Shoprite lays fraud, theft charges against Zambian lawyers

Shoprite has laid charges of fraud, theft and possible money laundering against a Zambian law firm and its partners, whom it accuses of selling Shoprite treasury shares outside its mandate and stealing R70m in proceeds.

The fraud and theft charges against Lewis Nathan Advocates and its partners – Lewis Mosho, Lastene Mwanabo, Charles Chonto and Frederick Mudenda – arise from the transfer agent’s alleged selling of shares without authority and keeping the proceeds.

In the IPO only 479 000 shares were taken up. Lewis Nathan allegedly subsequently sold another 1,9m shares.

Shoprite financial director Carel Goosen said the possible money laundering charge relates to drug enforcement in Zambia. The criminal matter is now between the accused and the Zambian police.

Shoprite continues to seek civil remedies. It is trying to determine in the court whether legal title did pass. It has also lodged a complaint against Lewis Nathan to the Zambian Law Society. The latter will not adjudicate until the courts do.

Shoprite’s final dividend for the year to December will not be paid to Zambian shareholders. It will go into the escrow account into which the interim dividend was paid, pending the outcome of legal action about the status of the shares issued by Lewis Nathan.

At a general meeting of shareholders in November at which nearly 90% of holders on the Zambian registry were represented, those who obtained their shares legally in the initial public offer argued that they should receive their dividends.

They were told that the Lusaka Stock Exchange insisted on equal treatment of all shareholders. Shoprite advised shareholders to hire their own legal counsel.

Goosen says first prize for Shoprite would be to recover the shares illegally sold and repay their investors. Shoprite was not keen to have a bigger free float of shares trading at a discount, as they do in Zambia.

Still, Shoprite would be glad just to honour the transfers and recover its money if that is what the court rules. The retailer has already provided in full for the potential loss.

Shoprite group secretary Pieter du Preez said it was a “misperception” that the shares had gone missing.

“The shares have been paid for, transferred and registered in the names of those who bought them. They were mostly Zambian pension funds but individuals as well. They paid for the shares but we have not received the proceeds.”

Lewis Nathan Advocates had been appointed transfer secretaries. Shoprite claims that it sold the shares in contravention of its mandate and has kept the money. In the first round, the Kitwe High Court refused to freeze the bank accounts of the law firm and its partners on the grounds that not all the moneys in the firm belonged to Shoprite.

Shoprite wanted its shares suspended on the Lusaka Stock Exchange but the stock exchange refused.

Shoprite’s shares trade at a discount of 40% to 50% to the JSE price. Zambian holders are not able to take advantage of the huge arbitrage opportunity. The shares rank pari passu with SA shares but those on the Zambian register are actually not listed on the JSE.

Goosen said the Lusaka Stock Exchange has not been very helpful to its customer, the issuer.

Beatrice Nkanzana, CEO of the Lusaka Stock Exchange, said: “ Puzzling situation isn’t it? Same questions are also being asked by ourselves. I wish the dispute with Lewis Nathan Advocates had been separated from the market issues.

“The matter is really between the disputing parties.”

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