EAAB faces 'probably the biggest case of fraud' ever

An estimated R20 million to R40m has allegedly been misappropriated by Constantia Sectional Title Managers (CSTM), the managing agent for about 450 bodies corporate of residential complexes in Gauteng.

CSTM's trust accounts have been placed under curatorship and frozen, an interdict was obtained to stop it trading, the business has been placed in provisional liquidation, CSTM director and principal Quintin Brown has been provisionally sequestrated and a criminal investigation has been launched into its affairs by the Hawks.

About R10m collected from unit owners for municipal rates and taxes and services in complexes managed by CSTM was believed to not have been paid to municipalities, Clive Ashpol, the executive enforcement manager at the Estate Agency Affairs Board (EAAB) said yesterday at a seminar in Johannesburg. It was held to update body corporate representatives on the situation and offer them solutions.

The EAAB has been in the news recently over its investigation into trust fund irregularities by Wendy Machanik, an EAAB board member and the principal of Wendy Machanik Property Holdings, and the suspension and subsequent dismissal of the then EAAB board chairwoman Nomonde Mapetla.

Lawrence Moepi, the curator of CSTM's trust accounts, said there was almost R500 000 in these trust accounts at the end of last month.

However, income going through CSTM's accounts in one year totalled more than R300m, said Cindy Nicholls. She is a member of the team of forensic investigators at Pasco Risk Management appointed by the EAAB to investigate the financial affairs of CSTM.

Nicholls added that CSTM "was involved in probably the biggest case of fraud" ever faced by the EAAB.

She confirmed accounts opened by CSTM at FNB did not comply with the Financial Intelligence Centre Act (Fica) and Pasco was engaging with the head of forensics at FNB to determine how they were opened and who was involved.

Marina Constas, a specialist sectional title attorney, said close to 100 000 people were affected but there was "no magic wand" with money quickly coming to those affected.

According to Ashpol, Brown had never been registered with the EAAB but if it was shown that CSTM was acting as a managing agent and proven that CSTM received trust funds and stole this money, it would be covered by the EAAB's fidelity fund.

He said owners of units would not be able to sell their units until they were issued clearance certificates by their body corporate while banks would not approve any mortgage bonds over affected units because the financial statements of the bodies corporate were "suspect".

Nicholls said Pasco was "a month to six months away" from providing a forensic investigation report to the EAAB.

Moepi said the funds in accounts opened by CSTM at Nedbank and FNB were immediately frozen on his appointment as curator to safeguard these funds and would remain frozen until his audit had been completed.

He had to report back to the South Gauteng High Court at the end of August, but might need more time to complete the audit, he said.

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Article from: www.iolproperty.co.za