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BLESSING TO MANKIND
Monday, December 24, 2012
Bernard L. Madoff
Ruby Washington/The New York TimesUpdated: Dec. 20, 2012
Overview
On Wall Street, his name was legendary. Now it is infamous.
With money Bernard L. Madoff had earned as a lifeguard on the beaches of Long Island, he built a trading powerhouse that prospered for more than four decades. By age 70, he had become an influential spokesman for the traders who are the hidden gears of the marketplace.
But on Dec. 11, 2008, Mr. Madoff was arrested at his Manhattan home by federal agents and charged in a 20-year Ponzi scheme that was the largest fraud in Wall Street history.
On March 12, 2009, Mr. Madoff pleaded guilty to all the federal charges filed against him — 11 felony counts, including securities fraud, money laundering and perjury.
A few months later, Judge Denny Chin of the federal district court in Manhattan imposed a term of 150 years on Mr. Madoff. In an interview in June 2011, Judge Chin said that prosecutors had suggested a sentence that might have allowed Mr. Madoff to be freed when he is in his 90s, but that he had concluded that his conduct had been “extraordinarily evil.’'
On the eve of the fraud’s collapse in 2008, the total shown on Madoff investor account statements was nearly $65 billion, the sum of fictional paper profits that had accumulated in some accounts for decades. Approximately $17.3 billion was actually invested by customers.
Irving H. Picard, the court-appointed trustee representing Mr. Madoff’s victims in the United States, filed more than 1,000 lawsuits seeking nearly $100 billion in damages and fictional profits. As of May 2012, he had reached settlement deals worth some $9 billion. However, he had delivered only $330 million to Mr. Madoff’s victims because so many of those settlements were being challenged in court.
In June 2012, the Supreme Court said it would not take up a dispute over how the claims of victims of Mr. Madoff’s huge Ponzi scheme should be calculated. Without comment, the high court declined to hear an appeal from lawyers for investors who got back all the cash they had invested with Mr. Madoff before his December 2008 arrest. They had urged the justices to order Mr. Picard to base victim claims on the final statements they received from Mr. Madoff in November 2008.
The decision by the Supreme Court means that rulings by a federal bankruptcy judge and a Federal Appeals Court in Manhattan upholding the method employed by Mr. Picard now stand.
2010: A Blizzard of Lawsuits
In December 2010, facing a deadline for the filing of claims, Mr. Picard initiated a blizzard of lawsuits. Claims were filed against members of Mr. Madoff’s immediate family, longtime individual investors like Jeffry Picower, and major feeder funds, including those operated by the Fairfield Greenwich Group and J. Ezra Merkin, a prominent Wall Street investment manager.
The largest of these was a $1.6 billion suit filed against Sonja Kohn, an Austrian banker. Mr. Picard called her Mr. Madoff’s “criminal soul mate,’' accusing her of masterminding a 23-year conspiracy that played a central role in financing the Ponzi scheme.
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Yet another lawsuit contended that the owners of the Mets, Fred Wilpon and Saul Katz, used the profits from their investments in Madoff to establish personal fortunes, create dozens of family trusts and financially fuel their array of businesses, from the Mets to real estate to the creation of a cable sports network. The lawsuit originally sought $1 billion, but a ruling by Judge Jed Rakoff limited the claims to upwards of $300 million.
The suit accused the Mets owners of being so enamored of the enormous profits they earned while investing over decades with Mr. Madoff that they ignored repeated and specific warnings that he might have been operating a fraud. Mr. Wilpon and other Mets officials have denied the charges.
After more than a year of back and forth, on the verge of a jury trial, Mr. Wilpon and Mr. Katz agreed to a settlement of $162 million. The $162 million is to be paid out of money Mr. Wilpon and Mr. Katz expect to recover as a “net loser” of the Madoff scheme. As part of the settlement, Mr. Picard dropped the willful blindness claim against Mr. Wilpon and Mr. Katz.
