N:\Corpcapital\Kas Herman affidavit.doc1.
12/10/2018
CORPCAPITAL INSPECTION IN TERMS OF s258(2) OF THE COMPANIES ACT
AFFIDAVIT
______
I, the undersigned,
CLYDE KASRIL HERMAN
do hereby make oath and say that :
1.
1.1I am an adult male businessman currently residing at unit 43, The Augustus, 51 Linden Road, Sandown, 2196.
1.2The facts contained herein fall within my personal knowledge – unless otherwise stated or indicated – and are true and correct.
2.
2.1I was the former audit engagement partner of the W&A Group, incorporating W&A Investment Corporation Limited and FSI Corporation Limited.
2.2The senior partners at Kessel Feinstein whom I worked under wereZell Rangecroft (“Rangecroft”), the pre issuance partner of the W&A Group and Julius Feinstein (“Feinstein”).
2.3With regard to the annual audit of the W&A Group, a yearly final negotiation of the audit issues took place between Jeff Liebesman (“Liebesman”), Rangecroft and Feinstein. Issues discussed included the classification of items as prior year adjustments and extraordinary items.
3.
3.1During November 1995 litigation ensued between a number of corporate entities in the W & A Group (including two FSI entities) as Plaintiff’s, and, inter alia, Jeff Liebesman, Neville Cohen, the financial director of the W&A Group, Kessel Feinstein and myself as Defendants (the “W&A” litigation).
3.2The matters underlying the W&A litigation arose prior to 31 December 1992, and were brought to a head by a due diligence investigation conducted by Deloittes at the behest of Trencor. Trencor, in terms of a restructure at 31 December 1992 together with Liebesman became the controlling shareholders of the W&A Group.
3.3Ray Hasson (“Hasson”), the Chief Executive of Trencor and chairman of FSI, suspected misconduct by Liebesman. Hasson mistrusted certain disclosures that Liebesman had made to him.
3.4Mr D Nurek, senior partner of Sonnenberg Hoffman & Golombic Attorneys, prior to the W&A litigation conducted an investigation at the behest of Trencor and prepared a report. The contents of this report resulted in summons being issued. The summons and particulars of claim comprise almost 100 pages and I do not annexe them to avoid prolixity. Suffice it to say that the misconduct alleged against, inter alia, Liebesman, included breach of fiduciary duties, falsifying books of account and the acquisition of numerous assets and benefits by Liebesman and members of his family improperly and at the expense of various corporate entities. The particulars of claim contain a litany of wrongdoing on the part of Liebesman.
3.5At the year ended December 1992, Kessel Feinstein was the sole auditors of the W&A Group. At the year ended December 1993, Kessel Feinstein and Arthur Andersen performed a joint audit of W&A Group. Thereafter, Arthur Andersen was the sole auditors of the W&A Group.
3.6There were material prior year adjustments and extraordinary items in December 1992 and December 1993. In December 1993, Kessel Feinstein and Arthur Andersen each issued an independent audit report. There was a dispute about the prior year adjustments, and this resulted in a complaint to the Public Accountants and Auditors Board (“PAAB”) about Kessel Feinstein. The complaint included that the prior year adjustments and extraordinary items were invalid and represented profit adjustments.
3.7The PAAB conducted an investigation and found no wrong doing on the part of Kessel Feinstein.
3.8During the litigation proceedings Kessel Feinstein and I prepared a series of documentation relating to our defense against the accusations against us. This included representations that Liebesman had made relating to certain transactions.
3.9A major item was an admin fee totaling R 17 million paid during the period 1988 to 1993. Liebesman had this “admin fee” paid to his private companies by FSI Corporate Services (A wholly owned subsidiary of W&A) to fund the interest on R65million that he had borrowed privately, to fund his investment in the W&A Group. This admin fee was introduced when the dividends he was receiving from the W&A Group was inadequate.
3.10Liebesman employed Allan Chonowitz (“Chonowitz”) as the Managing Director of FSI Corporate Services. Chonowitz is a former partner of Kessel Feinstein. Chonowitz signed many agreements and was intimately involved in the drafting of various agreements. Chonowitz was paid a R1 million restraint of trade payment when he left FSI Corporate Services.
3.11Liebesman and Neville Cohen the W&A financial director were also former Kessel Feinstein partners. Neville Cohen was paid an R 1.5 million restraint of trade payment in 1990 by FSI Corporate Services.
4.
4.1During February 1997 a settlement meeting was held at the legal offices of Benji Liebmann (“Liebmann”).
4.2The following parties were present at the meeting:
4.2.1Myself;
4.2.2Liebesman;
4.2.3Liebmann;
4.2.4Eric Ellerine (“Ellerine”);
4.2.5Errol Grolman (“Grolman”);
4.2.6Michael Hart of Deneys Reitz Attorneys, who were Kessel Feinstein’s attorneys and represented the public indemnity insurers;
4.2.7Julius Feinstein (“Feinstein”), senior partner of Kessel Feinstein; and
4.2.8Hennie Van der Merwe (“Van der Merwe”), who was appointed by Trencor to represent the W&A Group at this meeting. Van der Merwe was a director of W&A at that time.
4.3Myself, Grolman, Feinstein and Van der Merwe, signed a settlement agreement.
4.4The settlement agreement included:
4.4.1a payment in the sum of R20 million by Grolman on behalf of Liebesman and a payment of R 20 million by Kessel Feinstein’s public indemnity insurers.
4.4.2a non-disclosure clause, which was subsequently negated by W&A in their 1997 financial statements.
4.5Grolman handed a cheque to Van der Merwe. Van der Merwe made a phone call, presumably to a director of Trencor, and thereafter the settlement agreement was signed.
4.6Feinstein advised me that Ellerine had previously approached him to discuss Kessel Feinstein’s contribution towards the legal case settlement. Feinstein had explained that any settlement was in the hands of Kessel Feinstein’s indemnity insurers. Ellerine’s presence at the meeting was therefore not a surprise.
4.7Advocate Wim Trengove SC was Kessel Feinstein’s defence counsel and Advocate Neil Lazarus SC was Liebesman’s defence counsel and were obviously aware of the ultimate settlement of the case.
CLYDE KASRIL HERMAN
CA (SA)
ID no: 380507 5108 083
Signed and sworn to before me at on 2004, the deponent having acknowledged that the deponent knows and understands the contents of this affidavit.
COMMISSIONER OF OATHS
Full names:
Business address:
Designation:
Capacity