A letter from Remo Investment Brokers MD Mohamed Mahmed claims Remo settled with Interfin Securities last month and was, therefore, still awaiting the return of the securities it lodged with the firm which it suspects have been sold.
The letter, dated 20 March 2012 to Interfin securities boss Rufaro Zengeni, reads: “On 23 February 2012, we paid you (IS) an amount of US$849 694,67 to clear all loans that we had with you. On the same date we required that all shares, that were lodged with you as security, be returned to ourselves.”
In an interview yesterday Mahmed said none of the shares belonged to clients.
He said: “None of the shares were client shares. The stock exchange has been aware of this and is satisfied.”
However, a letter dated March 27, 2012 to ZSE CEO Emmanuel Munyukwi, Interfin Securities executive director Rufaro Zengeni denies misappropriating securities belonging to Remo, claiming his company acted as a diligent creditor to recover its debts.
“The allegations by Remo and Mr Mahmed are unfounded and malicious. Interfin Securities did not misappropriate any securities belonging to Remo, it acted as a diligent creditor to recover its debt after the debtors had defaulted on their repayment obligations to Interfin Securities,” reads part of the letter.
In the letter to Munyukwi, Zengeni claims his broking firm –– between 2010 and 2011 –– entered into several separate agreements with Zimslate Quartzite and Remo, which saw Zimslate borrowing US$2,664 million while Remo borrowed US$3,640 million.
The loans, according to Zengeni, ought to have been repaid on or before October 30, 2011.
“The debtors would secure the indebtedness with Interfin Securities via a pledge of shares. In pursuance to the agreements, IS advanced a total sum of US$6 304 981,46 to the debtors and in turn Remo pledged certain shares inter alia, registered under Remo Nominees,” he said.
“It is to be noted that at different occasions, Mr M I Mahmed used Remo to do transactions with IS and as such would at arm’s length tender in security, (which) securities would interchange from time to time between Remo and Zimslate, that is to say, at other instances securities tendered in by Zimslate would be registered under Remo Nominees and these would be called back from time to time and be replaced and tendered in again for Remo obligations.”
Documents seen by businessdigest show that Remo owed Interfin US$649 694 made up of US$218 821, US$144 590 and US$220 925.
Zengeni said sometime in August 2011, CBZ shares registered under Remo Nominees were sold to settle Zimslate’s indebtedness, with the consent of Remo.
But documents seen by businessdigest showed that the shares were not to be sold or re-registered to another party.
Investigations by businessdigest also revealed that some of the shares have been re-registered with other parties.
“It is common cause that Zimslate and Remo defaulted in repaying their loans,” the letter reads.
Zengeni said, in September 2011, that Mahmed and Tinashe Chimanikire, a Zimslate director, who were representing Zimslate, gave Interfin Securities a payment plan to settle outstanding amounts.
Chimanikire and Mahmed, according to the documents, proposed to pay US$400 000 by October 2011, US$300 000 by November 30, 2011, US$250 000 by December 31, 2011, another US$250 000 by January 30. They also proposed to settle the outstanding balance by February 28.
Mahmed yesterday said Remo and Zimslate were two separate entities.
“These are two separate entities and anything to do with Zimslate should be directed to Zimslate themselves. Remo has nothing to do with Zimslate,” he said.
The duo –– Mahmed and Chimanikire –– allegedly breached their repayment proposal, Zengeni claimed in his letter.
“The commitment to the payment plan by Zimslate was not executed timeously and as at the date of signing this letter Zimslate is still in default,” Zengeni said.
Interfin Securities, according to Zengeni, liquidated some of the pledged securities –– listed shares –– “pledged” by REMO and Zimslate.
“At the time of liquidating the said shares the securities had been interchanged from Remo to Zimslate at the behest of the Mr Mahmed,” Zengeni said.
“Accordingly, Interfin Securities was well within its rights to realise the pledged property in order to settle the debtors’ indebtedness to Interfin Securities. Indeed it is intrinsic in the very nature of a pledge that upon failure by the debtor to act in terms of the loan agreement, the pledgee can sell the pledged property to settle the debt.”
Zengeni said the relationship between Interfin Securities and Remo Investment Brokers and Zimslate Quartzite was always that of creditor and debtor, as opposed to one of client and stockbroker as suggested by Mahmed.
“With respect therefore, this is not a matter within the realm of the ZSE as Interfin Securities has not breached any of its obligations and/or duties vis-à-vis the ZSE,” Zengeni said. “For good measure, under no circumstance did IS abuse and/or misappropriate securities belonging to Remo Nominees in its capacity as a stockbroker or at all; there was an underlying creditor/debtor agreement between Interfin Securities and the debtors.”
Zengeni said Mahmed had used his influence as a stockbroker to source for certain credit facilities from his Interfin Securities to assist his companies on purely business terms as corroborated and evidenced by the fact that his companies –– Remo and Zimslate –– tendered in security.
“Remo, through its Managing Director, Mr Mahmed is trying to nicodemously hide behind the corporate veil principle in a bid to conceal its related company’s identity and consequently, in that respect, we do not accept that position as he is enlisting ZSE to assist him to escape liability through Zimslate,” he said.
Zengeni denies IS misappropriated any securities belonging to REMO, saying his company acted as “a diligent creditor” to recover its debt after the debtors had defaulted on their repayment obligations.
But people close to Remo said the shares were simply “lodged” with Interfin Securities and not “ceded”.
Zimslate still remains indebted to IS and as such IS still has the legal right to retain the pledged shares that it has in its possession, Zengeni claimed in the letter.
“Furthermore, Remo and Zimslate cannot be unjustifiably enriched through its well-orchestrated delays in settling the amounts due to us, and also recalling and interchanging of securities to deprive, confuse and prejudice IS and consequently separating it from its funds which are long overdue,” Zengeni said.
“In the light of the above, IS reiterates that it is committed to the upholding of values of the Zimbabwe Stock Exchange, to which it is a proud member. In all respects, Interfin Securities remains available to clarify any issues which may arise here from and holds itself available to appear in any adjudicating process which may be deemed necessary to settle the present dispute.”
When reached for comment yesterday, Zengeni said: “These issues are being handled by the regulators and I cannot comment. We are working on resolving the issue.”
Remo says it settled with Interfin last month and is still awaiting its security lodged with Interfin. Some of the security involves 700 000 Old Mutual shares, five million CBZ shares and five million DZL shares and a million TA shares.
“It is now almost four weeks later and we have yet to receive any of these certificates. During meetings we held with yourselves (Interfin Securities) in the course of last week, it has become apparent to us that you have lodged or pledged these to third parties as security for loans that you obtained from them,” Mahmed said in a letter.