Old Mutual’s hard-hitting response to Peter Moyo’s claim that he should be temporarily reinstated is littered with reputation-destroying descriptions of its former CEO and his legal action, employing terms such as bizarre, nonsensical, ludicrous and entirely fanciful.
But potentially greater damage is contained in the details of how NMT Capital, a company co-founded by Moyo, was managed, and how it relied upon the presumed goodwill of Old Mutual to survive.
In April 2019, just weeks before Moyo’s suspension, NMT wrote to Old Mutual requesting it to subordinate, effectively suspend all of its claims in order to restore its solvency and ensure its assets exceed its liabilities.
The damning court papers also reveal minutes of the critical NMT board meeting held on July 4, 2018, to confirm the controversial ordinary dividend payments were only signed in April 2019.
Moyo, who was suspended in May and fired in June for his handling of a conflict of interest, filed papers two weeks ago demanding to be reinstated and that all 13 non-executive directors of the board be declared delinquent. He claims chair Trevor Manuel was “gunning for him” because he had raised concerns that Manuel was conflicted in the handling of the split of its domestic business from the UK-based Old Mutual plc. Moyo also said he incurred Manuel’s wrath by questioning why Old Mutual paid legal costs in a court battle involving Gupta associates.
“In seeking the extraordinary relief that he does, the applicant’s (Moyo's) inflated sense of self-importance is astonishing,” said Old Mutual in its response. It went on to say that Moyo’s description of the board’s decision to fire him “can only reasonably be described as bizarre” and that his attempt to cast himself as a whistleblower “is entirely fanciful”.
One investment fund manager said the tone and contents of Old Mutual’s response made it impossible for the parties to reach an amicable out-of-court settlement. And unless Moyo has powerful and so-far unused ammunition, it might also make it extremely difficult for him to resume the sort of corporate status he enjoyed until May 24 when Old Mutual announced his suspension just hours before its much-anticipated first AGM back in SA.
As Old Mutual describes it, Moyo had little regard for the conflict of interest that existed between his employer and NMT Capital, in which Old Mutual had invested R275m. Much of that investment was through preference share funding. By the end of December 2018, Old Mutual’s exposure in terms of preference share capital and dividends owed on the preference shares was R374.5m.
NMT Capital returned R424m to Old Mutual on a R150m private equity investment, “a return of more than 180%”. However, Old Mutual points out this R150m was policyholder funds that NMT Capital was entrusted to manage in return for a fee and that it was quite separate from the investment Old Mutual made in NMT, which generated considerably smaller returns. In the 14 years since its initial investment in NMT, Old Mutual has received approximately R47.1m in ordinary dividends, “R23m of which was paid during 2018”.
Old Mutual claims Moyo and NMT assumed they could “assert as a right that Old Mutual would roll-over any of NMT’s liability as and when NMT (or Moyo) wished this to be the case.”
Moyo apparently told members of the board that he and NMT were entitled to treat Old Mutual’s preference share funding as an open-ended facility, “that regular extensions to that facility were simply a matter of course and that it was unnecessary for NMT Capital to have complied with its preference share obligations to Old Mutual when ordinary dividends were distributed to him and his fellow shareholders”.
The document sent by NMT to Old Mutual, “without any prior notice or explanation”, requesting it to subordinate its R277m of claims in order to secure its solvency and enable it to pay out more dividends, may have been the final straw for the Old Mutual board.
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