South Africa


Western Cape Judge implicated in misappropriation of R8m in legal firm trust funds

(Photo: Adobestock)

The South African Legal Practice Council has lodged an application with the Western Cape High Court to have two directors of a law firm linked to Judge Mushtak Parker struck from the attorneys’ roll. The sin: an alleged misappropriation of around R8-million from the firm’s trust fund.

The matter, which is set to be heard in the Western Cape High Court, was originally brought to the attention of the Cape Law Society by a whistle-blower in July 2018.

Case No 22707/19 was enrolled at the Cape High Court on 25 January 2020 and is due to be heard in the troubled division on 21 February 2020.

The complainant alleged that the trust fund of Parker and Khan Incorporated, of which Judge Parker was a director, was in arrears by about R8.2-million.

Further allegations are that the firm did not generate sufficient funds to pay its creditors, that trust account funds were used to pay creditors and that the trust’s client ledgers had been manipulated to “make it appear that the accounts balanced”.

The South African Legal Practice Council (LPC) has asked the court for a curator to be appointed to administer the accounts of Parker & Khan Incorporated, pending an application to strike two directors, Abdurahman Khan and Irfan Kassiem Parker, from the roll.

In his answering affidavit, Irfan Parker reveals that his brother Mushtak Parker, a former director of the firm until he resigned after being appointed to the Bench in 2017, had “stumbled on the trust shortfall” and had confronted Khan about this.

“I raised the issue with both of my fellow directors [Khan and Mushtak Parker] directly and in person until Mushtak left the firm, and thereafter during the latter part of 2016, by way of WhatsApp communications,” Irfan Parker revealed.

Daily Maverick has contacted Judge Parker to determine whether he disclosed to the Judicial Services Commission during his interview in 2017, for a spot on the Western Cape Bench, that a firm of which he was a director at the time had been implicated in the misappropriation of funds.

As a candidate for the Bench, Parker, in the standard application form, was required to reply to the general question of whether there was anything the JSC should be made aware of that could bring the judiciary into disrepute.

It appears Judge Parker did not disclose the shortfall in the trust fund of his legal firm.

Judge Parker had not responded to several emails at the time of writing.

In its founding affidavit the LPC’s Janine Kim Myburgh said the application was being brought as Khan and Parker “may have misappropriated funds held in trust on behalf of some of their clients and it is apparent that they have mal administered trust funds”.

The funds in trust included Road Accident Fund payouts, a R1-million payout from the Department of Education, as well as several deceased estates.

The LPC launched an investigation into Parker Khan Inc, which is listed as the Third Respondent in the matter, obtaining records of the firm’s books and bank accounts in the process.

During a meeting with the whistle-blower in April 2019 Myburgh had revealed that at the end of 2018 and the beginning of 2019, a document had been drafted to estimate the trust shortfall. At that stage it had stood at an estimated R5-million.

The investigation revealed that Parker Khan Inc auditors, Arnold Swartz and Associates, had issued an unqualified trust audit report for both 2017 and 2018 financial years.

Parker Khan Inc was formed in 2005 when Khan and Irfan Parker merged with Mushtak K Parker Attorneys to form Parker & Khan Inc.

“In 2016, Mushtak Parker effectively withdrew from the practice, as he started acting as Judge of the High Court, Western Cape, whereafter he was permanently appointed to the bench on 1 November 2017,” Khan told investigators.

During an interview with Khan in August 2019, he had admitted “that there was a trust shortfall”.

When asked when he noticed this shortfall, Khan had responded that “he was unable to identify certain matters in which there was a trust shortfall. He was not able to provide a list of the irregular transfers which resulted in the trust shortfall,” LPC investigators found.

Khan had also said that he had “only recently” brought the matter to the attention of fellow director Irfan Parker.

Parker, in turn, had told investigators that he had no part in the irregular trust transactions but Khan had stated that both directors had been required to sign off on payments, implying he should have been aware.

Irfan Parker told investigators that he had “no involvement in or contribution to the shortfall in the trust account”.

The LPC founding affidavit revealed that in March 2019 an amount of R7,973,255.71 had been transferred from a “Supplier Journal” to the firm’s Fees Ledger Account.

