BIFM takes aim at Molefe and BBS board

TSHIRELETSO MOTLOGELWA
Staff Writer | Friday December 9, 2011 00:00

 

The fund, in its last communication before the final court option was explored, portrayed Molefe as a man not only unable but unwilling to apply his mind to the simple principles of corporate practice.  In a letter addressed to the BBS board Rhys Carr of BIFM accused Molefe of pursuing a personal vendetta against the fund.  Carr warns that the bank would pay heavily for Molefe's indiscretions.  'Molefe's more recent pursuance of his personal vendetta against the BIFM Capital, liberally using the resources of BBS to do this, places the Society at enormous risk. 

This is because the board took a decision to attack the contract with BCIF1 without even having had the signed agreements at hand to ensure its actions were legal (which they are not),' warned Carr in October.

That was then.  This week, in its response to the BBS application in the court battle, Carr once again targeted Molefe and the bank's board.  Last week Molefe, in his submission to the High Court, sought to argue why the bank wants to redeem the fund's shares which the latter acquired in its P150 million investment in 2004.

The major thrust of Carr's argument is that BBS, represented by Molefe, misinterprets both the BBS Act and related regulations. However in the affidavit, Molefe comes across as a man who has no respect for human courtesy let alone corporate relationships. A man who, after being rescued, now wants to dump his rescuer with absolute contempt.

Carr says in his affidavit that Molefe came to the fund a desperate man, looking for funding while time was running out for the bank to get cash to meet its obligations following the withdrawal of government.  BBS needed money to buy government's shares at a time when government had refused to have BBS redeem them and had been granted a court order to freeze the sale.  BBS faced the prospect of transgressing its obligations as per the Registrar of Society's commitment.

At the time, Carr says BIFM understood this and moved quickly to rescue the bank while also establishing a framework for returns for the fund in the form of indefinite period shares and a 11 percent fixed dividend.

However, Carr's affidavit states Molefe now wants to dismiss the agreement between the two parties on less than genuine grounds, to damage the fund's interests on unfounded allegations and invalid legal arguments.

'The relationship between government and the applicant was strained.  Molefe said the applicant required urgent funding in the amount of approximately P150 million.  Some P112 million of the funding was required, Molefe explained, to pay the government in respect of its shares, as well as for the applicant's loan book,' argues Carr.

He says the bank and Molefe understood at the time that the Fund could only agree to enter into the deal if the rate was fixed and that the relationship would be for the long term. 'After a constructive series of negotiations, which were conducted in a mutually supportive manner, the applicant's Board agreed to a final structure.

What was agreed catered for all of its needs and also satisfied (BIFM Fund)'s need for a fixed rate,' explains Carr. The two parties went through all the proper avenues of putting pen to paper.  Carr accuses Molefe of playing the nationalistic card and projecting himself as a defender of indigenous interests by projecting BIFM Fund as a foreign-owned entity which bore no benefit to locals. However, he argues that the beneficiaries of any deal between the two would be Batswana pensioners who are the shareholders of Botswana Insurance from which the funds were sourced.

'To date the applicant has given no explanation to the respondent (in particular the accusations in the press). 

Accordingly, it is only the applicant's indication in the media that it is against foreign investors, that the respondent infers may be the reason for its sudden change in attitude,' says Carr.

Carr says the BBS wants to use a pretext to withdraw from a valid contract. He argues that while Molefe maintains that Price Water House auditors advised that the contract was breached it was a simple misunderstanding that should lead to dismissal of a valid contract. According to Carr, the PwC sought to know how to classify the Fund's interest, whether as equity or debt.

He says this enquiry was referred to during a board meeting, at which point Molefe was assigned to go and seek legal advice on the matter.  'However, somewhere along the line, the board's initial enquiries as to the debt/equity and withholding tax issues transmogrified into an outright challenge as to the legality of the agreement,' argues Carr.

Carr dismisses Molefe's assertions that he (Carr) and his partner Timothy Marsland may have given tacit approval to the BBS board's position that the deal was invalid because, according to the BBS, it transgressed the BBS Act.

He argues that they were on the BBS board to serve the interest of the bank, not the Fund's, saying that their taking part in the board meetings did not suggest that they agreed to the bank's position on the contract.

He says even if the BBS position was different to its original agreement, it would have had to follow the right channels to present the new position to the Fund.  'Although discussion had occurred at board level, at no time did the applicant write to the respondent to place its position on record and no amendments to the agreement were made,' he says.

Carr says the agreement remains valid and contrary to Molefe's assertions that the agreement precludes BBS from exercising any power over both the rate and the shares, the board is free to change the rate and even redeem the shares.  However he warns that BBS can only vary the rate for reasons relating to its finances like not having enough profit. 

He argues that indeed the bank is allowed to even redeem the shares but with the agreement of the Fund.  He concludes that the bank's argument that the agreement transgresses the Act and precludes the bank from exercising control over its business is not valid.

BBS has approached the High Court to declare the investment agreement between it and BIFM to be illegal and thus allow the bank to redeem the Fund's shares.  The Fund has warned that it would slap the bank with a P400 million demand for damages if the agreement between the two were breached.