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Cape Town - There are difficulties in deciding whether the admissions of former Fidentia boss J Arthur Brown are sufficient to convict him of fraud, a Western Cape High Court judge said on Wednesday.
"This is an important matter. The State started off with nine counts. There are two [counts] left, basically. I do not think the parties understand the difficulties the court faces at the moment," Judge Anton Veldhuizen said during Brown's trial.
He was referring to counts two and six, both of fraud, which relate to Fidentia's dealings with the Transport Education and Training Authority (Teta) and Mantadia Asset Trust Company (Matco).
Brown handed up a document on Tuesday in which he admitted some form of culpability in terms of these counts.
Following this, the State said on Wednesday that it would focus on these two counts as it did not have enough evidence for conviction on the other counts.
Veldhuizen said the difficulties he faced were specifically with count six.
"I must make it clear at this stage that I have fully discussed this with my assessors and the difficulty is not so much in count two... [where there are] admissions which spell out what would amount to fraud," he said.
"I would like full heads of argument and I will give you time to prepare these heads.... I am not going to rush this matter."
Regarding Teta, prosecutor Jannie van Vuuren argued that Brown was guilty of two types of misrepresentation, which resulted in fraud.
The first was when Brown broke the non-discretionary investment mandate he had with Teta and decided to invest in asset classes that were more risky.
He said Brown had had a legal duty to act positively and remove the misconception that he was not investing as promised.
Veldhuizen said these actions seemed more like a breach of contract than fraud.
The second misrepresentation on this count was that he had admitted to sending incorrect financial statements to Teta, Van Vuuren said.
Regarding Matco, the State believed Brown made misrepresentations when he told company heads he could afford to buy Matco, when actually he could not.
Brown admitted that Fidentia did not have enough liquid cash at the time of purchase, but that it had enough assets in the form of negotiable instruments.
Van Vuuren said it was due to Brown's misrepresentation of being able to afford the company, that Matco handed over control of company operations before the full purchase price was paid.
Veldhuizen disagreed and said the State had to prove a link between Brown's actions and the handing over of control.
"What was in their [Matco's] minds? Why did they hand over control? Where does it appear? I need causation," the judge said.
The trial was postponed until Monday for full argument.