Mr. Picard also filed multibillion-dollar lawsuits against JPMorgan, UBS and HSBC, adding $17.4 billion to the amount he was claiming on behalf of victims, for a total of more than $32 billion. That amount, which included demands for punitive damages, was 50 percent more than the $20 billion he estimated as the actual cash losses in the fraud. The 2010 lawsuits against the banks and other financial institutions accused them of willfullly turning a blind eye to evidence that Mr. Madoff was operating a fraud, thereby allowing it to continue and increasing the financial destruction it caused.
Internal JPMorgan Chase documents released as part of Mr. Picard’s lawsuit show that senior bank executives expressed serious doubts about the legitimacy of Mr. Madoff’s investment business more than 18 months before his Ponzi scheme collapsed but continued to do business with him.
In May 2010, about 720,000 Madoff investors outside the United States settled with their banks, receiving about $15.5 billion in all, according to law firms representing them.
2011: Many Setbacks and Some Support
Mr. Picard suffered a setback in July 2011 when a federal judge ruled that he did not have the right to sue banks and other third parties on behalf of the victims — a finding likely to reduce by billions of dollars how much the trustee may ultimately be able to recover.
But in August 2011 Mr. Picard had good news when the United States Court of Appeals for the Second Circuit sided with him, ruling that his approach on how to calculate investor losses in the case against Mr. Madoff was “legally sound” and fundamentally fair.”
The ruling upheld a formula that limits investor claims to the actual cash that they had lost in the scheme, not the fictional profits they believed had accumulated in their accounts over the years of the fraud. Under this approach, those who invested more than they received from Mr. Madoff’s Ponzi scheme, the net losers, can pursue claims for reimbursement, while those who took out more than they put in, the net winners, are subject to lawsuits to recoup their gains.
In September 2011, United States District Judge Jed Rakoff threw out all but two of the 11 claims filed by Mr. Picard against Fred Wilpon and Saul Katz, the owners of the New York Mets, ruling that he could seek no more than $386 million in fictional profits that Mr. Madoff paid out to Mr. Wilpon and Mr. Katz. That figure was based on the sum the men invested in the two years before the fraud was discovered in December 2008, the recovery window set by federal bankruptcy law. The trustee had been seeking $1 billion in fictional profits and principal paid out in the last six years of the fraud, as permitted under New York State law.
Judge Rakoff also threw out the trustee’s bid to recover so-called preference claims, the cash paid out to the team’s owners in the final 90 days of the fraud.
Mr. Picard had another setback in early November 2011, when a federal judge in Manhattan ruled that he did not have the legal right to pursue $20 billion in combined damage claims against JPMorgan Chase & Company and UBS, to help compensate Mr. Madoff’s victims.
The decision echoed the July ruling that barred Mr. Picard from seeking a combined $8.8 billion in similar damage claims against HSBC, the London-based banking giant, and UniCredit, one of Italy’s largest banking groups.
Only the Trustee Can Count On Being Paid
According to a Government Accountability Office report quoting the Securities Investor Protection Corporation, which hired Mr. Picard as the bankruptcy trustee, it is unlikely he will be able to pay back Mr. Madoff’s customers the $17.3 billion that he had said was his goal, let alone the $100 billion he originally sought.
Mr. Picard has been successful in seeking to claw back money from “net winners” — investors who walked away with more money than they started with — so he can pay the “net losers.” As of May 2012, he had reached settlement deals worth some $9 billion. However, he had delivered only $330 million to Mr. Madoff’s victims because so many of those settlements were being challenged in court. It was unclear whether some of the settlements, which were approved by a bankruptcy judge but were being challenged by others on appeal, would hold up.
Meanwhile, the legal fees keep piling up. At $850 an hour, Mr. Picard and his law firm, Baker & Hostetler, created a whopping $554 million in legal and other fees as of May 2012. The fees do not come out of the hide of the Mr. Madoff’s victims. They are paid from a fund overseen by SIPC, which provides a form of protection for investors against losses that arise when a broker-dealer fails. The nonprofit group is supported by charges paid by its broker-dealer members.
