Fortress exec puts up his defences
Executives of JSE-listed property company Fortress, accused by an anonymous whistleblower of ripping-off investors in a series of shady deals, have interdicted the Hawks from seizing their bank records under a subpoena.
Fortress took more than R2bn when it listed on the JSE in October 2009 from more than 1,400 members of the public. It falls under the umbrella of R13bn property giant Resilient, which owns blue chip assets, including the Jabulani mall in Soweto and the Mall of the North in Polokwane.
The Hawks took an interest after a series of anonymous emails surfaced this year accusing the directors of the Fortress and the Resilient group of making millions by secretly selling properties they personally own to investors in companies they control.
Last month, Fortress CEO Mark Stevens obtained a high court interdict which prevented the police from accessing his bank records at Investec, Nedbank and BoE Stockbrokers. Banks are not allowed to tell their clients their records have been subpoenad - but this information was leaked to Stevens in mid-August.
A number of directors of companies in the Resilient group are listed as being part of his court action, including Resilient CEO Des de Beer – a former Nedbank employee who has become the 28th richest person in South Africa with a personal wealth of more than R1,15bn.
In the first transaction, sealed when Fortress listed on the JSE in 2009, a company called Madison Park sold Fortress 13 properties for R128.1-million.
However, Madison Park — which was 35%-owned by Stevens’s MWS Investment Trust — had bought the properties for R80.6-million in May 2007 from another company called Pangbourne.
It appears, then, that Stevens and his business partners made a 59% profit on the transaction in a short time.
The Sunday Times has investigated two major deals, which expose conflicts of interest understood to form part of the criminal probe:
• In the first transaction, sealed when Fortress listed on the JSE in October 2009, a company called Madison Park that was 35%-owned by Stevens’ MWS Investment Trust sold Fortress a portfolio of 13-properties for R128.1m. Yet, Madison Park had bought those properties for R80.6m in May 2007 from another company now owned by Resilient, Pangbourne. In this way, Stevens and his business partners seem to have made a 59% profit in a very short time – paid by Fortress investors.
• In the second deal, also struck when Fortress listed in 2009, Fortress bought a blue-chip building in Rosebank, Johannesburg – now being leased by Sasol - for R96m from Intshebe Props 98. However, Intshebe was 75% owned by Andrew Texeira, who is a director of another company in the Resilient group, the Capital Property Fund. Capital also owns large chunks of Fortress’ shares. Fortress’ prospectus shows that Texeira had bought the Sasol building from Old Mutual barely seven months earlier for only R22.8m, yet sold it for more than four times that within a few months. Again, Fortress’ public investors footed the much higher bill for the building.
These are just two examples of deals, independently corroborated by the Sunday Times, which were discussed in the anonymous emails sent to the JSE and financial regulators.
The subpoenas issued by the police to Investec, seen by the Sunday Times, ask for the bank statements of Intshebe 98 and Madison Park, as well as documents relating to Stevens’ and Teixeira’s companies.
This week, Stevens said all their deals were above board.
He said the police had only tried to subpoena the bank records because investigations firm SSG had abused the criminal justice system to do the bidding of a rival company. “This was an attack from a competitor and had nothing to do with a legitimate police investigation,” he said.
This week, Stevens told the Sunday Times that all those deals were above board. He attributed the police probe to an abuse of the justice system by his competitors to “obtain private business information”, using private investigations firm SSG.
When it came to the R128m made by Madison Park, of which R44m was paid to his MWS Trust, Stevens’ said he did properly disclose it to investors as a “related party transaction”.
He defended the fact that the properties had been bought for only R80.3m two years before. “Considerable value was added to that portfolio (which was very neglected) through refurbishment and reletting,” he said.
On the Sasol deal, Stevens argued it was not a “related party deal”. This is despite the fact that Texeira heads Capital (which has shares in Fortress) and also owned Intshebe, which sold the building to Fortress.
Though Intshebe got back four-times the R22.8m it spent within a year from Fortress shareholders, Stevens said considerable work had been done to fix-up and extend the building.
“Although the transaction was profitable for its shareholders (mostly Texeira), ... there was little comparison between the concrete shell that was earmarked for demolition and the redeveloped and corporate tenanted building that was sold to Fortress on its listing,” he said.
When asked why Capital itself hadn’t bought the building so that its shareholders could have shared in the quick profit, rather than the cash going directly to the CEO Texeira, Stevens said “Capital has no interest in acquiring C-grade office blocks or redeveloping them”.
Texeira did not return calls or SMS’s from the Sunday Times.
But there are other red flags over the Sasol deal.
For one thing, Intshebe 98 originally bought the property from Old Mutual in early 2009 for R22.8m. Soon after, Old Mutual property broker Thys van Heerden popped-up as a director of one of Texeira’s companies that owned the property. He then left Old Mutual under murky circumstances.
When contacted, Van Heerden said he “reached an amicable settlement with Old Mutual properties ... (and) part of this agreement has confidentiality provisions and I’m not at liberty to contravene these”.
Van Heerden said it was “not appropriate” to say whether he personally benefitted from the deal, nor would he answer why Old Mutual would sell the property so cheap, when it could have made four times the amount within a few months.
Another red flags was that Stevens himself signed as surety for the original R36m loan that Investec had given to allow Texeira to buy the Sasol building – implying he may have had an undisclosed interest in the building later sold to his shareholders.
But Stevens denied this, explaining: “due to our common interests in a number of investments, Andrew and I have over the years signed surety for each other’s property loans.”
He insisted that the police had only tried to subpoena the bank records because private investigations firm SSG had “abused the criminal justice system” on behalf of a competitor – who he did not name - to obtain sensitive business information.
“This was an attack from a competitor and had nothing to do with a legitimate police investigation,” he said
Despite being named in Steven’s papers, De Beer told the Sunday Times that the court action had nothing to do with Resilient. But he said the accusations in the emails had been completely discredited.
In affidavits responding to Stevens’, police captain Peter Stolterfoht said it was a legitimate investigation, started after the police were given information “on a confidential basis by an informer”, along with 225 pages of supporting documents
Stolterfoht admitted that SSG employee Philip Thorn introduced this anonymous informer to Hawks’ warrant officer Johannes Steenkamp, whom Thorn apparently knew “on a social level”.
But he said there is no evidence that the subpoena was obtained through “an abuse of the criminal justice system”, saying it was only obtained lawfully after a decision was made by a prosecutor and a magistrate.