Fidentia fraud case resumes

Independent Newspapers

The trial of former Fidentia chief executive Joseph Arthur Brown (foreground) is being heard in the Western Cape High Court. File photo: Brenton Geach

Johannesburg - The fraud, corruption, money-laundering and theft trial against former Fidentia boss Joseph Arthur Brown was scheduled to continue in the Western Cape High Court on Thursday.

On Wednesday, the court heard that Brown got legal advice on whether asset managers were prohibited from putting clients' investments into their own name.

Braganza Pretorius, for Brown, asked Fidentia's former broker, Steven Goodwin, to read out the legal advice from Bowman Gilfillan in court.

The law firm's Shahid Sulaiman wrote that according to a code of conduct, discretionary asset managers were required to obtain a signed mandate from their clients specifying in whose name the investments should be registered.

Brown e-mailed this advice to Goodwin in July 2006, asking that he give opinion on how it applied to Fidentia Asset Management (Fam).

The opinion was sought before the Financial Services Board began probing the business.

Goodwin replied to Brown's email with his opinion, which Pretorius asked him to explain in court.

“To cut to the chase, you must follow the mandate or, in the absence thereof, be an agent and hold assets in custody on behalf of the client. In our instance, the general mandate refers to Fidentia Asset Management holding assets,” Goodwin said.

He described in the email at the time that it would be potentially problematic if a clause dictated that all investments be made in the name of the client, unless otherwise agreed to in writing.

Brown faces nine charges of fraud, theft, corruption and money-laundering, related to Fidentia and several affected companies.

Brown sold the Transport, Education, and Training Authority's (Teta) promissory notes worth R100.3-million, allegedly without its approval, and the money was placed in his accountant Graham Maddock's account.

The State alleges that instead of re-investing this money for Teta, he used some of the proceeds for other purposes, including buying vehicles and properties. - Sapa