VBS Bank liquidators take a scalp in the form of Firmanox

Written by Ciaran Ryan. Posted in Journalism

Firmanox’s ‘far-fetched’ story to dodge R24m owed to the bank didn’t pass muster with the court. From Moneyweb.

Among other things, the bank agreed to pay more than R1.3m to Firmanox as sponsorship towards Shembe Unyazi TV, which was to be broadcast across SA and the world. Image: Supplied

Among other things, the bank agreed to pay more than R1.3m to Firmanox as sponsorship towards Shembe Unyazi TV, which was to be broadcast across SA and the world. Image: Supplied

The untangling of the mess around VBS Bank, which was placed in liquidation in 2018, continues to ricochet through the courts.

Read: Eight suspects arrested in SA’s ‘biggest bank robbery’ VBS fraud case

Last month the Johannesburg High Court placed Firmanox in liquidation after finding it owed the bank R24 million and was unable to pay its debts. This was for the 2016 purchase of six vehicles and an overdraft facility.

Firmanox, a brand communication, media and advisory services company, had argued that it was not indebted to the bank, and pointed to agreements signed with the bank to enter into a business deals whereby the bank would be required to make financial contributions.

VBS curator Anoosh Rooplal presented evidence to the court that in March 2017, VBS’s then chair Tshifhiwa Matodzi had generated a list of overdrawn bank accounts which were to be “cleared” or removed from the bank’s balance sheet before the financial year-end on March 31, 2017.

Fictitious deposit

One of these accounts was that of Firmanox. Two days before the financial year-end, a fictitious entry was created in Firmanox’s overdrawn bank account in the amount of R15.5 million to clear the overdrawn account.

“It is undisputed that there was no actual deposit of R15.5 million made into Firmanox’s bank account. Instead, according to the liquidator, it was made to appear as if a deposit had been made, whereas in reality Firmanox remained indebted to VBS in the amount to which its account was overdrawn,” reads the judgment.

VBS and Firmanox had entered into an agreement to form a company, Shembe Unyazi Bank of South Africa (Subsa), which would be 60% owned by the bank and 10% by Firmanox, with the aim of providing financial services across the country.

The agreement stipulated that VBS would pay R5 million towards the implementation phase of the company roll out.

It would also pay two monthly amounts of R666 000 to Firmanox as sponsorship towards a new TV channel called Shembe Unyazi TV, which was to be broadcast across SA and the world.

Firmanox also relied on a memorandum of understanding which required VBS to make other payments to it in terms of the business arrangements between them.

On this basis Firmanox denied it owed anything to the bank.

“The agreements on which Firmanox relies do not explain the overdraft debt,” says the judgment. The only contractual obligation on VBS was to provide initial funding of R5 million and monthly payments of R660 000 commencing on April 25, 2016.

Firmanox did not deny the existence of the fraudulent scheme at VBS, only that it was not a beneficiary of or participant in the scheme. It also did not deny the credit entry of R15.5 million in its account in March 2017.

Read: How VBS looted municipalities

Court perplexed

The court was perplexed by Firmanox’s denial of the existence of vehicle finance agreements, when the company had paid eight monthly instalments on the six vehicles, but stopped suddenly when its overdrawn account was credited with an amount of R15.5 million .

The court also found it peculiar that two other companies whose VBS accounts received fictitious deposits just prior to the 2017 financial year-end, BLT and Sabicorp, were also parties to the agreement with Firmanox.

Rooplal claimed that the debt owed by Firmanox to VBS forms part of a larger fraudulent scheme perpetrated on VBS which resulted in a loss to it of more than R1 billion, “which scheme led to its ultimate liquidation”.

The court found Firmanox’s story “patently far-fetched and implausible” and “beset with contradictions and difficulties” and ordered its final winding up.

Read:Ex-PIC CEO denies bribe to help VBS Mutual Bank

More public shame for PIC officials linked to VBS

Ciaran Ryan

The Writer's Room is a curated by Ciaran Ryan, who has written on South African affairs for Sunday Times, Mail & Guardian, Financial Mail, Finweek, Noseweek, The Daily Telegraph, Forbes, USA Today, Acts Online and Lewrockwell.com, among others. In between he manages a gold mining operation in Ghana, and previously worked in Congo. Most of his time is spent in the lovely city of Joburg.