Signature Life Hospitality allegedly liquidates

Durban - Durban-based hotel management company Signature Life Hospitality has collapsed amid allegations that it has ripped off its clients by millions of rand through running what was nothing more than a pyramid scheme.

The future management of 16 hotels the group has been running, including the Quarters Hotel in Florida Road, was thrown into uncertainty on Friday when some creditors secured an urgent interim order in the Durban High Court putting the company into forced liquidation.

The creditors said that a liquidator needed to take control immediately to preserve documentation and interrogate directors, including director Alan Vels, to determine “where the money has gone”.

Vels, a Durban tourism bigwig and former regional chairman of industry body the Federated Hospitality Association of SA, founded Signature Life in 2009 with two other directors, Glyn Taylor and Donald Pitt.

The three left Durban-based hotel management group Three Cities Hospitality following an acrimonious fallout with the company’s founder, Russell Stevens.

Vels has been the face of Signature Life.

He told The Mercury on Sunday: “The papers served in court on Friday are factually incorrect and defamatory. We are compelled to attend to these allegations that have been made and have instructed our attorney to act immediately, as we want the real facts to be brought before court. This has been an orchestrated attack on the directors of Signature Life Hospitality and will be defended vigorously.”

But creditors say he has questions to answer.

“A thorough and immediate investigation is warranted. We want to know where the misappropriated money has gone,” said James Murray, manager of the Docklands Hotel, which alleges it is owed more than R2 million by Signature Life, and which launched the urgent application.

Murray has the support of four other hotels the company previously managed: Hotel on the Park, Boulevard 44 Boutique Hotel and the two Quarters hotels, all of which claim they are owed money. While not supporting the application, Hotel 64 on Gordon also says it is owed money.

In his affidavit, which came before Judge Phillip Nkosi on Friday, Murray discloses that in May he had attempted to place Signature Life in liquidation, but this had been resisted by the company.

With that matter pending, he accuses the directors of Signature Life of quietly placing the company into voluntary liquidation in June.

This led to the appointment last week of a “tame liquidator” who did not have proper search and seizure and interrogation powers.

This, he alleges, “arouses deep suspicion” and was done so that the company could continue to trade in violation of the law and shield the directors from scrutiny.

Murray said Signature Life had, in the contracts it signed with hoteliers, undertaken to manage and market their hotels in return for certain fees.

In terms of these contracts, it had to conduct a bank account in the name of the establishment and deposit all funds received into the account.

It was not permitted to mingle funds between the various business operations.

In spite of this, he alleges Signature Life diverted all of Docklands money into its own bank account, refused to transfer the money back, and then created disputes regarding the reconciliation.

“It compounded the disputes on a month-to-month basis, as it misappropriated more and more income, making the reconciliations almost impossible, and then it held on to the money, drip-feeding only such amounts as were strictly necessary to prevent it from closing its doors.”

He said one hotel, Pephumula on the South Coast, had been driven into bankruptcy because of this “common practice”.

“Consistent with the structure of a pyramid scheme, Signature Life increased the number of its victims by contracting with further hotels, and at one stage it had contracted with up to 36.

“In this way, it managed to secure fresh sources of income that it misappropriated… warranting my allegation that it operates a pyramid scheme under the guise of conducting a legitimate business.”

In spite of the alleged misappropriation of millions of rand, the company did not own any fixed assets or any assets of value.

In June, when a judgment creditor sent the sheriff to its Currie Road offices, office furniture worth R12 000 was attached, and there needed to be an immediate investigation into where the money went.

He said that, while an enquiry was possible under voluntary liquidation laws, it would be possible for witnesses to tailor evidence and frustrate the probe, “and there is a high risk that its directors, who appear to have acted with criminal intent, shall do this”.

He said e-mails between Vels and the International Hotel School, in response to a demand for payment, indicated the company remained in the control of the directors, and that the “friendly voluntarily liquidator appointed” was nothing more than an agent of the directors.

When the matter came before the judge on Friday, it was opposed by a creditor Hugo Deugle, who was said to “represent a number of creditors, including a shareholder of 50 percent”.

However, advocate Mark Harcourt for Docklands, said he had been instructed that Deugle was a director of Signature Life “who is opposing this under another guise”.

Harcourt said because the company was already in voluntary liquidation, the directors had no standing in the matter. The voluntarily liquidator had agreed to abide by the decision of the court.

The judge said Signature Life’s conduct so far warranted Docklands’ apprehension and he granted an interim order. – The Mercury. Additional reporting bt Suren Naidoo