Conrad Dube/Shakeman Mugari/Dumisani Muleya
THE Zimbabwe Allied Banking Group (ZABG) is practically insolvent after a Supreme Court ruling which said it acquired the core of its assets illegally.
Lawyers say the ruling by Justice Wilson Sandura virtually pulled the plug on the ZABG and left it insolvent and facing collapse. Stripped of assets seized from Trust Bank and Royal Bank, the ZABG is a shell and cannot trade.
RBZ governor Gideon Gono was instrumental in the formation of the ZABG.
The judgement said the assets acquired by the ZABG from Trust Bank and Royal Bank were taken unlawfully. It also said the curators who sold those assets did not follow the Troubled Financial Institutions (Resolution) Act and the Banking Act.
The sale of the assets was ruled “null and void”. Trust and Royal Bank shareholders immediately unleashed their lawyers to take steps to regain the assets.
In a letter to the Reserve Bank, Royal Bank lawyer Sternford Moyo said the ZABG should immediately stop trading in unlawfully acquired assets and return the properties.
“Clearly, it is untenable and insupportable that an institution be allowed to trade, even for a day, with assets judicially declared to have been unlawfully acquired by it,” Moyo said.
If the assets are returned to the owners, the move will suck life out of the ZABG whose shareholders may not have the capacity to pump in trillions to prevent its closure. It will trigger a run on the bank.
Although the ZABG recently declared a $28 billion profit, the ruling has thrown its book into disarray as it might find itself paying billions in damages and forfeiting its profit.
A series of lawsuits linked to illegal use and benefit from the unlawfully acquired assets might follow soon, crippling the struggling bank which experienced severe teething problems as it tried to rise from the ashes of collapsed banks.
Speculation was rife yesterday the ZABG might have been involved in financial engineering to come up with a favourable balance sheet underpinned by the illegal assets.
Sources said two big companies lent money to the ZABG before the June 30 reporting deadline to boost its balance sheet.
“One company deposited $50 billion, while another put in $20 billion before the accounting dates to boost the balance sheet,” a source said. “On July 1 the money was transferred to other banks as the purpose of the deposits had been achieved.”
Following the ruling, lawyers for the closed banks have been piling pressure on the ZABG and the Reserve Bank to immediately stop the bank from trading.
“In the meantime, please confirm as a matter of urgency that the ZABG will desist from trading with unlawfully acquired assets and resources and restore such assets and resources to the curator of Royal Bank forthwith,” Moyo wrote to the ZABG, the RBZ and the curator’s lawyers this week.
“Clearly, in the light of the clear and unequivocal judicial pronouncements to the effect that your clients acted unlawfully, we trust that they will act to remedy the situation as a matter of urgency and without having to await further judicial intervention,” Moyo said.
The lawyers want the RBZ to appoint another curator for Royal Bank to facilitate remedial action against the unlawful actions of the curator, Robert McIndoe.
The attorneys also want “an independent and impartial discharge of statutory obligations to correct the unlawful mess arising from the unlawful conduct of the curator of Royal Bank.”