Sparks fly in electro family dispute
Former employees of Cape Town millionaire Johnny Feinstein’s Motor Electrodiesel business, the MED Group, accused of illegally setting up in competition with him, have struck back.
Feinstein’s claims in nose155 appeared together with a brief blanket-denial of wrongdoing by the ex-employees he referred to as “The Family”. Now the clan – former operations director Lamees Ismail, her procurement manager and sister Benito Dodgen, and their sales-manager brother Jason Magnet – all represented by another brother, Kurt Magnet, spell out their version.
When Feinstein bought MED in 2004 he inherited the firm’s long-serving family members. In Noseweek’s article, Feinstein claimed that after he accepted Lamees Ismail’s resignation last year, The Family set up their own competing Auto Magneto business – in defiance of restraints of trade.
Not so, says Family spokesman Kurt Magnet, a director of the new Auto Magneto, who works for Old Mutual. Examination of the 2005 Shareholders’ Agreement indeed shows no restraints of trade. Section 16 merely covers confidentiality, in which the members agree not to use for their benefit confidential information pertaining to MED.
Kurt Magnet counters now: “Auto Magneto was registered on 9 February 2012” (within a week of Dodgen and Magnet having submitted their resignations).
To support his claim of a much earlier registration date of 18 November 2011), Feinstein had produced two pages of selected Companies Intellectual Property Commission (Cipc) documentation that appeared to confirm this. However, the full record reveals that on 18 November 2011 a shelf company named K2011134169 (Pty) Ltd was registered by company formation agent Karen Oosthuizen.
Kurt Magnet explains they had subsequently purchased this “shelf” company from accountants Mazars and registered the new name of Auto Magneto (Pty) Ltd on 9 February 2012.
Feinstein had complained that in defiance of the Shareholders’ Agreement and pledges in their letters of resignation, The Family had refused to resign from and part with their shares in his companies, MED and its Workshop CC, resulting in Auto Magneto directors holding 17% of the group with which they are now in competition.
Under the Shareholders’ Agreement, in the event of minority shareholders leaving, they undertook to sell their shares to Feinstein at the fair market value of the equity as determined by the auditors (Grant Thornton).
Feinstein said in nose155 that in February 2012 he had received a R40-million offer for the group from the WAI auto-electric company in Fort Lauderdale, US. He added that MED would “soon” be worth R60m.
Yet the fair value that Grant Thornton came up with at 31 December 2011, using “a discounted cash flow approach,” was only R8.46m for MED and nil for the Workshop CC.
Says Kurt Magnet now: “The valuation done by the same firm in 2009 using a different model, valued the company at R20m. Despite the phenomenal growth of the company as stated and proclaimed by Mr Feinstein, three years later the company is now valued – devalued – at R8.5m. It appears that Mr Feinstein wants to acquire the minority shares at a reduced price.”
Noseweek’s report in September stated that a condition of Feinstein’s purchase of MED was that 10% of its shares should be “given” to empower a group of long-serving employees. In all, Noseweek reported, Feinstein “dished out” 19% of the stock (17% of this to the present Auto Magneto directors).
Magnet says no stock was “given”. In a four-page letter to its “associates and friends” – following publication of nose155 – The Family stated that Feinstein had offered the initial 10% at R28,000 for each 1% (a total of R280,000). Later more shares were offered at the greatly increased price of R120,000 per 1%.
Feinstein’s other big complaint – strongly denied by The Family – was that Lamees Ismail and Jason Magnet had been phoning MED’s customers claiming Auto Magneto was an extension of MED and could assist with stock. In other words, poaching his customers.
“Probably 10 customers have told me that in the past three months,” Feinstein assured Noseweek.
“I can get an affidavit from two of them.” However, no customers’ letters or affidavits have been forthcoming.
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