Law firm’s links with uMngeni probed

2010-11-26 00:00

THE relationship between city Law firm Venn Nemeth and Hart (VNH) and uMngeni Municipality came under the spotlight at the Commission of Inquiry into the affairs of the municipality yesterday.

The commission heard that the law firm is the debt collector for the municipality as well as allegedly one of its major debtors. Evidence was presented to show that directors of VNH are trustees and beneficiaries of various trusts which are owners and part owners of three multi-million rand estates in Howick. These are Garlington, Gowrie Village and Gowrie Golf Estate

VNH as debt collector failed to collect over R1,3 million in outstanding debt from these developments.

The evidence was presented by Democratic Alliance Councillor Tim Lindsay-White who called on the commission to probe the “several hats” won by VNH in its relationship with the municipality and whether this did not represent a conflict of interest.

Lindsay-White mentioned that VNH were the council’s attorneys and one of its legal representative Matthew Francis had advised the municipality on issues that fell within the ambit of the commission.

When questions were raised about the purchase of the mayor’s house, Francis advised the house was a tool of trade — essential for the mayor to conduct his business.

When then MEC for Local Government Mike Mabuyakhulu instituted a forensic investigation, Francis advised that officials and councillors would not give evidence unless subpoenaed. Lindsay-White said he also advised the municipality that the MEC’s investigation was “tainted” and that the municipality should institute its own inquiry.

Lindsay-White who presented a dossier of documents to the commission spent much of his time peeling apart the layers of trusts within trusts, demonstrating that sometimes this went six layers deep before it emerged that directors of the law firm or their family members were beneficiaries or trustees of the trusts.

He showed that the firm Dobeyn appointed by the municipality allegedly on the advice of Francis, was also an administrator of two of the property trusts. He alleged that chief investigator for Dobeyn at uMngeni Municipality, Kugesh Naidoo, was also a trustee with some directors of VNH of a trust that had part ownership in the Gowrie development.

A trust shared the same address as the law firm, but the report from the debt collecting arm of VNH, stated that the debt collection centre had not collected outstanding money because it was “tracing” the owners. The commission was also told of a property (Gowrie 56) that over a period of five to six years did not pay rates. Now that this property is paying rates it is allegedly getting a 30% residential rebate, but was being run as a business.

Lindsay-White questioned the collection methods of VNH which he felt prejudiced the municipality. He went on to claim that there was alleged undervaluation of some properties in the Gowrie and Garlington developments.

He concluded: “We know that uMngeni is in the red for approximately R3,5million. The municipality is also facing a cash flow crisis. We have seen trusts linked to VNH owe the municipality outstanding debt of R1,3 million. With outstanding rates and proper valuation of properties, the municipality could recoup a further R2 million from these estates. If you add all of this it is close to our loss of about R3 million. These are attorneys, debt collectors and developers who should know better.”

At the start of the proceedings, Advocate Gerrit Roberts SC representing VNH argued the commission had no bearing on his clients as it was looking at the misconduct of municipal officials. Chairman of the commission Advocate Vuzi Khuzwayo said the commission was looking at the credibility of the municipality and how it managed its affairs. This included rates, debt collection and the solvency of the municipality. He said since the firm performed certain tasks in this regard for the municipality and its name had come up, the commission was offering VNH an opportunity to put its side of the story.

Roberts said he had no problem with that, but would need all the evidence that had been submitted to prepare for cross examination. This was agreed to and proceedings were adjourned to 31 January next year.

 

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