Offshore with sharks


Various companies in the Nedbank group, including several of its offshore subsidiaries, have brazenly conspired to commit fraud – and have exploited the shocking negligence of two Durban High Court judges – in order to secure the liquidation of a client who might otherwise have sued them for several millions of rands. And in the process have exposed the banking group’s shabby offshore business dealings.

To assist them in their unseemly task, they employed Mr Leonard Katz, a senior partner in one of the country’s largest (some would say most notorious) and most expensive law firms, Edward Nathan Sonnenbergs (better known by its acronym, ENS). Katz’s reputation for unscrupulous behaviour has led to him being known in the trade as “Lenny the Liquidator”. He’s the man bankers set onto inconvenient clients to disable them, before they pose any threat – employing mafia-style legal strategies, known as “slamming the [victim’s] till drawer shut” or “cutting him off at the knees”. The banks and Mr Katz also hope to have their pound of flesh from their disabled client’s estate – to the grave disadvantage of his other creditors. No-one, it seems, has the courage to stop them.

Dear reader, if you find all of this shocking, you have not heard the half of it. But to tell the sad and sometimes convoluted story of what happened to Ian Brakspear, a Nedbank Private Bank client in Durban, takes time – so for those in a hurry, here’s the moral of it: If you are already a client of Nedbank’s offshore bank, Fairbairn Private Bank or a similarly named trust company, start worrying. If you happen to be considering making use of their services – grab your bag and run.

If you have recently had a visit from Nedbank’s Jersey-based offshore salesman, Greg Horton, know that the complicated – and costly – offshore “structure” he proposes to set up for you on various offshore islands, is, in all probability, illegal – and could land you (not him) in serious trouble; it will also cost you plenty and benefit you little or not at all (ask the First Rand clients who were sold similar “structures” – the Ansbacher saga, remember?).

Ask Ian Brakspear, once the multi-million rand beneficiary of a long-established offshore family trust, but today sitting car-less, penniless and alone in his R3m Durban home – which is about to be sold by Nedbank.

Brakspear was a refugee-immigrant from Zimbabwe – luckier than most, since he was one of the beneficiaries of an Isle of Man trust that his father, the heir to a small English brewery fortune, had set up many years before. The final disastrous episode of Brakspear’s story begins in 2003 when, already living in Durban, he came across what looked like a great business deal: the 87ha historic Klein Normandie wine estate near Franschhoek was up for sale and possible subdivision. Its neighbour on one side was the Rupert and Rothschild farm L’Ormarins; on the other flank lay Anglo American’s historic Boschendal estate (OK, they’d just sold out to Tokyo Sexwale and Brett Kebble, but still); the third neighbour was notorious Zimbabwean arms dealer Billy Rautenbach.

Brakspear found a local developer willing to go halves with him on the deal, and went along to see his bankers about raising some finance. At Nedbank Private Bank they got to talking about the Brakspear offshore trust as a possible source of cash and, before you knew it, Greg Horton, head of Fairbairn Private Bank, freshly in from Jersey, was on his doorstep, declaring “Have I got an offshore structure for you!”. Or something along those lines. The unique (Horton prefers the terms “bespoke”) structure he designed entailed moving funds from the Brakspear Trust, registered on the Isle of Man and now managed by Nedbank’s trust company in Guernsey, to the account of a newly-formed Jersey trust call the Wesley Trust held at Nedbank-owned Fairburn Private Bank in Jersey. The Westley Trust (also administerred by Faribairn Trustees) would then lend the money to a specially created company on the British Virgin Islands, called Wesley Holdings, which would in turn use the money to buy shares in a specially created South African company called Moneybox, which would lend the money to a company called West Dunes Properties, which would use the money to pay the deposit required to buy the farm.

To pay the balance of the purchase price, Fairbairn Private Bank, back in the Channel Islands, would provide a bank guarantee (secured by cash deposited at that bank by the Brakspear Trust) to Rand Merchaht Bank in Johannesburg, which would advance the required amount secured by a mortgage bond over the farm and Fairbairn Bank's guarantee secured by the Brakspear Trust's deposit.

You may now take a deep breath and – for the moment – forget all that. Brakspear himself couldn’t make head or tail of it: he simply accepted that the bankers knew what they were doing. “If I’ve got a splitting headache and the brain surgeon says I’ve got a brain tumour and prescribes surgical procedures, I can only hope he knows what he’s doing,” he says.

