eBusiness Weekly
Martin Kadzere
Former directors of the ENG Group, the first casualty of Zimbabwe’s financial crisis in 2004, have been fingered in the alleged fraudulent transfer of the ownership of an upmarket Harare commercial property sold in 2005 during the liquidation of the financial services firm.
Belgravia House was owned by ENG before it was sold to pay off the group’s creditors at the height of its troubles nearly 18 years ago.
ENG owned the property through an investment called Theright Investments, which was in turn 100 percent owned by Enganein Investment, also wholly owned by ENG. It had bought the property from one Michael Clinton in September 2003.
ENG group comprised ENG Capital and ENG Asset.
ENG, whose directors were Nyasha Watyoka and Gilbert Muponda and dozens of properties linked to them, were specified in terms of the Prevention of Corruption Act in May 2004 after failing to pay depositors on the maturity of their investments.
This was after the directors placed the group under voluntary liquidation in January 2004. Regis Saruchera of Camelsa was appointed the liquidator of the firm while the Government also appointed him the investigator of the specified persons.
Enganein Investments was among the properties disposed of to pay off the creditors.
It was sold to a company called Prosdeng Investments, which took over Theright Investments as the beneficial owner. The property was later sold to Kunze Kwayedza Enterprises in 2021.
However, Muponda and Watyoka took Kunze Kwayedza to court, claiming to be the rightful owners of the Theright Investment claiming that the sale of Belgravia House was irregular.
“Whatever the transaction that happened was fraudulent because the property did not belong to ENG, but was jointly owned by myself and Watyoka,” Muponda told Business Weekly Friday.
On September 14, 2022, High Court Judge Justice Tagu ordered all transactions involved in the transfer of the property from Theright Investments null and void, implying the sale of Belgravia House along Sam Nujoma, former Second Street, was unlawful.
The circumstances
ENG Asset took deposits from the public for investing in short-term money market investments, but upon maturity ENG Asset failed to settle its obligation to the depositors an amount of $133 billion, including interests 18 years ago.
Its failure to pay the depositors, due to liquidity constraints, was a result of ENG’s alleged illegal transactions involving the diversion of short-term deposits to buy long-term assets such as shares on the equities market, vehicles, commercial and residential properties, financial assets and companies, according to the liquidator’s report.
In December 2003, its directors passed resolutions for voluntary liquidation.
The depositors of ENG Asset demanded their deposits plus interest following the maturity of the short-term investments. Century Discount House, the second largest creditor, filed a report with the police citing allegations of fraud by the ENG directors.
A joint liquidation consent order was sought by First Mutual Life, the largest creditor and the directors of ENG Asset. This consent order was granted by the High Court.
ENG Asset and ENG Capital were consequently placed under provisional liquidation on January 12, 2004, in terms of the consent order issued by the High Court.
The effect of the liquidation order was that the directors of ENG were divested of all powers and duties regarding the management of ENG and all related assets.
As part of the liquidation process, Muponda and Watyoka signed affidavits empowering the liquidator to deal with the companies and assets owned by ENG Group to settle amounts due and payable to the creditors and contributories of ENG.
This included the shares acquired and assets owned by companies that had been bought by ENG.
The Government specified Muponda and Watyoka and their related companies in a notice published in the Government Gazette Extraordinary of the 20th of May 2004.
The specification order had the effect of freezing any activity within the companies thereby preventing asset stripping or any interference with the management.
Disposal of the Belgravia House
ENG wholly owned Engagein was bought using ENG’s depositors’ funds. Engagein wholly owned and controlled Theright Investments, which in turn owned Belgravia House.
Engagein and Theright, being wholly owned subsidiaries of ENG Capital, were part of its assets that were supposed to be disposed of in the liquidation process to generate cash for settling debts owed to the creditors of ENG.
The entire share capital of Engagein and Theright Investments was disposed to Prosdeng Investments.
This disposal transferred ownership and control of Engagein and Theright Investments and ultimately the Belgravia House from ENG Capital to Prosdeng Investments.
Muponda and Watyoka legally ceased to be the shareholders and directors of Engagein and Theright. Any rights to the Belgravia House ceased as well, the report says.
Proceeds from the disposal of the Belgravia House were used to partly settle amounts due and payable to the creditors of ENG, in the third interim dividend payment.
Belgravia House was sold for $1,8 billion. Other properties which were also sold included Thaine Building and Athanasia Court and various residential stands in Harare.
Before paying creditors, liquidation accounts were prepared as required by the Insolvency Act.
As required by law, the interim liquidation accounts were always made available for inspection by creditors and contributories for 10 working days at the Master of High Court’s offices, before being approved by the Master of the High Court.
A notice was published in the Government Gazette advising creditors and the interim liquidation account lay open for inspection at the Master of High Court’s offices.
The process of having the liquidation accounts laid for inspection at the Master of the High Court afforded creditors and contributors an opportunity to inspect the interim liquidation accounts and raise any issues of concern with the Master or the liquidator.
No issues of concern regarding the third interim liquidation account, which included the disposal of Belgravia House were raised. Upon approval of the third interim liquidation account, the interim dividend payments were made to the creditors.
The liquidation was completed after nine liquidation accounts had been prepared; made available for inspection by all affected persons, and subsequently approved by the Master of the High Court. The funds raised from the sale of assets were used to pay off all dividends to creditors.
Potential scam
Muponda and Watyoka are alleged to have used clandestine means to convince the court that they are the rightful owners of Theright Investments, which owns Belgravia House.
This was after more than one and a half decades after the completion of the liquidation process.
Muponda claims Belgravia House was owned by him and Watyoka through Theright, suggesting that Saruchera could have fraudulently sold the property.
They are also “disowning” the affidavits they signed empowering Saruchera to deal with the companies owned by ENG. Muponda, on January 24, 2004 confirmed that ENG purchased shares in Engagein Investments and empowered the liquidator “to deal with the shareholding or the assets…and utilise the proceeds to settle” creditors.
Then commissioner of oaths Pisirai Kwenda, now a High Court judge, witnessed the signing.
Besides, Muponda and Watyoka in a confidential report on the proof of ownership of ENG to support their bail application listed Belgravia House as one of its assets.
“The liabilities of ENG are a common cause,” reads part of the report. “The amount is $61 billion. “These liabilities are against the asset base of plus or minus $235 billion.
“The perusal of all the assets reflects that the creditors have now been fully secured.
“All these assets have been surrendered to the liquidator who is already inventorising such assets for their disposition for the value,” Muponda and Watyoka said.
Saruchera said the liquidation process was done above board and anyone with substantial claims could approach relevant authorities.
