Like a gripping John Grisham novel, reads a shareholders’ report conducted by the upmarket corporate law firm, Desai Law Group (DLG), on instruction by the Board of Directors of Turnstar Holdings Limited.
The report was triggered by a series of blockbuster front page articles by The Sunday Standard, disclosing what the weekly broadsheet newspaper reported was a scandal in the Middle East involving the Turnstar Managing Director (MD), Gulaam Abdoola. This week The Business Weekly & Review reveals fresh details of an investigation conducted by the corporate law firm into the property company that owns the posh Game City Mall.
To cut a long story short, The Sunday Standard wrote that the MD of Turnstar, Gulaam Abdoola, had demanded a commission as form of a cover for a ‘shady deal’ in Dubai. Interestingly though, the investigation report from DLG categorically disagrees with this assertion of theft on the one hand, but on the other does not spare its wrath on the corporate governance front at Turnstar.
“For the purposes of the DLG investigation, and in the absence of support from Mr Razi and The Sunday Standard, we are obligated to advise the Board that we have not seen evidence that suggests any form of complicity by Mr Abdoola in relation to any commission, and, in our view there cannot presently be derived or extrapolated from the allegation of such a commission alone any concern as to Mr Abdoola’s honesty and integrity or that he has perpetrated any act of bad faith, malice, fraud, theft or deception against the Company [Turnstar],” reads the DLG report.
However, the fact that Abdoola is said to be no thief does not absolve him from some material shortcomings in the manner in which Turnstar handled this transaction that is kicking up a storm in the courts in Dubai. The report spares no punches when describing the “results of blind misplaced trust in the wrong people” by Abdoola as a fundamental flaw in the complicated transaction. The report is currently being kept under lock and key at DLG offices for review by shareholders only. Even so, a key shareholder, has shared aspects of the report with The Business Weekly & Review on the basis of anonymity.
Abdoola is known in property development circles as the maestro, having dreamt up the likes of Game City in Gaborone and Nzano Mall in Francistown. His work drew the attention of fund managers and institutional investors who convinced him to establish a BSE-listed entity, Turnstar, to allow him to expand, increase profits significantly and to get members of the public and pension funds to share in the profits.
At Turnstar, Abdoola was appointed the founding MD. It appears that up until the Palazzo Venezia scandal, he had an impressive success rate with properties he steered Turnstar to. At the time, the Board had a rock star as its Executive leader, and he rarely got it wrong.
Abdoola’s success is what appears to have been the root of the apparent neglect and relative inattention of his Board or even his own inability to recognise that his associates in Dubai during the Palazzo Venezia deal may not have had the best interests of Turnstar at heart. The Board is found wanting in the DLG report, with weak governance structures. Notable was the lack of an Investment Sub-committee at the time of the Dubai investment. This sub-committee would have been able to pick up several tell-tale reg flags that pepper the Palazzo Venezia investment. Also notable was the valuation used to purchase the property from one of the stars in this action-packed story, Muhammad Lakhani of GCP Property developers, that came to a staggering AED28 million.
The value of the property, it turns out, was in reality actually in the range of AED10 million. It is this breath-taking difference that is the point of contention for The Sunday Standard. The weekly paper reported that Abdoola should have known that this property was overvalued. Instead, they suggest, he demanded commission for his ability to pull the wool over the eyes of the Turnstar Board for his personal gain. This demand for commission, they say, they have on good authority.
But inspite of these striking revelations, DLG report says it found no evidence of this demand, with the report going as far as saying The Sunday Standard misunderstood elements of the transaction. However, what the report does point to in apparent support of The Sunday Standard is that the rock star at the helm of Turnstar was caught napping and was duped, with the result that over AED20 million at Turnstar was lost in value.
It appears that Abdoola and his leadership team were sold a lemon and they paid top dollars for a pyramid-style scheme. The valuation used by Lakhani was based on the pretence that a single tenant had a long-term lease at the Palazzo Venezia. The assumed tenant rental provided Turnstar a 9 percent return (from a rental income of AED3,1 million per year). It turns out that no such tenant existed. Infact, there was not one tenant but 11 rather small tenants paying a combined rental of less than AED 400 000 per year. How the scheme worked was that as long as Turnstar saw some rentals coming in, they would not bother to actually meet the tenants as they had appointed an agent to look after the property.
