Fishy business pings police’s radar

2014-08-03 15:00

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The former managing director of Old Fashioned Fish and Chips’ distribution centre, which is facing liquidation, is the target of an investigation by the police’s Organised Crime Unit.

This has emerged from a City Press investigation into the affairs of the franchise chain run by Emilia De Sousa, which has left many would-be franchisees destitute and attracted the attention of the National Consumer Commission.

An officer within the unit, who cannot be named as he is not authorised to speak to the media, confirmed the director, Paul Mendonca, is being investigated for fraud, theft and defeating the ends of justice.

Most of the allegations centre on a company called Terrawise, which Mendonca claimed in court he had nothing to do with.

Police are investigating allegations that Mendonca, through ­Terrawise, used the assets and some employees of Old Fashioned Fish and Chips’ distribution centre – and that he fraudulently, therefore conducted another business in direct competition with his own employer.

The distribution centre is facing a liquidation application brought by two of its ­suppliers in the South Gauteng High Court. Old Fashioned Fish and Chips is contesting the case.

A source with knowledge of the investigation indicated that one of the allegations being investigated by the police involved Terrawise, which Mendonca ­allegedly used to sell potatoes and other fresh produce to some Steers franchises in the Western Cape. Famous Brands, which owns Steers, has confirmed that it was approached by Mendonca who wanted to sell products at Steers branches. Certain Steers branches were later invoiced for products by Terrawise.

This week Darren Hele, chief executive for food services at Famous Brands, distanced the company from Terrawise.

Mendonca this week did not explain the nature of his involvement with Terrawise, but denied the allegations of theft or misappropriation of funds from the distribution centre, saying he was cleared by a KPMG investigation.

“I have never been asked by the police to provide a statement,” he said. “To the best of my knowledge, there are no criminal matters pending against me.”

He also denied using the assets and employees of the distribution centre for Terrawise’s benefit, but admitted Terrawise’s founding director was his girlfriend. Mendonca said Terrawise no longer supplied fresh produce to Steers franchises.

The long line of creditors

The National Consumer Commission said last month it was investigating Old Fashioned Fish and Chips and its affiliates, Chingos Chicken and Traditional Brands, with a view to obtaining an attachment order from the National Consumer Tribunal.

Deputy commissioner Thezi Mabuza said this was an attempt to bring justice to complainants, who were both potential and former franchisees who lost their money to the three companies and their CEO, Emilia De Sousa.

“People have given their life savings,” she said. “Others give their savings, but it is not enough, so they get indebted to the bank and give their homes as surety.”

When nothing came of their agreements with De Sousa, their homes were repossessed because they could not service their debts, said Mabuza.

But Old Fashioned Fish and Chips has a long queue of creditors, some of whom have obtained cost orders against the company.

But as one creditor’s lawyer previously told City Press, when creditors attempted to attach the company’s movable assets to satisfy judgment debts, they found that other creditors got there before them.

In the liquidation proceedings currently before the courts, the applicants’ attorneys are arguing that they cannot attach the company’s fleet of trucks because they are most likely financed.

This raises a question about whether the cash sunk into the company is gone forever.

Not necessarily, says Fahdia Bhayat, a director at law firm Bowman Gilfillan’s dispute resolution practice.

Creditors could turn to the Companies Act of 2008 for legal recourse.

She said section 77 of the act provides that company directors were liable for any loss, damages or costs arising as a direct or indirect consequence of that director acquiescing to carrying on the business of the company knowing it was done recklessly, negligently or fraudulently.

Directors are also liable for losses or damages arising from acts or omissions calculated to defraud a creditor, employee or shareholder of the company.

“Proceedings to recover any loss, damage or costs for which a person is liable in terms of section 77 of the act is, however, subject to a three-year period of prescription,” said Bhayat.

“Any court action will naturally have to prove or show that the director in question’s conduct in fact fell within the purview of [these] sections.”

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