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Molefe plans to hit Absa hard
13/07/2008 17:48 - (SA)
Andile Ntingi
Johannesburg - Former Meeg Bank founding investor Eric Molefe will take his public brawl with Absa to court as he moves to scupper the banking giant's plan to buy out minorities in the tiny Eastern Cape lender.
Molefe will approach the Mthatha High Court on Wednesday to ask it to grant him an interdict to prevent a special shareholders meeting. On the meeting's agenda is a vote on Absa's offer to purchase 26% of Meeg Bank from the minorities.
Absa, which values the 26% stake at R35.7m, owns 74% of the bank and plans to amalgamate it into its operations after concluding the deal with the minorities, which include the Eastern Cape government and 1 600 individual shareholders.
The crucial vote is scheduled to take place on July 31 in Mthatha, once the capital of the former Transkei homeland.
Molefe does not want the buyout offer to go ahead until all the issues involving the R100m he lost in Meeg Bank have been resolved.
Molefe's application for the court order is the first salvo in his bid to hit Absa and ex-Meeg Bank executives with a R100m lawsuit. He blames Absa and the executives, who include Wiseman Nkuhlu, the Meeg Bank chairperson, for his heavy losses.
Molefe alleges that Absa - which had representatives in the team that ran Meeg Bank - was involved in the execution of fraudulent and unauthorised transactions that nearly led to the collapse of the Eastern Cape bank in 2000.
At the heart of Molefe?s pending court battle is an unauthorised R10m loan that Meeg Bank extended to its controlling shareholder Meeg Bank Holding Company (MBHC) in May 1999. The money, which was initially meant to be a one-month loan, was never repaid by MBHC, leading to Meeg Bank slipping into a capital-adequacy crisis after it was unable to satisfy the growing demand for loans from its customers.
The liquidity problems were worsened by an unauthorised R100m loan repayment to the Eastern Cape government earlier that year. The payout was made two years before the maturity date, starving the bank of much-needed capital, Molefe says.
The two crucial transactions, which are contained in a forensic report by auditors David Vagle & Associates, were made without Molefe's knowledge or consultation as a big investor in Meeg Bank.
'Fraudulent activities'
The forensic report will form part of Molefe's court bid.
Molefe says that Absa's takeover of Meeg Bank has nothing to do with the "bailout" of the capital-hungry bank as the public has been led to believe. He believes the acquisition of the lender is part of a conspiracy.
"Absa is buying Meeg Bank in order to hide all the fraudulent and unauthorised transactions that were made by executives and Absa representatives that ran the bank as per our operational support agreement.
"As a result of these fraudulent activities, I lost up to R100m. In terms of my lawsuit, there will be no sacred cows between Absa and the former Meeg Bank executives who participated in the malpractice. They all did wrong," he says.
In 1998, Molefe, Nkuhlu, and Absa formed MBHC and used the entity to purchase a controlling 34.9% stake in the Bank of Transkei. The bank was renamed Meeg Bank.
But the unauthorised deals, particularly the R10m loan, led to boardroom fights between MBHC shareholders. The company was closed down in 2002 and its shares in Meeg Bank subsequently fell into the hands of Absa, which already owned a separate 15.1% interest in the bank.
"Despite the fact that I was a major shareholder in the bank, I was never informed about the transactions. I trusted my partner (Nkuhlu) to do the right thing but he let me down," says Molefe.
According to Molefe, after the R10m loan was given to MBHC by Meeg Bank, it made its way to Meeg Limited, an entity of which he was neither a shareholder nor a director.
Molefe says Meeg Limited used the R10m to buy listed investments, including IT shares, on the JSE. But when Meeg Limited directors, who were also executive directors in Meeg Bank, realised their investments were bombing, they sold them to MBHC between 1999 and 2000.
By the time Molefe, who was at the time an executive director at JCI Limited, uncovered this, the listed investments were worth no more than R2m.
'Forced to take responsibility'
Meeg Limited shareholders directors included Nkuhlu, who was the executive chairperson of Meeg Bank, Jimmy Manyi, Malose Kekana, Mpho Makwana and Sylvester Mahlati.
The R10m loan was never repaid by MBHC to Meeg Bank, which in 2000 needed more capital to fund its loan book. In April 2000, Nkuhlu and Molefe were forced by fellow shareholder in MBHC, Absa, to sign a contract in which the bank agreed to repay the loan in exchange for indemnity against any court "claim or action" from the two investors.
"Nkuhlu and Absa were running the bank and were involved in the fraud and mismanagement, but I was forced to take responsibility for something I was never involved in.
"I ended up signing Absa's contract because I did not want Meeg Bank to go belly-up and the depositors to lose their money," says Molefe.
However, Nkuhlu denies that he is involved in any fraudulent activities.
"As far as I know the loan was repaid to Meeg Bank. At no stage did Meeg Bank lose money as a result of this.
"The other thing I want to clarify is that there were no transactions between Meeg Bank and Meeg Limited. However, there were transactions between Meeg Bank and MBHC.
"So I don't know what Eric is talking about," Nkuhlu says.
Molefe left the bank empty-handed in 2002 but Nkuhlu stayed behind.
Absa declined to comment, as the matter is sub judice.
- City Press
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