A Path of Financial Destruction
Mr. Madoff left a zigzagged path of financial destruction across the world, from HSBC bank to BNP Paribas, to industry leaders and celebrities in the United States, from Elie Wiesel and the Hollywood director Steven Spielberg to the publisher Mortimer B. Zuckerman and the real estate business of former New York governor Eliot Spitzer.
R. Thierry Magon de la Villehuchet, a prominent hedge fund manager who apparently had lost $1.4 billion with Mr. Madoff, was found dead in his office on Madison Avenue in December 2008, about 10 days after Mr. Madoff was arrested. The evidence pointed to suicide, the police said.
Mr. Madoff founded Bernard L. Madoff Investment Securities in 1960. By the early 1980s, his firm was one of the largest independent trading operations in the securities industry. The company had around $300 million in assets in 2000 at the height of the Internet bubble and ranked among the top trading and securities firms in the nation. According federal filings, Bernard L. Madoff Investment Securities operated more than two dozen funds overseeing $17 billion.
These funds had been widely marketed to wealthy investors, hedge funds and other institutional customers for more than a decade, although an S.E.C. filing in the case said the firm reported having 11 to 23 clients at the beginning of 2008.
A Promise of High Returns
Prosecutors said that Mr. Madoff — whose investors prized his steady single-digit annual returns — actually had promised select clients extraordinarily high returns, as much as 46 percent, to lure them in. One of Mr. Madoff’s more prominent investors, the Fairfield Sentry fund, reported having $7.3 billion in assets in October 2008 and claimed to have paid more than 11 percent interest each year through its 15-year track record. Angry victims began to charge that funds like Fairfield, which had built profitable businesses through providing access to Mr. Madoff’s investment vehicle, had failed to perform proper due diligence.
To sustain his fraud, Mr. Madoff assembled an ill-trained and inexperienced clerical staff, directed them to “generate false and fraudulent documents,” told lies and supplied false records to regulators, and shuffled hundreds of millions of dollars from bank to bank to create the illusion of active trading. The government said Mr. Madoff ordered multimillion-dollar bank transfers in part “to give the appearance that he was conducting securities transactions in Europe on behalf of the investors, when, in fact, he was not.”
Extending His Crime’s Shadow
In an accusation that extended his crime’s shadow to the edges of the business where his brother and sons worked, prosecutors accused Mr. Madoff of using some of the money he gathered through his Ponzi scheme to support the supposedly legitimate wholesale stock trading operation that made his name on Wall Street.
Specifically, prosecutors said that Mr. Madoff “caused more than $250 million” he collected through his Ponzi scheme from at least 2002 through 2008 “to be directed, through a series of wire transfers, to the operating accounts that funded the operations of these businesses.”
The government also charged that he had money transferred from his firm’s London office “to purchase property and services for the personal use and benefit” of himself, his family members and his associates.
Mr. Madoff ran the business with several family members, including his brother Peter, his nephew Charles, his niece Shana and his sons Mark and Andrew. His older son, Mark, 46, was found dead in December 2010 in his Manhattan apartment, hanging from a dog leash while his 2-year-old son slept in an adjoining room. David J. Sheehan, counsel to Mr. Picard, said Mr. Madoff’s apparent suicide would not affect the complaints filed against him, his brother, Andrew, and other relatives.
Peter Madoff Sentenced to 10 Years in Prison
In December 2012, Peter B. Madoff, the only brother of Bernard Madoff, was sentenced to 10 years in prison for his role in enabling the fraud. He served as the senior lawyer and chief compliance officer at his brother’s firm.
In June, Peter Madoff admitted to a range of crimes, including falsifying documents, lying to securities regulators, and filing sham tax returns. Prosecutors said that if he had implemented a proper compliance program, regulators would likely have detected the fraud years earlier.
His guilty plea did not include an admission that he ever knew about or participated in the Ponzi scheme.
