Fi­nan­cial probe lashes in­vestors’ would-be friend

Man be­hind King res­cue ‘in­ept’

Weekend Argus (Saturday Edition) - - NEWS - BIANCA CAPAZORIO

THE MAN tasked with find­ing an in­ter­na­tional in­vestor to res­cue King Fi­nan­cial Hold­ings pre­vi­ously worked for the com­pany and was de­scribed in a re­port in­cluded in court pa­pers as un­able to hold a man­age­ment po­si­tion in a cor­po­rate en­vi­ron­ment.

A se­ques­tra­tion or­der was granted in the Cape High Court this week for Adrian King, founder and di­rec­tor of King Fi­nan­cial Hold­ings. The com­pany went into pro­vi­sional liq­ui­da­tion last month but the fi­nal liq­ui­da­tion hear­ing has been post­poned twice.

The com­pany is be­lieved to have had 10 000 in­vestors who to­gether in­vested more than R600 mil­lion in com­pa­nies set up and di­rected by the three King broth­ers of Welling­ton, Adrian, Stephen and Paul.

The King Fi­nan­cial Hold­ings liq­ui­da­tion case was yes­ter­day post­poned to Mon­day, but in pa­pers filed with the court it is stated that Pierre Groe­newald has taken on the task of find­ing an in­ter­na­tional in­vestor will­ing to put R500m into the com­pany.

A con­tract be­tween Groe­newald and the King com­pany in­di­cates that he was ini­tially em­ployed by the com­pany on a con­tract ba­sis as “co-or­di­na­tor: projects” for one month in March 2008 at a salary of R10 000.

Last De­cem­ber, Groe­newald signed off on the com­pany’s fi­nan­cial state­ments as chief fi­nan­cial of­fi­cer. The state­ments showed a profit of R53.3m. The Fi­nan­cial Ser­vices Board, which started in­ves­ti­gat­ing the com­pany in De­cem­ber, found it to be “com­mer­cially and tech­ni­cally in­sol­vent”.

Fur­ther­more, an anal­y­sis by a com­pany called Phoenix De­vel­op­ments in March – in or­der to “as­cer­tain the most cost-ef­fec­tive soft­ware sys­tem for each busi­ness unit” fol­low­ing a re­struc­ture – found Groe­newald to be lack­ing in the skills re­quired to man­age the fi­nance depart­ment.

In its rec­om­men­da­tions, Phoenix sug­gested that “Pierre Groe­newald be re­placed as head of fi­nance by some­one who can in­tro­duce the nec­es­sary dis­ci­pline and pro­ce­dures re­quired in a cor­po­rate fi­nan­cial divi­sion. Based on the in­for­ma­tion which I have ob­tained, it is du­bi­ous whether Pierre pos­sesses the abil­ity to hold a man­age­ment po­si­tion in a cor­po­rate en­vi­ron­ment”.

The anal­y­sis, con­ducted by Pro­fes­sor Kenneth MacGre­gor, was done by in­ter­view­ing sev­eral staff mem­bers. It found that while Groe­newald “claimed there was a plan to en­sure that au­dits meet the dead­line… it is doubt­ful if a plan does ex­ist”.

In his in­ter­views, Groe­newald re­marked that the rea­son he was in fi­nance and not in a prod­uct plan­ning or cor­po­rate strat­egy func­tion was be­cause “this is where they put me”.

He also said he was “not in­ter­ested in book­keep­ing but num­bers”.

MacGre­gor’s re­port also said the com­pany re­lied ex­ces­sively on Ex­cel spread­sheets us­ing com­plex for­mu­lae that many mem­bers of the fi­nance depart­ment could not un­der­stand. It also stated that there were no “books” for two of the com­pa­nies, in­clud­ing King Fi­nan­cial Ser­vices.

Mean­while, a group of in­vestors met this week to sign a doc­u­ment re­quest­ing a speedy con­clu­sion to the mat­ter.

Liq­uida­tor Rynette Pi­eters, of In­de­pen­dent Trustees, cir­cu­lated a doc­u­ment to share­hold­ers this week ex­plain­ing the com­plex sit­u­a­tion.

“In­vestors would ap­pear to hold shares in and have loan claims against King Hold­ings and many of its sub­sidiary com­pa­nies,” the doc­u­ment said.

The liq­uida­tors were try­ing to de­ter­mine in which com­pa­nies in­vestors held in­ter­ests.

“It is at this stage im­pos­si­ble to com­ment on the prospects of a re­turn to in­vestors. In any event, cer­tain in­vestors may be bet­ter in­vested than oth­ers,” Pi­eters said.

She said claim forms would be cir­cu­lated to in­vestors within the next month and a tele­phone line had been es­tab­lished to deal with in­vestor queries.

In­vestors can call 021 864 2136 if they have queries about their in­vest­ments.

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