Johannesburg - The heads of a scheme in which investors lost at least R277m in fact allegedly lined their own pockets with R117m-odd of that amount.
This is one of the reasons advanced in the North Gauteng High Court in Pretoria on Friday for the liquidation of Spitskop Village, a Mpumalanga property development that recruited investors on a large scale.
The application was granted as Spitskop is hopelessly insolvent and the development will probably not proceed.
Among the arguments presented, it appears that Hennie Lamprecht, chief executive of Bluezone, which raised the investments for Spitskop, and Johan van Zyl, a director, derived direct benefit when Blue Dot (in which they were also directors) sold the land for the development to Spitskop for R118.3m.
They had themselves paid just more than R1m for it.
From financial returns supplied by Van Zyl to the Financial Services Board (FSB), it appears that he received R5.5m from the deal and Lamprecht R95.6m.
An in-depth and damning FSB report on the financial viability of the development was made available to the applicants for the liquidation of Spitskop.
The purchase price of the land, a piece of unzoned farm land described by the FSB as "barren bushveld", was advanced as a reason why the Spitskop development had been insolvent from the outset.
The purchase price of the land represents 30% of the money that was to be raised from investors for the development, and this was paid from the initial capital received from the investors.
Bluezone promised a return of 20% a year.
Between May 2006 and December 2007 at least R351.4m was raised from the public. The Spitskop bank statements show that by December 2007 an irrecoverable R269.93m had been paid out.
For instance, advance payments of R62m were made from the initial amounts received from investors.
These included legal fees of R4m, R6m to professional advisers and R32m in advance commissions to brokers marketing the scheme.
A further R124m was reputedly spent on the project - of which there is no evidence.
In an affidavit Spitskop declared that it could account for all expenditure. But no details were supplied.
The legal team acting on behalf of the applicants for the liquidation, advocates André Badenhorst SC and Johan Hershensohn, argue that the money raised from investors was in contravention of the Banks Act.
Plan unworkable
The legal team agrees with the FSB's conclusion that the Spitskop development is no more than a scheme that has misappropriated investor funds through gross negligence.
The plan presented to investors on June 25 to rescue Spitskop by selling it to a new developer is, according to the team, unworkable.
In terms of this plan - which would contravene the Companies Act - Share Africa Housing would buy Spitskop for R270m.
Even though it was presented to investors as a conditional purchase agreement, the legal arguments hold that it was no more than a letter of intent.
One of the conditions precedent was that sufficient money could be raised from the public to meet the purchase price.
The legal team held that this simply amounted to establishing a second syndication scheme to carry on operating Spitskop under a different name.
- Sake24.com
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