Associates Plead Guilty
Frank DiPascali, a longtime aide to Mr. Madoff, admitted on Aug. 11, 2009, that for at least 20 years, he helped carry out the fraud. (He then pleaded guilty in Federal District Court in Manhattan to 10 felony counts, including conspiracy and tax evasion.)
He explained how he and others helped Mr. Madoff perpetuate the crime — using historical stock data from the Internet to create fake trade blotters, sending out fraudulent account statements to clients and arranging wire transfers between Mr. Madoff’s London and New York offices — to create the impression that the firm was earning commissions from stock trades.
To give the appearance that Mr. Madoff’s firm had mastered the markets, Mr. Madoff and his employees would track stock prices and then simply pretend to buy stocks whose trajectories matched the firm’s investment goals, Mr. DiPascali said.
According to court documents, Mr. DiPascali sorted clients into categories, each with its own pattern of fictional but plausible trading. He identified a subset of “special accounts” for which he created an extensive paper trail suitable for regulatory inspection. He communicated directly with some large investors and feeder funds.
And he arranged for additional fictional profits, up to 53 percent a year, to be invented for certain investors designated by Mr. Madoff, according to one filing.
On Nov. 3, 2009, David G. Friehling, Mr. Madoff’s independent auditor from 1991 until the fraud collapsed in December 2008, pleaded guilty to a total of nine criminal charges carrying a potential prison term of 114 years.
In essence, Mr. Friehling admitted that he had never adequately audited the Madoff operation and, as an investor in the scheme, had never been a truly independent auditor. Nevertheless, he produced the supposedly professional and independent audits that sustained the Madoff fraud year in and year out.
S.E.C. Lapses
On Oct. 30, 2009, the S.E.C.’s inspector general, H. David Kotz, released a trove of official exhibits gathered during the 10-month investigation of how the commission handled, and mishandled, numerous tips and warnings it received about Mr. Madoff over the years.
Mr. Kotz’s full report found the S.E.C had received six substantive complaints about Mr. Madoff since 1992 — and botched the investigation of every one of them. He found no evidence of any bribery, collusion or deliberate sabotage of those investigations.
In a jailhouse interview, Mr. Madoff said that the young investigators who pestered him over incidentals like e-mail messages should have just checked basics like his account with Wall Street’s central clearinghouse and his dealings with the firms that were supposedly handling his trades.
“If you’re looking at a Ponzi scheme, it’s the first thing you do,” he said.
Those simple steps, he added, could have revealed years earlier that he was running the largest Ponzi scheme ever, a crime that has now dragged the S.E.C. into the worst scandal in its 75-year history. “It would have been easy for them to see,” he added.
Mr. Madoff said that, on two occasions, he was certain it was only a matter of days or even hours before he would be caught. The first time, in 2004, he assumed the investigators would check his clearinghouse account. He said he was “astonished” that they did not, and theorized that they might have decided against doing so because of his stature in the industry.
In Mr. Madoff’s second close call in 2006, investigators actually asked for his clearinghouse account number on a Friday afternoon, but then never followed up. He said he firmly expected the following Monday would bring the curtain down on his crime. Again, nothing happened. He recalled thinking at the time: “After all this, I got away lucky.”
JPMorgan Chase’s Internal Doubts
In December 2010, David J. Sheehan, counsel to Mr. Picard, bluntly asserted that Mr. Madoff “would not have been able to commit the massive Ponzi scheme without Chase.” But with the case under seal, there was no way to gauge the documentation on which Mr. Picard based his $6.4 billion in claims against the bank.
In February 2011, internal bank documents released as part of Mr. Picard’s lawsuit show that senior bank executives expressed serious doubts about the legitimacy of Mr. Madoff’s investment business more than 18 months before his Ponzi scheme collapsed but continued to do business with him.
