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In December 2017, NBFIRA – a state agency mandated by an ACT of Parliament to regulate and enforce compliance within the non-bank financial sector was alerted to a conflict between two of its licensed institutions – BPOPF and CMB.
The fight between the two is over the fate of millions of Pula belonging to atleast 170, 000 government pensioners as well as unspecified number of future pensioners.
At the time when court proceedings kick started in December 2017, the BPOPF made the court aware that it had placed P447, 500, 000 of pensioner’s monies in the care of CMB through its management of an equity fund known as Botswana Opportunities Partnerships or BOP. Under the BOP agreement, the BPOPF became a 99 percent limited partner while CMB held the one percent as general partner.
In the most recent judgement relating to the case, Justice Ian Kirby explained that the BOP is an equity fund set up to hold, invest and administer the funds of limited partners.
“The Limited partners are required to provide funds up to committed limits to BOP for investment on their behalf by the general partner which has untrammelled discretion in that regard, and which also administers the Fund for a substantial fee”, said Justice Kirby.
Court records show that to date, BPOPF has been the sole limited partner in BOP and initially bound itself to provide up to P500, 000, 000 to BOP for investment purposes, which was later increased to P880, 000, 000.
The court has also established that one of the investments made by CMB on behalf of BPOPF was the acquisition by BOP of a 40 percent stake in Bona Life – another entity licensed and regulated by NBFIRA. The CMB itself is also part of the shareholders list at Bona Life owning a 25 percent stake separately.
.....THE BIG DECLINE
From look of things, the fight between CMB directors (Okaile Rapula and Tim Marsland) on one end and the BPOPF Chief Executive Boitumelo Molefe was fast tracked by a decline by the latter to consent to a draw down notice for a further P77, 000, 000 by CMB in late September 2017. The war-of-words between the two parties then shifted from gear one to two, with CMB declaring BPOPF a defaulting partner for failure to honour the draw down notice in mid October 2017. By the end of the same month, CMB directors notified BPOPF’s Molefe that it they have requested bids and had disposed of BPOPF’s interest in BOP. In a doubtful circumstance, CMB is reported to have disposed BPOPF’s share in BOP for only P50, 000, 000 to an unnamed beneficiary – whose identity remains a mystery to date. The BPOPF stake, if measured by the initial investment was valued at over P400, 000, 000.
Fast forward to mid December 2017, the BPOPF dragged CMB directors to court through an urgent application seeking a declaration which would settle which party has control over BOP. The application was dismissed for lack of urgency and later referred to arbitration following the declaration of the dispute by the High Court in the capital Gaborone.
“There appears to have been no progress in the arbitration and CMB remains in de facto control of BOP and its assets”, said Justice Kirby recently.
The RED FLAGS......
Concerned that millions of Pula belonging to pensioners might be at risk, NBFIRA then made a swift move to appoint an inspector in early January 2018 in a bid to get to the bottom of the tussle. While he was denied access to the books and records of the web of companies that CMB conducted business under, the regulator investigator were however able to establish that the CMB had submitted unaudited results for the previous – this raised the first red flag. The second red flag came in the form of denied access to the premises of CMB by its directors to the statutory manager Peter Collins who was appointed by the regulator.
“On his arrival at the premises with NBFIRA officers, he was met with hostility by Okaile, who summoned his attorney, Mr Kanjabanga. They together refused him further access to the premises, and warned him that should he return he would be physically restrained”, reads part of Justice Kirby ruling.
Further red flags have been identified – including the discovery that CMB was not complying with financial services laws. Amongst other things, it was discovered that assets managed on behalf of pensioners were held in the name of an unapproved party, BOP, contrary to section 24 of the Retirement Funds Act. At the same time, CMB – which is said to have conducted business through an unlicensed company – CMBF1 also failed to keep proper records or account faithfully to Bona Life contrary to section 4 (4) of the Securities Act.
Meanwhile Kirby’s judgment also states that a number of further red flags were revealed both in the supplementary affidavits and in the preliminary report issued by Peter Collins. Still in the preliminary report, Collins further stated that he is also reasonably certain, despite not having access to the files and records that CMB is in an unsound financial position.
At the same time, CMB’s tax compliance summary issued by BURS dated 16th January indicated overdue taxes of some P3.8 million.
By the end of July 2018, Justice Kirby, as expressed through his ruling, was convinced that the major possibility of criminality in the purported disposal of BPOPF’s 99 percent share of BOP remains unresolved.