In January this year, acting on instructions from Swiss-based investment bankers Montague Goldsmith AG, Johannesburg attorney Ian Small-Smith - more generally known as a criminal defence attorney - made a formal report to the police authorities in terms of the Prevention and Combating of Corruption Act. In the report, Small-Smith laid criminal complaints of fraud, theft and various statutory criminal breaches, involving the misappropriation of millions of rands, against well-known Cape Town attorney Dines Chandra Manilal Gihwala.
|Ex-chairman of Cliffe Dekker Hofmeyr, Dines Gihwala, and his successor Chris Ewing|
Also named as suspects for investigation in the report are the trustees of the Dines Gihwala Family Trust, Gihwala's business associate, Rivonia businessman Lance Manala, and the auditors and directors of two companies of which Gihwala and Manala were directors: Seena Marena Investments, and Ngatana Property Investments.
At the bottom of the list of those it is suggested should be criminally charged is the well-known law firm Hofmeyr, Herbstein Gihwala Inc (more recently re-incorporated as Cliffe Dekker, Hofmeyrs) of which Dines Gihwala was "at all material times" the chairman.
(Cliffe Dekker Hofmeyr earlier this year quietly "removed" Gihwala as their chairman. At the time of going to press he was still a partner in the firm, but sources close to the firm said they were frantically negotiating a "parting of the ways".)
These developments should come as no surprise to Noseweek readers: they have long known Dines Gihwala to be unscrupulous and a disreputable opportunist - see below.
However, current events make it all the more urgent that the Financial Services Board should explain how, given Gihwala's reputation, it came to recommend to the Western Cape High Court that it appoint him as joint curator of Fidentia, the financial services group that, inter alia, controls (or once controlled) a R1 billion fund for the benefit of the widows and orphans of South African mine workers.
And why, bizarrely, the FSB went a step further and recommended that Gihwala be excused from providing the surety bond which candidates are otherwise required to provide before they can be appointed as a curator or trustee. Effectively an insurance policy, a surety bond protects vulnerable creditors and investors from losses that might result from the curator's possible negligence - or criminal acts.
The investors and creditors of Fidentia - amongst them those unfortunate widows and orphans - now have no such protection. And the signs are everywhere that the curatorship has been disastrous. (See below for some examples.)
Curatorship is normally used as a means to restore a potentially viable financial institution to good health - or to rescue at least those parts of the business that are viable. Here, by appointing a man of Gihwala's reputation, the impression is, the FSB may have had another, more sinister, agenda. Did it in fact wish to ensure that Fidentia never rose again? An intriguing question for another day.
The matters canvassed in Montague Goldsmith's (MG's) criminal complaint against Gihwala ostensibly have no bearing on his curatorship of Fidentia - other than a reputational one. Except for one disturbing bit of evidence:
When, at an earlier stage of their business dealings, Montague Goldsmith first became concerned about Gihwala's probity and the security of their investment, they demanded an accounting from Gihwala for the R10 million they had been persuaded to invest in one of his ventures - and payment of the proceeds. A settlement agreement was reached and Gihwala refunded the R10m, claiming - falsely - that he had not been able to make the originally planned investment.
Not long thereafter it was discovered in the course of a forensic audit of Fidentia's accounts that the R10m refund to MG was not made from Gihwala's attorneys' trust account - where it ought to have been; it was made from Fidentia's bank account, prompting the auditor to pose the question: was the R10m payment in settlement of a legitimate claim for curatorship fees - or was Gihwala simply using Fidentia's bank account as a convenient source of funds to settle his private debts?
Montague Goldsmith CEO Karim Mawji declares in an affidavit that Gihwala and Manala "repeatedly, seemingly by design" provided inadequate records to try to mislead MG and their clients with regard to what they actually did with the monies they received from MG. On more than one occasion they were obliged to obtain court orders from the Western Cape High Court to compel them to render a "full and proper" account.
