Central Bank lawyer’s tainted past exposed

KANANELO BOLOETSE

MASERU – South African lawyer, Christiaan Serfontein Edeling, who advised the Central Bank of Lesotho (CBL) on the much-publicised MKM issue, has a chequered past that includes being struck from the roll of advocates in his country for serious dishonesty.

Edeling represented the Central Bank in the appeal to the Lesotho Court of Appeal against the final liquidation orders in respect of all MKM companies and entities. Towards the end of 2012, the Central Bank asked Edeling and his South African colleague, Kemp J Kemp “to furnish an opinion” on MKM proposal to Prime Minister Motsoahae Thabane asking for amnesty against the company’s liquidation.

The proposers said if the liquidation, as ordered by the courts was reconsidered, it was possible to pay “100 percent of the monies invested by Basotho in the schemes.” “We hereby propose that MKM and its companies in liquidation be given an opportunity to regularise its operations and comply with the laws of Lesotho and the companies be given an opportunity to repay all monies due to Basotho,” reads the proposal. In their opinion dated November 26, 2012, Edeling and Kemp advised the Central Bank not to support the proposal.

They said the proposal was a transparent attempt to manipulate government by using various techniques including, but not limited to, blaming others for the demise of MKM. The Central Bank also appointed Edeling to investigate a local company, Banca del Afrique Holdings’ alleged unlawful activities. Banca del Afrique Holdings was consequently closed by the Central Bank in September 2015. The Central Bank accused the company of conducting banking business without a licence.

These just go to show how Edeling was involved with the Central Bank. Public Eye has established that Edeling is a “seriously dishonest lawyer” who was found to be an unfit to practise as an advocate. An advocate is required to be completely honest, truthful and reliable. Also, according to the Supreme Court of Appeal of South Africa, being a fit and proper person to practise as an advocate is not territorially confined. Public Eye was unable to get a comment from the Central Bank this week.

The Gauteng Division of the High Court of South Africa in 1997, about 10 years before MKM was closed, ordered that his name be struck from the roll of advocates. He was admitted as an advocate of the then Supreme Court of South Africa on March 27, 1979. He initially practised at the Johannesburg Bar and then joined the Free State Bar in 1984, where he practised until 1993. While in the Free State, he was admitted as an advocate in Lesotho. He then re-applied to and was granted membership of the Johannesburg Bar and resumed his practice there.

During March 1996, the Society of Advocates of South Africa, Witwatersrand Division, as the Johannesburg Society of Advocates was then known, applied for Edeling to be struck off. On December 11, 1997, he was struck from the roll of advocates by order of the Witwatersrand Local Division. Aggrieved, Edeling applied for leave to appeal against the judgment of the high court, but it was refused. His applications for leave to appeal to the Supreme Court of Appeal and the Constitutional Court were also dismissed.

Edeling was struck off the roll largely in consequence of his dealings with one Glyn Rudolph who had devised a scheme under which properties were sold at vastly inflated prices, with payments being effected in terms of two promissory notes given by the purchaser to the seller. The first of these would be for the approximate value of the property. The second would be a wildly inflated figure payable many years in the future. The purpose of these arrangements was to secure a refund of Value Added Tax (VAT) from the revenue authorities.

In terms of one of these schemes Edeling sold his own home in Bloemfontein, worth between R850 000 and R1 million, to Special Aircraft Utilisation (Pty) Ltd (SAU), a company effectively controlled by Rudolph, for some R73 million. He also attempted to purchase a commercial property in Johannesburg, referred to as the St Margaret’s property valued at R2.5 million, for R120 million under a similar scheme, but this fell through.

Instead, SAU purchased the property for R158 million, to be discharged by way of two promissory notes. When Rudolph told him that there were problems with regard to the purchase of the St Margaret’s property, Edeling drafted an agreement, the condor agreement, with a view to circumventing those problems. This involved a trust that he had formed in Lesotho, controlled by him and another attorney known as Redelinghuys.

The purpose of the agreement was to acquire the interests of the seller of the St Margaret’s property in a manner that would ensure that it would never be necessary to satisfy the second inflated promissory note. This was to be concealed from the revenue authorities. When the purchases by SAU of Edeling’s home and the St Margaret’s property were considered in the Special Income Tax Court, Edeling gave evidence in support of their legality.

The Special Income Tax Court held that both schemes were fraudulent and that Edeling perjured himself in giving his evidence. On December 11, 1997, the Gauteng High Court concluded with regard to the first transaction that the sale by Edeling of his house in Bloemfontein was not a true sale, but a simulated transaction entered into solely to obtain a tax advantage to which the parties were not entitled.

This finding implied that Edeling had not been truthful in his evidence to either the Special Court or the court hearing the striking off application. With regard to the second intended transaction the high court concluded that the offer to purchase the St Margaret’s property was a simulated transaction employed solely to obtain an unconscionable tax benefit to which the parties were not entitled.

“It was not genuine and was intended as a fraud on the fiscus,” the high court ruled. The high court analysed the condor transaction in some detail and concluded that it showed that Edeling had been untruthful in regard to his relationship with Rudolph, that he was aware that the two transactions were simulated, and that his evidence at a number of points was untruthful. That was also its conclusion in regard to the evidence given in the Special Court.

In his counter-application Edeling attacked a number of senior members of the Johannesburg Bar in the most intemperate and insulting terms without any justification whatsoever. The court concluded that the insulting statements made by Edeling in his counter-application concerning the Society, its Bar Council and certain of its members were not true. The high court viewed these allegations in serious light, and held that they were particularly serious when made of officers of the court whose honesty and integrity had to be beyond question.

It concluded that it was clear that the insulting statements were self-serving and evidence of an attempt by the respondent to discourage full and proper investigation into his conduct. The high court concluded that he was not a fit and proper person to practise as an advocate and ordered that his name be struck from the roll of advocates. It held that Edeling had been party to dishonest and simulated transactions and that the “moment he perceived the vulnerability in the VAT Act, he waded in and exploited it to the hilt”.

“He displayed a lack of judgment, which was revealed by his inability to perceive that he had done anything wrong.” In 2009, Edeling launched an application for his re-admission which was eventually withdrawn and he had to pay the costs. In that application, he did not disclose that he was practising as an advocate in Lesotho despite his removal from the roll of advocates in South Africa. When the Society raised his appearance as an advocate in Lesotho, his response was to say that he had disclosed it to the Chief Justice of Lesotho, “who raised no objection”.

Edeling asserted that he did not regard the fact that he was practising in Lesotho as relevant; he said he was an advocate of good standing in Lesotho and that no misconduct complaint was ever lodged against him in Lesotho. He launched another application for his re-admission in 2015 and was readmitted by the Gauteng high court. The Johannesburg Society of Advocates appealed the high court decision. In March last year, the Supreme Court of Appeal of South Africa upheld the appeal.

The Supreme Court said it was clear that Edeling’s conduct since he was struck off indicated a consistent inability to accept the findings made against him by the court that struck him off. The court said his lack of candour about his dishonesty and a paucity of information about his reformation was a fatal barrier for his re-admission as an advocate. It said he lacked the reformation that is necessary to warrant his readmission as an advocate.