Monday, August 15, 2022

Inside the BBS curious money trail

A winding paper trail picked by forensic experts into the accounts and cash flows surrounding the controversial “auction sale” of property attached by Botswana Building Society (BBS) suggests the sale was staged.

High Court Judge, Justice Maruping Dibotelo, who last year reversed the questionable auction sale of Southern African Furniture Manufactures (SAFCO) factory warehouse to Masterplans, says the evidence by forensic experts “who examined documents pertaining to the sale that in his opinion the sale was not an arm’s length commercial transaction” is virtually unchallenged.

An arm’s length transaction is one in which the buyers (Masterplans) and sellers (BBS, its lawyers and deputy sheriff) act independently and have no family or business relationship.

The report by forensic expert Allan Greyling of Accounts @ Law (Pty) Limited, which was presented in court and is currently before the Court of Appeal states, “the opinion of Greyling as set out herein is based on the documentation that has been provided and which we have been advised is the only documentation that has been produced by the relevant parties and which is the only documentation which they contend is in existence in relation to the transaction. Assuming the correctness of their statement, then we should add that the fact that such documentation, which ought to exist, in fact does not exist, is further cause for concluding that there was no legitimate transaction.”

Deputy Sheriff’s mystery windfall

The forensic experts investigation into the money trail revealed that the deputy sheriff who conducted the controversial “auction sale”, Bashir Kennekae, received P51 000 which cannot be accounted for from Mr. Chana of Masterplans Pty (Ltd). Mr. Chana bought the SAFCO property under controversial circumstances.

“On the 31 May 2005 a bank cheque was issued on behalf of Chartered Properties (another of Mr. Chana’s companies) in favour of Kennekae for auction fees.” The conditions of sale recorded that the auctioneer’s charges as 2, 5 percent of the purchase price of P3 100 000. As such the auctioneer’s fees of P77, 500 were in accordance with such condition.

Greyling, however, was able to access a deposit slip for 16th May 2005 reflecting a deposit of P 51 500 received from Building Concepts into Deputy Sheriff Kennekae’s bank account number 0100175915300 held at Standard Chartered Bank. Building concepts is one of the businesses operated by Mr. Chana.

The Greyling Forensic report states that “It is a remarkable coincidence that Kennekae as the auctioneer is paid P51 500 ostensibly with no supporting documentation. Absent any other evidence to the contrary, it is questionable whether this payment did not constitute an inducement to Kennekae to transact with Chana and Masterplans in respect of the sale of the property in question. However, there may be a reasonable explanation for the payment if the necessary evidence is provided to Greyling.”

BBS’ questionable loan

The forensic expert says he has studied the BBS operational manual which supports his opinion that “the BBS loan of P1, 5 million to Masterplans was not a commercial lending transaction in accordance with prudent banking lending norms”.

States the forensic expert: “It is evident from the BBS operations manual that the loan to Masterplans did not comply therewith in respect of the requirements to demonstrate that Masterplans was able to afford the repayment of the interest and subsequent capital. Masterplans was a dormant company with no previous trading history and failed to meet such criteria of BBS manual.

“Furthermore, the manual requires an analysis of the AFS. It is clear that the document presented to BBS was a one page balance sheet with no independent opinion to enhance the representation provided by Mr. Chana to the BBS as to the veracity of the balance sheet items.

“The BBS manual requires verification of the assets and liabilities of the members/directors of Masterplans and to obtain details of their personal assets and liabilities. Greyling has seen to evidence thereof.

“Because the funding for the acquisition of Masterplans property appears to have been sourced from Chartered Properties, a related party entity owned by Mr. Chana, it would have been commercially sound to expect cross suretyship from these entities as well as AFS to establish the solvency of Chartered Properties and Building Concepts. No such documentation has been provided to Greyling. Furthermore, there are no details of the terms of the intercompany loans, or cession thereof by BBS and any proof of the three properties purportedly owned by Masterplans according to its presentation to BBS.

“One would have expected BBS to verify the existence, value and ownership of the three properties purportedly owned by BBS to Masterplans to grant them additional comfort regarding the security for their loan and one would have expected a pledge of the title deed or covering bond on these properties. No such evidence has been presented to Greyling.” The report states, “Masterplans did not provide any security and as it was a dormant company, Masterplans would not have qualified for this loan if the transaction was approved in accordance with prudent normal commercial banking credit norms on an arm’s length basis.” Greyling says he has seen no documentation to establish whether the property was insured by BBS on behalf of Masterplans to cover any insurance risks for the bond.