ENTER UZAIR RAZI
Uzair Razi is a leading cast member in this script. A Motswana living in Dubai, Razi was no stranger to scandal, having left his job at a leading commercial bank in Botswana under a cloud. In The Sunday Standard stories and a letter that Razi wrote, it would appear that he chose to play the role of whistle-blower because he claimed to have been the man who raised the alarm on Abdoola and the over-payment for the Palazzo Venezia.
What Razi omits to mention is his role in the acquisition of the Palazzo Venezia in the first place, first identifying the development for sale and then convincing Abdoola to drive the sale with the Turnstar Board. He was a trusted friend of Abdoola whom – upon being asked why he had appointed him with a Turnstar power of attorney – the DLG report quotes Abdoola as having said: “I am not being defensive. I am taking responsibility for that. I trusted the wrong people.”
Razi was to ensure the running and collection of the rentals from the Palazzo Venezia. He is quoted negotiating discounts for the phantom ‘tenant’ as the collector of rent. It is clear from the DLG report that Razi was aware that the Palazzo Venezia had not one star tenant but 11 rather low-end tenants. He would have known this as he was hired by Turnstar Investments with the power of attorney to act on behalf of the BSE-listed company. For over three years, Razi’s role was to collect rent on behalf of Turnstar to the value of AED3.1 million a year (as per the ‘lease’, even though the rental he was actually collecting was much less.
The scam required rentals to be collected to keep up appearances and thus not draw the scrutiny of the Turnstar Board and/or attract the attention of Abdoola, who was unusually unfocused on this particular property. It appears that the ploy needed an opportunity for the ‘phantom tenant’ to exit the lease.
The DLG report suggests that when COVID-19 came about, Razi and his cohorts thought this would be a good chance to exit the scam with a convincing story of business hardships for the imaginary tenant. The rentals stopped flowing, and that predictably drew the attention of Abdoola, who offered several payment options and holidays to the phantom tenant. However, when all the offers were apparently declined, it was the final red flag that had Abdoola on the first flight to Dubai as soon as travel restrictions were lifted. Fearing the fact that the scam would be discovered and legal action might follow, the report suggests that Razi seemingly chose to go on the offensive by breaking the news to the public and pointing a finger at Abdoola. It would appear that this was done omitting the role that Razi himself and Lakhani had played up to that point.
The DLG report does not pull any punches when describing the roles of all the players who should have caught the scent of this scam before the investment was made in the first place. The result is that the BSE-listed entity, Turnstar, has lost value that belongs to the shareholders and that the loss could have been avoided and disclosed to the BSE, at least after the stink, which it appears was not. As the Palazzo Venezia, an investment scam or not, resulted in shareholders losing value of nearly P70 million (says a Sunday Standard story), this needed to have been disclosed with the plans of recovery in a cautionary.
However, in a recent cautionary from Turnstar a picture is painted of vast improvements in performance of the company but the Board falls short of taking any responsibility for the value that is lost by the Palazzo Venezia fiasco. Shareholders will be looking to the BSE for intervention and/or action to see improvements on governance standards at the Turnstar Board.
According to previous press statement from Abdoola and Turnstar, it would appear that they, are infact taking legal action in Dubai to try and recover the value that was lost in the Palazzo Venezia ‘deal.’ This is the basis of the dust up in Dubai, which would be consistent with the assertion from the DLG report that the documents and information given to The Sunday Standard were intended to create a cloud of doubt about Abdoola and cover the actions of Razi and Lakhani.
Meanwhile, the result has created another storm which is brewing closer to home. In this personal capacity, Abdoola has laid charges of defamation on The Sunday Standard for a collective record P35 million. The Sunday Standard has made it clear that they intend to defend their stories but there is no sign of letting up from Abdoola. According to the DLG report, while Abdoola appears to be cleared of theft and personal gain, he is not cleared of falling asleep at the wheel.