High Court officials and the whole judicial process are under threat to be sucked into the ‘vortex of the black hole’ that is becoming the Bank of Botswana vs Kingdom Bank case. According to a source close to the ongoing legal tussle in the High Court in Gaborone Collins Newman & Company faces allegations of forgery as the P27 million suit against the Bank of Botswana’s takes another turn. Collins Newman & Company, one of the country’s foremost law firms, has been accused of forging a High Court stamp, in order to circumvent the deadline for submission of court papers that had lapsed. The allegations are related to the case currently pending before High Court judge, Justice Zein Kebonang, in which Bank of Botswana (BoB), through its lawyers Collins Newman, is seeking to stop EBC Guernsey from attaching BoB’s property to reclaim a P27m debt arising from the winding up of the defunct Kingdom Bank Limited (KBAL).
In an affidavit filed before the court, South African veteran handwriting expert, Gerhard Cloete, swears that upon analyzing the High Court stamps impressed on documents purportedly signifying BoB’s intention to defend the suit submitted to the Registrar of the High Court by Collins Newman & Company, he concluded that they had been tampered with and a false date inserted on them. The late submission by Collins Newman & Company was the main reason for a default judgment in the sum of P27 million being granted against Bank of Botswana, The Business Weekly & Review has gathered. The issue surrounding the time of submission of the said papers has become central to the legal tussle between two of the country’s most prominent law firms; Collins Newman fighting on the BoB corner and Minchin and Kelly representing EBC Guernsey, hence the focus on the High Court stamps. The default judgment granted against Bank of Botswana on the basis that the central bank failed to submit papers signifying BoB’s intention to defend the EBC Guernsey’s suit over the company’s losses resulting from the alleged mismanagement in winding up of Kingdom Bank.
THE HEART OF THE MATTER – DATES AND STAMPS
The default judgment is said to have been granted on the 15th of July. Collins Newman & Company, maintain that their papers were submitted on time. They argue that they submitted their papers on the 19th of June, more than a month before the default judgment. According to the source, High Court Assistant Registrar, Bafi Nlanda is said to have sent a letter on the 27th June vouching for the authenticity of the submission by Collins Newman & Company. The letter, The Business Weekly & Review investigations have revealed, was written immediately after the High Court official had held a meeting with one Bokani Machinya, a lawyer at Collins Newman & Company.
However, EBC Guernsey Director, Stephen Wentzel has dismissed BoB’s account, calling it a forgery. According to Wentzel, they applied for default judgment which was granted on the 15th July. Wentzel contends that Collins Newman & Company papers were forged in a bid to create an impression that same were submitted within the stipulated time. Handwriting expert Cloete’s analysis corroborated Wentzel’s assertion that stamps borne by Collins Newman & Company were forged. Collins Newman & Company, have countered the assertion and have called in their own expert, a veteran Cecil Greenfield, a forensic expert. Greenfield is a qualified member of the American Association of Handwriting Analysts. The enquiry into the authenticity of the documents, was hampered by the fact that the original files of the documents have since disappeared from the Court collection, according to some sources.
BOB HOT POTATO
The KBAL saga has become a hot potato for the Bank of Botswana since the regulator took over control of the now defunct Kingdom Bank (KBAL) and placed it under temporary management due to acute liquidity constraints. KBAL’s liquidity woes resulted in creditors being unable to access their funds and with KBAL staff going unpaid for several months.
An inventory of the balance sheet compiled by the temporary managers, Deloitte Botswana, showed that KBAL liabilities outweighed its assets by approximately $17 million (P163 million), leading to the BoB, as the regulator, petitioning the courts for an order to close down the offshore bank. According to the daily newspaper, Mmegi in a statement released in March this year, the central bank said that during the temporary management period, Deloitte found out that the asset base of the bank had been severely eroded due to a number of factors that gave rise to the liquidity problems and ultimate insolvency. The petition for the final winding-up of KBAL was brought before the High Court of Botswana on May 12, 2015, and an order was subsequently granted with Max Marinelli and Chris Bray being appointed to act as joint liquidators. An inventory of the bank’s assets released by the BoB showed that liabilities outweighed assets by as much as $16.7 million (P160 million) with an estimated minimum recovery rate of 12 percent on deposits. The majority of KBAL’s creditors and debtors are in Zimbabwe where the bank originates. The British financial services company EBC Guernsey approached the High Court early this year, seeking to sue Bank of Botswana over its failure to properly regulate KBAL which in turn caused EBC losses amounting to P25 million, add legal costs, the total would come to around P27 million.
According to insiders, KBAL’s non-compliance began as early as December 2013. The reporting systems of the BoB provided the warning signs of KBAL’s lack of liquidity, however, despite BoB placing Kingdom Bank under management, BoB failed to take decisive action to minimize or entirely negate creditor’s losses. BoB’s failure to fulfil its statutory duties did not only arise from its failure to ensure Kingdom Banks liquidity but more importantly, when faced with KBAL’s non-compliance it failed to properly oversee its administration. In August 2014, when it was evident that KBAL lacked liquidity, two potential investors had proposed to buy the beleaguered bank.
Mauritian financiers, Dolberg Capital and South African agricultural financier, Afgri Ltd, made offers to purchase Kingdom Bank. The Bank of Botswana failed to act on both offers, notably, at a time when such offers would have secured KBAL’s creditors and prevented the losses occasioned to both BoB and Kingdom Bank arising from its downward trend towards insolvency. Sources say both suitors included in their offers, a guarantee for depositors’ funds, making it clear that they understood that KBAL was experiencing financial difficulties. “The Bank failed to prevent the insolvency of Kingdom Bank and the losses resulting from that, to the depositors,” argued an insider.
KBAL need not have been placed under liquidation given the offers to purchase it. Bank of Botswana had the regulatory oversight to put in place measures of control which would have sustained KBAL pending the finalization of the purchase and in so doing adhering to its obligations under the Act. Given that KBAL faltered and collapsed under the watch of Bank of Botswana, experts argue, points to the regulator’s failure to take the least painful direction to rescue it. Financial experts indicate that the refusal of the Bank of Botswana to grant potential investors an opportunity to inject liquidity into KBAL constituted a potential failure by BoB to fulfill its mandate.
THE BOTSWANA GAZETTE AND THE SUNDAY STANDARD JOIN THE SUIT TO OPEN UP BOB CASE FILE
The Business Weekly & Review sought access to the file on this matter and were denied access. The publication has since instructed its lawyers, Bayford & Associates to demand access through the courts by challenging the rules that stipulate that files be kept closed to public scrutiny. The central tenet of this newspaper’s argument is that a matter involving BoB is of public interest and that the public has the right to receive information regarding public institutions; the media and for that matter any member of the public has the right to inspect court proceedings in an open society. Two weeks ago, The Botswana Gazette and The Sunday Standard have joined the case in support of The Business Weekly & Review. In another rare victory for the media, the pan-African legal NGO Southern African Litigation Centre has thrown its weight behind the lawsuit by The Business Weekly & Review.