| Fri 22 Apr 2005, 12:24 | | FNB loans funded R13m payout to Ayob — papers |
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FNB loans funded R13m payout to Ayob — papers
Vukani Mde and Tom Mapham
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FIRST National Bank (FNB) allegedly extended a series of loans to an embattled empowerment company, Union Alliance Media (UAM), that allowed UAM subsidiary Concept Group to pay a R13m commission to Ismail Ayob, the lawyer- businessman Nelson Mandela is suing.
According to a minority shareholder in UAM, the bank allegedly extended R45m between 1999 and 2000, even though the company was failing to meet its financial obligations and two subsidiaries had already been liquidated.
The FNB loan facility allowed Concept to enter into an agreement with Ayob’s Magnifique Investment and Holding to launch the Touch of Mandela Project. Concept was run by Ross Calder, whom Mandela is suing along with Ayob.
According to documents in Business Day’s possession, the payment to Ayob was made without the knowledge or approval of UAM’s shareholders.
When Concept and UAM went into liquidation in 2002, FNB made an abortive attempt to reclaim Ayob’s R13m commission. FNB’s lawyers were confident they would reclaim the money, until Ayob produced “an agreement” persuading FNB it had no case against him.
It is not clear what the nature of this agreement was, nor what legal obstacles it represented to FNB, but yesterday FNB said it was convinced of its validity.
“This document changed our legal position substantially, and we were asked to stand down,” said Inus Du Preez, of FNB’s corporate debt recovery department.
Du Preez said an arbitration hearing between Ayob and liquidators acting for the bank was aborted at the last minute, after Ayob produced the agreement. A shareholder in UAM — speaking on condition of anonymity — said they were never fully satisfied that such an agreement existed, or whether it was valid.
The source said Ayob produced an addendum to the original contract between himself and Concept, signed only by Ayob, and which mentioned names of three of Mandela’s children. “The lawyers took this to FNB, who saw the names and said ‘drop it’.”
Ayob has said Magnifique is majority-owned by the Nelson Mandela Trust, whose beneficiaries are Makaziwe, Zenani and the late Makgatho Mandela.
FNB’s lawyers refused to disclose the contents of the document produced by Ayob, saying arbitration was confidential. Ayob did not respond to queries.
Though FNB dropped the claim against Ayob, the payment left UAM’s minority shareholders with a R13m headache. Holding 30% of UAM, these shareholders reported the payment to the Johannesburg Securities Exchange SA, which declined to investigate UAM’s management.
UAM was wholly owned by Union Alliance Holdings, an empowerment consortium including some of SA’s largest trade unions. Other shareholders were the Workers’ Investment Corporation, the Transformation and Development Trust and empowerment company New Africa Investments Limited.
Business Day has seen a letter written by the minority shareholders to the exchange, complaining about the payment to Ayob. “The transaction in question amounts to at least a R12m payment in cash,” they wrote. “We believe the transaction was concluded (at a time) when the share price of UAM fluctuated between 3c (and) 7c, a market capitalisation of R5,49m to R12m. As a result, the transaction is between 218% and 100% of the company’s market capitalisation.”
They argued such an amount could not be committed without shareholder approval, and the transaction was “abnormal” to their business. They objected to the company trading in Mandela’s name.
The source said UAM’s minority shareholders were confident of recovering the money until FNB pulled the rug from under their feet.
