Iqbal Survé, the chairman of Sekunjalo, intends to sue South Africa’s Financial Sector Conduct Authority following its search and seizure operation at the Sekunjalo offices in Cape Town last week.

He accused the regulator of being part of a fishing expedition led by the Government Employees Pension Fund among others, to bring negative attention to companies he is associated with.

The company’s legal counsel will approach the High Court to set the FSCA application aside, according to a statement issued by Survé. In addition, Sekunjalo intends to proceed with an extensive damages claim against the FSCA, its acting commissioner Abel Sithole, as well as the investigators who participated in the “irregular raid” on the company’s offices.

Sekunjalo will also include an action to recover damages from individuals directly linked to the organisation, which have accrued as a result of the action brought by the FSCA.

The search and seizure operation was conducted as part of an investigation into allegations of manipulation of the AYO share price between April and May 2018. AYO is a subsidiary of AEEI, which in turn is a subsidiary of Sekunjalo.

The investigation transpired after the JSE flagged suspicious transactions and reported these to the FSCA.

Survé did not take kindly to this, as documented in Business Maverick last week, and accused the FSCA of finding a judge, in the form of Judge Patrick Gamble, “who is a friend of the DA and Pravin Gordhan,” to issue the order.

He also accused the FSCA of being used by Sithole to drive the agenda of the Government Employees Pension Fund, which has litigation pending against Sekunjalo.

Judge Gamble, Gordhan and the FSCA took exception to the allegations made against them. Gordhan’s response can be read here.

In a statement prepared on his behalf, Judge Gamble provided a concise lesson on the operations of the Western Cape High Court. He noted that as the week of 30 September to 4 October 2019 was recess in the Western Cape High Court, just two judges were on hand to attend to urgent matters, Judges NC Erasmus and P Gamble.

Judge Erasmus dealt with the court roll that week and Judge Gamble with all other urgent matters.

When FSCA lodged two confidential applications for search warrants, the chief registrar placed the files before Judge Gamble.

The applications were heard on 2 October and Judge Gamble issued both warrants sought by the FSCA.

“The terms of the warrants included a provision that the searches were to be overseen by nominated independent attorneys.”

In other words, the application was not denied by one judge and granted by a second “friendly” judge, as alleged.

Further, “Judge Gamble does not know Minister Pravin Gordhan and has never met him in either his official or personal capacity. Neither the Minister nor his department were, in any event, parties to the proceedings.”

The FSCA also stands by its actions.

“We have a number of investigative tools that we use in our cases, including subpoenas and searches,” said Tembisa Marele, head of communications at FSCA.

Search and seizure operations are among the most effective because they provide the authority with access to information that is not publicly available, she says. This gives FSCA the opportunity to comb through the evidence to see whether there has been any wrongdoing.

Importantly, this is also a mechanism for an innocent party to be cleared.

Survé says he believes Sekunjalo is a victim of unfair treatment.

“It should be noted that the FSCA has not raided any other company operating in South Africa, in the way they invaded our offices… This is a blatant abuse of the power with a specific purpose to achieve private, personal and political agendas,” he said in a statement.

But search and seizure operations are not new or unusual for the FSCA.

“In this year alone, we have searched the premises of at least eight companies. That’s because our new mandate requires that we be more proactive in the way we conduct our work,” says Marele.

This year, FSCA levied a fine of R100-million against Metropolitan Collective Investments after what Marele referred to as “a painstakingly thorough investigation”.

This was the biggest fine in the history of financial regulation in SA. The fine levied against Steinhoff was R1.5-billion, remitted to R53-million because of mitigating factors.

The FSCA investigation had absolutely nothing to do with the PIC, the GEPF or Sithole, who also heads the GEPF, she adds.

In his role as commissioner of the FSCA, Sithole appointed all investigators in April 2018, when the new authority was established. Beyond this he has had no involvement with any investigation, she told Business Maverick. Investigations, like all other operational functions, have been delegated to the relevant executives.

While unrelated, it is possible that pending litigation between the GEPF and Sekunjalo has Survé rattled.

In 2013, the Government Employees Pension Fund provided about R1.27-billion worth of funding to the Sekunjalo-led consortium for the acquisition of Independent Media. Some of this was direct – the PIC, which invests on behalf of the GEPF, acquired a 25% stake in the media business, but the balance was debt funding to Sekunjalo itself.

The company did not service its debt and by the end of September 2018, after interest, Sekunjalo owed the PIC R1.35-billion, according to evidence provided at the Mpati inquiry into the PIC.

Of this, the PIC has written off more than R1-billion, according to corporate finance expert Dirk de Vos. However, it is not being as charitable when it comes to its investment in Sekunjalo subsidiary AYO Technologies.

Just before Christmas 2017, the PIC invested R4.3-billion in AYO Technologies, acquiring 29% of the company ahead of its listing. The investment was facilitated by former CEO Dan Matjila, who appears to have contravened the PIC’s mandate from the GEPF and almost every other corporate governance rule in the process.

The investment is now worth a pittance as the AYO share price has fallen from the lofty heights of R43/share to R5/share and is central to the investigations into impropriety at the PIC.

This year, the PIC issued summons against AYO in a bid to recoup the R4.3-billion that it invested into the technology company. It argues that the legality of the deal can be challenged because AYO misrepresented itself ahead of the investment.

Sekunjalo denies this, and is counter-suing.

The pot is getting hotter. BM