Tongaat bidder’s fake letter sparks fury
Vision Investments, which is in the process of buying troubled sugar maker Tongaat Hulett, has opened a fraud case against losing bidder RGS of having submitted a forged bank letter claiming it had R2bn to buy the company.
Vision, partly-owned by businessman Robert Gumede, this week accused representatives of RGS, based in Mozambique, of submitting the letter from Absa Mozambique to Tongaat’s business rescue practitioners (BRPs) in support of their prolonged bid for the company.
Absa has confirmed it did not issue such a letter.
Tongaat was placed in business rescue in October 2022 when funders who were owed R7bn in debt refused to back its restructuring process.
In January, RGS withdrew from the process the day before lenders were scheduled to vote on the rival bids for Tongaat. The group accused the BRPs of being “patently biased in favour” of the proposal from Vision.
In a statement this week, Vision Investments director Rute Moyo accused RGS, its representatives and agents of having committed fraud “through the perversion and distortion of truth” during the process of bidding to become the appointed strategic economic partner (SEP) of Tongaat.
He said although RGS had withdrawn from the process, it persisted in making vexatious allegations against Vision, the BRPs and the lender group.
Two months ago, RGS joined a failed court action by a Tongaat supplier, Powertrans Sales and Services, which claimed that Vision’s business plan and its subsequent acquisition of the sugar maker was unlawful and should be overturned.
In an affidavit, Momade Aquil Rajahussein, the executive chair of RGS, referred to “provision of an irregular and untruthful letter” issued by Absa Mozambique and “unwittingly provided by RGS to the BRPs” as proof of funding.
The BRPs required the bidders to provide proof that they had funds to acquire Tongaat’s lender group debt.
Rajahussein said in the affidavit that a junior manager at RGS, who was instructed to deposit the money into an Absa Mozambique account, had reservations about doing so given the interest that would be forfeited.
Without the knowledge of RGS senior management, the junior manager arranged for Absa Mozambique officials to be provided with evidence of the funds held by RGS in other bank accounts, so the bank could issue a letter stating the money existed.
RGS senior managers are said to have become aware of the issue for the first time when Absa South Africa questioned the authenticity of the letter in December.
An Absa spokesperson in South Africa told Business Times: “Following internal checks, Absa confirmed to all parties that Absa Mozambique did not issue any proof of funds letter. This matter is now part of a broader investigation and for confidentiality reasons, and based on the ongoing court proceedings in Mozambique, we cannot comment further.”
A spokesperson for RGS had not responded to questions from Business Times at the time of going to print.
Moyo said RGS “required the forged Absa letter to deceive Tongaat’s lenders that it could raise the R2bn required upfront to show the bidders were serious”.
“By satisfying the lender group that RGS could acquire the secured claims (or portion thereof) for R2bn, the BRPs were satisfied that RGS was capable of presenting a viable
business rescue plan which the BRPs could present to [Tongaat] creditors.”
The BRPs declined to comment when contacted on Friday.
Rajahussein said in the affidavit that RGS “deeply regrets this unfortunate incident” and its senior management played no part in the scheme. He said the company has appointed a lawyer to investigate the matter and the police were also involved.
Moyo said Rajahussein’s “excuse”, that RGS senior management only became aware of the Absa letter in December, was “doubted”.
“On their version one wonders what they did after they found out that one of their employees committed fraud, whether they disclosed it to their legal team and advisers, when they did so, and what the legal team and advisers did with the information,” he said.
He said police in South Africa should investigate whether senior RGS executives or their advisers were “party to a fraud committed against the BRPs and creditors”.
Moyo said it was unlikely that a junior employee who would derive no benefit whatsoever from forging a letter on behalf of his employer had taken it upon himself to manufacture the letter and disregard an instruction from senior staff to pay the money required for a major transaction.
“Only RGS would have derived a benefit from the fraudulent act as it induced the lender group and the BRPs into believing that RGS had the financial capabilities to acquire the ... debt. The fraudulent and misleading information consequently led to the BRPs (under false pretences) to publish the amended RGS plan as a viable option for the rescue of Tongaat,” he said.
Moyo said misrepresentations by RGS, which resulted in its plan being published by the BRPs, “led to a fraud being committed on the broader group of creditors of THL who would have believed that RGS was capable of fulfilling the position of an SEP”.
The process to transfer Tongaat to Vision is under way.