Dr Munsamy, I presume

He’s been called ‘A crook and a fraudster. An animal and a disgusting waste of skin and bones’.

In July last year, notorious Czech fugitive and gangster Radovan Krejcir stood in the dock in the Johannesburg Magistrate’s Court in connection with a money-laundering scam that defrauded the Central Bank of Swaziland of R7.6 million. Next to him stood his three co-accused – a prominent Gauteng businessman, Nico Oosthuizen, a relatively innocuous individual called Keith Bain and a Dr Mahendran Munsamy. (See below - The legal argument.)

Dr Mahendran Munsamy and wife Dr Leegale Adonis

There have been several postponements since, and their next court appearance was scheduled to take place shortly after Noseweek went to press.

The world knows about Krejcir – but where had we heard of Dr Munsamy before? A bit of research revealed that the wealthy, suave medical doctor with a portfolio of lavish properties, from Hyde Park to Sandhurst, Johannesburg, has previously featured in a variety of elaborate, convoluted and allegedly criminal schemes involving South African banks and petroleum companies, a corrupted bank manager and the criminal underworld.

Of particular interest was the extraordinary evidence we found contained in case file number 2014/27890, at the Gauteng Local Division of the High Court. It contains the record of an application brought by South African Petroleum and Energy Guild (Sapeg) – a company controlled by Mahendran Munsamy – against RMB Private Bank (a division of FirstRand Bank Ltd) in August 2014. The bank had frozen his accounts because they had come to the conclusion that he was using them for money laundering other unlawful purposes. (He also happened to owe the bank a couple of hundred million on some fraudulently obtained bank guarantees.)

Munsamy denied the accusation and applied to court to order the bank to release his funds.

Remarkably, considering the nature and extent of the evidence presented and the issue of law raised in it, the case appears to have escaped media attention until now.

A 105-page affidavit made on behalf of RMB by FNB Premium’s Head of Legal, Malini Mudaly, reads like a thriller and handbook on money laundering combined. But despite the detailed evidence that the bank had managed to gather – which persuaded it to freeze Sapeg and Munsamy’s bank accounts – all of it has yet to be tested in court.

Munsamy succeeded in his application and the court ordered the bank to release the funds it had frozen. In a controversial judgment delivered on 5 December 2014, Judge Roland Sutherland ordered Sapeg and Munsamy’s accounts to be unfrozen on the grounds that “even a criminal has rights”, and a bank does not, by law, have the right to freeze a client’s account on it’s own accord, even if it has grounds to believe the account is being used for money laundering or other criminal purposes.

In such a case the bank must report its suspicions to the appropriate state authority – the Financial Intelligence Centre – and only the FIC may order an account to be frozen, preparatory to legal action.

Of even greater interest to Noseweek readers will be the account of just what the bank discovered about Munsamy and his associates when it went looking. This is contained in the 150-page answering affidavit by Malini Mudaly, FNB Premium’s Head of Legal.

The story begins on 13 June 2014 when $560,000 (approximately R6m at the time) was transferred from a Mauritius bank account into the FNB account of Corporate Social Investment (Pty) Ltd, a company controlled by Munsamy’s wife, Dr Leegale  Adonis.

Routinely asked by a bank official to explain the source and purpose of the payment, to comply with Reserve Bank regulations, Adonis first said it was a loan, but when asked to complete the required form for foreign loans, changed her mind and claimed that it was actually an advance payment for her research services related to the fuel trade between Mauritius and Richards Bay.

This raised the bank’s suspicions – both because of the sudden change in description, and the unlikelihood of Adonis, a medical doctor, being commissioned to research matters relating to the oil trade. These suspicions were confirmed when, within days of the money’s arrival in Corporate Social Investment (CSI’s) account, the entire sum was transferred to that of Sapeg, of which Dr Munsamy is a director.

