Sharemax law firm accused of extortion

Sharemax law firm accused of extortion
July 27 2011 at 05:00am
By Roy Cokayne


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Zambezi mall one of Sharemax property.photo by Simphiwe Mbokazi 453

Roy Cokayne


Sharemax attorneys Weavind & Weavind have been accused of attempted extortion and unprofessional conduct, related to a complaint lodged against the law firm with the Law Society of the Northern Provinces by prospective investors in property syndication schemes marketed by Sharemax.

Pierre Hough, a multi-disciplinary strategist and investigator of serious economic crime, claims attempts were made to get his client, Toffie Risk, to withdraw his complaint to the law society and the SAPS. Hough said this week that Risk was living in fear over a damages action instituted against him by Weavind & Weavind.

He alleged Weavind & Weavind had made an offer to Risk that if he signed a document and disassociated himself from Hough’s advice and from Hough as a consultant, it would withdraw the damages action against him.

“This is attempted extortion, which is a very serious matter, and unprofessional conduct. It also amounts to attempting to defeat the ends of justice,” Hough said.

Weavind & Weavind today faces a law society disciplinary committee hearing related to an initial complaint made by Hough, Risk and another of Hough’s clients, JMM Bosman. They claim misappropriation of trust funds in Sharemax schemes, by releasing funds from the law firm’s trust account in contravention of a government prohibition.

A R200 000 claim has been lodged with the Attorneys Fidelity Fund as well.

Weavind & Weavind at the time ignored a request from Business Report for comment about the initial complaint.

However, in response to a letter of demand from an attorney representing 11 other investors in Sharemax schemes, Weavind & Weavind claimed the government prohibition was not applicable to the firm. The law firm subsequently instituted a multimillion-rand damages claim against Risk, Bosman, Hough and his firm, Chase International, for defamation.

Hough said at the time that the claims were an attempt to intimidate his clients.

Weavind & Weavind managing director Raiford Johnson said the allegations of attempted extortion and defeating the ends of justice were extremely serious but neither his firm nor anyone acting on its instructions or with its consent had made any offer, as suggested, to either Bosman or Risk or to anybody acting on behalf of the complainants to the law society.

Johnson said the claims were “totally false, slanderous and obviously made with the intent of causing us (Weavind & Weavind) huge harm”.

Hough said he had lodged a further complaint with the law society last week about the alleged attempted extortion and unprofessional conduct by Weavind & Weavind.

Jaco Fourie, the senior legal official of the disciplinary department at the Law Society of the Northern Provinces, declined to confirm if such a complaint had been lodged. He said a committee of the law society had been provided with certain documentation for the hearing this week and it would consider and discuss them at the hearing.

But, Fourie added, as far as he knew, the people Hough was representing “had withdrawn their complaints” and these allegations now only came from Hough.

Bosman has withdrawn her complaint to the law society while Weavind & Weavind has withdrawn the damages action against her.

Bosman confirmed she had contacted Weavind & Weavind and informed the firm she no longer wanted to continue with her complaint.

“I did not have the energy, time or money to continue with it,” she said.

Charle Rossouw, Toffie Risk’s attorney, declined to comment on whether Risk had withdrawn his complaint against Weavind & Weavind.

Rossouw confirmed they had approached Weavind & Weavind after reviewing Risk’s situation in relation to the summons issued against him for damages.

“There were no offers from Weavind & Weavind in that respect and certain discussions followed thereafter but I cannot discuss them,” he said.

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07 December 2010 23:13 Sharemax update: Chris de Beer - lawyer, De BeerJanse v Vuuren & De Wet Inc
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A plea for a proper investigation into the debacle.
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ALEC HOGG: Well, Chris de Beer has got a similar case that he's digging into. He's a lawyer at De Beer Janse v Vuuren & De Wet. Chris, you've taken a particular interest in Sharemax. We'll get on to that in a moment, but why? What stimulated you to be interested in this whole saga?

CHRIS DE BEER: Hi Alec. Ja, we are acting on behalf of investors in some of the syndication companies and we had a proper look. We've been investigating the scheme for a while now, and ... down to the fact that in our papers we basically state in 700 pages what we believe the state of affairs is. Certainly some of the syndications are doing much better than the others, but the application is brought with a view of ultimately ensuring protection of investors and the public.

