The former chief executive of the now defunct SFG Insurance firm, Charles Madziva is facing allegations of diverting over $300 000 meant for settling a claim by a client.
Madziva was interrogated at the High Court on Wednesday at the instigation of one of SFG’s major creditors, Cloudy Nyakonda, a farmer who had insured his tobacco crop during the 2011/12 season.
An arbitrator awarded him $610 000 in 2013 after he lost his crop but SFG failed to pay the money despite successfully claiming part of it from its reinsurer, the court heard.
During cross examination by Nyakonda’s lawyer Unity Sakhe of Kantor and Immerman, the court heard that Nyakonda had not been given money prior to the liquidation.
“SFG must account for the amount it received from the reinsurer’s claim. For that reason he (farmer) felt an enquiry had to be heard in terms of what transpired,” he said.
In his response, Madziva said he was aware of the judgement and that SFG had indeed received some payment from the reinsurer.
“Proceeds were paid to SFG because putting in place a reinsurer is a protection measure,” he said, adding that the “funds were to be paid to the client.”
Madziva said SFG had received $305 000 which was supposed to be paid to the client but noted that “discretion of disbursement was purely an SFG responsibility.”
“You received $300 000 from the reinsurers in April 2013, up until time of placement of SFG into liquidation, SFG has not paid this amount to Mr Nyakonda. He has not received a cent from the arbitration award. What happened to that money?” asked Sakhe.
In response Madziva said: “SFG had discretion to use it while waiting for recapitalisation.”
This prompted Sakhe to ask for specifics on how the money was used, to which Madziva maintained that it had been used “purely for the business of SFG.”
“You were CEO of SFG, surely you can tell the court what happened to the money,” responded Sakhe.
“It was to do with keeping SFG going while waiting for injection of capital by shareholders. I was summoned to appear here on short notice,” said Madziva, claiming that he did not have the information readily available.
Sakhe continued with is interrogation: “In your recollection, given the handsome amount of $300 000 what could it have been used for. Was it used to pay salaries, buy vehicles?”
Madziva admitted that the money had also been used to pay salaries, but declined that it was used to pay packages or buy vehicles.
“Yes, part of it could have paid salaries and other claims,” he said.
Sakhe wanted to know what Madziva was paid since he declined that he was a director of the company.
“Like all other employees, I received what was owed,” he said.
Pressed to reveal the figure, Madziva said he did not have the information.
Sakhe said the interrogation would continue and would make a formal request for some company documents he wanted to have sight of.
SFG Insurance licence was cancelled by the Insurance and Pension Commission last year due to bankruptcy after the regulator increased the minimum capital threshold for insurance companies from $300 000 to $2 million.
In 2012, the company recorded huge losses to high claims and operational expenses. As a result, the company became insolvent with a negative capital of $1.7 million as a September 30 of that year.
The company, which was placed under liquidation in October 2013 has assets worth $2 million while its liabilities total $3.6 million.- The Source