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No Fidentia investor funds went to Panama - curators

Apr 05 2016 17:46
Matthew le Cordeur

Cape Town – Fidentia did not stash any investor cash in the Panama entities set up by law firm Mossack Fonseca, curators of the fallen financial services firm revealed on Tuesday.

John Levin, who in August 2014 replaced Dines Gihwala as co-curator with George Papadakis, told Fin24 on Tuesday that, “except for the costs of registration of the foundations, no investor funds were diverted to these entities”.  

READ: How Fidentia fraudster stashed cash abroad – Panama leaks

Fidentia’s convicted accountant Graham Maddock paid Mossack Fonseca $59 000 in 2005 and 2006 (R1m in 2016) to create two sets of offshore companies, secret documents known as the Panama Papers, leaked on Sunday revealed.

“Mossack Fonseca’s records show that one of the men later jailed in South Africa for his role in the fraud, Graham Maddock, paid Mossack Fonseca $59 000 in 2005 and 2006 to create two sets of offshore companies, including one called Fidentia North America,” the International Consortium of Investigative Journalists revealed.

The Fidentia scandal saw its mastermind, J Arthur Brown, lavishly spend the savings of 47 000 widows and orphans, wasting over R500m of their money. He was eventually sentenced to 15 years in jail on December 1 2014. He was first arrested in 2007 in one of South Africa’s biggest financial scandals, in which Brown ran a pyramid scheme and used investors' funds for his own personal gain.

“The Fidentia curators wish to inform investors and other interested parties that the original Fidentia curators (George Papadakis and Dines Gihwala) became aware early on in the curatorship of the existence of the entities which had been registered in Panama at the instance of Fidentia through the offices of Mossack Fonseca,” Levin said in a statement on Tuesday.

“As a result the curators at the time carried out a forensic audit and instituted a number of enquiries at which previous Fidentia directors and staff were interviewed,” they said.

What the curators found

“Following on these enquiries it was established at the time that:

-    The original intention appeared to have been that Fidentia would structure its international expansion through entities registered in Panama by reason of Panama having a more relaxed regulatory environment for carrying on financial services than most other countries and not having any ‘know your client’ legislation;

-    Pursuant to such intention Fidentia procured the registration of eight Panamanian foundations through the offices of Mossack Fonseca at a cost of $10 000 per entity, inclusive of starting capital;

-    Nothing came of the intended expansion and no investor funds flowed from Fidentia to any of the Panama foundations other than the costs of registering the foundations.”

FSB backs up curator assessment

Levin said the leaks confirmed that only the costs of registration of the entities were paid from Fidentia to Mossack Fonseca.

“If more information is forthcoming to indicate that more funds may have flowed, we will follow up,” he said.

The Financial Services Board (FSB) agreed with this assessment.

Tembisa Marele, spokesperson for the FSB, told Fin24 on Tuesday that it investigated Fidentia in 2007/2008 and found that while there were foundations set up with Panama links, no funds flowed to those foundations.

“In light of these developments the FSB will once again look into the matter to see if further investigation or action is warranted,” said Marele.

Nowhere to hide – Gordhan

Finance Minister Pravin Gordhan said in a statement on Tuesday that he noted reports on the clients of a Panamanian legal firm and certain South Africans that may be linked to offshore bank accounts.

“The ministry would like to point out the relevant agencies (e.g. Sars, FIC, Sarb) always investigate such reports to ensure that those that have such links have complied with the law,” he said in a statement.

“The Treasury welcomes the release of such information which, like the recent release of information related to the clients of HSBC, provides the basis for authorities to act against those who illegally move funds out of SA,” he said.

“The world is systemically narrowing the scope for those who want to hide their offshore assets and avoid paying their taxes due to the South African fiscus.

“It is in the interests of all those hiding their assets to come clean and disclose, and the Government offers such persons a way to legitimise their financial affairs before they are caught out,” he said.

The Fidentia curators have so far recovered about R200m of the R1.2bn that was misappropriated from the Livings Hands Umbrella Trust fund.

MORE ON THE PANAMA PAPERS AND THE SA CONNECTION:

The Panama papers and the Zuma link
How Fidentia fraudster stashed cash abroad – Panama leaks
Panama Papers: Kabila twin linked to Vodacom unit
Panama Papers: BHP Billiton unaware of ‘high risk’ reviewPanama leaks: Implats refutes it paid Zim wages via offshore firm
Panama Papers: Khulubuse Zuma responds

fsb  |  fidentia  |  panama papers
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