Property mogul Lew Geffen was dragged to court this week after allegedly selling out his business partners and sabotaging their lucrative auction company.

Details of how Geffen tried to sell the businesses to its main competitor in a deal that he would score from emerged in the Johannesburg High Court on Thursday, where the urgent interdict halted the sale.

The businesses – Savile Row Auctions Holdings and Savile Row Auctions – together with affiliated company CIPSA, applied for an urgent interdict against Geffen and Alliance Group Capital and Alliance Group when they discovered how Geffen planned to sell their firm.

Geffen is chairman of both Savile companies and a director of all three applicant companies, which sell and lease property.

Neither Geffen nor Alliance opposed the urgent application.

In court papers, the other shareholders and directors, save for one, said they had no idea about Geffen’s “premeditated plan” until one of the directors discovered a pile of documents in his postbox two weeks ago.

The documents included an internal staff memo by Alliance CEO Rael Levitt, a letter allegedly written by Geffen to Levitt and a draft agreement that paved the way for a R14-million sale of Savile to Alliance. Alliance would get a majority shareholding in Savile, while Geffen would score 34.9% of its shares and its chairmanship.

Geffen had promised Alliance could do a comprehensive due diligence into Savile’s affairs.

Savile’s shareholders and directors had no inkling about the investigation.

The court ordered, on an interim basis, that the due diligence be halted and that Geffen and Alliance be prevented from using any confidential information involving the applicants.

Published on the web by Times Live on May 23, 2010.

Savile Row takes Geffen to court
May 23, 2010

By

THE HONEYMOON is clearly over between Savile Row Auctions Holdings chairman Lew Geffen and the other shareholders and directors of the auction house.

This follows an urgent application to the South Gauteng High Court last week that effectively scuppered an alleged plan of Geffen’s to sell Savile Row to the Alliance Group without the knowledge of other shareholders and directors.

The court documents contain an e-mail, allegedly drafted by Alliance Group chief executive Rael Levitt to his directors, that refers to Geffen’s unhappiness with his shareholders and calls several of them “treacherous backstabbers”.

It adds that Geffen had told them he could quickly get rid of Savile Row managing director Mark Kleynhans and simultaneously withdraw his financial guarantees “so that the business will collapse in weeks”.

Kleynhans, in an affidavit in support of the application, claimed a bundle of documents, discovered in the post box of one of the company’s directors this month, had revealed the breach of the fiduciary duty owed by Geffen to the company.

Apart from Geffen making scurrilous allegations about his fellow directors and shareholders, “he was planning to manoeuvre, by nefarious means, to collapse the Savile Row structure” to obtain the other shareholders’ shares to be able to sell the entire issued share capital to the Alliance Group, according to the affidavit.

Kleynhans said the “true, sinister meaning” behind the use of the word “collapse”, emanating from the discussions between Geffen and Levitt, was borne out by the rest of the e-mail.

“The appropriate interpretation of such language is the complete downfall and destruction of the Savile Row structure,” he said.

Kleynhans said another letter clearly showed Geffen’s treachery because he wanted a “concrete agreement” and after four months to “negotiate” to acquire 100 percent of the shares in Savile Row.

“He clearly intended to secure a deal with Alliance, and thereafter to somehow persuade the other shareholders to sell him their shares.”

In a statement to Business Report, Geffen said the applicants had, among other things, misinterpreted the relevant documentation and attributed “ill will to my activities in circumstances where such activities were intended to assist Savile Row Auctions, its shareholders and staff members in difficult circumstances, precipitated by the resignation of Mark Kleynhans as managing director of Savile Row Auctions during March”.

Geffen said the interests of the parties remained his prime concern and he has and would continue to use his best endeavours to resolve the disputes that had arisen between the remaining shareholders in the group and himself.

“It is regrettable that my co-shareholders chose to launch an attack against me without prior notice and without following the procedures relating to the resolution of disputes set out in our shareholders’ agreement,” he said.

The main court application was postponed after certain undertakings were given by Geffen, who is also the chairman of Sotheby’s International Realty in South Africa.

Andrew Scarrott, the legal counsel for Mark Kleynhans and the applicants in the case, Savile Row Holdings, Savile Row Auctions and Cipsa, said the court also granted an interim order against Alliance Group Capital and Alliance Group restraining them from conducting a due diligence on Savile Row Auctions Holdings and using any confidential and proprietary information pertaining to the company.

Savile Row was launched in June with the aim of opening up “new horizons for property sellers” by Lew Geffen and a group of associates.

Geffen stressed the court application was being opposed and had been postponed. Owing to these circumstances, he was unable to comment at this stage on the allegations that had been made against him and Auction Alliance.

Kleynhans said on Friday he remained managing director of the company and had been persuaded by Geffen to withdraw his resignation on the same day he had issued it.

He said the only dispute was with Geffen. The other directors and shareholders were united in their support of the actions instituted to protect the company’s best interest.

“My fellow directors and shareholders and I were shocked to find out about the meetings that had taken place between Lew Geffen and Alliance Group Capital and Alliance Group. It was this discovery that led to the litigation.”

The shareholders in Savile Row Auctions Holdings are Geffen (28 percent), Kleynhans (15 percent), Cipsa (5 percent) and the Lematev Trust (10 percent). Savile Row chief executive Brent Townes holds 42 percent.

Published on the web by Business Report on May 21, 2010.