Fidentia: It’s a wrap! Widows and orphans get crumbs, curators walk away with juicy fees

The Fidentia scandal involved a massive financial services company raiding funds allocated to widows and orphans in the 2000s. Fidentia had plush headquarters in Cape Town’s Century City and financial services professionals were queuing to join the company known for its extravagant perks. Heading the operation was J. Arthur Brown, a former lawn salesman, and wiley accountant Graham Maddock. There were others who knew they were playing with other people’s cash, including Brown’s wife, who set up a pole-dancing operation in a Cape Town building bought specially for her company, Facets. This week it emerged that the sale of Facets contributed to the final amounts paid out to those owed money by Fidentia. Astonishingly, the building fetched only a fraction of what it cost to pay the individuals tasked with wrapping up the affairs. The Fidentia saga is a reminder that the only winners when the lawyers and accountants are called in to rescue the finances are the lawyers and accountants. The widows and orphans get only a fraction back of the hard-earned savings that were handed over to Fidentia for investment. – Jackie Cameron

By Thulasizwe Sithole

More than a decade after the Fidentia group was placed in curatorship, investors have recovered only a quarter of the R1,3bn in claims.

That’s the depressing news, as reported by Netwerk24, after the company’s matters were finally wrapped up in court.

The media organisation said on Monday that the Grand Master of Fidentia, J. Arthur Brown, is currently serving 15 years in prison for fraud after being sentenced in 2014.

The curators accepted four investors’ claims totaling R1.36bn, say the reporters.

These investors are:

  • Teta: R185m
  • Antheru: Antheru: R9.2m
  • Balltron: Balltron: R38.5m
  • Living Hands Umbrella Trust: Living Hands Umbrella Trust: R1.1bn

The Living Hands Umbrella Trust was established as a trust for the  dependents of deceased mineworkers.

The Financial Services Conduct Authority argued that the curatorship has been finalised and there is good reason for the termination of the curators now.

Since the start of the curatorship, numerous assets have been sold. Netwerk24 says R171m was raised. The largest amount, of R43.4m, was obtained for Century City property Facets. The Facets Lifestyle Centre was bought with investor money for J. Arthur Brown’s wife.

The curators also received a total of R50m through the sale of investments in the private equity portfolio of the asset manager. Other money raised amounts to R57m and includes the rights to a cricket lodge that were sold.

The total cost of the curatorship, excluding value-added tax (VAT) amounted to R101.6m at the end of April.

  • Curators fees to Dines Gihwala: R16.1m
  • Curator fees to George Papadakis: R11.6m
  • Curator fees to John Levin: R6.2m
  • Forensic accounting services: R8.6m
  • DLA and CDH Legal Services: R49.3m

Initially, Gihwala and Papadakis were confirmed as curators. Gihwala resigned in June 2014 following an order in connection with another company that was not related to the Fidentia, says Netwerk24. Levin was appointed after that.

Insolvency practitioner Gihwala was struck off the roll of attorneys earlier this year, reports TimesLive. The former chairman of one of South Africa’s big five law firms, Cliffe Dekker Hofmeyr, Gihwala’s downfall followed a complaint of “unprofessional and dishonourable conduct” against him by Karim Mawji, CEO of the Swiss-based asset management company Montague Goldsmith, to the Cape Law Society, it says.

According to the court, Gihwala paid fees at Stellenbosch University for the daughter of a beneficiary of his family trust using “interest” that belonged to Montague Goldsmith, reports the news company.

Judge Mark Sher ended crooked lawyer Gihwala’s 40-year career with a scathing 25-page judgment, it adds.