The fat end of the wedge

Why did the state’s Public Investment Corporation (PIC) shell out R140m of Government Employees’ Pension Fund money for an asset valued just months earlier by its owners at only R31.6m?

And where did the lolly end up?

PIC (chief executive Brian Molefe) has a massive R740bn-worth of government-owned assets under its management, making it one of the largest investment managers on the African continent. In 2007, looking to increase its exposure in commercial real estate, PIC made a successful R2.3bn bid (at a premium of some 15% over share value at the time), on behalf of the Government Employees Pension Fund, for listed property company CBS Property Portfolio – which owns, inter alia, a R250m stake in The Wedge, an upmarket shopping centre in Joburg’s Morningside.

The Wedge

As a pre-condition to the deal, PIC agreed to pay R140m for a separate, smaller company, CBS Asset Management (Pty) Ltd, which had the contract to advise on CBS’s property portfolio. It turns out that 50% of that entity’s shares were held by well-known property punters Martin Ettin and Derek Greenberg, through their Caribbean Estates (Pty) Ltd – and they’re behind the inflated price paid by PIC.

It wouldn’t have come to anyone’s attention – if Ettin and Greenberg hadn’t allegedly done a dirty on property mogul Leslie Lob, who had built The Wedge and sold it to CBS Property Portfolio when it was controlled by Ettin and Greenberg. At some point the duo had sold what amounted to a 6% stake in CBS Asset Management to Lob – but in 2006 the pair exercised an option to buy back this stake, and Lob got a cheque for R1.26m – the supposed fair value of the shares.

Caribbean’s 2006 accounts reveal that in fiscal 2005 the directors valued their 50% of CBS Asset Management at R11.3m. The following year, ending on 30 September 2006, they re-valued their 50% at R15.8m. Lob’s payout was therefore loosely based on the 2005 valuation, rather than the 2006 one.

But when PIC took over CBS in 2007, the Government Pension Fund, represented by PIC, paid R140m for the CBS Asset Management – meaning that Caribbean Estates’s 50% stake was being valued at R70m. This effectively valued Lob's original stake at R8.4m – a good deal more than the R1.26m that Ettin and Greenberg had paid him.

Immediately Lob discovered this, he sued Ettin and Greenberg for the difference: R7.1m. That’s the kernel of his case, their counter action and a slew of interlocutory applications.

It transpires that half of the R140m paid by PIC was to have been paid into bank accounts nominated by Ettin and Greenberg’s Caribbean Estates. But, at least initially, the whole R70m went to Caribbean’s own account, from where it quickly disappeared. Court papers reveal that the company subsequently had no assets.

In his court papers, Lob demands some answers: Where did the R70m go? What tax was paid? What VAT? When Lob called for the 2007 and 2008 annual financial statements and accounts of Caribbean Estates, he was told under oath by its directors that there were no accounts or payment records for these years.

And how had the Government Employees Pension Fund come to pay R140m for the Asset Management Contract, valued by Ettin and Greenberg just months before at just R31m? Already, PIC’s attorney Helgaard von Holtzhausen has admitted that no formal due diligence was done to justify this payout, “due to time constraints”. Really?

This month (on 2 February) Lob’s long-standing tussle for his claimed R7.1m continues in South Gauteng High Court. He wants the court to order Caribbean Estates (Ettin and Greenberg) to produce VAT returns for 12 months between November 2007 and September 2009, as well as signed annual financial statements for Caribbean for 2005, 2006 and 2007.

Lob also seeks production of four lever arch files delivered in a sealed box by Caribbean’s auditors, Tabak, Pelkowitz & Berman, to Ettin and Greenberg, in alleged breach of an earlier subpoena served against these auditors, compelling them to deliver documentation to the registrar of the high court.

Martin Ettin and Derek Greenberg, both 62, make a formidable partnership. Greenberg, whose abundant dark brown hair is no stranger to the dye bottle, is the quiet one, the numbers man. Ettin, tall, grey-haired and goatee-bearded, with a fancy for exotic cars – his latest is a Jaguar e-type convertible – is the deal-maker, by turns charming, aggressive or manipulative.


When noseweek met with them we got some answers – albeit along with a load of schmooze.

That R70m the Government Employees Pension Fund paid to Caribbean Estates? Where did it go? Says Greenberg: “Caribbean Estates is a business and in the normal course of business, after receiving the R70m, the company paid a dividend to its shareholders.”

How much? Greenberg: “That I can’t tell you, but the whole R70m was distributed.”

Who are Caribbean’s shareholders? Greenberg refuses to say. He will only assure us: “Martin and I were not shareholders of Caribbean.”

(Bah! Humbug! Caribbean’s shareholders who received the “dividend” were The Martin Ettin Family Trust and Greenberg’s Crystalight Trust).

How was the figure of R140m arrived at for CBS Asset Management? Martin Ettin: “That’s not relevant.” Derek Greenberg: “It’s sub judice; it will be debated in the appropriate forum.”

Ettin: “There’s nothing to hide, nothing untoward.”

And the lack of a due diligence? Greenberg: “We don’t want to debate this.”

Are rumours that the duo are planning to relocate to the US correct? For some reason, this question throws the duo into a tizz. After a lot of huffing and puffing Greenberg’s comment is: “We both spend a lot of time in America; my three children are there.” (Greenberg has sons aged 21, 23 and 25. The two elder ones are studying in New York; the youngest has been studying accountancy at Wits. Ettin’s 21-year-old son Isaac is in his third year of an eight-year BA/MD programme at Providence’s snooty Brown University).

Their nemesis Leslie Lob, also 62, lives in considerable style in Hyde Park’s 4th Road – Joburg’s Millionaire’s Row. Lob will only say: “The process of discovery [of relevant documents] will continue unabated. I have every confidence that the truth will emerge.” 

  • In March 2009 Derek Greenberg, who holds permanent residency in the US, paid $8.5m (R65m) for a 37th floor 4 beds, 4.5 baths penthouse condominium (renovated by “iconic” architect Lee Mindel, with panoramic view of Central Park) at 15 West 63rd Street in New York’s Manhattan. The previous year Ettin, who also holds permanent residency in the US, paid around $305,000 (R2.3m) for a 1920-built condo conversion in Providence, Rhode Island, in the name of his son Isaac. Months later Ettin Snr snapped up a second property (5 beds, 3 baths) in the same Blackstone Boulevard strip, for $1.2m (R9m).
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