Scam: law firm sued for R178 mln

2011-12-06 00:00

A LEGAL battle to determine whether one of Durban’s oldest law firms, Garlicke and Bousfield, is liable for claims by investors who lost millions as a result of attorney Colin Cowan’s bridging finance scheme will be decided by the high court in Pietermaritzburg.

Judge Isaac Madondo yesterday reserved judgment in a series of applications that have been brought against Garlicke and Bousfield by some of the investors who lost their money as a result of actions by Cowan.

Cowan committed suicide.

It has been estimated that total losses suffered by investors are about R178 million.

When he shot himself after he was confronted by partners at the law firm in November 2010, Cowan (71) reportedly admitted in a suicide note that the scheme was fraudulent.

At the time he was an executive consultant and practising attorney at Garlicke and Bousfield and the claimants argue he was operating as an authorised representative of the firm.

Garlicke and Bousfield denies that Cowan acted on its authority, and is defending the claims on the basis that Cowan concluded the various agreements for his “own dishonest purposes” and not for the purposes of or interests of the firm.

However, if found to be liable, the firm claims it is entitled to reimbursement by third parties PKF Incorporated of Durban, Patrick Robert and Nerak Financial Services on the grounds that they had a legal duty to report his dealings to the firm. They dispute this.

It was submitted in court papers that had Garlicke and Bousfield known what Cowan was doing it would have taken steps to ensure it was not bound by transactions he entered into.

One claimant, David Jaffit, a Gauteng businessman, deposited R3, 5 million into an account allegedly operated by or on behalf of the law firm in terms of an agreement reached on October 5 last year, and was promised a return of 30% per annum payable on November 30 last year. He never received a cent.

In his application papers Jaffit alleges that Garlicke and Bousfield designated Cowan as an executive consultant and allowed him to “practice publicly and openly” from its offices as an attorney.

It is further alleged that the firm knew he was conducting a bridging finance scheme and “advised the public accordingly”, and allowed Cowan to use its account to conduct the business and to earn remuneration for and in the name of Garlicke and Bousfield on each of the transactions.

Court documents reflect that Durban businessman Neil Rodseth has a similar claim for R2,5 million, Cotton King Manufacturing for R2,5 million, Dyecomber Pty Ltd for R500 000, Mount Edgecombe businessman, Errol Watt for R1 million and Tower Bridge SA Pty Ltd for three investments of R10 709 079, R7 134 463 and R6 110 838.

• ingrido@witness.co.za

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