On closer investigation, according to the affidavit, it emerged that the Sapeg account (also held at FNB) was conducted primarily to pay Munsamy’s personal expenses. Within no time, the money was spent by him, purchasing properties in high-end suburbs and at a BMW motor dealership.

At that stage, the bank officials investigating the transaction were unaware of a prior contentious issue between the bank and Dr Munsamy, relating to fraudulent guarantees issued by the bank in favour of Sasol Oil.

But then the details came pouring out – and this is the really interesting part of the story if you’re a fan of carefully considered financial conspiracies.

What the bank investigators now discovered putting two and two together, led them to believe that the questionable transfer from Mauritius and the initial fraudulent guarantees were “very much linked and intertwined”. As a result, the bank iced the payments. Sapeg responded with a court application to force the bank to release the money.

FNB argued in court that, by virtue of an implied or tacit term governing the relationship between the bank and its client Sapeg, it was entitled to prevent the payment of R5m from Mauritius and freeze the funds. In turn, Munsamy accused the bank of holding Sapeg to ransom saying its behaviour was akin to extortion and it had breached statutory obligations.

Justifying the bank’s actions, Mudaly explained in her affidavit how, between January and May 2011, the bank manager of FNB in Hyde Park, Preggy Reddy, fraudulently created and issued at least four bank guarantees for a total of R310m in favour of Sasol Oil (Pty) Ltd. This enabled a company called Lavela (controlled by Munsamy) to purchase fuel worth hundreds of millions of rands without having to pay for it in advance, as was usually required.

Shortly afterwards Lavela went into liquidation without having paid Sasol, leaving FNB to meet the guarantees.

On investigation, the bank found that none of the guarantees were entered on its register, and that the second bank signature on the guarantees was a forgery. Subsequent investigations revealed that Sapeg’s account was linked to Reddy and the fraudulent guarantees, and that Munsamy and entities controlled by him or by his personal assistant had paid at least R670,000 – and possibly as much as R2m – to Reddy at the time the fraudulent guarantees were issued.

These payments were into a “staff account”  in the name of Reddy’s mother – who did not work at the bank – and carried descriptions such as “Part Comm” and “Consulting Fee”.

Although in his mother’s name, the account was opened by the bank manager for his own benefit. (See below -  Bank manager who was hung out to dry.)

“The bank considers that the facts show that Sapeg’s account has been used for illegal purposes in the past and is again being utilised for illegal purposes, and the bank submits that it is entitled to put a hold on the account,” says the bank in court papers.

In his affidavit, Munsamy insists that the fraudulent guarantee litigation has nothing to do with the funds transferred from Mauritius.

The bank disagrees. It believes that instead of paying Sasol, entities controlled by Munsamy ensured the fuel was shipped off-shore to Mozambique and sold there. Part of the proceeds of those sales were not remitted to South Africa but instead ended up in Mauritius, in the hands of another Munsamy entity, “GTL Direct Ltd Mauritius”, controlled by a cousin of Munsamy.

In short, instead of paying Sasol, the fuel and the proceeds of its sale were diverted off shore. The bank believed the same company that received the diverted funds was trying to reintroduce this money back into South Africa.  (The “Payor” of the $560,000 that arrived in Munsamy’s wife’s FNB account was identified as “GTL Mauritius”.) It also believes that the reasons advanced by Munsamy and his wife for the payment were “false and mere pretences” and that “the funds are being introduced as part of money laundering”.

In correspondence with the bank, Adonis claimed that, as a public health specialist working for Wits University and completing her PhD, she was tasked to conduct a research project relating to Richards Bay and Mauritius.

“The sponsors of the project who commissioned my services indicated that the funds of $560,000 is advance payment for the scope of work to be rendered. Further funds will be paid as the project develops over a four-year period,” she told the bank in an email.

In the court papers, the bank lists several reasons why it is suspicious that, as a medical doctor, Adonis is being paid significant sums of money for a petroleum-related research project.

