On the basis of the powers which CMB derived from the legal document, its directors Tim Marsland and Rapula Okaile have been discharged and acquitted of all financial crimes they were previously accused of. As it stands, BPOPF has been submerged by its own contract.
Since 2017, CMB directors, Rapula Okaile and Timothy Marsland, have been in a bitter tussle with the Botswana Public Officers Pensions Fund (BPOPF), and to some extent, the Department of Public Prosecutions (DPP) and other law enforcement agencies. CMB was awarded an P800 million private equity mandate by the moneyed BPOPF but was later accused of mismanaging the funds for the directors’ personal benefit. It went to the extent of the two facing charges of money laundering and obtaining by false pretenses.
Interestingly though, a judgement by High Court Judge Boipuso Tshweneyagae, delivered on 30 August 2021, discharged Okaile and Marsland of the money laundering and obtaining by false pretense charges, and even acquitted them. Key of the reasons for their acquittal was that as per an en commandite agreement signed by the BPOPF and CMB, no money laundering was done and the funds not obtained by CMB under false pretenses. In short, a contract that was signed by the BPOPF and CMB has rescued the CMB directors and choked BPOPF.
It all began in November 2014 when CMB was a darling of the BPOPF and was the most preferred for partnership in a multi-million pula private equity fund mandate. At that time, the BPOPF had established its first-ever private equity fund as a way of diversifying its investment vehicles. At the time, CMB was first awarded P500 million to be managed under the fund in which CMB was the General Partner while the BPOPF was a Limited Partner. That CMB was the blue-eyed boy to BPOPF can be summed up by the fact that CMB beat two other asset managers, Venture Partners Botswana (VPB) and African Alliance, which were shortlisted for the lucrative tender.
Infact, 13 asset managers had passed the first stage of the tendering process but only three firms, Capital Management Botswana (CMB), African Alliance and VPB made it to the last stage of shortlisting. The BPOPF then was under the stewardship of Lesedi Moakofhi, an interim Chief Executive Officer (CEO), who took over from Ephraim Letebele. The latter was dismissed controversially from the BPOPF top seat. That P500 million kitty awarded to CMB was the first tranche of BPOPF’s trend-setting P800 million private equity funds solely targeted for investments in Botswana.
CMB was formed out of BIFM Capital in 2012 when its promoters, Timothy Marsland and Rhys Car,r parted ways with former partners, BIHL. Rapula Okaile would then join the two. He owned 25 percent of CMB. BPOPF then regarded CMB as experts in the asset management business. Marsland and Carr had previously managed an P890 million kitty from Botswana Life annuity fund. At Bifm Capital, they were mandated with finding quality Pula-denominated assets matching the Botswana Insurance Holdings Limited (BIHL) long-term liabilities to pensioners.
Among the assets that BIFM Capital had invested in before the dissolution of the BIHL subsidiary included P150 million in Botswana Building Society (BBS) as well as P250 million promissory notes in pan-African finance house, ABC Holdings. The company had also invested in colossal retailer Choppies Enterprises Limited and CA Sales. Carr has since left CMB. Marsland and Okaile were then the remaining shareholders at CMB.
Further, the attachment between CMB and BPOPF was further demonstrated in December 2016 when BPOPF awarded a further P380 million to be managed by CMB in the private equity fund. It brought the total assets in the BOP to P880 million. At that time, Boitumelo Molefe was the CEO, having been appointed substantively around July 2015, taking over from Moakofhi, who was acting CEO.
BPOPF then said it chose to extend CMB allocation because of the pace at which they were finding new lucrative private equity investments. Some of the companies they had invested in include the first-ever 100 percent life insurance firm, Bona Life Insurance Limited, leading eco-tourism outfit Wilderness Safaris and certain companies in Mozambique.
A year down the line, relations soured between the two. Accusations and counter-accusations were thrown at each other. CMB and BPOPF became rivals so much that their disputes were dragged to the courts of law. The law being an evidence and document supported creature, the courts looked at what the two had initially agreed. BPOPF accused CMB of breaching the BOP agreement by investing in listed equities despite the fund being a private equity. CMB was also accused of failing to submit audited financials and of improper valuation of some of its investments. When CMB put in a P77 million drawdown notice to BPOPF towards the end of 2017, BPOPF, because of its grievances against CMB, chose to ignore the request by CMB, until CMB exercised powers bestowed upon it by the BOP agreement and declared BPOPF a Defaulting Limited Partner. CMB then disposed of assets in the BOP and paid BPOPF P50 million, which it claims was a ‘settlement fee’.
Such is also confirmed by Justice Omphemetse Motumise in his judgment delivered sometime ago. The judgment was from a consolidated case in which Bona Life, BPOPF and the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) wanted CMB to be placed under Statutory Management. BPOPF also contested the Defaulting Limited Partner decision by CMB and demanded its funds (P400 million) invested in the BOP. Justice Motumise said in the judgment that the money which was said to be at stake was an investment made in terms of the BOP Agreement Clause 28.2.1, which states that in case of a Defaulting Limited Partner, the General Partner shall be entitled, and is hereby irrevocably authorised by the Defaulting Limited Partner, to dispose of the Defaulting Limited Partner’s interest in Botswana Opportunity Partnership to one or more third parties at such price and on such terms and conditions as the General Partner, in its sole and absolute discretion, deems fit, provided that the General Partner first offers such interest, at the same price, and on the same terms, first to the non-defaulting Limited Partners.
