Saturday, February 18, 2012

Auction house implicated in kickback scandal

Auction house implicated in kickback scandal
February 18 2012 at 11:25am


UNDER A CLOUD: Auction Alliance's Rael Levitt accused of 'heavy-handed tactics'. Picture: Cindy waxa

Auction house Auction Alliance has come under a hammer of a different sort, with insiders blowing the lid on business dealings that link bank staff, liquidators and attorneys to a money-making racket.

Based on a paper trail dating back more than 13 years, and on the damning evidence provided by a number of insiders who have broken rank, Weekend Argus can reveal that:

l Auction Alliance paid kickbacks to liquidators, attorneys and bank staff to pull business their way, with founder and chairman Rael Levitt insisting that “they will be in cash”, according to an explosive e-mail trail.

l The bank account of Levitt’s Johannesburg-based business development manager was used to launder some of the payouts in order to disguise the cash payouts. Money would be lodged into his account, then later withdrawn in cash, only to be hand-delivered to the intended recipients, all with the full knowledge of the individual in question.

l Two staff members of Investec, whose names are known to Weekend Argus, have been paid such hefty commissions by AA to keep the flow of auctions steady that other auctioneers have struggled to crack AA’s hold over the financial institution.

l A former senior manager at Absa in Gauteng was ousted by the bank some years back, when the AA kickback trail which revealed him as a recipient, was unearthed.

l A number of attorneys were also on the take, with documentation pointing to payouts of R500 000 in cash in one instance.

l A number of liquidators also pocketed massive amounts.

l The kickbacks in all these cases are typically 50 percent of the commission AA makes, but have risen up to 75 percent during market slumps, to ensure that business keeps coming Levitt’s way.

l Levitt forced staff to make the payments in cash cheques or EFTs, and ordered the company’s accounting system to be manipulated in order to keep auditors out of the loop, insisting in one e-mail “this is money under the table” and cannot be revealed.

l AA paid one aggrieved Johannesburg seller a cash “settlement” to drop a legal claim against the company when a botched auction was exposed, and threatened heavy legal action if he proceeded with a criminal case.

l Another aggrieved seller in Cape Town successfully exposed an enormous kickback paid by AA to a liquidator, that was channelled through a local attorney.

l AA trained its auctioneers how to rig auctions, and what to do and what not to do if they were caught in the act, and how to lean on bogus buyers who were and still are paid by Levitt to attend auctions to drive up bids.

l Levitt also traded on numerous occasions on his own auction floor by selling his own stock, presenting a potential conflict of interest.

l He bought a string of properties at AA auctions at knock-down prices.

l A court has found AA culpable of gross “misrepresentation” in a damning judgment.

l Another is pending, in Cape Town.

In an interview with Independent Newspapers last week,

Levitt denied the allegations and threatened to interdict the publication of the story, arguing that its “defamatory” content “would cause irreparable damage” to his business.

On Tuesday, Auction Alliance and Levitt attempted to prevent publication by bringing an urgent interdict against Independent Newspapers in the Western Cape High Court.

This was, however, withdrawn later in the week in an out-of-court settlement.

Meanwhile, insiders claim the allegations are not new, and are common practice throughout AA nationwide, adding that it is on the back of such allegedly irregular business styles that AA grew to become the market leader. In Levitt’s own words, his company leads the industry “by a long shot”.

AA’s turnover was reported to be in excess of R1 billion last year. It has offices dotted throughout the country and employs hundreds of staff, directly and indirectly, though staff turnover is sky high.

Levitt, many say, “is the industry”, which has made it difficult for anyone to challenge him, to date.

Insiders now talk candidly about “heavy-handed tactics” that were employed.

“If the payments weren’t delivered, or if I didn’t cash the cheques for him, that was the end,” claims one source.

“There was always a threat if things didn’t go his way. And it would always be your job that was under threat. And no one ever doubted that they could be axed with the snap of his fingers,” another said.

“It was always about money. Money, money and more money.”

Staff were not the only victims.

A number of sellers and buyers were also sitting on evidence, and were intimidated in the very same manner, said a source who has signed an affidavit in support of his claim.

“He and his men told me not to take him on, and warned me not to go the newspapers because they are such powerful advertisers, and can stop any story that would nail him.”

All that changed in December, however, when billionaire Wendy Appelbaum disputed the auction of Quoin Rock Estate wine estate, of which she was the winning bidder.

“I was not the winning bidder, but the sole bidder, and therefore bidding against myself,” Appelbaum told Weekend Argus. “That’s what I am disputing. Not the price, but the procedure, which has raised some very serious concerns.”

Last month Appelbaum lodged a complaint with the Consumer Protection Commission.

Levitt responded by suing her for defamation earlier this month, a case that is now about to play out.

“But this is the case that was needed,” said one of the five insiders who have signed affidavits supporting their allegations, which hinge on reams of incriminating documents, all of which help paint the darker side of Auction Alliance. - Weekend Argus

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