Forensic audit exposes three in BOPEU looting
Staff Writer | Friday May 17, 2019 12:51
Further, the forensic audit recommends that the various transactions concluded by a certain powerful figure (name withheld) and a fellow colleague be investigated further as part of a criminal inquiry.
“From the totality of the facts at our disposal, we are of the view that a criminal investigation is warranted and the purpose of the investigation would be to determine if Mr X and/or Mr Y benefited irregularly from the investments made by Babereki Investments,” the forensic audit states.
Although Mmegi cannot make known their names for the purpose of respecting the confidentiality of the forensic audit and the fact that the matter is currently being investigated by Serious Crime Squad, this publication can reveal that the forensic audit compiled by Johannesburg-based company ENS Africa Forensics has: “Concerns regarding the relationship between a certain middle-man/agent, and two powerful figures at Babereki Investments at the time of the controversial deals”.
The forensic audit raises particular concern that this agent negotiated in the Babereki Ka Lerato, Future Sustain International and Quality Builders Investments dealings.
Of interest is the revelations by the forensic audit about this particular agent’s shortcomings: “When we interviewed the agent, it did not appear that he had any special skills that recommended him as a negotiator in these transactions,” the forensic audit found in part.
Directors of the Quality Builders, a company that made away with more than P8 million with the promise of a housing project for BOPEU members, reveal in the forensic audit how the two powerful BOPEU business wing figures directed them to channel their proposal through the controversial agent, whom they later paid P1 million, from part of the over-P8 million Quality Builders had managed to get from the BOPEU company in 2016.
According to the forensic report, the controversial agent later confirmed receiving the figure from Quality Builders, which has since been dragged before the courts of law by Masego Mogwera, the BOPEU president who is also the chairperson of Babereki Investments, to return the money.
However, the forensic report states that they were not able to verify if the controversial agent was similarly referred to the shareholders/owners of Babereki Ka Lorato (BKL) and Future Sustain International because the former owners of the entities (Mr M, and Mr R) refused to attend interviews with forensic auditors.
It was then verified that at BKL the agent ended up receiving a substantial shareholding of 24% despite the fact that he had not invested a penny; while at Future Sustain International, the agent owned between 17% to 18% shareholding after the BOPEU company came in. He told the auditors that the other shareholder had given him shareholding, which he later disposed for P650,000. The forensic report also captures board meeting minutes where a certain Masego Mogwera raised alarm about the looting of the business wing’s coffers through unauthorised car rental arrangement that had at the time fleeced the BOPEU business of well over P480,000 in rentals alone.
The transaction involved two of the three colluders that include the controversial agent, as well as a sleeping director, directors of Future Sustain International, all driving Avis rented cars at their pleasure.
All in all, six vehicles were hired without the knowledge of the Board of Babereki Investments, the forensic audit reveals.
According to the forensic audit, the controversial agent, when interviewed, stated that he had approached both Mr M of Ka Lorato Funeral Parlour and Mr R of Future Sustain International, and suggested partnering with Babereki Investments.
The forensic report further raised concern over the two powerful figures at Babereki Investments’ relationship with the agent.
It caused further concern because on January 8, 2016, a powerful Babereki Investments’ official entered into a mandate agreement with the agent, without the authorisation nor knowledge of the Babereki Investments Board.
In terms of this agreement, the agent was to raise capital on behalf of Babereki Investments. A further facilitation agreement was concluded with the agent on September 2, 2016.
In terms of this facilitation agreement, the agent was paid P13,104,000. It appears that an amount of P11,604,000 may not have been owed to the agent.
According to another Babereki Investments official (not one of the two), when she queried the payments to the agent, Mr X, a colluder, was adamant that the agent should be paid the full amount of P13,104,000 as according to Mr X, the amounts were due to the agent, in terms of the facilitation agreement, the forensic report states in part.
The forensic report also tells of how the business deals at Babereki Investments were identified by only the two people, who are two of the three colluders, while the rest of the executives and the Board would later be motivated by the two colluders to jump onto the deals.
“During our interviews with Babereki Investments Board members, we were told that the investments in Stoffberg, FMS, FSI, BKL and Quality Builders were identified by Mr X and Mr Y. The Board allowed itself to be guided by Mr X and Mr Y’s skills in the area of business when they agreed to invest in Stoffberg, FMS, FSI and BKL. The Quality Builders investment was not approved by the Board”.
In addition, the audit states a high-ranking official at the business wing said that Mr X and Mr Y negotiated these deals themselves and they excluded her from the negotiations.
The high-ranking official also stated that the agent regularly met with Mr X and Y, but she was not invited to these meetings. The high-ranking female official described Mr Y’s leadership style as intimidating, forceful and not consultative.
The forensic auditors further concluded, “We are concerned with how Mr X and Y identified the Stoffberg, FMS, FSI, BKL and Quality Builders investments. Prior to engaging in these transactions, Babereki Investments was not in possession of audited financial information indicating what the value of these companies were. Further, it is unclear to us how the amount to be invested was determined based on the lack of reliable financial information in respect of these investment opportunities. From the interviews that we have conducted it appears that the Babereki Investments Board based the value of its investment on the amount that was being requested by the entity concerned, without any consideration of whether the amount requested was reasonable given the value of the business”.
“Nevertheless, Mr X and/or Y, motivated for Babereki Investments to invest in these companies. Babereki Investments’ auditors have impaired the investments in all of these businesses. FMS and FSI have been liquidated. BKL is of strategic importance to Babereki Investments and it continues to invest in this business even though the investment is not profitable. At this stage it is unclear if Babereki Investments will realise any benefit from its investment in Stoffberg. Babereki Investments has realised no benefit from its investment in Quality Builders and is litigating against Quality Builders to secure the return of its investment,” the forensic audit states in part.