Winners in Ponzi scheme could still lose out

DEAN Rees, a high-profile agent for the Ponzi-type investment scheme headed by Barry Tannenbaum, which fleeced billions of rands from about 400 investors in South Africa, is to apply for the sequestration of Tannenbaum’s personal estate in Australia.

Rees explained this to investors in the scheme at a meeting in Midrand on Sunday, according to Michael Strauss of Ian Levitt Attorneys, who attended the meeting.An investor, who attended the meeting but did not want to be named, confirmed Rees’s comments at the meeting. Rees did not respond to messages left at his Sandton office.Steve Harcourt-Cooke of Computer Forensic Services, whose offices were used for the meeting, said on Monday that it was unlikely investors would ever see their money again.This was based on his firm’s 12-year experience, during which it investigated many pyramid schemes, such as Krion Financial Services.Harcourt-Cooke said his firm’s only involvement in the meeting was to explain to investors the implications of the Insolvency Act.He said if an investor had put R100 000 into the scheme and got back R150 000, that investor was deemed, in terms of the act, to be a winner and would be required to pay back the R50 000 profit. An investor who put in R100 000 and got back only R50 000 in the past six months would be required to pay back the R50 000, even though the investor would now lose the entire capital.Harcourt-Cooke said the concern for investors was that Tannenbaum was not going to be extradited from Australia to South Africa, as he would get protection from courts due to his chances of contracting HIV-Aids in a South African jail. In addition, Harcourt-Cooke said: ‘The larger winners in the scheme are running for the hills and don’t want to pay anything back.’The only way investors would get anything back was if winners paid back their returns. But the winners did not want to co-operate with the police, and trying to recover these funds through a court process was expensive in South Africa.The master of the Gauteng South High Court was expected to appoint a trustee for the Tannenbaum’s local estate, which was placed in provisional sequestration on June 5.The application was lodged by investor Christopher Leppan after Tannenbaum had defaulted on repayments.The funds raised by investors were supposed to be used by Tannenbaum’s Frankel Group to acquire raw materials for drugs, with the price then dramatically marked up before they were resold to drug manufacturers for the antiretroviral generics.Aspen said last week that it knew of the existence of documents representing purchase orders and other correspondence between Aspen and Frankel that ‘were neither prepared nor authorised by Aspen…’These documents have been fraudulently prepared using forged purchase order templates and forged signatures, representing Aspen personnel,’ it said. – Business Report