ALEC HOGG: You mention an application. You too are going to the courts to try and resolve an issue that you feel is problematic with those who are currently running the Sharemax portfolios. Why are you concerned that they aren't doing a good job?

CHRIS DE BEER: As far as "basically concerned that they are not doing a good job", I think the concern is more regarding the powers that are divested to the statutory managers. They are appointed in terms of the Banks Act, and they've got ... limited powers, whereas if you apply for a judicial manager they've got far more powers than the statutory manager, and they can do proper investigations into financial affairs. They can deal properly with any irregularities if there should have been any. They can better ensure the protection of investors.

ALEC HOGG: You say that you are representing investors. How many investors are those, Chris?

CHRIS DE BEER: Well, it's a group of investors. You've got people putting a lot of money in...

ALEC HOGG: So it's a lot.

CHRIS DE BEER: Pensioners as well. One of my clients put R10m in one of these syndications.

ALEC HOGG: What possessed him to do that? R10m in a Sharemax syndication?

CHRIS DE BEER: It's a lot of money into what was sold as being a good property investment.

ALEC HOGG: So he bought the story, he gave some broker, what, probably R3m in commission, and he's now struggling to get his money back, or at least to get some of it back?

CHRIS DE BEER: You see, that's the reason I say, Alec, there should be proper investigation into this. We don't want to be responsible with statements we make. The bottom line is that we see that some of the properties, specifically the latest ones, are grossly overvalued. And we can't see how with limited powers any statutory manager can properly protect investors and the public. If you have a look at the profile of the investors, I mean, it's old people, it's basically a mix. But ja, it should be a very responsible approach, and that's why we also try to ensure continuity by requesting the court to appoint the statutory managers as the co-judicial managers.

ALEC HOGG: So you want judicial managers. In South Africa's history, though, the past 27 years, only one property has come out of judicial management. All the others have actually gone bust. Is that not something that might happen here - that you then get the liquidators getting their hands on Sharemax, and heaven knows if anything's going to come out after that's happened.

CHRIS DE BEER: What I can tell you about that, Alec, is that at this stage we are approaching the court to get the permission in terms of the appointment of the statutory managers to bring judicial management applications in respect of seven of the syndication schemes. I think the two most problematic schemes are the Zambezi Retail Park and The Villa Retail Park. We are basically bringing two judicial management applications for Zambezi and for Villa.

ALEC HOGG: Those are the two biggest ones, are they?

CHRIS DE BEER: Yes. The two biggest ones, the two latest ones and also the ones with the biggest problems, looking at values.

ALEC HOGG: Chris, just on a broader sense, you say you put together 700 pages for the courts. Is there stuff that's come out in your investigation that we haven't seen yet from Sharemax?

CHRIS DE BEER: Alec, I can tell you this much. The papers are available from tomorrow at 10 o'clock, on an internet website. It's a link that you can find on the internet site. It's a public document, so anybody who wants to read it can go and read it there.

ALEC HOGG: How bad were these guys - Mr Willie Botha and his team, his cohorts?

CHRIS DE BEER: Well, I think it's for the reader to decide. At this stage we are strongly of the view that there should be further investigation into the affairs of the group. I think it's quite clear that there have been irregularities, otherwise there wouldn't have been statutory managers. But ja, I think specifically if you look at the way that they conducted loans between the companies - I think that's something that needs to be attended to.

ALEC HOGG: Chris, just finally - did you track down any assets abroad, overseas?

CHRIS DE BEER: Well, at this stage we haven't really had the opportunity to do that, but that's something that a judicial manager will probably have a proper look at, and we'll investigate that as we go further.

ALEC HOGG: Chris de Beer is a lawyer at De Beer Janse v Vuuren & De Wet, and he's done some serious investigation, as you heard, into Sharemax. We will be posting that link onto Moneyweb tomorrow. You can go and read the 700 pages and make up your own mind.

