Editorial

Dear Reader: Lennie dials the wrong number


Seated together at a table for breakfast at the Taj hotel in Cape Town on Wednesday 7 November were the entire defence team appearing for various former Pinnacle Group directors and executives who have been sued for R720 million by the liquidators of six companies in the Pinnacle group.

Ranged around the table are one-time CFO of the Pinnacle Group Steven Kruger, Senior Counsel Ian Green, advocate Ndumiso Nxumalo (junior counsel), advocate Matthew Clark (junior counsel), Accountancy Prof Harvey Wainer (expert witness) and briefing attorneys Christopher MacRoberts and Tony Hardy of Clyde and Co.

Despite years spent under siege by “the largest law firm in Africa” ENS’s head of liquidations, Leonard Katz (long better known as “Lennie the Liquidator” with all that title’s brutal connotations) and his favoured Senior Counsel, Gavin Woodland SC (liquidators’ legal fees and costs R60m so far), the Pinnacle defenders are in surprisingly good spirits.

In recent weeks things have suddenly turned in their favour in the trial proceeding before Judge Ashley Binns-Ward. Katz’s chosen expert witness, forensic accountant and investigator Terence Hatzkilson’s evidence has been torn to shreds. Witnesses called to substantiate his expert opinion, ended up contradicting it. He had (conveniently?) failed to note numerous company documents that happened not to support his damning view of the directors’ conduct. His theoretical analysis did not stand up to scrutiny. He made serious calculation errors.

Halfway through the breakfast, attorney Chris MacRoberts’s cellphone rang. Within seconds, the astounded expression on his face had all those seated around him silent. For some time he said nothing, just listening to what the caller was saying. Then he spoke: “Lennie, do you know who you are talking to? This is Chris MacRoberts.”  Seconds later the call was over.

“You will not believe it! I’ve just had Leonard Katz on the phone thinking I am Terence Hatzkilson (his expert witness)! He did not allow me time to talk. He just launched in with ‘Terence, we are in serious shit. We need more time to deal with IFRS [International Financial Reporting Standards] technical issues. You need to be sick for another day. Get a sick note.’”

It was then that MacRoberts intervened to tell him who he was talking to. Katz’s confused and clearly panicked response was to say “I am sorry, I didn’t know you were sick” and then abruptly ended the call.”
The breakfast table listened in awed silence then broke out in raucous laughter that went on and on and on.

Then everyone got serious. Katz had just done what some say could amount to interfering with the court process – a serious offence. It was decided that advocate Green SC and his juniors would go, accompanied by Katz’s counsel Gavin Woodland and see the judge in his chambers before court and tell him there was “an issue” that “might have to be raised in open court”, but that, in the meantime, the parties were not ready to proceed with the trial that day. Which is what happened.

On the way out of the judges’ chambers, Woodland formally distanced himself from what Katz had done that morning and declared he had known nothing about it.

A while later a “without prejudice” letter arrived from Leonard Katz, “totally denying everything” (unspecified in his letter), reserving his rights to sue whoever, and accusing his opponents of “playing dirty” by summoning the head of ENS, Michael Katz (no relation) and Kevin Markman, head of Commercial at ENS in Johannesburg to testify for the defence.

It emerges both had been highly paid legal advisors to the Pinnacle Point directors in relation to most of the issues for which Katz was now accusing them of misconduct.

Within 48 hours the two opposing law firms were talking settlement. A settlement agreement was signed by all the parties and made an order of court by Judge Binns-Ward on 12 November (see Western Cape High Court case no. 11156/14).

In brief: The claim for a total of R720m in the original summons was settled with a payment of R25m by the insurers, AIG, and R2.5m by Absa’s nominee director at Pinnacle, Hennie Pretorius. In total, less than 4% of the original claim.

The opposing parties absolved one another of all claims against them. The agreement records that “Payment of the settlement amount does not constitute an admission of liability by the defendants and has been agreed to only in order to resolve the matter and avoid incurring further legal costs.”

Investec, who guaranteed ENS’s fees and costs in the case (said to total at least R60m), will collect the tab for the balance. More about the case in the next Noseweek.

The Editor.
 

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