Director of law firm Garlick and Bousfield Brian Jennings says he could have “kicked himself” for trusting colleague Colin Cowan so much that he signed dozens of “letters of undertaking” for what turned out to be a multi-million rand Ponzi scheme.
But‚ he insisted in evidence before Judge Jerome Mnguni in the Pietermaritzburg High Court on Tuesday‚ that the firm should not be liable for the R100-million in claims by those who invested in Cowan’s “bridging finance scheme”‚ saying they should have done their own homework.
The claim before the court is that of Durban businessman Merlin Stols who struck several deals with Cowan‚ the final one being for R7-million (R2-million of which was deposited into the firm’s trust account) just prior to Cowan committing suicide in November 2010.
Evidence before the court is that the letters of undertaking were signed by directors of the firm and were on its letterhead.
Stols alleges he was further “comforted” by the fact that another director of the firm and an acquaintance‚ David Ramsay‚ had assured him Cowan’s scheme was “all kosher”.
Expert evidence has been that in the hundreds of deals‚ there were no borrowers‚ “only lenders paying lenders” and there were no underlying property transactions.
In his evidence‚ Jennings repeatedly stated that Cowan was a “respected elder” whom he trusted implicitly.
“He would come into my office and ask me to sign….I would ask him ‘are we fine?’ He would assure me we were. He would pre-empt my questions. It was like I was being groomed.
“There was never a complaint….his fees were normal‚ his lifestyle was consistent.
“I saw no difficulty in signing the letter of undertaking because‚ in essence‚ if the firm didn’t get the proceeds‚ we would not have to pay.”
Jennings conceded that apart from the “first time”‚ he had not looked at the documentation or done a “mini audit”.
“With the benefit of hindsight‚ I should not have trusted him‚” he said.
But Advocate Spiko Dickson‚ for Stols‚ suggested that Jennings was “just making excuses”.
“What you raise is mitigation‚ not a defence.”
Dickson asked: “Mr Jennings. You are giving me explanations about why you didn’t do your job. All I am asking you is whether you accept you didn’t do your job?”
Jennings replied: “No. I don’t accept that because my job has to be judged by the circumstances at the time. I can’t divorce myself from my subconscious.
“What was surprising was the lenders didn’t know who they were actually lending their money to.”
Dickson: “Are you serious Mr Jennings? That someone who gets a letter from GB signed by you as a director cannot rely on its contents?”
Jennings: “Well he shouldn’t just rely on the contents because the letter is to pay out of the proceeds...the principal debt is not the letter of undertaking‚ it is the loan agreement.”
Jennings said many of the “investors” had made a lot of money initially.
“If you could unscramble the egg‚ a just situation would be that they should pay the losers.
“The firm did not benefit from the scheme…...and it cannot afford to pay even a fraction of the claims. We were as much victims as everyone else.”
Dickson: “I am sure all the plaintiffs feel sorry for you.”
The case is continuing.