—-As it emerges that apparel and textile sector is being paralyzed by fraud and corruption within the sector
By?Mohalenyane Phakela / Moorosi Tsiane
A fake liquidation process was used to steal millions from the once thriving textile giant, CGM, which at its peak employed more than 5000 people, leaving it on its knees.
The fake liquidation process was inspired by the firm’s employees, who created hoax indebtedness for CGM subsidiary, Presitex, to their own company which they had established in Dubai as a shell entity to facilitate their carefully orchestrated theft.
That company, Nazimada Textile FZE, was created by CGM employee, Sharmala Roya, who then claimed it was owed money by Presitex. In reality, no such money was owed but the fictious debt was used a pretext to liquidate Presitex ?in September 2023 and channel proceeds from the bogus liquidation to Nazimada.
Ms Roya?had??been the finance and administration manager for both CGM and Presitex for the past 25 years.? She had registered, Nazimada Textile FZE, as a shell company to orchestrate this fraud. This she did with the connivance of her boss,?Madhav Vasant Dalvi, who stands accused of stealing about M1 billion from CGM using various fraudulent schemes and who has since fled Lesotho.
Nazimada Textile FZE?had?successfully petitioned the High Court?in Maseru,?to have Presitex liquidated, ?after Roya had established it ?and listed it as one of Presitex’s “suppliers”.??She then?claimed?Presitex??owed??Nazimada?US$?2,242,619?(about?M42,6?million)?at the time. Justice Moroke Mokhesi?had?granted Nazimada’s application??to have Presitex liquidated?in September 2023,?unaware that he had been led?on a garden path into issuing an liquidation order on the basis of fabricated “facts”.
Presitex’s real?shareholders, Solandra Incorporated and Ci-ta Chang, who own 99% and 1%?respectively of parent company,?CGM,?had only?learnt?of their?subsidiary’s?“insolvency”?from ?the?Directorate on Corruption and Economic Offences (DCEO)?when the latter had started probing the fraud at the textile company.
At the time, the real shareholders?were already embroiled in a battle to regain control of their?company,?after?Dalvi,?a?former director and CEO?of the company, had fraudulently transferred their shares to himself. Dalvi had fraudulently transferred 999 of the 1,000 CGM and Presitex??issued?shares to himself on 19 October 2022. Solandra Inc. successfully rescinded this transfer on 5 June 2023 and reported the matter to the DCEO in July 2023.
Dalvi??had?allegedly created shell companies?-?involving his wife, Sushama Madhav Dalvi, son Chaitanya Madhav Dalvi, Ms Roya, CGM employee Asitha Medawewa, Presitex Manager Jitech John Babu, and Presitex employees Tseko Alphonce Bohloa and ‘Mathabo Klass?-??which he used as conduits?to defraud CGM of nearly M1 billion?over the years.
The DCEO?has since?unearthed?how those shell companies were indeed used as conduits in a?money laundering, corruption, and fraud web?involving ?the nearly ?M1 billion after they were fraudulently listed as “suppliers” of raw materials to CGM. In reality, they were not suppliers but used as “brokers” to justify payments to them.
?The aforementioned?– except Dalvi, his wife and son – have since been charged?in the Maseru Magistrates Court on 15 May 2024.
Dalvi and his family?members are now fugitives after fleeing??Lesotho, Those charged?were released on M10,000 bail and M100,000 surety each by Chief Magistrate ‘Matankiso Nthunya.
CGM?shareholders, Solandra and Ms?Chang, alongside?the DCEO,?had since?petitioned Justice Mokhesi to rescind the liquidation order. They argued that??Presitex?was never?bankrupt and?its indebtedness to Nazimada had been created as a ruse to deprive it of its assets. ?The winding?up process?of Presitex on the basis of a fraudulently obtained court order?would hinder investigations?into the wider fraud at CGM. However, Justice Mokhesi?ordered?security costs of M800,000, M500,000, and M500,000?from the applicants, Solandra, Ms Chang, ?and the DCEO?respectively before?considering?the rescission application.? This after the “liquidators” had challenged the rescission application on a technicality.? That application is still pending because the security costs of a total of M1.8 million are yet to be paid. ?
????????????????????????????????????? ??????????Liquidation
Nazimada?had obtained the liquidation order after?filing?an urgent application in the Lesotho High Court seeking Presitex’s liquidation on?the?grounds of insolvency. The application, filed by Krishna Baraiya, Nazimada’s?“accountant”, claimed Presitex owed?it?US$2,242,619.79, which remained unpaid. In an email dated 9 August 2023, Presitex acknowledged its debt and its inability to make immediate payments due to cash flow issues and ongoing litigation, compounded by?“document confiscations”?by law enforcement agencies?including the?DCEO.?But that email was also a self-created hoax to justify the fraud.
Justice Mokhesi?had??granted the liquidation application on 7 September 2023. Lawyers Moroesi Tau Thabane and Paul Mosoeu?had been?appointed as Presitex liquidators.
