Dodgy SA directors in R1.7bn con
Johannesburg - A group of South African businessmen allegedly conned Indian multimillionaire Ali Bagash into investing $20m (about R137m) in property deals by claiming to have assets worth more than R1.7bn.
Bagash claims six local businessmen misled him into investing millions of dollars in 11 properties whose values were artificially inflated.
Their names are known to City Press but cannot be mentioned as they have not been charged with any wrongdoing.
Court papers and a bulky 233-page forensic report, dated December 2010, prepared by investigators appointed by trade and industry minister Rob Davies, show the businessmen, through their group of companies, misrepresented their asset base to Bagash by claiming that it was "in excess of $250m (R1.7bn)" during a meeting in 2005.
The report concludes the actual net assets of the group amounted to just R9m, according to the audited financial statements dated February 28, 2006.
The misrepresentation was intended to entice Bagash and create the impression that the group had a substantial asset base which could help raise finance on the strength of its balance sheet.
Bagash invested the $20m to participate in the buying and development of properties in KwaZulu-Natal located in some of the province's sought-after areas includin La Lucia, Durban Point, Royal Shaka, Shelley Beach and Umhlanga.
His investment was, however, allegedly used by his business partners to purchase properties at artificially inflated prices and then pocket the difference.
According to the Davies report, the businessmen also tried to lure Bagash into buying a property in Durban for $125m (about R860m) when the owner was selling it for R95m. The deal never went through because Bagash caught wind of the property’s true value from its owner.
“The conduct of the businessmen in deliberately, intentionally and artificially inflating the values of the purchased properties and land is fraudulent,” says the Davies report.
Davies has referred the matter to the National Prosecuting Authority (NPA) for further investigation and prosecution.
At the time of going to press the NPA had failed to respond to questions on whether it would investigate the matter.
Davies launched the probe into the affairs of 36 companies of which the men are directors, after Bagash complained to his department in December 2007 about "bad treatment" by the businessmen and their companies.
Davies's report says Bagash transferred almost $13m to the company between December 2005 and January 2009.
In 2006 he also took over a $7m investment from his UAE business associate, Abdul Rahman Hayal Saeed, in some of the 36 companies run by the businessmen.
Bagash paid Saeed in full for his investment, bringing his investments in South Africa to $20m.
In a bid to recover his lost millions, Bagash launched two separate lawsuits in 2009 and last year. Last year’s lawsuit pertains to the $7m he invested in buying out Saeed, while the 2009 litigation is related to his $13m investment in the company.
The businessmen have hit back, however, demanding R4m in security, which is an estimate of the legal fees they are likely to incur in defending Bagash's $7m claim.
Bagash claims in the Davies report that he was asked by one of the men to sign a shareholder's loan agreement "on the boot of a car" while on a visit to KwaZulu-Natal, under the pretext that the documents were required by the Reserve Bank.
Bagash's lawyer, Saber Jazbhay, said the matter was in the court’s hands. "We expect a trial date soon," he said.
The businessmen’s lawyer, Asif Latif, said he had no instructions to respond to City Press queries.
Latif referred questions to the businessmen, who could not be reached for comment.