From a copy of a loan agreement supplied to investigators, it became evident that the two directors had loaned some of the money from a Mr Hassaniyan Ibrahim Velaskar.

The loan agreement had been signed on October 2018 “in terms of which the First Respondent [Khan] and Second Respondent [Parker] acknowledge themselves to be truly and lawfully indebted to Mr Velaskar in the sum of R1-million”.

“It is respectfully submitted that the First Respondent [Khan] and Second Respondent [Parker] appear to have administered trust funds under their control in an irresponsible and reckless manner, without regard for their duties as attorneys,” said the LPC.

There was clearly a shortfall in the trust account of Parker & Khan Inc and the two attorneys, said the LPC, “cannot be trusted to practice as attorneys as they pose a danger to the public at large”.

While Khan had admitted that there was a shortfall held under Parker & Khan Inc’s control, Parker claimed that he had been unaware of developments with regard to the trust account even while, said the LPC, “he is a director” and “as an attorney has a responsibility to ensure that the firm’s trust account is kept in order”.

From bank statements and other documents obtained by investigators it was clear that as of March 2017 the shortfall in the Parker & Khan Inc trust account stood at R7,876,882.39 and R7,556,829.37 as of February 2018.

Khan and Parker, said the LPC investigators, had been “rolling monies so that when the trust’s creditors monies are due for payment, in a situation where there is insufficient monies held in trust at that time for that trust creditor, then money is taken from different trust creditor’s account to satisfy the other trust creditor”.

“It gets to a point where this would lead to a ‘crash’ whereby the remaining trust creditors are left without sufficient monies.”

Irfan Parker did not immediately report the shortfall to the LPC “when he apparently got to know about the shortfall” and instead had agreed to assist Khan “to attempt to regularise the shortfall”.

“He ought to have immediately reported the matter to the Applicant [SALC] as well as taken steps to unravel the extent of the problem,” said the LPC.

Both Khan and Parker, the LPC said in its founding affidavit, could not be trusted “to practise as attorneys pending final determination of applications to strike their names from the roll of attorneys”.

As directors of Parker & Khan Inc, Khan and Parker had both been responsible for the affairs of the firm, said the LPC.

The two attorneys had “committed the worst professional sin that an attorney could commit, by misappropriating funds belonging to clients”.

Irfan Parker revealed that “on a date which I unfortunately cannot recall”, the firm’s three directors, including Mushtak Parker, had met. At this meeting Mushtak Parker had “confronted Khan, who was in charge of finances and accounting, with it, but Khan could not explain it”.

Irfan Parker said that in the interests of “transparency” he had attached the fees ledger from 1 March 2013 to date, “in which the shortfalls in the trust account over the years is reflected”.

“I had never seen this ledger until my Counsel requested it,” said Irfan Parker.

He attached to his replying affidavit WhatsApp messages between himself and Mushtak Parker and Khan between 16 June 2016 and 10 October 2019, “some of which related to the issue of trust funds”.

Importantly, if this is not challenged by Judge Parker, it would seem to indicate he was aware of the misappropriation of funds from the trust fund account of a firm of which he was a director at the time.

The WhatsApp texts are attached to Parker’s affidavit as an annexure.

Irfan Parker said that in August 2019 “it was agreed that each of the three of us would raise one third of the shortfall in the trust account and that we should inform the Applicant [LPC] that the account will be regularised by 30 September 2019”.

In a WhatsApp between Irfan Parker and Judge Parker on 6 September 2019, Judge Parker had informed him, “I HAVE tried very hard to come to the party which I by implication allegedly contributed to.” He added that “a number of different people” had been approached for loans.

These people, added Judge Parker, had needed to be informed “who the money is for”.

“Two of these people have already reverted to me promising R100k each,” said Judge Parker.

The implication of Judge Parker in this matter involving his former legal firm as well as his apparent lack of disclosure of this to the JSC during his interview for the Bench is bound to add to the woes of the Western Cape judiciary.

It will be embattled WC Judge President, John Hlophe, who will oversee the allocation of the case, implicating a fellow judge, to another judge in the division.

It is common knowledge in the corridors of the division that Judge Parker and Judge Hlophe have a tempestuous relationship. This has been confirmed to Daily Maverick by three independent sources. DM