On 23 October 2023, Ms Chang and Solandra?in turn?petitioned Justice Mokhesi to overturn the liquidation order. They argued that Presitex had the funds to pay its creditors and that Ms Roya, as the finance manager, should have prioritized?her?own?firm’s payments?even though it had been fraudulently set up. They accused Ms Roya of an obvious?conflict of interest. Additionally, they?pointed out that Nazimada’s trading license in Dubai had expired, making its trade with Presitex illegal.
“This company??(Nazimada)?is one of the companies established by and on the instruction of Mr Dalvi …?This company was established mainly to siphon funds from Presitex.
“According to the records that we have, Ms Roya has?a?residence permit of the United Arab Emirates which identifies her as?an?investor of this respondent (Nazimada). I have had an opportunity to access online company registry and business licensing department records of the Ministry of Economy, United Arab Emirates, and have established that the company has been deregistered and its license expired on 7 July 2023.
“The effect of this in?law and in fact is that this company does not have rights to trade in?the?United Arab Emirates and as such would not have trading rights with Presitex. I further aver that this company would not have a standing before this Honourable Court to claim as it did when its existence is questionable. I further aver that a de-registered company does not have rights to litigate against anybody let alone to trade with anybody.
“This respondent together with her team had control and access to Presitex accounts in South Africa and such had more than M24 million. It remains a mystery why this respondent decided not to pay her own company, Nazimada Textiles, while she continued to pay others from the Presitex South African accounts.
“This company?(Presitex)?belongs to my family and it is the company that we love and willing to jealously protect. This company became a victim and a cash cow for Mr Dalvi, his family and close allies. One of their?main allies is Ms Roya who is the finance officer of Presitex. In almost every unlawful activity??used to siphon money,??it would be Mr Dalvi and Ms Roya?involved?,” Ms Chang states in her affidavit.
????????????????????????????????????????????Rescission
On 29 November 2023, DCEO Director General Knorx Molelle?also?sought to reverse the liquidation order. He?argued?that Nazimada, under investigation for siphoning funds from CGM/Presitex, should not?be?liquidated?or?allowed to?claim debts from Presitex. He?further argued that?the liquidation was a tactic to defeat justice, considering the implicated individuals, including Ms Roya and Mr Dalvi, were involved in ?a?transnational corporate conspiracy.
“The?Applicant (DCEO) is currently investigating the activities of not only the company in issue (Nazimada)?which is?of?a?transitional character and scope but also?the?agents?of the company in issue,?in particular, the activities of the fourth respondent (Roya) and the family of one Madhav Vasant Dalvi who?has?since fled the country on account of being implicated in a trail of economic offences….
“The activities of all the implicated individuals reveal a well-coordinated corporate conspiracy of a transnational magnitude and the liquidation of the fifth respondent (Presitex) was none?other than a stratagem to defeat the ends of justice. The DCEO is considering to arrest the implicated individuals to salvage the situation.
“Nazimada was aware that the DCEO has a substantial legal interest in the litigation but elected not to join it?(in the liquidation application)?for opportunistic if not self-serving ends,” Adv Molelle argued.? The DCEO’s rescission application has since been consolidated with the one for Solandra and Ms Chang. It will be heard once the security of costs have been furnished. ?
????????????????????????? ????????????????????????Charges
The liquidators had challenged the rescission application and asked for the security of costs order, resulting in Judge’s Mokhesi’s ruling that the three applicants pay the M1.8 million in the security of costs.
?While awaiting a ruling on?the security?costs?order,?which Judge Mokhesi’s issued on 13 June 2024,??the DCEO??had already?charged Mr Dalvi, Ms Roya, Mr Bohloa, and the two liquidators on 23 May 2024, accusing them of defrauding CGM of M78,712,323.44 through the??fake?liquidation. They were released on M2,000 bail and M100,000 surety, except for Mr Dalvi, who remains a fugitive.
Meanwhile, Ms Roya has through?her companies,?Alchemy and Denimagic,?sued the DCEO in the High Court for?the?release?of?the properties?the anti-graft body?has confiscated?from these companies after designating them as?“proceeds of crime”.?Vehicles and factory buildings from Alchemy and Denimagic, among others, ?had been seized by the DCEO.? The two companies were owned by Roya and Dalvi’s wife, Sushama Dalvi.? They were set up to defraud CGM. Alchemcy was listed as one of CGM’s suppliers while Denimagic had been used to steal factory premises which belonged to CGM before they were leased back to CGM.? Roya’s application is also still pending.
The whole case is illustrative of the huge corruption and fraud paralyzing Lesotho’s once thriving apparel and textiles sector, the second largest employer after the government.
While its problems are largely blamed by proprietors on dwindling orders from America and on the Covid-19 pandemic, it has been emerging that widespread corruption and fraud in the sector is also to blame for its woes.