Get IOL's cool new iPad app...
Cape Town - A company which invested capital with former Fidentia boss J Arthur Brown eventually got its money back, the Western Cape High Court heard on Monday.
Brown is on trial for allegedly running a pyramid scheme and using investors' funds for his personal gain.
Fundi Projects director Leon Grobbelaar testified that he entered into an agreement with Brown in 2002, on the basis that Brown was a director of Brown Brothers Investment Management Services (BBIMS).
Grobbelaar said he approached Brown for assistance because he was having difficulty in supplying chemicals to a Zambian firm.
Brown apparently said he could solve the problem through financial gearing and structuring, giving Fundi Projects a monthly income, capital guarantees, and capital growth, which would allow it to fulfil its obligations to Nitrogen Chemicals of Zambia.
The Fundi director was asked to transfer R1.5 million for a premium payable on the purchase of a guarantee, and R16m in investment.
Grobbelaar paid the R1.5m premium and an R8m investment into what was said to be the trust account of “independent appointed auditor” Graham Maddock.
However, Maddock was actually the accountant for the Brown Brothers group and the “Maddock Incorporated Trust” account was a business cheque account.
According to the indictment, only R5m of the money was paid to suppliers.
After a series of letters cancelling the investment, and impending legal action, R3m was paid back in 2003.
“All the capital we invested, we got back,” Grobbelaar said.
Prosecutor Jannie Van Vuuren said the point was that the company had lost out on the interest the money would have earned in an account.
When Maddock testified in the same court in November, he said he “believed Grobbelaar's money was to be invested by Mr Brown and Grobbelaar was to get returns”.
Instead, two properties were bought with some of the money. Maddock said the properties were in Sunset Beach, Milnerton, and were held in trusts operated by Brown.
Maddock said “at some stage Grobbelaar requested a cancellation of the investment” and about R3m was paid back. He said investments from another company, Teta, were used to repay Grobbelaar, as his original funds were no longer available.
Earlier on Monday, the court heard that Brown falsely represented himself in the agreement.
“He interacted with me as the owner or director of that company. He began with BBIMS, which turned to Brown Brothers Financial (Management) Services (BBFMS). In all correspondence, it was Brown Brothers,” Grobbelaar said.
According to the indictment, Louis Koen was the sole director of BBIMS at the time and Brown was added as a director only in January 2003.
BBIMS was owned by Brown Brothers Holdings (BBH), which later changed to Fidentia Holdings in 2004.
BBIMS, BBFMS, and BBH were apparently used interchangeably during that period.
The trial resumes on Tuesday. - Sapa