Prosecutor throws in the towel on Glodina charges

A year after KwaZulu-Natalbased towel manufacturer Glodina’s retail director and accountant first appeared in court, the fraud charges against them have been withdrawn.

When Fehaaz Eusuf and David Larkan, both of Durban, appeared in the Palm Ridge magistrate’s court this week they were told they were free to go. In a letter, Gideon Nkoana, deputy director of public prosecutions in Johannesburg, said he looked “objectively and dispassionately” at their representations and found “no reasonable prospects of a successful prosecution”. The Hawks said initially they misrepresented themselves and “submitted a fraudulent audit report” when applying for funding from the Industrial Development Corporation (IDC).

As a result, the IDC transferred about R35m into Glodina’s business account for development projects. Glodina did not have a R10m surplus in its bank account as indicated in its audit report, said the Hawks. The investigating unit accused the men of “stealing from other aspiring entrepreneurs who need funding”.

In his bail application, Eusuf said the company was in liquidation after being in business rescue. “I have been advised by the business rescue practitioner to open a charge of fraud against the IDC for R25m. The entire incident, together with various others, is being dealt with by the liquidator and an inquiry into the matters is being held soon.”

In representations to Nkoana, Eusuf’s attorney SP Pillay said the IDC, the complainant, came to court “with dirty hands”. The financing of the deal failed due to the IDC’s actions.

Pillay said Eusuf owned La Bomb Investments, which bid for Glodina (a division of KAP Homeware), part of the Steinhoff Group. Eusuf formed a company, Glodina Lifestyle, which would buy Glodina after being told by KAP’s then-CFO the IDC was interested in providing funding. Pillay said the IDC knew the purchase agreement was altered and that R10m for the brand and equipment could be paid in monthly instalments rather than in one lump sum.

“The loan agreement does not require that the ... R10m be used for any specific purpose or that it may not be used at all. It was simply to ensure KAP was paid what was owed to them.

“At no time had the IDC indicated to our client this amended agreement was not acceptable.”

Pillay said the IDC insisted on appointing two directors to the board, then claimed the “agreement had failed” and demanded the return of the R35m. These directors, said Pillay, without calling a legal board meeting, caused the R25m balance in the bank account of Lifestyle to be transferred to the IDC.

“There was no notice of any board meeting given to our client ... neither was there any court order to cause such drastic action. It is respectfully submitted that, on this version, they had stolen the funds from Lifestyle.”

Pillay said the two IDC appointees joined KAP to regain control of Glodina “behind our client’s back and without his knowledge. The numerous attempts by our client to resurrect the purchase and to keep Lifestyle alive, coupled with the millions he spent of his own funds, stand in stark contrast to the actions of the IDC. We … request the withdrawal of charges against our client.”

Eusuf said the case dented his credibility. “I believe it was corporate sabotage.”

The IDC now owned Glodina. Through business rescue, liquidation proceedings and the courts, he intended to take the matter further. He wanted an amicable solution and to find common ground with the IDC and the government.

TimesLIVE is awaiting a response from the IDC.