Durban law firm ordered to pay R7m to Ponzi scheme victim
Durban law firm Garlick and Bousfield has been ordered to pay R7m to a former client who invested money in what turned out to be a multimillion-rand Ponzi scheme run by disgraced lawyer Colin Cowan.
The successful claim by businessman Merlin Stols is one of several matters pending before the courts as those who were ripped off by the once “trusted and respected” attorney attempt to hold the law firm legally responsible for their losses.
Cowan, who worked as a consultant for the firm, committed suicide in November 2010 at his home in Innes Road, Durban. He left a suicide note in which he admitted his guilt.
In his evidence before the Pietermaritzburg high court judge Jerome Mnguni, Stols said he had struck several deals with Cowan through his “bridging finance scheme”, ostensibly propping up property transactions which were pending finance. The final one was for R7m, R2m of which was deposited into the firm’s trust account.
Scheme was said to be 'kosher'
Stols was reassured by the fact that Cowan worked for the firm. He said another director had assured him the scheme was “kosher” and that letters of undertaking were signed off by directors.
The firm’s Brian Jennings said in his evidence that he could have “kicked himself” for trusting Cowan. He said the firm was facing claims of R100m, and that “investors” should have done their own homework before handing over their money.
He said: “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.”
Expert evidence before the court revealed there were hundreds of deals‚ that there were no borrowers‚ “only lenders paying lenders”, and there were no underlying property transactions.
In the long-awaited judgment handed down on Tuesday, Mnguni ordered the firm to pay Stols R7m plus interest.
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