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17 September 2010 23:13 Statutory managers appointed at Sharemax: Michael Blackbeard - deputy registrar of banks, SARB
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Reserve Bank moves decisively to help Sharemax investors.
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ALEC HOGG: Well, I guess the guys who put their money in Sharemax are wishing they had listened to Deon Basson years ago, and are wishing they put their money into something like Discovery Invest because unfortunately, as they say in the classics, the fit has hit the shan, and Advocate Michael Blackbeard is the South African Reserve Bank. He's the deputy registrar there. Michael, you've put into place now - it's called statutory managers, but the same thing as the curators that were put into place at Fidentia. They are now going to try to get money back for the investors.

MICHAEL BLACKBEARD: Yes, good evening, Alec. The position is that we did find that the funding model of Sharemax was indeed a contravention of the Banks Act, and the only administrative powers that we do have in such a case is to order repayment and then to appoint managers to manage the repayment process.

ALEC HOGG: Why did it take you so long? The late Deon Basson was writing about this for years. We have also at Moneyweb. Julius Cobbett has been unpacking individual parts of these portfolios and showing that they are completely unsustainable. Was it not possible to move quicker?

MICHAEL BLACKBEARD: Look, hindsight is 20:20 vision. There are various factors. Firstly, it's a question of was the law clear enough? And the lawyers of Sharemax made a big issue about whether the commercial paper notice was clear enough and whether there was room for interpretation, and we have to ... these submissions by the lawyer. So there were lawyers involved.

ALEC HOGG: They kicked you into touch though, playing for time, and in the period that they were playing for time more people presumably put their money into this crooked lot.

MICHAEL BLACKBEARD: Yes, unfortunately that is usually the case. We receive a complaint, we have to react, we do react. The question is do we react too quickly, then we are also not very popular, because we are destroying the goose that lays the golden egg. If we obviously respect the rights of the other and we take too long we are also not - so it's a very thankless task.

ALEC HOGG: It is. It's never easy to be a state employee and to be an honest one at that. You guys really are. But, Michael, from your perspective, what can the public do, we as journalists? And again I'll just refer to Deon Basson - the poor man went out there and attacked Sharemax all on his own. Naspers, his employers, refused to support him in the court action against Sharemax. He's passed on now and we know that the stress that was involved probably had a role in that. What can the public, what can journalists do perhaps if they get exposed to a similar...

MICHAEL BLACKBEARD: Look, I think there have been so many articles in a lot of newspapers that that's spot-on. If it sounds too good to be true, it usually is. And do your homework. Is it a reputable business, do you foresee problems? But the problem is I think it's always the carrot. There's a monthly interest to be earned, and that carrot would appear to erase all the cautionary elements.

ALEC HOGG: There's also slimy salesmen in between, aren't there?

MICHAEL BLACKBEARD: That is unfortunately also the problem.

ALEC HOGG: What is going to happen now to those who have been responsible for harvesting all this money from investors? Are they going to be brought to book?

MICHAEL BLACKBEARD: Look, it is our policy that once we find that the Banks Act was contravened, we hand the matter over to the police. But I must caution that the test we have is that we have to be satisfied. So it's a very easy test - we have to be satisfied that the act was contravened. In a criminal case there is a beyond-reasonable-doubt test. So the police and the prosecutor sometimes have difficulty in proving reasonable doubt. ...

ALEC HOGG: Let's hope that this time round you are able to do it but, more than that, that the South African public can take a lesson from this. We've had Masterbond, we've had Fidentia, now we have Sharemax and there have always been people out there warning against these schemes. If it's too good to be true, as the deputy registrar was saying, believe it, it is. Wayne McCurrie, you've often used that credo.

WAYNE McCURRIE: Alec, I have. If you stick to one simple rule in investments - it's just diversify your portfolio, don't ever put more than 8% or 10% of you money in any one investment. You'll probably escape all of the things that you've said there, that have gone wrong for investors.

ALEC HOGG: I just wish that they would go after the consultants in a case like this. You think of the PR consultants, a guy like this Johan Geertsema, who was involved with Saambou - he was involved here as well. They lend some kind of credibility sometimes to it through their silky tongues and unfortunately it means that the ordinary people in the street get encouraged to go ahead and put their money in there and lose it. It doesn't seem fair.

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