What he did know was that the structure was being set up at his behest, to serve his needs – and at his expense. Horton billed him for £8,810 (roughly R100,000) for the service. The £10 was the capital to be settled on the new trust; the £8800 was divided amongst the various Nedbank offshore entities as fees for services and expertise.

Here we need to retrace our steps a little. Ian Brakspear and his relatives had earlier already decided to consolidate control of their financial affairs in South Africa. The Brakspear Trust had originally been managed by two trustees based in Zimbabwe, appointed by his father. The beneficiaries wanted the trust to be managed from South Africa. Easy, said the experts at Nedbank Private Bank. Under Isle of Man law, if all the beneficiaries agree, they can fire the old trustees. And may we suggest that you appoint our Jersey associates at Fairbairn Trust Ltd as the new trustees?

Fine, said an older, wiser beneficiary – but just get Fairbairn Trust to give us an undated letter of resignation as trustee, should we later decide we’re not happy with them. No, no, absolutely not necessary, said Fairbairn Trust of Jersey – Manx law allows you to fire us, if that’s what you want.

The old trustees were duly fired. But then the gentlemen at Fairbairn Trust said they weren’t really happy with taking over the administration of the old trust: they spoke of problems with the “perpetuity clause” (whatever that meant) and of “decanting” the old trust into a new one with a new trust deed. No need to sign anything. Well, if that’s what you say – OK, said the beneficiaries. Just let us have a copy of the new trust deed. But a copy never arrived – something to do with offshore trust confidentiality, and not having such documents “lying around for other eyes to see”.

Brakspear’s very bespoke structure was duly set up, shares were bought and the £500,000 (about R7m) guarantee emerged at the other end of the pipeline. Klein Normandie was bought by West Dunes, with finance provided by Rand Merchant Bank, against the guarantee and a bond.

Then, as is to be expected when city slickers buy wine farms, it all went wrong: Brakspear’s partner in the farming business diddled him out of R4m, and was eventually, after costly litigation, persuaded to pull out. Then the farm manager ripped him off, charging him nearly R1m for “ghost" labourers, and materials that were never bought. When he was finally got rid of, the new farm manager announced that production was less than expected: only 28ha were under vine cultivation, and not 50ha as claimed by the seller. (Ditto for the fruit orchards).

So it came about that West Dunes fell behind with its bond repayments. RMB called up the £500,000 guarantee and, within no time, the £500,000 arrived – sent, as it happens, directly from the Brakspear Trust's own bank account. This transaction was duly reflected in the Brakspear Trust annual accounts as a “distribution to beneficiary IB” – Ian Brakspear. So much for the elaborate structure.

Neither a farmer nor a property developer, Brakspear decided it was time to sell. And quick as a wink, a local estate agent had produced a buyer: who else, dear noseweek reader, but Zunaid Moti (see noses past). Moti personally paced out the farm and put in an offer for R32m, with an unconditional R1m deposit. Accepted!

The moment of bliss lasted ... but a moment. Then the men at Fairbairn Trust in Jersey went and bungled it through sheer incompetence.

Because the Westley Trust (and its Fairbairn trustees) ostensibly controlled the South African end of the structure, including the farm company, they had to produce a resolution approving the sale, and agree to the details of the transaction. Brakspear was negotiating with Moti’s office and reporting, almost daily, to Justin Thomas, MD of Fairbairn Trust in Jersey. Then, on 30 November 2007 he received an email from Mr Thomas which, curiously, was addressed to “Dear Ian and Zeyn”. Who and why Zeyn?

In the email Thomas informed Brakspear that “Fairbairn Private Bank have extended the loan facility ... until 28 February 2008. Interest is being accrued and amalgamated with the principal, and, as at today’s date, the balance outstanding is £427,401.86.

“As you are aware, the Trust does not have sufficient liquid assets to repay the loan unless it receives the proceeds from the sale of the farm. It is important, therefore, that the sale is progressed as soon as is reasonably possible, as the [Fairbairn Private] Bank will not provide a further extension on the loan and will seek full repayment on 28 February 2008. If the Trust is not put in funds by this date, the terms of the loan are such that the Bank is able to call .... “ (Never mind that the money had actually been deposited with the bank, interest-free, by the Brakspear Trust and had been used to purchase shares in Moneybox. That is now strategically omitted from the argument.)

The real horror it: Fairbairn Trust’s MD had, for some unaccountable reason, copied this compromising letter to Moti’s attorney and business associate Zeyn Bhyat. While Bhyat is a partner at Sandton law firm Routledge Modise, the email was addressed to his email address at Moti’s lead company, Abalengani. Moti would now know that Brakspear was a desperate seller being squeezed by his bankers – and, given hisreputation, would be sure to take advantage of this knowledge.

