allAfrica.com: Namibia: Nam Diamonds Implicated in U.S. Scam (Page 1 of 1)

Diamond Commissioner in the Ministry of Mines and Energy, Kennedy Hamutenya, yesterday denied that there is a deliberate hold-up to an application for the renewal of the Toscanini diamond exclusive prospecting licence (EPL) along the Skeleton Coast held by Malaysian Dr Subramanian Ragubathi.

Hamutenya said Minister of Mines and Energy Erkki Nghimtina is considering applications - now up for renewal or new licences - and that a "serious staff shortage" in the diamond commission's office had caused a backlog in the consideration of the licence applications.

However, Hamutenya stressed that concerns regarding the integrity of licence applications would be a consideration in granting them.

"We cannot afford to tarnish the image of the diamond industry of Namibia," commented Hamutenya.

In a letter to New Era, Ragubathi complained that he is yet to be informed by the ministry if his lease will be renewed, and whether the ministry will assist him to "remove" operating company Bret Investments, from the EPL area.

"The Minister of Mines [Nghimtima] is yet to help me remove the people who are still mining on Toscanini without my approval," wrote Ragubathi.

"I have raised the matter to the highest office and I am yet to get any reply and my work permit has been rejected two times while I have got my investment in Namibia."

This came in the wake of a charge in which two principals of an American-based company, WexTrust Capital, was charged with conspiracy to commit securities fraud by the Federal Bureau of Investigations (FBI) in the US.

Wextrust Capital is linked to Pure Africa Minerals (PAM), of which Michael van der Merwe is its South African-based director. Van der Merwe is also the director of Bret Investments, which is the operating company at the Toscanini diamond mine.

Ragubathi had earlier accused Bret Investments of illegally removing diamonds from Toscanini, claiming that they were mined at Block 3 [EPL 3218 of Rosh Pinah] mined by Bret Investments and PAM.

At the time, Van der Merwe denied all claims made by Ragubathi.

According to a press statement issued by the US Attorney's Office, Steven Byers (president and CEO of WexTrust Capital) and Joseph Shereshevsky (principal and former chief operating officer of WexTrust) were charged in a criminal complaint with defrauding investors by diverting funds they raised through private placement offerings.

WexTrust Capital is reported to have a globally diversified private equity company specialising in real estate and specialty finance opportunities. It has an office in Johannesburg, South Africa, where Van der Merwe is a director.

The US Securities Exchange Commission (SEC) lodged an urgent appeal to the US federal court for an emergency asset freeze to halt an alleged Ponzi scheme that has raised US$255 million from at least 1 196 investors by WexTrust.

In the court particulars, the WexTrust principals had reportedly fraudulently raised money in various offerings without disclosing that funds raised were actually being used to pay prior investors in unrelated offerings and to make unauthorised payments to fund the operations of WexTrust entities.

According to an internal 'balance sheet', WexTrust entities had "borrowed" at least US$74 million from the limited liabilities companies (LLC entities), and also "lent" US$54 million to various other LLC entities.

One of the five main areas of business of WexTrust is pointed out in the court papers as "certain interests in diamond mines and operations in Africa held through Pure Africa Mining Ltd. and other affiliates, in which WexTrust has a substantial interest".

Records obtained from WexTrust indicated that Byers and Shereshevsky have raised the US$47 million in at least six private placements, which was used to purchase directly or indirectly interests in "certain diamond mines in South Africa and Namibia".

E-mail records of Byers and Shereshevsky before the US federal court, indicate that the two made "improper transfers" of funds towards the end of last year.

In one of the e-mails, the Toscanini mine is mentioned, when Shereshevsky was found to have written to one of their partners: "Wextrust borrowed about a month ago 750.000 from Skelton Coast [in Africa]. Now we needed it so we took back 250.000. We [sic] are still owed 450.000 and I will continue to take it out until it is paid."

In another e-mail conversation, Shereshevsky wrote: "The reason why it is more important to pay back Africa is because our only hope of getting out of our mess is Africa," saying that WexTrust has spent more than US$1 million per month than what it made by the end of last year.

One of these "improper transfers" WexTrust received was a loan of US$600 000 to fund PAM and another entity called Guaranteed Depository Receipt Fund (GDR).

Further, a Block III Mines and Minerals (referred to as Block III) was formed to acquire an interest in a Namibian company, Deva Investments, which owns exploration and mining rights.

WexTrust balance sheets showed that US$3,99,910 of proceeds raised by Block III was diverted to WexTrust entities.

Shereshevsky and his wife have allegedly received US$249 577 (or two percent) of the funds raised, as well as a US$750 000 bonus by WexTrust Securities in connection with the Block III offerings.

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