Ricochet News

Fidentia's J Arthur Brown begins 15-year jail sentence

DECEMBER 3, 2014
Fidentia's J Arthur Brown begins 15-year jail sentence

Former Fidentia boss and PE businessman, J Arthur Brown, has been arrested in Cape Town and will be taken to prison on Wednesday morning where he and is expected to begin his 15-year jail sentence. This is after a warrant of arrest was issued on Tuesday afternoon, after he failed to report to prison to begin his prison sentence for fraud. 

In 2007, Brown was the CEO of Fidentia, a firm that mismanaged around R1.4 billion meant to help orphans and widows of mineworkers. 

According to Hawks spokesperson Paul Ramaloko, Brown was arrested on Tuesday night and taken into police custody.

“The arrest warrant was issued and executed. He handed himself over without any difficulty,” he said.

"He will now be taken to prison to begin his sentence."

Initial sentence overturned 

On Monday, the Supreme Court of Appeal handed down 15 years' imprisonment on each of the two fraud charges Brown pleaded guilty to. The sentences would run concurrently.

In May last year, Western Cape High Court Judge Anton Veldhuizen initially sentenced Brown to a R150 000 fine (R75,000 for each fraud charge) or a suspended jail term.

Brown pleaded guilty to two fraud charges relating to his handling of investments for the Transport Education and Training Authority and the Mantadia Asset Trust Company between 2002 and 2006. He had originally faced 192 charges.

The National Prosecuting Authority's (NPA) appeal was heard last month.

New sentence welcomed

The Financial Services Board (FSB) on Monday welcomed the Supreme Court of Appeal's decision to overturn Brown's previous sentence acknowledged the seriousness of the fraud he committed.

“The previous sentence simply did not acknowledge the severity of Brown’s crime and the significant impact his actions had on thousands of poor South Africans,” FSB executive officer Dube Tshidi said.

“This is a great day for South Africa’s justice system and for our citizens. It shows that no matter who you are, if you break the law, you will be prosecuted and sentenced appropriately.”

Brown's meteoric rise

Brown's meteoric but short-lived business empire was a far cry from his previous base - a smallholding in modest Green Bushes, Port Elizabeth, and his instant-lawn business in that city.

According to Independent Newspapers, he was listed in the companies' register as a director of several other virtually unknown enterprises in the Eastern Cape, including construction, transport and computer companies registered in Umthatha.

Brown was reportedly born in Namibia and was about six when his father died. He and his two brothers then moved to South Africa with his mother and lived with his stepfather in the southern Cape.

His qualifications are unknown, but he told colleagues that he had studied at the University of Port Elizabeth and had once worked for a local merchant bank.

Moving to Cape Town in 2002 or thereabouts, Brown reportedly dabbled in currency trading. At first he had few clients interested in entrusting money to his then company, Brown Brothers.

But, amazingly, Brown won the business of the transport Seta (Transport Education and Training Authority, or Teta), a government skills and training initiative. The R150 million invested by Teta was not properly invested and Fidentia owed the Teta R250 million. That is when trouble started.

The high life

Financial statements reflected that Fidentia itself lived the high life, paying huge salaries and providing perks that included a gym at its corporate headquarters at Century City in Cape Town.

The monthly salary bill of Fidentia Holdings alone are thought to have been about R20 million. Then there were bonuses and commissions paid to senior executives, R2 million spent on "staff welfare" each month and R4 million on entertainment.

Brown lived in a mansion in the most expensive strip of Sunset Beach, a nouveau riche Atlantic coast suburb 10 minutes west of Cape Town. Then there are farms that were bought for millions in the scenic Boland outside Cape Town, as well as Sante Winelands, which houses a wellness centre that by all accounts is a white elephant. All belong to Fidentia Property Investments Portfolio, according to deeds office records.

His wife, Susan, reportedly received as a gift the multi-level building that previously housed the popular Dockside club. It is now the venue for Facets, another wellness centre. The acquisition of Facets was financed by a loan that was written off when the centre made no profit and was taken back by Fidentia.

Fidentia also splashed out building its corporate image through social investment, which included a youth choir, a R4 million student bursary fund and empowerment awards. Fidentia sponsored a Boland rugby team, renamed the Fidentia Boland Cavaliers, to the tune of R15 million.

Journalist Bruce Cameron of Independent Newspapers has traced how money placed with Fidentia Asset Management was transferred into various Fidentia companies and was treated as capital owned by the companies and not as investors' money, as required by law, including the Financial Institutions (Protection of Funds) Act.

Money invested via Fidentia Asset Management was used to buy other companies, often at inflated cost. Much of this money came when Fidentia acquired the Mantadia Trust Administration company.

Danisa Baloyi was a director of Mantadia and is a trustee of the associated Living Hands umbrella trust.

Living Hands Fidentia was responsible for R1.4 billion of assets of the Living Hands Trust, which functions for miners' beneficiaries. 

Photo caption: Former Fidentia boss and PE businessman, J Arthur Brown, has been arrested in Cape Town and will be taken to prison on Wednesday morning where he and is expected to begin his 15-year jail sentence. Image eNCA.