When the bank’s attorneys were given sight of – but not allowed to copy – the Richard’s Bay report she claimed to have written, in order to justify the fee she said she was paid, they found plenty of evidence to show that it had been hurriedly concocted from a report on oil logistics produced several years earlier, and quoting long-outdated statistics.

During an insolvency inquiry held in May 2014 for Lavela, Andrew Botha testified that he had acted as personal consultant to Dr Munsamy at a time when Munsamy had come into “a pile of money”, and how he had used it to go on a property purchasing “rampage” (aided and abetted by Botha, an architect and former property developer).

“The reason why Dr Munsamy had a pile of money available is because it was the proceeds of the fuel that had been shipped to Mozambique instead of paying Sasol – leaving Sasol to claim against FNB on the back of the fraudulent guarantees that Mr Reddy created whilst receiving payments from entities controlled by Dr Munsamy and his personal assistant,” says FNB’s head of legal in its affidavit.

Bank manager Preggy Reddy was suspended in July 2011 and he subsequently resigned from the bank. He has since offered to come clean and spill the beans on the entire intricate web of deals.

The Hawks are investigating various charges of money laundering arising from the case in conjunction with the National Prosecuting Authority.

Munsamy insists that the bank has made several false and defamatory claims against him and he reserves his rights with regard to these.

In his 2014 ruling, Judge Sutherland explained that it was not for him to determine whether the allegations of money laundering were indeed true, but rather he had to determine whether the bank acted correctly in freezing the money.

“The sole basis in law relied upon to freeze the operation of the account is an alleged power that the bank has in terms of an alleged term of the agreement between the parties.”

The sole question to be determined by the court was therefore whether such a term in favour of the bank could be implied, as it was not written into their contract.

Judge Sutherland found that it was not an implied term. On the contrary, their written contract explicitly prescribed that the bank could only place a hold on (or “freeze”) a client’s account on instruction from the Financial Intelligence Centre.

“Moreover, the term sought to be imputed and its radical intrusion on the rights of a client far exceed what Fica  authorises the Centre [Financial Intelligence Centre] to do. What is sometimes overlooked, is that even criminals have rights; the more basic of which is to be convicted before being punished. With the sole exception of the process of Asset Forfeiture, provided for in Chapter 6 of Poca [Prevention of Organised Crime Act], our law adheres to this order of things. By contrast, the respondent claims a term that entitles it to freeze R5m of a business for over five months, and further claims it may continue to do so until the applicant convinces a court that the bank’s belief in its wickedness is unreasonable. In my view to imply such a term is untenable.”

Judge Sutherland did take the opportunity to lash the law enforcement authorities for failing to act in this case.

“The languid, if not moribund response from the authorities in response to the report by the respondent of a possible crime is lamentable. But the harsh reality is that a bank is not the sheriff in a frontier town. I refrain from offering gratuitous advice about what a bank might do to invigorate the centre, and the police. Self-evidently, if a proper case exists to interdict the operation of the account, such an application may be brought by anyone who has a plausible cause of action.”

So despite extensive investigations and what it believed to be evidence of a vast money-laundering scheme, Munsamy won the day in court and the bank and its lawyers were left to lick their wounds – and pay Munsamy’s costs on the punitive attorney-and-own-client scale.

It’s unclear why, despite the evidence of fraud and probable money laundering collected by FNB, the National Prosecuting Authority (NPA) has not charged Dr Munsamy, his wife or his personal assistant with money laundering relating to this incident.

The bank manager, Reddy, was charged and taken to court but charges were provisionally withdrawn in 2014.

FNB says it has reported all of its information to the NPA and is standing ready to assist prosecutors.

“First National Bank (FNB) has zero tolerance for criminal conduct and will take the necessary steps to assist the authorities in dealing with any criminal activity. You will note from the affidavit that the Bank had reported the facts to, amongst others, the National Prosecuting Authority.

“The Bank is waiting for the authorities to complete their investigations and, so as not to prejudice the finalisation of the investigations, we are not, at this stage, in a position to make any further comment,” said the bank in a statement.

