Crooked lawyer's suicide left mountains of misery
Durban attorney left a pile of debts, dozens of furious clients and a legal headache for one of SA's oldest law firms
While faced with claims amounting to about R45-million thus far, the man in charge of wrapping up the financial affairs of disgraced lawyer Colin Cowan, has only managed to recover R7-million.
Cowan, once a well-respected attorney in Durban, committed suicide in November 2010, his death uncovering large-scale fraud he committed while working as a consultant at law firm Garlicke and Bousfield.
While some of his victims have lodged claims against his estate – which is being handled by insolvency practitioner Rahim Khan – others have filed claims in the courts against the law firm, the first of which will begin in the Pietermaritzburg High Court on Tuesday.
In essence, the claimants say they handed over millions of rands to Cowan to be used in a “bridging finance scheme” which he operated from the firm’s premises. They were given letters of undertaking signed by some of the directors of the firm.Many eyes will be focussed on local businessman Merlin Stol’s claim for R7-million. His attorney, Dave Randles, said there were several other cases “waiting in the wings”.
Randles said he had other matters totaling about R11-million.
Two other attorneys confirmed they had claims totaling more than R50-million.
Garlicke and Bousfield has successfully managed to join other parties to the litigation, including its auditors Deloittes, local financial advisor Patrick Robert who is said to have allegedly helped Cowan in signing up investors, and PKF Durban, an audit company allegedly involved in managing elements of the scheme. They all deny liability.
In essence, the firm says that if it is found liable, then it must share the blame and the financial burden.
Director Christine Seger said the issue at hand is principally what the firm maintains is the illegality of what Cowan was doing – a view supported by Deloitte’s expert.
“We were also victims of his fraud ... the firm’s trust account was only involved in a tiny slice of what was a very, large and complex Ponzi scheme,” Seger said.At the time of his death, the financial extent of his crime was reported to be anything from R100-million to R200-million.
Khan confirmed that the R7-million recovered was from Cowan’s assets and insurance policies.
He said: “ A lot of people who lost money are not pursuing claims for the simple reason that it is considered uneconomical to do so. The creditors who lost money in the scheme and who have proved claims are Top Spec Investments (Pty) Ltd (R30,5-million), Palm Stationery Manufacturers (Pty) Limited (R6-million) and Anglorand Derivatives (Pty) Limited who lost R7,5-million. Garlicke and Bousfield have proved a claim of R71,291,00 in respect of overpayment of remuneration.”In order to recover more money, Khan has initiated a “test case” before the Supreme Court of Appeal against Maxprop, one of the first beneficiaries of Cowan’s scheme, to recover “profits” it received.
He said the legal issue was whether Cowan – as the puppet master who directed when and where money must be paid in and withdrawn – could be deemed to have possession of money, even if it never went into his bank account.
“We have instituted various high court actions against people and entities who benefitted in the scheme. In terms of our law, only the profit component may be recovered. So, if you invested R100,00 in the scheme and got paid back R110,00, I can only claim back the R10,00.”