Freedom reveals irregular deals
Former managers blamed
LISTED Freedom Property Fund, whose share trading on the JSE has been suspended since July last year, has released details of several allegedly irregular property transactions by its previous board and executive management.
The fund said on Friday its audit committee had been notified by RSM South Africa, the company’s auditor, of its belief that reportable irregularities had and were taking place at the company and reported them to the Independent Regulatory Board for Auditors.
Most of these irregularities relate to transactions that took place between March 2015 and end-February last year when Freedom’s previous board and executive management were in control of managing the company. The suspension in trading in Freedom’s shares followed its failure last year to publish its financial results for the year to February within three months of its year-end.
Trading in Freedom’s shares on the JSE remains suspended, because it has still not published or finalised these financial results, which its auditors believe is also a reportable irregularity.
Freedom assured shareholders of its continued determination to take all necessary steps to address all outstanding matters related to certain transactions irrespective of whether or not the previous board and executive management provided the required information.
The fund said it would continue to work closely with its auditor to finalise the release of its annual financial results as soon as possible.
Freedom added it had received confirmation from the company’s auditor that all irregularities reported, apart from the continued suspension of the company on the JSE, had been satisfactorily dealt with by its board.
It said steps already taken by its board included seeking legal counsel for potential legal action regarding the irregularities against the previous board and executive management of the company. Freedom said it would continue to interrogate transactions not highlighted by the auditor as irregularities.
This included a sale agreement entered into by whollyowned subsidiary Kadoma Investments, represented by former chief executive Tyrone Govender, and Montepio in February 2015 for the purchase by Montepio of the platinum group metal content sludge or tailings material on the site of Kadoma for R6 million.
Freedom said the Montepio representative had alleged this agreement was cancelled but a transfer of R1.5m was made from Freedom subsidiary Zambesa Investments to Kadoma in February 2015 with the reference “tailings”. A further payment of R250 000 was transferred to Kadoma from Epic Beach, another Freedom subsidiary, in June 2015, also with a reference to “tailings”.
Freedom said to date it had been unable to determine the status of the tailings agreement and its investigations were continuing. Reportable irregularities highlighted by Freedom’s auditor involved four property transactions and a total of almost R21m.
These relate to the sale of property units to Weskus Aftree Beleggings, for which deposits worth R7m were received; payments totalling R10.7m based on allegedly inflated invoices and a building that was never constructed that were made to Freesteel Property in terms of a development contract; the sale of property units to Montanita Investments for which deposits of R2.75m were received; and the sale of property units to Pasta Point for which deposits valued at R493 406 were received.
Freedom said Weskus Aftree Beleggings had subsequently entered into voluntary liquidation and was claiming the R7m paid as a deposit.
The fund said its new management had decided to reverse the revenue in the year to February 2015 from Weskus and raise a liability for the R7m received, because there were significant doubts about the validity of these sale agreements.
It had decided to terminate the Montanita and Pasta Point sale agreement and reverse the revenue received in the year to February 2015 and raise a liability for the deposits received, also because there were significant doubts about the validity of these sale agreements.
Freedom said its new management had also decided to reverse the inflated development invoices related to the contract with Freesteel, which had subsequently entered into voluntary liquidation.
R10.7m Payment received for alleged inflated invoices
Freedom Property Fund’s shares have been suspended on the JSE since July last year.