Noseweek put the following questions to Dr Munsamy through his attorney, Rudi Pottas:

1. Dr Munsamy is accused of money laundering, both in court documents and in court in the so-called Krejcir matter. What is his response to this allegation?

2. Dr Munsamy has not been criminally charged in relation to the Lavela/Sapeg vs RMB matter – would he like to respond to the allegations levelled against him by the bank in that case?

3. Did he intentionally enlist FNB manager Preggy Reddy to issue

fraudulent guarantees in order to facilitate fraudulent activities?

4.  In reply, Dr Munsamy insists the fraudulent guarantee litigation has nothing to do with the funds transferred from Mauritius but the bank disagrees. What is his version?

5. Reddy accuses Dr Munsamy of being a money launderer and a thief. What is his response to this?

6. Is Dr Munsamy aware that the Hawks are currently investigating other cases (aside from the Swaziland/Krejcir case) and that other victims have come forward to claim he has defrauded them?

Noseweek received the following reply from attorney Pottas:
“Dr Munsamy denies any liability, whether civil or criminal of any nature. The matters are largely sub judice, save for the RMB matter where judgment has been delivered. It should be noted that the learned Judge Sutherland J ordered that: The actions of RMB were unlawful; RMB was to release the funds; and pay costs on attorney-client scale.

“Preggy Reddy was the only individual to have ever been charged criminally in the Sasol/FNB matter and various stories have been touted over a long period in order to obtain financial incentives. The allegations as they currently stand are denied in the strongest terms. You may also have regard to paragraph 30 of the judgment of Sutherland J, which amplifies Dr Munsamy’s contentions that no criminal conduct has been committed by him as alleged or at all. 

“Dr Munsamy has instructed me to place on record that any reckless reporting, without the necessary verification, will be dealt with legally.”

The legal argument

On a Thursday in July last year, Dr Mahendran Munsamy, together with Gauteng businessmen Nico Oosthuizen and Keith Bain, handed themselves over to the police. On the same day they appeared in the Johannesburg Magistrate’s Court – along with notorious Czech gangster Radovan Krejcir as their celebrity co-accused.

Radovan Krejcir

Their arraignment in court was the culmination of a police investigation that started in 2013. That investigation and those charges involved their alleged dealings with Absa Bank and was unrelated to the events described here in the adjacent Noseweek story, which recounts Munsamy’s dealings with FNB – although the alleged modus operandi of the suspects in both cases shows striking similarities.

Lead investigator Colonel Cohen Oock told the court that the group and employees at the Central Bank of Swaziland had issued fraudulent documents to Absa and the South African Reserve Bank relating to various international transactions.

“The money was then laundered through various entities and persons, and unlawfully and intentionally appropriated,” Oock said.

Krejcir had been implicated because money laundered through the scam had been used to buy Krejcir’s yacht, which was later seized by SARS as part of a preservation order against the Czech’s assets.

The State’s provisional charge sheet alleges that the group secured four amounts of between R429,878 and R3,980,823 in October 2013 through Absa and the Reserve Bank. The total amount involved was said to be R7,594,467.

The largest amount ultimately arrived in the accounts of Basadi Logix, a company of which Munsamy was once a director.

The accused in the Absa case were due to make their next court appearance within days of Noseweek’s going to press.

Bank manager who was hung out to dry

Pragasen “Preggy” Reddy does not look like a banker. That may be because, despite having had a relatively long and successful career in banking, he no longer is one. He has some tattoos. He’s in shorts. He’s had a rough few years – by his own admission, this is largely as a result of his own doing and his naïvety in trusting someone he now calls “an animal” and “a disgusting waste of skin and bones”.

The 38-year-old started out as a service adviser at the FNB branch in Sandton City. He explains that he was then hand-picked to join a group of elite managers for a new chain of “McDonald’s-style” FNB outlets. He was appointed the associate bank manager at Hyde Park in 2010.