In simple terms, because the BPOPF declined at that time to authorise a further P77 million to CMB, it then gave the latter powers to now cancel the entire agreement, dispose of assets under conditions it deemed fit, and the BPOPF was then paid P50 million.
While BPOPF further wanted CMB to ‘pay back the money’, Justice Motumise said a telling Clause in the BOP Agreement provides that funds paid to the General Partner, in this case CMB, may only be returned to the Limited Partner, the BPOPF, under very limited circumstances. Clause 60 of the agreement says except as provided in Clause 26 or any loss suffered due to any grossly negligent, reckless, fraudulent or willful misconduct activities by the General Partner, neither the General Partner nor any of its Affiliates shall be liable for the return of the capital commitments of any Partner, and such return shall be made solely from the available Fund Assets if any, and each Limited Partner hereby waives any and all claims it may have against the General Partner or any Affiliate thereof in this regard.
This here gave CMB immunity from BPOPF, even if CMB could be in the wrong. In his judgment, Justice Motumise said BPOPF authorised the disposal of its investment/interest under the agreement. But since the agreement itself provides for the resolution of all matters or claims through arbitration, Motumise said it was not for the court to resolve the BPOPF-CMB matter.
He added that BPOPF knew from October and November 2017 that the balance of the investment claimed (half a billion pula) was not available as evidenced by its letter to NBFIRA on 17 January 2018 which said CMB sold all assets in the BOP for a paltry P50 million. The judge said by the time the matter was reported to NBFIRA, the money was not available.
However, the matter dragged on, but fast forward to 30 August 2021 to Justice Tshweneyagae echoing the same sentiments. At the heart of the charges faced by Okaile and Marsland, says Justice Tshweneyagae, is an en commandite agreement. Okaile and Marsland disputed in court that they have neither obtained money from the BPOPF under false pretenses nor engaged in money laundering. They argued that the charges arose out of the misunderstanding by the DPP and the Attorney General (AG) of the Private Equity Investments entered into by their company, CMB and the BPOPF. Justice Tshweneyagae agreed with Marsland and Okaile. In his judgment, he said of all the documentation provided in the CMB case, of the utmost importance is the en commandite partnership agreement entered into between the BPOPF and CMM in November 2014 because it has all the features of an en commandite agreement.
Justice Tshweneyagae noted that Clause 3 of the agreement provided that the purpose of the agreement is to establish an en commandite partnership between the partners for purposes of conducting the business activities as per Clause 4 of the partnership. Clause 4 provides that the business of the BOP to accept the capital commitments, to acquire, hold and dispose of investments in accordance with the investment policy and to engage in such other activities in relation to BOP as the General Partner deems necessary, advisable and/or incidental all the above matters. Further, Justice Tshweneyagae noted that in terms of Clause 9 of the BOP agreement, the management of the BOP was to be vested exclusively in CMB, the General Partner. As General Partner, CMB was to perform all acts and enter into contracts and other undertakings that in its sole discretion it deemed necessary.
In the event of a dispute arising from implementation of the agreement, Clause 77 provided for such to be referred to arbitration, according to Justice Tshweneyagae.
“There is no evidence that the parties ever invoked an arbitration clause before criminal proceedings were instituted against them,” he said. The judge was persuaded by Okaile and Marsland’s submissions that they never received any proceeds of crime or misrepresented/and or induced the BPOPF to inject money into the BOP. As a result, Justice Tshweneyagae agreed with the CMB directors that the money from BPOPF cannot be regarded as dirty money.
“There is no single evidence pointing to money laundering activities between the General Partner and the Limited Partner either directly or through their directors. In terms of the en commandite agreement Applicants (Okaile and Marsland) had exclusive management of the funds invested in the partnership,” the judge ruled in alignment with Clause 15.1 of the partnership agreement which prohibits the Limited Partner from partaking in management or control of the BPO, transacting or having any power to sign for or otherwise bind the BOP.
In recognition of the exclusive investment mandate, Justice Tshweneyagae concluded that the agreement provided for unlimited liability of the CMB directors. Moreover, the CMB directors were accused of making some investments in their names personally, using the BPOPF funds. That the investments could be in their names in this type of agreement is not something outside of the agreement, according to Justice Tshweneyagae. “They were to look out for investments and opportunities for the BOP,” he noted. “Clause 16.1 of the agreement provided for that.”
In the context of the agreement, the judge added, to charge Okaile and Marsland with money laundering was irrational. “It is clear that the agreement provided for recourse between the parties in the event of a dispute,” he said. “The recourse provided was one of arbitration. It is unfortunate that a purely contractual matter was elevated to a criminal matter.”
Justice Tshweneyagae noted that contrary to what the AG and DPP says, there is evidence that investments were made into companies like Wilderness Safaris, Bona Life and Cell City (to mention a few), with share certificates and company registration documents.
Consequently, Justice Tshweneyagae ruled that DPP’s decision to charge Okaile and Marsland with money laundering and obtaining by false pretenses reviewed and set aside. He acquitted and discharged Okaile and Marsland of all charges. Further, warrants of arrest issued against Marsland dated 12/06/19, 11/07/19 and 12/07/19 and any other such warrants were cancelled and set aside by Justice Tshweneyagae.