Owner of Rhapsody's accused of R50m fraud

Businessmen have lost R50 million after allegedly being defrauded by the owner of the Rhapsody’s bar franchise.

29 Aug 2013

Article via: The Star

Johannesburg - Several businessmen have lost R50 million after allegedly being defrauded by the owner of the popular Rhapsody’s bar franchise.

According to liquidation papers in the Pretoria High Court, franchise owner Michalis Xekalos shuffled around investors’ money, sold the same bar more than once to different people at the same time, and used company accounts for personal payments.
The alleged fraud has sent the franchise into a financial sinkhole and could leave the businessmen out of pocket.

Xekalos has painted himself not as a fraudster, but as a man who became involved in too many of the franchises – resulting in the failure of Rhapsody’s.

“It’s definitely financial mismanagement. It was left in the control of one person, (being) myself, and my biggest success and failure was being too involved in the shops, both emotionally and financially,” he said on Wednesday.

According to the court documents, Xekalos:

* Sold the Bryanston Rhapsody’s branch several times to different investors without the permission of owners Theodopolous Lagonikos and Zambezi mall magnate Paul Kyriacou. Xekalos faces criminal charges of defrauding the pair of R7.26m;

* Transferred R3.7m of a R4m investment by the president and chief operations officer of Aluminium SA at BHP Billiton, Xolani Mkhwanazi, into the Sunnyside franchise, into the Menlyn branch and one of his personal accounts;

* Sold 115 percent of the Menlyn branch to four separate investors, including Olga Lombardy and Dutch national Nawar Hussein, pocketing R6.5m in the process;

* Failed to pay R1.7m in rent for the Brooklyn branch, whose owners, Pieter and Wessel Kruger, invested R2.4m. They claim the franchise bank account is financially depleted and “plagued with suspicious financial transactions”;

* Helped Alexandra Mourtzois secure a loan of R4.2m to invest in the Bloemfontein branch, but defaulted on his portion of the repayments, leaving her in debt;

* Failed to transfer member interests into their names; and

* Misused about R23.6m invested by Hussein in various franchises.

And, according to an affidavit filed on behalf of Lynnwood Rhapsody’s director Henk Kirsten, Xekalos is accused of being a “party to the disappearance of a substantial amount of money”, and that none of the money accrued in loans and transactions was available to be repaid.

It’s also claimed that Xekalos forged bank statements and proof of payments to support loan applications to banks.

In an affidavit responding to Hussein’s criminal claims, Xekalos admits he misrepresented the franchise to Hussein and took advantage of his finances – behaving “fraudulently”.

But, speaking to The Star on Wednesday, Xekalos said figures by Lombardy were inflated and that the onus was on her to transfer the member’s interest into her name. Also, claims by the Krugers were most likely going to be withdrawn as he had reached an agreement with them. This could not be independently verified.
He claimed Kyriacou and Lagonikos overspent on renovations to their franchise, but he owed nothing to them personally.

As to the R3.7m taken from Mkhwanazi’s R4m investment, he saw nothing wrong with transferring R500 000 to another franchise. The other R3.2m was paid directly to contractors for construction work on the shop.

Xekalos said he had applied for business rescue.

According to the business rescue documents, the franchise was R85m in debt.

Article via: The Star


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