MASERU — A group of MKM creditors and depositors has asked the chief justice to appoint a foreign judge to hear the troubled company’s case after Justice David Lyons became the sixth judge to drop out of the case.
The group, which calls itself the Investors Trust, includes companies owed by MKM and individuals whose investments were locked up in the company when it was abruptly shut down by the Central Bank of Lesotho (CBL) in November 2007.
MKM is fighting the CBL’s attempts to liquidate the company, accused of running a pyramid scheme that had attracted 400 000 depositors.
Justice Lyons, an Australian judge seconded to Lesotho by the Commonwealth, was seen as a neutral judge who could bring finality to the long-running MKM case.
He was appointed to hear the case in June after Justice Lisebo Chaka-Makhooane recused herself after alleging there had been an attempt to influence her.
The central bank wants MKM liquidated for running a “money multiplication” scheme and operating banking and insurance businesses without a licence.
The case has however dragged on for the past three years with High Court judges pulling out in what observers say is an indication of the political nature of the case.
Sources close to the case say Justice Lyons told Chief Justice Mahapela Lehohla at a meeting two weeks ago that he feared a backlash if he was to pass a judgment that would see the company liquidated.
The sources said Justice Lyons expressed fears that he could be “lynched in the streets of Maseru”.
Nearly 400 000 people, almost a quarter of the country’s population, had invested their money with MKM before it was shut down by the CBL.
Liquidation would mean depositors would only get a small portion of what they invested.
Rough estimates, based on a PricewaterhouseCoopers report that says MKM only has M100 million of the M400 million it received from clients, show that a depositor would get only 25 lisente for every loti he or she invested.
For example, a depositor who invested M10 000 would only be able to get M2 500 in the payout if the company were to be liquidated.
If the liquidation is approved, MKM’s assets might be auctioned but observers say it is highly unlikely that a forced sale would help the company meet its obligations.
But even then, some of MKM’s assets are in the form of cars whose value has drastically depreciated, observers note.
Most of the cars are registered in the name of MKM managing director Simon Thebe-ea-Khale.
The buildings owned by the company, observers say, are unlikely to fetch huge amounts because of recession.
Also, the price of a property at an auction is not determined by its true value but by the highest bid.
In their letter to the chief justice, the group of creditors and depositors, through law firm Webber Newdigate, says a foreign judge must be appointed to avoid further delays in the case.
They said following Justice Chaka-Makhooane and Justice Lyons’s recusal they believed the chief justice should now “act and immediately” because the “brazen” interference with justice “cannot be tolerated”.
The letter, dated June 30, suggests that the chief justice appoints a foreign judge who “is not subjected to local pressures”.
“For this reason we respectfully submit that a suitable person from South Africa (preferably Bloemfontein which is within easy reach) should be appointed as acting judge to hear these matters,” the letter says.
“There are a number of retired High Court judges and there are also a number of experienced senior counsel.”
The lawyers said their clients feared that if the case was allocated to other local judges attempts might be made to influence their judgment as happened when Justice Chaka-Makhooane received a nocturnal visit from an emissary who said he had been sent to her by the MKM boss to discuss the case.
“Those who managed to get rid of another judge by unlawful conduct would surely not hesitate to do the same with every other Mosotho judge who may be allocated (the case),” the letter says.
The lawyers said since the Court of Appeal of Lesotho had already ruled that MKM’s operations were unlawful, any delay in the current cases might cause “massive financial harm to the economy and thousands of innocent victim investors will remain”.
“The unfortunate perception at this stage is that Mr Thebe-ea-Khale is above the law,” the letter says.
“Of course you will not allow this, and our clients respectfully ask you to take immediate appropriate steps to address the situation.”
So far six judges have either dealt with or have been assigned to handle the case since it started in 2007.
The first one to deal with the case was Justice Semapo Peete who later pulled out.
The case was then brought before Justice Nthomeng Majara who gave an order and the case was moved to another judge.
Justice Kelello Guni was the third judge to deal with the case.
The fourth judge was Justice Tseliso Monaphathi who had to recuse himself from the case because one of the MKM directors had lent him the company’s car when his official Mercedes-Benz broke down.
He also said he had known the director for more than 20 years and at one time MKM had given his son a part-time job.
Justices Chaka-Makhooane and Lyons pulled out last month.
In the meantime, sharp differences have emerged between the government and the central bank on how to deal with the MKM issue.
Cabinet recently resolved that MKM be allowed to pay out its depositors.
The CBL however insists that MKM should be liquidated to ensure a fair distribution of the money among the depositors.