Despite this, they never did. When Mawji eventually gained access to company records, "a picture of fraud and deceit by Gihwala and Manala began to unfold". MG and its clients were not told of dividends that were due to them; instead these dividends were simply appropriated by Gihwala (or his family trust) and Manala, "in itself theft and fraud on their part".
A January 2009 memorandum drawn up by Gihwala "fraudulently sought to persuade the complainants into accepting a greatly inferior settlement by misstating facts and painting a very bleak picture of the Republic of South Africa". Various dividend allotments were allegedly manipulated, with the collusion of the auditors, in order to deprive Montague Goldsmith's clients of their share.
It emerged from the 2010 draft accounts of Seena - "effectively a dormant company with a single investment" - that Gihwala and Manala had awarded themselves R5.5m in "directors' fees" and a further R1.1m each as "administration fees" - simply so as to avoid the declaration of a dividend in which other shareholders would share.
"This is a clear case of theft," Mawji declares in an affidavit handed to the police.
Mawji further states: "Hofmeyr Herbstein Gihwala trust account records reveal that, on 8 August 2005, Gihwala fraudulently used R21,073.82 of the complainant's [MG's] money to pay tuition fees at the University of Stellenbosch, and transferred a [further] amount of R57,182.66 to the Dines Gihwala Family Trust's account. It seems clear... that Hofmeyrs facilitated the use of its trust account as Gihwala's personal bank account." Page after page of such details follow.
In the light of the above revelations, consider just the following two (of many such) items taken from the forensic audit done on Fidentia's affairs while under Gihwala's curatorship:
Antheru Beleggings Trust, which invested millions in Fidentia, has applied to the Western Cape High Court for the company to be put into liquidation, rather than remain under the joint curatorship of Dines Gihwala and George Papadakis. In support of the application, the Antheru trustees allege that the curators have sold assets (purchased by Fidentia with investors' funds) to their friends for amounts far below their true market value and have helped themselves to millions in fees.
They point to specific transactions that they want a liquidator to investigate; among them the sales by the curators of Manning Rangers Soccer Club, Software Futures, Automated Outsourcing Solutions and Thaba Manzi Farm.
Manning Rangers, (valued by Ernst & Young and more recently forensic auditor Nico van Rensburg at R12.5m), was sold for? ...well, the November 2007 curators' report says R2.5m, but their March 2009 report says it was sold for R3.2m, while in the March 2010 curators' report they sold it for R3m.
Antheru allege that not only was the price way too low, but the curators sold the club on 26th March 2007, before the High Court had confirmed their appointment. Provisionally appointed curators and trustees are precluded from selling any assets before the FSB has approved their appointment. The FSB says it was never informed of the sale by the curators.
Now the fun bit: The Professional Soccer League (PSL) injected roughly R10m into all Mvela League teams shortly before the Soccer World Cup. The benefactor of the urgent sale not only got a nice discount but benefitted from an additional R10m bonus. What irks Antheru most is that the shelf company that bagged such a nice windfall in buying the soccer club for a R10m discount plus a R10m cash bonus, is said to be "particularly closely associated with Dines Gihwala".
CHAMPION OF THE POOR
Who’s Who online still lists Dines Gihwala (facing page) as Chair, Disciplinary Committee of the Public Accountants’ & Auditors’ Board; Deputy Chair, Free State University Council and Chair, Hofmeyr Herbstein & Gihwala (now Cliffe Dekker Hofmeyr), but ...
Above we reveal that South Africa’s elite commercial crimes unit, The Hawks, is preparing to pounce on Fidentia curator Dines Gihwala for alleged fraud and various other misdemeanours relating to milions of rands entrusted to his care by a Swiss finance house.
More than a decade ago, regular Noseweek readers already knew that Dines Gihwala was a man not to be trusted. Now the question is: did the Financial Services Board nominate Gihwala to administer nearly a billion rand put aside for the support of widows and orphans despite what they knew about him… or because of what they knew about him? In short: was their priority to destroy Fidentia boss Arthur Brown, or to protect the savings of the weak and vulnerable?
