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NPA decides not to freeze Nova’s assets

Moneyweb: Author: Ryk van Niekerk  2 Sep 2020  

AfriForum says decision is ‘irrational’ and ‘incongruous’

Former state prosecutor Gerrie Nel, representing AfriForum, maintains that an asset forfeiture intervention is required since other safeguards have failed investors ‘dismally’. Image: Phill Magakoe, Reuters
Former state prosecutor Gerrie Nel, representing AfriForum, maintains that an asset forfeiture intervention is required since other safeguards have failed investors ‘dismally’. Image: Phill Magakoe, Reuters

The National Prosecuting Authority (NPA) has decided not to freeze the assets of the Nova PropGrow Group, the rescue vehicle of the failed Sharemax property investment scheme.

The decision follows civil rights movement AfriForum asking the NPA in June to seize Nova’s assets on the basis of the South African Reserve Bank’s 2010 finding that Sharemax had contravened the Banks Act.

AfriForum said this was a criminal offence, meaning that Sharemax had acquired the properties with the proceeds of crime.

The Reserve Bank’s finding triggered Sharemax’s collapse. Nova was then established through a Section 311 Scheme of Arrangement (SoA) to take ownership of the properties and to repay investors. AfriForum contends that the SoA does not remit Sharemax’s contravention of the Banks Act, and that Nova acquired assets that were procured with proceeds of crime.

AfriForum labelled the NPA’s decision not to freeze Nova’s assets “irrational and incongruous” and asked Shamila Batohi, national director of public prosecutions, to take it on review.

Moneyweb is in possession of a letter the NPA sent to AfriForum in response to the request to freeze Nova’s assets.

In the letter Advocate Rodney de Kock, deputy national director of public prosecutions, motivated the NPA’s decision. He also acknowledged that the Hawks had handed the case to the Gauteng division of the Director of Public Prosecutions for a prosecution decision and that Nova, through its attorneys, submitted “representations” in response to AfriForum’s action. (Moneyweb has not had sight of this letter and has asked the attorneys for a copy. At the time of publication, it had not been forthcoming. However, Nova issued a press release in response to the AfriForum claims shortly after the original announcement).

De Kock stated that the court sanctioned the SoA and that the Reserve Bank supported the scheme. “As a result of this there appears to be no ‘illegality’ as the companies and their underlying assets taken over by Nova complied with the Banks Act and can therefore not be regarded as assets acquired from the proceeds of crime.”

He added that Nova continues to sell properties and “they have already sold a large number of the properties”.

De Kock also said that if the NPA froze the assets, the NPA would merely assume the functions of Nova.

“The purpose of Nova is to compensate the investors who lost their money. The purpose of any possible asset forfeiture intervention, at this stage, will be exactly the same,” said De Kock.

“The NPA/AFU [Asset Forfeiture Unit] will therefore be assuming the functions of Nova at great expense to itself.”

AfriForum’s response

In response, Advocate Gerrie Nel, head of the AfriForum Private Prosecution Unit, wrote directly to Batohi and called for a review of the NPA’s decision not to freeze Nova’s assets.

“The entire Sharemax investment scheme was declared illegal following proven transgressions of the Banks Act … During 2012 all the property-owning companies promoted by Sharemax were transferred to and became part of Nova Properties. The Nova scheme cannot absolve the contravention of the Banks Act by Sharemax,” he wrote.

“We feel strongly and consider this an aspect that perhaps did not get the attention it deserves and we, therefore, reiterate that if the original funds were procured through criminal conduct it remains proceeds until restitution is made to the victims.”

Nel said AfriForum’s argument “may seem crude, but the principle is stark that the Reserve Bank cannot condone criminal conduct or affect the reality that assets were procured with the proceeds of crime.”

Further, De Kock’s argument that the freezing of Nova’s assets would result in the NPA and AFU assuming the functions of Nova “escapes us”, said Nel.

“The NPA is obliged and equipped through the AFU to take action concerning the proceeds of crime. We argue that a Chapter 6 asset forfeiture intervention is required in the interests of justice and protecting the rights of the investors since the other safeguards have failed them dismally to this point,” Nel wrote.

Nel also criticised the delay in the decision to prosecute.

“An inference is possible that the delay to prosecute the directors of Sharemax is not only inexplicable but may contribute to the dissemination of assets by the board members of Nova which may, in turn, deprive the investors of their investment funds for an extended time.”

(NDCAG Comment: the letters referred to above will be posted separately)

Moneyweb’s June 22 post on the Afriforum intervention.

AfriForum asks the NPA to freeze Nova’s assets

Gerrie Nel’s unit says Nova was established with the proceeds of crime

Civil rights group AfriForum has approached the National Prosecuting Authority (NPA) to seize the assets of the Nova Property Group to prevent the group from selling the properties at below market values.

Nova is the so-called rescue vehicle of the failed Sharemax investment scheme in which around 18 700 investors invested approximately R4.6 billion. All Sharemax’s underlying property assets were transferred to Nova in terms of a Section 311 Scheme of Arrangement to manage. The proceeds were to be used to repay investors.

