Investec accused of fraud in property deal

A director of property development company MKB, which is under liquidation, has laid criminal charges against Investec over the exclusion of a Hyde Park property from its estate.

Jonathan Molyneux-Killik, a director of the MKB group of companies, is accusing Investec and head of global risk Ciaran Whelan of fraud, following Investec's application to liquidate the companies in December 2008. The fraud allegations are now under investigation by the commercial crimes unit of the South African Police Service.

At the heart of the matter is the ownership of a Hyde Park property, which Molyneux-Killik said MKB bought from Xeedan for R10-million in June 2008. Xeedan formed part of the Abalengani group of companies, owned by Zunaid Moti, with whom MKB did a number of deals.

According to Killik's affidavit, MKB paid for the Morsim Road property in full through "offsetting" from the purchase price a Parkmore property that Moti was buying from MKB for R31-million.

Moti had extensive property dealings before the start of the global economic crisis, which had a severely negative effect on the property market. Investec's exposure to Moti's dealings reportedly totalled R1-billion.

Various Moti properties have since been transferred to TP Hentiq, a wholly-owned Investec subsidiary.

Investec also provided significant funding for the development of the Morsim Road property to MKB. According to Killik's affidavit, Investec advanced R5.3-million to MKB, for which Xeedan signed surety of R5-million. A further R40.5-million loan from Investec to MKB was approved "in anticipation of MKB taking ownership of the property" for the development of four cluster homes on the property, according to Killik.

"At all relevant times Investec/Whelan was aware of the contractual arrangements between Xeedan and MKB and aware of the fact that purchase price had been paid in full," Killik says in his affidavit.

According to Whelan's affidavit, earthworks were completed on site at the time and four platforms were laid. However, the property was not yet transferred to MKB.

Correspondence between attorneys involved in the Morsim Road transaction seen by Business Times indicate that the failure of Xeedan to settle its outstanding Investec bond on the Morsim Road property was the likely reason for the delay in finalising the transfer.

Investec's liquidation proceedings against MKB were started before such transfer took place. According to Killik, the Morsim Road property should be included in MKB's estate, but the liquidators failed to do so. Instead, it was still regarded as a Moti property and has since been transferred to Investec's TP Hentiq.

Following accusations of fraud and a conflict of interest, Killik successfully applied to get the liquidators removed in March. The appointment of new liquidators, who will investigate the Morsim Road matter, is expected shortly.

When questioned on the Morsim Road matter, Investec said MKB and Xeedan Property Investments had a contract to acquire and develop the Morsim Street property, and that working capital, for which Xeedan provided security, was advanced from Investec to MKB to develop the cluster homes.

According to Investec, the liquidators were informed by MKB fellow director Andrew Botha, who did not form part of the fraud charges, that the Morsim Road transaction did not proceed and that the property accordingly could not be transferred to MKB.