Johannesburg - The liquidation division of PricewaterhouseCoopers (PwC) was shut down after allegations that its head, Basil Nel, diverted R500 000 into his family trust, according to papers before the Pretoria high court.

The allegations have been denied by the auditing, accounting and business services group.

Evidence of the alleged fraud went missing after a raid on the home of insolvency practitioner Oliver Powell, according to a summons issued on the Director of Special Operations, its director and the national director of public prosecutions.

The raid was conducted under Office for Serious Economic Offences investigating director Jan Swanepoel, who, according to the papers, was Nel's friend and now works for PwC.

Nel has since resigned from PwC and the group's liquidation division has been shut down.

Powell is challenging the legality of investigations into his business and counts of impropriety in the office of the Pretoria master of the supreme court, which has discretionary powers over the appointment of liquidations, on the basis that it had been motivated by improper considerations and pressure to improve income for PwC's liquidations division, among other reasons.

He is also seeking the return of all documentation seized during the raid, including evidence of the fraud.

Powell alleges he confronted Nel about the apparent misappropriation of R500 000, and its transfer to Nel's family trust, the B&J trust.

According to the document, Powell told Nel he considered him dishonest in diverting funds to his family trust, which should rightfully have been paid to the insolvency division of the PwC.

The investigation followed a history of hostility between Nel, Powell and the master's office which had in 1998 refused to approve a special fee for Nel and a co-liquidator of over R1 million.

In April 1999 hostile correspondence was exchanged between (Powell) and Nel...

"The essence of the dispute was that Nel was not acting impartially in favour of the body of creditors, but rather serving the interests of his nominating creditors, but rather serving the interests of his nominating creditors, Standard Bank and the Industrial Development Corporation, who were both auditing clients of PwC.

"In about December 2000 Swanepoel left the employ of the {Directorate of Special Operations (formerly a division of the Office of Serious Economic Offenses)], and took up employment with PwC on January 8 2001, where he is still employed."

The decision to inquire into Powell's affairs, and the inquiry into alleged impropriety by the master, Ben Nell, had been taken in active association with Nel and/ or PwC.

The decision had been taken with the intent to remove the discretion of the master to appoint provisional liquidators, "thus removing the obstacles to the appointment of Nel as a liquidator... and improving the financial viability of the PwC insolvency division (and) silencing or discrediting (Powell) in relation to the complaints and allegations made by him about Nel and PwC".

It had also been intended to remove Powell as an insolvency practitioner and competitor of Nel and PwC, "and thus improve the financial viability of the PwC insolvency division" and to obtain possession of incriminating evidence in Powell's possession relating to the misappropriation of R500 000.

Approached for comment, a PwC spokesperson said : "We were approached by a newspaper about two years ago on the same issue.

The allegations were made that R500 000 was misappropriated by Basil Nel. As far as we could ascertain no money was misappropriated. In August 2000 Nel retired from PwC.

"Many of the contentions and views put forward by Powell as reflected in the above extracts from the court hearings are clearly inaccurate or a distortion of the position insofar as they refer to PwC," he said.

With acknowledgements to Lloyd Coutts and Sunday Independent.