Updated: US firm Symbion sued in New York court
Symbion, a company once associated with the family of controversial Durban businessman Vivian Reddy, is currently being sued in a US court after allegedly siphoning money from electrical power contracts in Madagascar and Tanzania.
According to the application in the Southern District Court of New York, US-company Symbion has a history of agreeing to build electrical power infrastructure but does not complete the contracts and siphons off funds intended to be used for completing the projects.
Amazingly, the same company was part of a consortium that recently lost a case against Eskom for building a power line that was not completed, and had its application for payment of R625-million turned down by the Appeal Court in October last year. That company, a local associate of the US company Symbion PNC, is now in liquidation and Reddy’s son, Shantan, has resigned as a director.
Vivian Reddy, who helped former president Jacob Zuma to pay for his Nkandla compound, has been linked to corruption allegations with Ace Magashule, and is the subject of a forensic investigation that claims that Reddy’s Edison group’s R1.2-billion contract “did not comply with legislative and administrative requirements”. Shantan is deputy chair of the Edison group.
Subsequent to the publication of this article, a legal firm acting for the Reddy family supplied the Daily Maverick with detailed company registration documents regarding Symbion PNC. The Lexis Windeed company registration document show that Vivian Reddy was a director Symbion PNC but resigned long before the Eskom contract was signed. Shantan Reddy was also a director and resigned in 2012, about a year after the Eskom contract was concluded, but before the dispute over the work began.
The US court application is being brought by Malagasy entrepreneur and investor Zouzar Bouka and his companies, Vision Indian Ocean, SA (VIO) and VIMA Real Estate SARL (VIMA).
According to the court documents, the companies are seeking discovery arising out of Symbion’s participation in a “multimillion-dollar theft from the Mandroseza Power Plant, a project designed to bring reliable electricity to Madagascar”.
The applicants claim that “Bouka’s investments focus on furthering Madagascar’s economic development. To that end, applicants embarked on the restoration and rehabilitation of the Mandroseza Power Plant, which was intended to supply power to the city of Antananarivo and, when fully repaired, could supply 15% of Madagascar’s electricity demand.
“In 2014, Mr Bouka met with Paul Hinks, who headed the Symbion group of companies. Symbion had won multiple US government contracts to rehabilitate electrical infrastructure in Iraq and Afghanistan, was a major participant in the Obama administration’s Power Africa initiative and therefore appeared to be the perfect partners to restore the plant.”
According to the court documents, the next year, VIMA (later succeeded by VIO) entered into a joint venture Agreement with Symbion Power LLC (Symbion Power). But all was not as it seemed. Symbion, it turned out, has a track record of misconduct. Applicants later learned that Symbion had been accused of ditching a Tanzanian power plant project and, facing court and arbitration claims from unpaid staff and suppliers, surreptitiously distributing the project’s assets to other Symbion entities and entities affiliated with Hinks and Symbion’s other principal, Lord Westbury.
“In an enforcement claim of an arbitral award, the Tribunal found that, as a contractor on a USAID-funded power plant project in Afghanistan, Symbion had exaggerated its costs and could not rely on its invoices as evidence of its entitlement to payment. Litigation both in this Court and in the New York and Delaware state courts describe a similar pattern of using the corporate form to avoid liabilities and defraud creditors.
“True to form, shortly after the Madagascar Plant was capitalised, Symbion decided to loot it. Between March 2017 and February 2019, Symbion transferred approximately $5-million to other businesses, including Symbion Power Services US Inc. and Symbion Power Holdings LLC. Symbion kept these payments secret and did not include them in financial reports to VIO and other investors.
“These payments were only discovered when Symbion inadvertently sent the real financial reports to its co-investors. Caught, Hinks admitted that Symbion had been going through a tough period and had to take a ‘loan’ from the Plant to pay, among other things, for rent on its office and other headquarters functions in New York. When his co-investors demanded that Symbion return the misappropriated funds, Symbion refused and instead told the Plant’s principal customer it would withhold millions of dollars in payment while the dispute was pending in order to try to extort a settlement.”
Symbion did not respond to a request for comment from DM168, but is reported to have denied the charges in the US press. The case is pending.
The modus operandi of Symbion in Madagascar and Tanzania appears very similar to what happened in SA.
According to the Appeal Court finding, Symbion was part of a 2011 joint venture that contracted with Eskom to construct a 100km 765KV Gamma-Kappa single-circuit transmission line. The contract price was R320,404,064.98.
The joint venture failed to complete the works within the stipulated period, the judgment found. It was afforded an extension until 10 May 2013. However, it became apparent that it would still not be able to complete the works within the agreed extended period.
In a letter dated 13 March 2013 it requested a further extension from Eskom. In its recovery plan it listed challenges that it had encountered, including some that it attributed to Eskom. As a result of the delays, the cost of the project escalated to R807,129,083.00, substantially more than double the initial contract price.
During the period 23 December 2014 to 14 May 2015 the joint venture notified Eskom of 13 claims amounting to R625,079,491.77, which allegedly emanated from the delays occasioned during the 165 days of the extended period.
Eskom counterclaimed, and the Appeal Court found in its favour.
Subsequent to the publication of this article, Symbion released a statement saying this article “regurgitates a series or statements which are false in a New York proceeding which the article which Maverick falsely claims is a ‘lawsuit’. In fact the proceeding in New York is a procedure to obtain documents and information only, ” which the company described as a “thinly disguised attempt to injure Symbion”.
The company also said it had no business with “Reddy”, an assertion contradicted by the company registration document, and it claimed (falsely) that not attempt was made to contact Symbion prior to publication. DM168
This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R25.
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