Free­dom re­veals ir­reg­u­lar deals

For­mer man­agers blamed

The Star Early Edition - - BUSINESS REPORT - Roy Cokayne

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.

Dealt with

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

FILE PHOTO: TIMOTHY BERNARD

Free­dom Prop­erty Fund’s shares have been sus­pended on the JSE since July last year.

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