Incredibly, they went as far as to ask the Western Cape High Court to excuse Gihwala from having to provide the customary surety bond from a recognised insurer to cover any losses that might result from dishonesty or lapses in his curatorship of those funds. And, it is now emerging, as each day goes by, that those lapses have been many – and serious.
Here’s a recap of what we long ago knew about Dines Gihwala:
nose24 – October 1998:
Dines Gihwala, was recently made an acting Judge of the Western Cape High Court. You may be surprised that we include him in our list of pals given jobs by the (since-deceased) Minister of Justice Dullah Omar. Gihwala was, after all, for many years Dullah’s arch-opponent; one of those men of colour happy to serve on the ethnic “management” committees set up by the apartheid regime; the sort of “coloured” lawyer who did not want to get involved with defending “politicals”. In fact, just the sort of attorney of colour who, in the new era, would have his law firm amalgamate with the ultimate in Broederbond firms, Hofmeyr Van der Merwe.
So why should Gihwala now have received the nod from the minister and have been appointed an acting judge?
Speculation is that the minister’s pride has been satisfied by Gihwala’s acknowledgement of his leadership. Gihwala has not only made a donation of R50,000 to ANC funds, but earlier this year persuaded the Hindu Association of Rylands Estate to throw a festive bash in honour of the minister. Great stuff in an election year. Not that everyone is that thrilled with the new-found affection between the two old enemies – unnamed “elements” in the Thornhill Residents’ Association (ANC stronghold of the Omar clan) expressed their disapproval by distributing a scurrilous pamphlet about Gihwala in their neighbourhood… more online.
nose26 – May 1999:
During his stint as an acting judge on the Cape bench, Gihwala heard the case of Standard Bank vs Eileen Friedman. The issue: whether or not a bank has the right to raise interest rates on existing home loans at will and at short notice. Just one of the arguments against banks having such a right is the fact that borrowers are at an unfair disadvantage: encumbered with a mortgage bond over their homes, it is near impossible for them to terminate the loan and seek cheaper finance elsewhere each time their bank decides to up the interest rate. In reality, the borrower is so defenceless that banks don’t even bother to ask – they simply give notice of such increases.
Acting Judge Gihwala gravely heard argument, then promptly gave his judgment – in favour of Standard Bank. What he failed to divulge was that his firm is – and has for some time been – on a retainer from Standard Bank, making the bank one of his firm’s biggest fee-paying clients. The fact that Acting Judge Gihwala did not have the sense to recuse himself from the case is scandalous.
nose28 – Jan 2000:
Another scandal: this time about the improper involvement of Dines Gihwala, by then chairman of mega law firm Hofmeyr Van der Merwe, in the cases of hundreds of Macassar residents with claims against the chemical giant AECI, resulting from a sulphur fire that broke out at the company’s premises in December 1995.
Hofmeyrs were, until very recently, AECI’s attorneys, defending all the claims arising from the Macassar incident. Noseweek has now discovered how Gihwala secretly gained access to – and control of – the attorney’s files of more than 600 of these Macassar claimants, while his firm still acted for AECI.
The conflict of interest could seriously prejudice the conduct of their cases and could constitute a fraud on the claimants, or on AECI, or on both.
nose30 – Aug 2000:
In 1988 Cape Town attorneys Faizal Noor and Dines Ghiwala decided it would be a good idea to go abroad to raise money for the poor and oppressed of South Africa.
This represented a remarkable and praiseworthy conversion, as neither man had previously shown any particular concern for the lot of the poor and oppressed.
They travelled to London (where they stayed at the five-star Dorchester Hotel and called on the luminaries of the Regent’s Park Mosque for introductions to rich Arabs), then flew to New York by Concorde. They saw various well-connected people to whom they promised 25% commission on any money they could raise for this cause. How much money they raised and what causes benefitted, we don’t know.
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