K100mil deal cost firm K38mil

National

Motor Vehicles Insurance Ltd lost more than K38 million on a controversial K100 million investment in Woodlawn Capital Australia, according to the Auditor-General’s Report for 2016.
Auditor-General Philip Nauga noted that despite the bad experience, MVIL did not comply with its investment policy and continued to invest without following guidelines.
The Woodlawn affair goes back to July 2009 when MVIL transferred K96 million kina (about A$43million) to Woodlawn to invest and manage with the aim of growing the money over time.
Subsequent investigations uncovered that Woodlawn Capital at the time it received the money from MVIL was not licensed to conduct business as a financial investment company.
Woodlawn did not hold a valid financial services licence (FSL) under the Australian Securities and Investment Commission (ASIC). There has since been a long-running court case to recover the money,
“My review of the initial investment of K100 million noted that K51,281,946 had been refunded to MVIL from the (Gadens) lawyers’ trust account,” Nauga said.
“The company then made a provision of K38,257,972 on the residual value of K48,944,255, leaving a balance of K10,460,082 in the Gadens’ trust account, Sydney. This resulted in MVIL making a loss of K38,257,972 on the overseas investment in Woodland Capital Ltd.”
Nauga said the Finance Minister, under the MVIL Act, had laid down the criteria for investments which were not complied with.
These related to Government securities, term deposits, commercial equities, property, long-term development, loans/debentures, subsidiaries and overseas investments.
“Further, per investment policy, the company should not invest in any one company more than 50 per cent of the paid-up capital of that company. However, MVIL has owned 100 per cent equity in Pacific MMI Ltd and 52 per cent in Pacific Re Ltd, by which it did not comply with the investment policy,” he said
“I brought this matter to the attention of management and I was advised that, ‘the 50 per cent of the shares in Pacific MMI was going to be divested to a prospective buyer,” Nauga said.  However, to date, the investment has not divested as per earlier advised’.”

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