Advocate Gerrie Nel, head of AfriForum Private Prosecution Unit, said in a statement it has drafted an order of preservation to prevent Nova from selling properties at “far below the market value” and requested the NPA to bring the order before a court of law. He said: “The properties in question were acquired by the proceeds of unlawful activity, including money laundering and fraud, as contemplated in the Prevention of Organized Crime Act, 121 of 1998, as well as the Banks Act, 94 of 1990.”

Andre Prakke (forensic accountant), Iva Kautsky (her dad committed suicided in front of Sharemax office), Kallie Kriel (CEO AfriForum), Adv Gerrie Nel, and Herman Lombaard at a briefing on Monday. Image: Shutterstock

Nel said “Since the property was instrumental to committing the above-mentioned crimes against the investors, and because Nova has been in control thereof since 2012 (but this company was founded with the proceeds of illegal deposits that had been accepted by Sharemax from the public), AfriForum has requested that the NPA take these properties into its custody.”

This relates to a directive the Reserve Bank issued in 2010 in which it found that Sharemax contravened the Banks Act and ordered the repayment of investors. Nova was then established as a vehicle to repay investors.

AfriForum contends that the Nova scheme is illegal as it did not absolve Sharemax’s contravention of the Banks Act and its underlying assets were acquired with the proceeds of crime. The statement said the Private Prosecution Unit also found evidence that the board members of Nova pay themselves excessive salaries, and pay themselves before paying debentures holders.

“It also seems that Nova is getting rid of buildings in an attempt to avoid liquidation. The actions of the Nova board are unscrupulous, and we have therefore been compelled to draft this application and send it to the NPA to keep investors from suffering further losses,” Nel added.

Nova has fallen into financial difficulty over the past few years. The company’s auditors have qualified both its 2018 and 2019 financial results and also expressed its concerns that the company was not able to continue to operate as a going concern. The auditors also said it was concerning that Nova was selling properties to finance operational expenses.

However, the Nova board denied the auditor’ concerns and said the company was in a sound financial position.

Kallie Kriel, the CEO of AfriForum, said “many of the investors in this scheme are elderly people with meagre resources who hoped to make an income by investing their nest eggs. The board of Nova/Sharemax have lived the high life at the expense of these people and as a civil rights organisation, AfriForum cannot allow that they are not held accountable. This scheme can be equated to the operation of a crime syndicate and for this reason their actions have to be stopped immediately.

Author: Ryk van Niekerk

This article can be viewewd by Moneyweb Insiders at: https://www.moneyweb.co.za/in-depth/investigations/afriforum-asks-the-npa-to-freeze-novas-assets/

LINKS TO INTERNET POSTS RELEVANT TO AFRIFORUM’S ANNOUNCEMENT OF ITS INTERVENTION ON BEHALF OF THE SHAREMAX INVESTORS ON MONDAY, 22 JUNE

Announcement in AfriForum’s web site: https://www.afriforum.co.za/en/?s=sharemax

Afrikaans content in AfriForum’s Facebook page: https://www.afriforum.co.za/afriforum-soek-geregtigheid-vir-slagoffers-van-sharemax-bedrog/?fbclid=IwAR2AucuOT1LQpqPO_ys_i0qTmFv0fG_e9BvFyI8iTjwID52BRZte8vTElws

Video of the AfriForum press briefing: https://web.facebook.com/watch/live/?=795278251313549&ref=watch_permalink

Podcast of the segment on this topic in RSG’s Geldsake program: https://iono.fm/e/880026

Nova’s response to the announcement: https://novapropertygroup.co.za/index.php/press-releases/

Moneyweb and Netwerk24 articles on the announcement will be posted in this web site hereafter

TRANSFER OF OWNERSHIP OF NOVA DEBENTURES OR NOVA SHARES FOLLOWING DEATH OF THE OWNER AND INHERITANCE BY FAMILY MEMBERS OR OTHER PARTIES IN TERMS OF THE DECEASED’S LAST WILL AND TESTAMENT

In the event of the death of a debenture holder and for the information of persons who inherit these assets in the deceased’s estate (this also applies to inheritance of Nova Property shares issued in terms of the Schemes of Arrangement), Nova has advised that the ownership transfer to be registered with them must be done by the estate executors


Whilst Nova have not confirmed in precise terms, the following information would, logically, have to be conveyed to them in writing on the executor’s letterhead:
Full name, SA ID # or passport#, address, email address, telephone numbers and Debenture or Share Certificate #s (although the executor will be fully conversant with the standard requirements, including necessary documentation, for registration of change of ownership of the assets bequeatherd in the estate)

The same information would be required for the person(s) inheriting from the deceased

Where the debenture(s) or share(s) have been left to more than one beneficiary, the executor must also provide the split per inheritor

We expect that Nova still charges for the transfer of ownership and suggest that the charge would be paid over to Nova by the executor and then be accounted for in the Liquidation & Distribution Account prepared by the executor for presentation to and the approval of, the Master of the High Court