalised and would be tabled at a council meeting at the end of June. - The Mercury