The tangled Mr Brown
He tells a story fraught with contradictions
AS FIDENTIA founder and chairman J Arthur Brown moved to deny wrongdoing in what curators believe could be the century’s biggest fraud, cracks began to appear in his carefully massaged media offensive. In a range of selected interviews, Brown sought to create the impression of a responsible asset manager mistreated by the financial regulators and media.
When asked about the hundreds of millions of rand the Financial Services Board (FSB) alleges are missing from the coffers of Fidentia, he said it had been invested in private equity and property investments that had potential for high growth. He said that had been done in consultation with, among others, the trustees of the Living Hands Trust, which is responsible for the financial wellbeing of the dependants of dead mineworkers.
However, the FSB report into Fidentia points to the potential of serious conflicts of interest in the administration of the trust. The report says two Living Hands trustees – including powerful black empowerment personality Danisa Baloyi, a director of Absa and other listed entities – were also at the time directors of Fidentia Holdings.
Baloyi’s SA Women Investment Holdings is an empowerment shareholder in Fidentia Holdings. It controls Living Hands – the administrator of Living Hands Trust. It’s a trustee of the Living Hands Trust.
The FSB report states: “This situation has ensured that the Fidentia Group controls its client, the trust and all the entities involved in the management of the funds.”
The report also states that having two of the trustees – Hjalmar Mulder and Danisa Baloyi – as officials of the administration company and the asset management firm’s holding company places them in “an untenable position” in terms of their fiduciary duties as trustees.
In an interview on Talk Radio 702’s The World at Six on Wednesday, 14 February, Brown also sought to create the impression that the private equity and property investments made with trust money had been independently valued by big four audit firm Ernst & Young. The firm immediately issued a statement distancing itself from the claim, saying it had valued “certain underlying assets” of just one subsidiary of Fidentia Asset Management – Bramber Alternative (Pty) Ltd.
Brown said he had offered to liquidate the group’s assets and return the capital to investors as an alternative to curatorship – but that had been declined by the FSB.
Brown is renowned in the financial services sector for paying considerably over the odds for assets.
The concern is that the curators won’t be able to achieve the buying prices for some of the assets Brown bought.
Concerns also exist with regard to the asset classes Brown claims to have invested in. Magda Wierzycka, CEO of Sygnia Asset Management, was instrumental in the drafting of Regulation 28 of the Pension Funds Act, which stipulates that only 5% of provident or pension money can be invested in alternative investment classes. “In the case of trust money it should be invested in cash or near cash to provide beneficiaries with a steady cash flow,” Wierzycka says.