Brakspear phoned Thomas in a rage, only to learn that not only had Thomas sent the letter to Zeyn; the Fairbairn Trust MD now confessed that he had for several weeks been speaking regularly to Zeyn by telephone – assuming him to be Ian’s attorney!

Later that day Thomas sent Brakspear a contrite message: “Once again I can only apologise for our error. Please accept my heartfelt apologies and, as I said, if there is anything I can do to rectify the matter I would be happy to assist. Regards, Justin”

Two weeks later, as anticipated, Moti pulled out of the deal. On 30 January 2008 RMB attached Klein Normandie. In June it was put up for auction. Moti was there to bid, and had it knocked down to him for just R18m.

An easy calculation, therefore: Justin Thomas’s careless indiscretion had in all probability cost Ian Brakspear and the Brakspear family trust more than R17m. Was Fairbairn Trust in Jersey, or its parent Nedcor, doing anything to rectify the matter – such as rushing to pay in the lost R17m? Forget it. They called in Lennie the Liquidator to chop Brakspear off at the knees before he could make trouble.

But not immediately. There was no real rush. On Friday 19 December, when everyone had gone on holiday, Edward Nathan Sonnenbergs brought an urgent application before the Durban High Court on behalf of Fairbairn Trust Ltd of Jersey (in their capacity as trustees of the Westley Trust) for the provisional liquidation of West Dunes Properties. The founding affidavit on which the application was based was made by Nico Andre Theo Botha, who is neither a director nor employee of the applicant, and neither power of attorney or any other written authority to act on behalf of the applicant.

Botha in fact identifies himself as a director of BoE Trust Ltd, which he declares “falls within the Nedbank and Old Mutual group of companies”.

He goes on to point out that Fairbairn Trust is a subsidiary of Fairbairn Private Bank which, in turn, is a subsidiary of Nedbank Group Ltd. Sounds good, maybe, but as any honest lawyer will tell you, they are all independent legal entities. A director of BoE has no legal capacity to act for another company, whether they be members of the same group or not. Worse, Botha has no personal knowledge of anything which he testified to in his affidavit, even though he claims the contrary. Everything he declares under oath is hearsay. He had no locus standi to bring the application, which, on that ground alone, the judge should have dismissed out of hand when it first came before court on 23 December 2008.

It gets still worse. Botha alleges in paragraph 15 of his affidavit that “in and during June 2008 the Westley Trust lent and advanced the sum of £500,000 (R7m) to West Dunes at the latter’s special instance and request”; that the debt is due, but the company was unable to pay the debt. He produces no written contract to evidence the R7m loan agreement. The reason is simple: There was no such agreement.

But there was method in the madness, or should we say sorcery. Botha could purvey a lie, and claim he was merely saying in good faith what he had been told to say. The actual trustees of the trust, by the same token, could claim they had declared nothing under oath.

Most telling: the Jersey Financial Services Commission’s Code of Practice for trust company business requires that “any registered person” (such as Fairbairn Trust Ltd) must be able to evidence, in writing, any decision made. Such as a request for a loan of R7m. If Fairbairn Trust Ltd wish to allege they made such a loan payment on the basis of an oral agreement, they would risk losing their licence to operate as a trust company in Jersey. But THEY don’t allege it. Mr Botha from BoE somehow gets it into his head to claim such an outrageous thing.

Ian Brakspear raised all these matters in his answering affidavit. But Judge Sharmaine Balton (hearing the provisional liquidation application), then Judge T Gorven, who issued the final liquidation order, were so much under the spell of Lennie the Liquidator’s magic that they noticed not a thing of all this skulduggery.

To be continued...

 

Keywords:
Nedbank
Offshore
Banking
Jersey
Ian Brakspear
Brakspear
Lennie The Liquidator
Attorneys
E N S
Edward Nathan Sonnenbergs
Trustees
Fairbairn Trust
Guernsey
Nico Botha
Insolvency Law
Liquidation Of Company
Boe
Share this article:

Reader's comments

Like to add your own comment ? Please click here to subscribe - OR -
 
Submitted by : Allison Joubert of Jeffreys Bay on 2010-06-03 21:40:38
woooow......why are there so many crooks in the world??!!

Editor's Note
Could be because the world is overpopulated

Disclaimer

While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the authors nor the publishers of this website bear any responsibility for the consequences of any actions based on the information contained therein.