After allegations emerged in court of yet another scam that
Regiments Capital used to plunder a Transnet pension fund, Regiments directors
quickly agreed to pay half a billion rand to settle all the fund’s claims
against it.
But Eric Wood, a former director, has gone to court to quash the deal, claiming his former colleagues are using the company’s money to save themselves, leaving him to face the music.
Regiments Capital has agreed to an astounding R500 million settlement with the Transnet Second Defined Benefit Fund (TSDBF).
Regiments is a financial services company that scored hundreds of millions of rands in business from Transnet with a leg-up from the Guptas and their associates.
The settlement follows the revelation of a previously unknown stratagem Regiments allegedly used to suck R349 million from the pension fund in a mere four days during late 2015 and early 2016.
TSDBF launched a R230 million claim against Regiments in the Johannesburg high court two years ago, charging that the firm had irregularly scored that amount in fees from dubious interest rate swap transactions concluded as part of Transnet’s tainted locomotive purchase spree.
The fund amended its claim a month ago, alleging that an audacious set of “bond churn” transactions were used to siphon off an additional R349 million.
The deals stem from Regiments’ appointment to manage Transnet pension money – a process the amended claim alleges was achieved with the help of Gupta influence on the TSDBF board.
In a nutshell, the “bond churn” entailed Regiments, as the manager of the fund’s assets, allegedly making the TSDBF buy government bonds from its subsidiary Regiments Securities. Then it would, on the same day, make the fund sell them back to Regiments Securities at a lower price. Regiments allegedly pocketed the difference as profit and the pension fund suffered a loss.
According to the new particulars of claim this led to easy profits for Regiments, and rapid losses for TSDBF, in the order of R348 577 524.66.
TSDBF observes that the transactions “served no legitimate portfolio management purpose”.
The transactions were carried out on four days between December 2015 and April 2016.
The first one was a mere two months after Regiments was given control of R9 billion of the fund’s assets after initially managing only R1.3 billion.
This obvious conflict of interest for Regiments – serving as the fund manager and, simultaneously, the counterparty in the fund’s trades – follows a pattern set by the controversial swap transactions that Regiments carried out with fund money.
The fund alleges, with reference to the swaps, that “all of the defendants were aware of… the conflict of interests to which Regiments Fund Managers was subject” – but kept the TSDBF in the dark.
Regiments has not filed its defense against the TSDBF’s claims, but in what might be seen as a capitulation, the company’s two directors and majority shareholders, Litha Nyhonyha and Niven Pillay, signed a settlement agreement on 8 August. This was just over a week after the TSDBF amended its claim.
The R500 million that Regiments would now pay the TSDBF constitutes a smallish discount on the full value of the initial and additional claims.
Paying for secrecy?
The settlement is set to be paid with a chunk of the Capitec shares indirectly owned by Regiments. To be precise, it is selling the fund 810 230 Capitec shares while covering R500 million of the cost. The fund will in fact buy the balance of shares – at a 10% discount to the going market price.
Capitec’s approval is in fact a condition precedent for the settlement to go ahead.
What Regiments and its two remaining directors, Nyhonyha and Pillay, get in return is an end to all hostilities between the parties and settlement of all claims, including those against the two directors personally.
This explicitly includes claims related to the rate swaps, bond churn and, ominously, any other “known or unknown” claims that may arise.
Maintaining secrecy is a sub-theme in the settlement agreement.
The deal would suspend two anti-dissipation court orders that have frozen Regiments’ assets. These orders obtained by TSDBF also called on Pillay, Nyhonyha and Regiments to disclose all their assets.
They have not yet complied and this requirement will fall away under the settlement agreement.
There is also a standing “Anton Piller” order against Regiments, which has seen its records seized by the sheriff.
An Anton Piller is a court-ordered search and seizure operation, similar to what the police might carry out, but in this case obtained by the TSDBF.
A raid on Regiments was carried out in August 2018 but a court appeal has left this sensitive information locked up in a safety deposit box. The search warrant covered computer servers, desktops, laptops, tablets, portable information storage devices, flash drives, CD’s, DVD’s, stiffy and floppy disks, zip drives, data cartridges, memory sticks, mobile phones and SIM cards.
The settlement agreement will give Regiments back the key to this box and its contents
They likely hold the secrets of how Regiments grew more than twenty-fold between 2013 and 2016 and also details of its dealings with ANC politicians, some of which have been exposed by amaBhungane.
The Wood factor
Significantly, Nyhonyha and Pillay’s former co-director Eric Wood is excluded from the settlement and might still be pursued personally by the TSDBF.
Wood retains an effective 32% shareholding, despite parting with Regiments in 2016 when he took the company’s advisory business into the Trillian group, controlled by Gupta business partner Salim Essa.
SOURCE: NEWS24
