VBS lawyer in hot water over missing ‘investment’

The lawyer representing ANC Limpopo heavyweight Danny Msiza is fighting a legal battle himself — a disciplinary hearing by the legal profession regulator over allegations of fraud and malpractice involving a R140m investment in VBS Mutual Bank.

The complaint against Maluks Attorneys chair Joseph Maluleke has been brought before the Legal Practice Council (LPC) by Maluleke’s former business partner, Angolan businessman Álvaro Sobrinho.

Sobrinho himself is standing trial in Portugal on 33 counts of fraud, breach of trust and money laundering, for alleged misappropriation of about €400m (R8bn). He is alleged to have embezzled Angolan government-backed funding intended for a housing project.

The LPC confirmed to the Sunday Times that a date has been set for the disciplinary hearing against Maluleke, who is representing Msiza, a former ANC Limpopo treasurer-general, and former ANC Youth League leader Kabelo Matsepe on fraud and other charges in the R2.3bn VBS Mutual Bank heist.

The VBS saga re-emerged into the spotlight earlier this month after an explosive affidavit by former chairman Tshifiwa Matodzi was leaked, implicating senior politicians in how large sums were “donated” to certain politicians.

Msiza and Matsepe have asked the Pretoria high court for a stay of prosecution pending finalisation of an application to the Supreme Court of Appeal. The pair, who are accused of soliciting deposits into VBS accounts, also want the court to separate their trial from that of the other accused.

‘False and inflammatory statements’

LPC spokesperson Kabelo Letebele told the Sunday Times the complaint against Maluleke had been considered by an investigating committee, which recommended that disciplinary proceedings be instituted. “It follows from the recommendation that the investigating committee was of the prima facie view that the complaint was valid. A date has been set for the disciplinary proceedings.”

However, Maluleke has dismissed the complaint as based on “false and conveniently designed information”.

“My submission is that the complaint raised issues of a commercial nature between the parties involved and that the LPC is a wrong platform to deal with the matters.”

He said the complaint had made “false and inflammatory statements in order to give credence to a complaint that lacks basis”. Maluleke said the money was at VBS, he never touched it and that Sobrinho and Fluxmans know this but were attempting to tarnish his reputation.

The complaint was lodged five years ago by Sobrinho, a former head of Banco Espírito Santo Angola (Besa).

Sobrinho, who is out on bail of €6m, is alleged to have led Besa to its collapse, which caused mother bank Banco Espírito Santo in Portugal to suffer a loss of €4.7bn. He is alleged to have siphoned off bank funds that found their way into other foreign bank accounts.

According to Matodzi’s affidavit, Sobrinho in 2017 invested R140m in VBS. He also detailed how he was introduced to Sobrinho by Maluleke and Msiza.

“Initially Dr Sobrinho wanted to become a VBS shareholder and I indicated to him that will not be possible. We then commenced with negotiations for Dr Sobrinho to buy shares from Vele.” Vele Investments, a majority shareholder in VBS, is owned by Matodzi and was used as the main vehicle to embezzle funds from VBS.

“In a show of good faith, he promised to invest $10m into VBS,” Matodzi said. “An investment of around R140m was made to VBS through Setlafusion around 2017.”

Setlafusion was a joint venture (JV) set up by Maluleke for Sobrinho.

“No agreements between Dr Sobrinho and Vele were concluded. The said amount was never withdrawn from VBS until the date of curatorship,” said Matodzi.

According to Sobrinho’s complaint to the LPC, Maluleke has failed to account for the R140m or hand over files related to the transaction, which was done via RW Attorneys.

Sobrinho’s attorneys, Fluxmans Attorneys, in a letter to the LPC, accused Maluleke of obfuscating the facts. “He alleges that the dispute between himself and RW Attorneys is a private commercial dispute which should be resolved by way of litigation in the high court and not before yourselves as the LPC. Our client, Dr Sobrinho, denies this allegation.” The letter states that Maluleke was given power of attorney by Sobrinho to represent him through RW Attorneys in his investment in VBS.

“RW Attorneys as represented by Mr Maluleke prepared ... the [Setlafusion] JV agreement. Our client then transferred to RW Attorneys trust account the sum of approximately R140m … Setlafusion had a bank account… RW Attorneys charged our client legal fees for services … They were obliged to place the monies in this account, but failed to do so. The allegation that this is not a matter for the LPC to determine is thus incorrect and without merit,” said Fluxmans.

“Certainly from the information we have provided to you, including the VBS Mutual Bank statements, it is clear that Mr Maluleke attempted to purchase a brand-new BMW 750i on March 12 2018 at a cost of R1.5m and to transfer R450,000 out of the Setlafusion account …

“We are advised by the then curator of VBS Mutual Bank that on his appointment this was one of the transactions which VBS was about to pay out on, which he stopped. This highlights one further example of unprofessional conduct by an attorney,” said Fluxmans. In response, Maluleke told the LPC that Sobrinho owes him, Mauritius-based lawyer Sunil Bheeroo and RW Attorneys about R3m.

He also alleged that when Sobrinho saw VBS in the news for alleged embezzlement of funds, the Angolan stormed into his offices demanding that his investment be paid back via electronic transfer. Maluleke says when he refused and told Sobrinho the money was at VBS as per the Setlafusion agreement with VBS, Sobrinho then met Matodzi at the OR Tambo Intercontinental Hotel to ask him to release his funds.

“The thing bringing the issues to head is the fact that VBS Mutual Bank is in liquidation and Dr Sobrinho conveniently tries to remove and dissociate himself from the risk associated with that fact.

“I went out of my way to attend to all his issues and in certain corners, found myself in difficult situations where I had to explain all the bad publicity and allegations of corruption and malfeasance without getting answers from him … He wants me to justify his false and baseless suggestion that I even purchased a motor vehicle with his funds. I paid for all my vehicles from hard-earned money and have proof to support this in the correct forum,” said Maluleke.

However, RW Attorneys MD Faathima Asmall said the firm had never represented Sobrinho and that Maluleke acted for him in his personal capacity.

 “Our records reflect that Rooth & Wessels t/a RW Attorneys was never instructed by and never acted for a client by the name of Sobrinho. If Mr Maluleke acted for or assisted one Sobrinho, he did so in either a personal capacity or in a capacity other than as a director of the firm. Mr Maluleke resigned from the firm during May 2019 for personal and confidential reasons,” said Asmall.

But Bheeroo defended Maluleke against the Fluxmans complaint. He said to do business with VBS, Setlafusion had to be set up.

“Due to some bad publicity on Dr Sobrinho, FNB declined to open a bank account in his name … Dr Sobrinho is not coming to you with clean hands, he wants to tarnish the reputation of Mr Maluleke and RW Attorneys without any basis whatsoever. RW Attorneys received the funds and the funds were deposited with VBS … You must be aware that you are dealing with a complaint of someone who is very dishonest,” Bheeroo said.

Sobrinho appointed him and Maluleke as directors of his company Álvaro Sobrinho Africa “and unilaterally removed us when his shenanigans started”.