Pensioners’ P447.5 million at stake
NBFIRA, BPOPF overcome first hurdle
Judicial Manager resumes work immediately
A financial crime may have been committed- Judge Kirby
Embattled asset management firm Capital Management Botswana (CMB) on Friday suffered a major setback in their tussle with Botswana Public Officers Pension Fund (BPOPF) over a P447.5 million investment when Court of Appeal Judge President Ian Kirby ruled against them.
The effect of the Friday judgment if that the statutory manager appointed by Non-Bank Financial Institutions Regulatory Authority (NBFIRA) Peter Collins has been confirmed to immediately resume his duties of managing CMB and investigating its transactions to trace the missing of pension funds. Hailed as one of the best commercial judgments, and progressive for it protects pensions worth billions of pula, Kirby’s decision paves the way for the judicial manager appointed by NBFIRA to immediately resume his duties of managing CMB.
In the judgment, which has been consented to by two other CoA judges, Justices Singh Walia and F.J. Brand, Justice Kirby pronounced that High court Judge Omphemetse Motumise was in error when he reviewed and set aside a decision by NBFIRA to appoint a statutory manager as empowered by the Act. He said Justice Motumise further erred by applying the wrong test when he dissected the arguments of NBFIRA on the basis of information supplied by CMB and declared that the matter brought before him on urgency was not, when all indications were that a crime or violations may have been committed.
Judge Kirby also found that Justice Motumise erred when he refused to admit additional reports including that of former High Court judge Peter Collins, who had been performing the duties of a statutory manager, and other evidence of facts subsequently discovered. He applied the wrong rule to the prejudice of NBFIRA, Kirby said. “This error was an important one, which could, and no doubt did, affect the final outcome,” said Kirby.
Kirby said the first red flag about suspicious conduct of CMB was when its Managing Director Rapula Okaile refused an NBFIRA inspector access to companies which they used to run the business. The inspector had discovered that the financial results for 2016 submitted in September 2017 had not been signed by the auditor, which also raised a red flag.
The redflag was followed by others including complaints registered with NBFIRA by BPOPF and BONA Life in January 2018. BPOPF represents nearly 170 000 current and prospective civil service pensioners while BONA Life also have annuitants funds (P133 million) under management by CMB.
Over and above deciding in favour of NBFIRA and BPOPF, Kirby hammered in the final nail by ordering CMB and its Director, Rapula Okaile to pay the costs of the lawsuit including the costs for two Senior Counsel from South Africa accompanied by a team of six advocates.
CMB are the Fund Manager and General Partner (GP) in the private equity portfolio (BOP), while BPOPF is the Limited Partner (LP). Private equity is capital that is not noted on a public exchange. It is composed of funds and investors that directly invest in private companies or that engage in buyouts of public companies resulting in the delisting of the public entity. Private equity agreements are partnerships that give the General Partner (GP) absolute discretion. Under the arrangement, the Limited Partner (LP) is expecting a certain targeted return on exit of the investment. For the Limited Partner to disengage from such contract with remedies, they must prove willful default and/or gross negligence.
A clearly elated BPOPF Principal Officer, Boitumelo Johnson, declined to comment on the CoA judgment late Friday safe to say “we hope the judicial manager will now be able to get down to business and perform his assignment without any hindrance as we have always insisted. Although we cannot pre-empt his findings at this stage we hope that his appointment will help unravel this issue and put the matter to rest, all in the interest of our constituents, the pensioners”.
Independent observers, who have been following the tussle over the BOP investment, have opined that should he find it fitting the judicial manager has the authority to recommend criminal investigations against CMB and its Directors.
What started off as a sweet deal between CMB and BPOPF in November 2014, when the latter awarded the former an initial P500 million to manage through a private equity portfolio –in an investment known as the Botswana Opportunity Partnership (BOP)- later degenerated into a catfight following questionable investment and refusal to account among other violations of the deal.
Chasing an ambitious P2 billion elusive target, CMB threw out the rule book soon into the partnership, disregarding investment policy, making unauthorized drawdowns worth millions of pula, refusing to appoint an external auditor or submit audited accounts, and investing outside mandate, buying shares in the likes of Wilderness Safaris (later P150 million found to be held by Tim Marsland), Johannesburg Stock Exchange (JSE), Kawena Holdings, Cell City and Makuba Airlines. It was only when BPOPF refused to honour a drawdown worth P70 million, after being tipped off that they may be fleeced that skeletons started tumbling out of the closet. At that stage CMB had already gobbled over P447 million in questionable transactions that breached the rules of the partnership. Nothwithstanding the breaches by CMB, legal experts warn that it was near impossible for BPOPF to reprimand the asset manager, recover the millions or terminate the partnership without huge losses.