Cape Town - Former Fidentia boss J Arthur Brown deliberately created confusion with solicited investments in a network of illegal pyramid schemes, according to his indictment in the Western Cape High Court.
In pyramid schemes, investors are falsely promised unrealistically high returns on their money, which is not invested. Returns are paid out from investments other people make.
Brown faces four counts of fraud, two of corruption, two of theft and one of money-laundering.
At the end of the preamble to the 90-page indictment, State prosecutor Jannie van Vuuren SC accuses Brown of using smoke-and-mirror tactics.
"The accused orchestrated a huge exercise of inflated assets, the back-dating of documents and asset-swap agreements, in an effort to defeat the attempts of the Financial Services Board to investigate and uncover the true picture," he writes.
"This smoke-and-mirror play was designed to play for time, and stall the uncovering of fraud, in an attempt to escape responsibility for his actions."
The fraud charges involve four entities:
It invested R9m with Fidentia Asset Management. It is alleged that Brown falsely informed Fundi that the investment would give Fundi a monthly income, capital guarantees and growth which would enable Fundi to fulfil its obligations to Zambian company, Nitrogen Chemicals.
Brown allegedly used some of the money as a deposit for a beach property for himself and his family, and Fidentia was unable to repay the investment when called upon to do so.
Teta (the State-owned Transport, Education and Training Authority):
Brown is accused of soliciting a R200m investment from Teta by giving Teta CEO Piet Bothma a R6m bribe.
He allegedly used more than R3m of the Teta money to buy four 4x4 vehicles for himself and his co-directors, and he used Teta money to buy two more beach properties for himself and his family.
Brown allegedly solicited a R44m, five-year investment from the Antheru Trust, and he used the Antheru money, and Teta and other investments, to repay investment capital, and to make interest payments to Antheru investors.
Matco controlled a Trust with more than R1.2bn in pension and provident funds, under administration and investment with Old Mutual on behalf of beneficiaries. Matco also had R70m available in its current bank account for the payment of monthly beneficiary-related obligations.
Brown allegedly acquired Matco, but orchestrated the transaction so he gained control of the company before full payment of the purchase price.
He is accused of stealing the R70m to finance the balance of the Matco purchase price.
"[H]e in fact used Matco's own money to buy Matco", Van Vuuren alleges.
Brown allegedly produced Standard Bank "Letters of Comfort", to give the Matco Board the false impression that Fidentia had the means to purchase the company.
The State claims that, once in control of Matco, Brown ordered the transfer to Fidentia of the R1.13bn in beneficiary funds invested with Old Mutual.
He is alleged to have tried to obtain R150m from Old Mutual, but was declined because of improper authorisation by Matco.
These funds were apparently nevertheless systematically depleted, with only R500m potentially recoverable when the FSB stopped the Brown operations.
On one theft count, the State alleges Fidentia bought the company Infinity, from which Brown stole R5m to pay Fidentia salaries.
On the second theft count, Brown is alleged to have stolen R12.6m of Antheru funds to buy the Eastern Cape farm, Thaba Manzi.
The two corruption counts relate to the alleged bribing of Bothma, for the R200m investment.
The money-laundering charge relates to amounts totalling R93.8m, which formed the proceeds of Brown's alleged unlawful activities.