Dr Mahendran Munsamy first walked into Reddy’s life during his Sandton days. “It was my job to meet the niche clients, the whales, the high- flyers, just to keep them happy,” Reddy recalls. “We were told by his account manager that we’ve got a big client in the gasoline industry, huge turnover a year, so we’ve got to look after him; they do a lot of cash withdrawals so can we just make sure the process is expedited and not to frustrate the client.

“It was a Saturday morning when I first met Munsamy. He said: ‘You won’t see me but you’ll see my PA Tanya Klein. She’ll be running in with the cheques,’ so we said ‘Sweet like a lemon. No issues. Just give us an hour and we’ll ready your cash.’ That’s how Munsamy walked into my life.”

Over the years Reddy got to know Klein very well although he rarely, if ever, saw Munsamy. Munsamy’s people regularly invited him to their end-of-year parties, but he would never attend – until 2010, when he decided “What the hell, why not?” That decision would change his life forever.

“I was at Hyde Park and Tanya (Klein) came to the branch and said ‘Listen, we’re having drinks tonight. Come.’ It was Friday, 20 December.

“I hadn’t seen Munsamy in years. It’s not strange for a banker to go to his client and have a drink, nothing unethical about it. He was a friendly, nice kinda guy. He put on the charm. He knows how to schmooze somebody.

“We started talking and he says to me, ‘Listen I’ve got projects coming up in 2011, I’ve just bought another company called Lavela Petroleum. My wife is going to be the head of the company. The company is in her name but it’s a massive contract we’re taking on.’

“He said he’s bought companies here and there and he wants to leverage their properties with the bank [use them as security for a bank loan]. He’s had some problems with other banks. Would the bank look at it?”

Over the Christmas break and into January, Reddy says, Munsamy was putting pressure on him to urgently set up the deal. He even summoned the bank manager to a meeting while he was on leave.

“He treated me to lunch. We chatted for about three hours. At that time I didn’t realise he was busy profiling me. He was getting to know me on a very personal level. I’ve taken some hard knocks in life. I don’t have a formal education but I’m smart. (I am busy studying for my BComm currently.) He says ‘You’re one of the students of the university of life’. Now I realise why the banks didn’t want to fund him. Because he’s a crook and a fraudster.”

Reddy won’t answer any questions about what happened between that time and when he was arrested because there is still on ongoing investigation. Yes, Munsamy’s PA did make payments into an account opened in his mother’s name. Yes, he did issue fraudulent guarantees. But he won’t say why he assisted Munsamy and whether he knew what he was doing was wrong. He is adamant that he was not wilfully participating in a fraudulent activity. 

“My mother’s account was not opened for fraud. I had an ITC issue in 2008, so I closed my FNB account and I opened my mom’s account and my salary was going into her account. That was it.”

Reddy was extremely surprised when in 2011 “this cop comes knocking on my door and he says ‘I’m investigating Mahendran Munsamy’. My heart fell into the pit of my stomach. He said this guy had defrauded people and he’s going to arrest him.

“So I phone Mahen and I say ‘Mahen there’s a cop knocking on my door at work and he says he believes there’s fraudulent guarantees placed at Sasol’. I panicked. Mahen says ‘Don’t worry about it, this is a witch hunt and he’s shaking the tree to see what falls.’ He says ‘Well, you must do what you like.’ But he warns me: ‘We are a chain put together and you can’t act unilaterally on your own. You must face the consequences if you want to withdraw.’

“Then I knew I was in kak.”

The police arrested Reddy and he spent a night in the cells in Germiston before appearing at the Commercial Crimes Court in Johannesburg. Munsamy sent a legal team over to help. In September 2013 the charges were provisionally withdrawn.

Reddy has decided to speak out now because of his conscience and because he feels there is no longer a threat to his safety.

“I had never been arrested for as much as a parking ticket before. I was not intentionally part of a money-laundering ring. I feel absolutely stupid! I was naïve to have done what I did. But I do want that animal arrested.”

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