Inside the money trail

The conditions of sale stipulated that a 10 percent deposit of the purchase price of P3, 100,000 being P310 000 shall be paid on the day of the sale, 13th May 2005. It was, however, only on 1st June 2005 that a bank cheque was issued in favour of Modimo & Associates (BBS lawyers) for an amount of P310, 000. The cheque, however, was paid on behalf of Chartered Properties and not the said purchaser, Masterplans. Curiously, the P310, 000 was not paid out of the Chartered Properties bank account (account no 62017813248) and Masterplans did not appear to have a bank account at the time. At the time of compiling the report, the forensic experts had not established the source of the money. Curiously, the deposit was not credited to the Masterplans client account with Modimo & Associates but instead credited to BBS/SAFCO client ledger account with Modimo & Associates. The receipt issued by the law firm was in favour of Chartered Properties and not Masterplans.

A forensic expert engaged by BBS Mr. D. Hudgson revealed Modimo & Associates “acted unprofessionally.” He referred the court to the P310 000 deposit paid by Masterplans Pty (Ltd) into the Modimo & Associates trust account which was appropriated by Modimo & associates as collection commission (i.e. a fee not related to work actually carried out on behalf of BBS)

The P 1, 5 million loan application by Mr. Chana to BBS was only made in September some four months after the purported auction sale.

On 10th October 2005 the Deputy Chief Executive of BBS loans department provided the CEO with a memorandum recommending that the loan be approved. In the memorandum, the Deputy Chief Executive stated that the balance of the purchase price had already been deposited with Modimo & Associates.

This was not true. The balance of P 1, 2 90,000 was only paid to Modimo & Associates on 24th November 2005. The loan was granted on 12th October 2005 and signed by Mr. Chana on behalf of Masterplans on 18th October 2005. This is in spite of the fact that the purported public auction was on 13th May 2005.

On November 24th 2005 a bank cheque was issued in favour of Modimo & Associates on behalf of Masterplans for part payment of P1, 290,000 of the purchase price.

“The source of the funds into the Masterplans bank account prior to this part payment needs to be identified,” states the forensic report. Modimo & Associates records that there was an incorrect entry of the amount of P1, 290, 000 into the client ledger accounts of House Planning Services and this was at the same time as the entry of the same amount into the client ledger account of Masterplans. It emerged that Modimo & Associates issued House Planning Services with a receipt for the payment (not Masterplans). The stated error by Modimo & Associates was only corrected by the law firm in the House Planning Services ledger account a month later. Curiously, the forensic experts say they have not seen a receipt issued to Masterplans in this regard.

On February 2006 the Deed of Transfer was registered in favour of Masterplans. The mortgage bond passed by Masterplans in favour of BBS was registered on the same day. The proceeds, however, were only paid over to Modimo & Associates from BBS on behalf of Masterplans on 6th February 2006 and a receipt was issued to Masterplans by Modimo & Associates on 9th February 2006.

The money trail disappears

The forensic experts report that “the full amount of the loan proceeds (P1, 500,000) were paid back to BBS on 23rd May 2006, despite this loan application being for a period of ten years. The forensic experts say they have “not been provided with the client ledger of BBS after 6th May 2005 with Modimo & Associates to ascertain whether this payment was credited to the BBS account.”

The forensic report further states that at the time the report was compiled (October 2008) this sale agreement had not been cancelled, yet the loan proceeds had purportedly been repaid to BBS and part of the balance price being P 1 290 000 less certain charges reflected on the Masterplans client account with Modimo & Associates, amounting to P 1 129 108.50 had been invested with the Bank of Baroda on behalf of Modimo & Associates as a trust account on behalf of a client. It is not disclosed whether the client is Masterplans or BBS.

“On December 2006 Modimo & Associates opened a new bank account with the Bank of Baroda and transferred the remaining funds reported in the Masterplans client ledger account into this new bank account. The other bank accounts in the name of Modimo & Associates are held with Standard Chartered Bank and not with Bank of Baroda. The details that appear in Modimo & Associates client ledger account for Masterplans on the date that the funds were transferred to the account with Bank of Baroda states that “payment to Client”, which is incorrect.

On 8th October 2007 Modimo & Associates instructed the Bank of Baroda to release a cheque to Masterplans for money held in the trust account.

On 17th November 2007 these funds were paid from the account that Modimo & Associates held with the Bank of Baroda with the reference “BC issued to Masterplans B/O to Modimo & Associates” These funds, however, do not enter either of the bank accounts for Masterplans. The forensic expert was not able to establish where the money went.

The forensic experts stated at the time of compiling the report, “As the sale agreement has not been rescinded, and Masterplans remain the registered owner it in inexplicable why Masterplans are being refunded part of the purchase price which should have been paid to BBS.”

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