Jingle, Jingle, Jingle

Yesterday I finally received my copy of the letter that accompanied the minutes of the meeting held under the auspices of Edwafin on 17 March 2009.

On opening the letter, a huge cloud of smoke emerged from the depths of the envelope, and when i tried to retrieve the rest of its contents, there was the jingling of shards or mirror. When I finally got to the documents, I understood why.

I have not yet spoken much about Don Hutchinson, the actual financial wizard of Edwafin (in a previous blog I had referred to Brian Poliah as the wizard, yet wizards they all be), and if I reckoned that Stapleton was a conjurer, then here we have a true emulator of Derren Brown. The main difference is that Derren Brown is successful.

The first three paragraphs is no more than a rehash of the oft-repeated structure of Edwafin and its fast diminishing organogram (I just love that word and found it on the now extinct Edwafin web siten - it's so earthy). Then it is stated that July 2008 was a record month, and one presumes that that is in terms of capital raised via debentures for the purpose of the groups business operations. Note that he doesn't mention what the "business operations"are. He continues that the following months were dismal as few debentures were issued and this is where the countries appalling financial situation begins to have an effect. Now, that they are not receiving any more capital via debentures, the money to pay investors is beginning to dry up. No mention is made of any income generated through business ventures, or that such hypothetical business is effected by the bad economic climate. Yet, he starts the same paragraph with the words "...Edwafinj is essentially a venture capital group, i.e. public funds are taken and invested in projects and companies that produce revenue streams and capital growth ...". Which projects? which companies? which revenue streams?

And then he admits it: "The company's cash reserves became fully depleted by the end of November beginning December 2008." Is that not a miracle? without any business generating finance, and no more interested investors - hey, no more money. We must keep that in mind for future reference.

Hutchinson, of course does not put the investors' minds at rest by assuring them that all the investments are covered by adequate assets.

Then he carries on by stating that they are expecting R40,000,000 from somewhere, first in November and then April/May. Yet, later on in the letter, Stapleton pegs the date to be in June 2009 (reminds me of the song "And my hat blows, blows, blows in the wind"). I wonder if that investors name is Paul or perhaps Peter? In any case we are now past the end of April and one word applies: zilch.

Then rainbow paints was sold - it was profitable though. If something is doing well and is managed properly, then you sell it don't you? So that you no longer have to receive the income from it. This is not the whole story according to what I have received from various sources.

And then again we have the sleight of hand: "Edwafin is profitable but is has suffered hugely in terms of cash flow shortage." Yep. "There are prospects on the horizon" - now isn't that telling us something!
Then follows a whole account of off-shore investments, that they cannot lay their hands on, and peculiar set of measures that the company is undertaking and that one would have expected from a responsible company in any case. Then some more promises, conjectures, counting chicks before they bred, and pie in the sky rantings.

Actual bottom line
And then came the actual crunch, his recommendations (two of them essentially):

• No more interest payments for the rest of the year.
• No more capital refunds for the rest of the year.
• He is essentially recommending that they break the law! In his arrogance is forgets that not only is he recommending that the contractual agreements be broken with investors, but that he and brother Stapleton have already done so unilaterally already. That should entice new investors into the Edwafin fold.
  

But that is not the end of it

• He actually asks those at the meeting for more money. Those poor pensioners have to contribute more (5 to 7 million Rand) to make DMC a success. My word, that must have taken gutspa.
  

The rest of the correspondence covers questions asked by the investors and the predominant question was concerning the refund of their investment capital. Key to the response was Mr Hutchinson's statement that

"if funds were not available to pay the interest then it stands to reason that the capital cannot be paid.... The business is solvent but assets cannot be converted into cash quick enough."

Now, I ask you with tears in my eyes, what assets are being converted into cash? Are the banks not prepared to finance a good part of that fantastic car, the DMC? (you must read the rants and rave of Stapleton about this vehicle, but nobody seems interested in financing it). It is a pity that the company did not have the foresight of including the balance sheet with the circular, it might just have made the whole episode a bit more believable.

Patrick, if you were still wondering why I did not keep my word about publishing this blog, then wonder no more. Your colleague, and you (a tiny bit) has provided the answers yourself - you never had the intention to refund me, like you don't have the intention to refund anybody else. At the same time you hold the investors at randsom with the threat of financial ruin should they persue the issue.

And then their was a bit of showmanship (shame on you Patrick). Stapleton asked that people put up their hands if the had not received interest payments before August. The note says: "No one raised their hands". You old rascal, you, back on the old economic crises again; you had no business of any consequence at that time and you only relied on new investors, as you still do now . Now, even I saw through that little trick of deception.

It is my confirmed conviction that people may believe what they want, and naturally may act accordingly. That is part of the universal spirit that pervades us all. I must admit though, that I personally have difficulties in understanding that certain souls cannot perceive the archetype of deception, when it presented to them on a platter - this is exclusively my opinion. Yes, I'll have to come back to this earthly place again, just to try and understand that.