MASERU — Investors in the troubled Millennium Goal Society are likely to get a portion of the money they invested in the company next month.
The percentage that each depositor will get will be decided after the company has liquidated some of the investments and assets that it acquired using the money from the investors.
The central bank will supervise the payout.
Millennium Goal’s 3 832 investors were left stranded after the Central Bank of Lesotho shut down the company in November 2007.
The central bank accused the company of operating insurance and banking businesses without a licence. Banks and insurance companies should be licensed with the central bank.
The matter was taken to the High Court where Judge Semapo Peete ruled that the company was indeed operating illegally.
Peete then ordered that the company should sell some of its shares in different ventures in order to raise funds to pay back depositors.
He said the payment should be done on a “first in time first payout” basis and the company’s shares in EWC Vehicle Communication be sold to an “outside buyer who is a highest bidder . . .”
The central bank had however appealed to the Appeal Court arguing that paying the depositors on a “first in time first payout” basis was unfair to other investors and wrong.
It also wanted to monitor the disposal of the company’s shares in EWC. The court last week upheld the appeal paving the way for what could be the beginning of the liquidation of the society which had been in trouble for the past two years.
In his judgment Justice Duglass Scott said the “first in time first payout” arrangement would disadvantage depositors who invested later because this was a pyramid scheme.
“To distribute the funds available on a “first in time first payout” basis would be to give effect to the scheme to the extent of benefiting the early investors at the expense of the later investors,” said Justice Scott.
He said the payout should be done on a pro rata basis.
This means that the investors would be paid a portion of every maloti that they invested in the scheme.
The investors might get a few cents out of every maloti that they deposited in the company.
Justice Scott said the disposal of the shares should be monitored by the central bank because there was a possibility that their price might be manipulated.
“They (directors) should not be given a free hand to sell the shares without supervision,” Justice Scott said.
“The first respondent is directed to sell its shares and loan account in EWC Vehicle Communications (Pty) Ltd at a price approved by the applicant (central bank) or by this court by 9th May 2009.”
The ruling could signal the end of the road for the Millennium Goal Society.
PricewaterhouseCoopers which investigated the company revealed that out of M16 417 117 collected from depositors only M7 784 737 worth of the society’s assets could be traced.
It is not clear whether the shares in EWC will be enough to raise the M8 million of depositors’ funds that the auditors said was missing from the company’s coffers.
When the shares were acquired they were valued at M500 000 each. The company bought five shares using the depositors’ funds.
Investment analysts however doubt that that M2.5 million invested could have grown to M8 million. Also doubtful is whether the shares had maintained their value.
But that is not the only problem.
The directors were enticing depositors by promising them a 131 percent return on their investment.
If this huge interest is factored in the company’s debts to the depositors the debt will balloon to a massive M37 635 270.
In terms of cash in the bank the company has very little.
Its account with the Standard Lesotho Bank has M89 631.