Prior to June 2007, a top private banking executive had been consistently steering clients away from investments linked to Mr. Madoff because his “Oz-like signals” were “too difficult to ignore.” And the first Chase risk analyst to look at a Madoff feeder fund, in February 2006, reported to his superiors that its returns did not make sense because it did far better than the securities that were supposedly in its portfolio.
Despite those suspicions and many more, the bank allowed Mr. Madoff to move billions of dollars of investors’ cash in and out of his Chase bank accounts right until the day of his arrest in December 2008 — although by then, the bank had withdrawn all but $35 million of the $276 million it had invested in Madoff-linked hedge funds, according to the litigation.
According to the trustee, the flow of money just between the Madoff accounts and this customer’s accounts should have set off warning bells at the bank. On a single day in 2002, Mr. Madoff initiated 318 separate payments of exactly $986,301 to the customer’s account for no apparent reason, the trustee reported. In December 2001, Mr. Madoff’s account received a $90 million check from the customer’s account “on a daily basis,” according to the lawsuit. The transfers should have caused the bank’s money-laundering software to start flashing, Mr. Picard’s complaint asserted.
For its part, the bank denied that it had known about or played any role in Mr. Madoff’s fraud and dismissed the claim that it turned a blind eye to his activities to retain income from his business.
Reflections and Accusations in Prison
In February 2011, in his first interview for publication since being arrested in December 2008, Mr. Madoff — looking noticeably thinner and rumpled in khaki prison garb — said family members knew nothing about his crimes. His family has faced stacks of lawsuits, the potential forfeiture of most of their assets, and relentless public suspicion and enmity that cut Mr. Madoff and his wife Ruth off from their children.
He also spoke with great intensity and fluency about his dealings with various banks and hedge funds, pointing to their “willful blindness” and their failure to examine discrepancies between his regulatory filings and other information available to them. “They had to know,” Mr. Madoff said. “But the attitude was sort of, ‘If you’re doing something wrong, we don’t want to know.’ ”
While he acknowledged his guilt in the interview and said nothing could excuse his crimes, he focused his comments laserlike on the big investors and giant institutions he dealt with, not on the financial pain he caused thousands of his more modest investors. He did not assert that any specific bank or fund knew about or was an accomplice in his Ponzi scheme.
Mr. Madoff’s claims must be weighed against his tenuous credibility. After deceiving federal regulators and supposedly sophisticated investors for at least 16 years, he would certainly be branded as a liar by defense lawyers if he appeared as a witness against any defendant in a courtroom — a fact he acknowledged somewhat ruefully during the interview.
While Mr. Madoff said he was determined to aid the trustee’s efforts to recover assets, he was also critical of the trustee’s reach, claiming that Mr. Picard was seeking far more money than was needed to resolve valid investor claims.
In addition to the customer claims for the cash losses and the paper wealth that vanished, the Madoff estate also faces claims by general creditors, like unpaid vendors and landlords, who cannot recover until all the valid customer claims are paid.
In prison, Mr. Madoff’s access to the outside world is both limited and monitored. All visitors must be approved by prison authorities, who also screen his limited collect calls and his incoming and outgoing e-mails and letters, though interviews with lawyers like Mr. Picard and his colleagues are less restricted and can be conducted in private.
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Highlights From the Archives
Scenes From the Madoff Masquerade
By DIANA B. HENRIQUES
Bernard L. Madoff remained calm and seemingly in control as the financial crisis closed in around him, a new book says.
April 24, 2011businessNews From Prison, Madoff Says Banks ‘Had to Know’ of Fraud
By DIANA B. HENRIQUES
In his first interview for publication since his arrest, Bernard L. Madoff insisted that his family knew nothing about his crimes, but some banks and hedge funds “had to know.”
February 16, 2011businessNews Madoff Is Sentenced to 150 Years for Ponzi Scheme
By DIANA B. HENRIQUES
A federal judge sentenced Bernard L. Madoff to 150 years in prison for running a huge Ponzi scheme that devastated thousands of investors, calling his crimes “extraordinarily evil.”
June 30, 2009businessNews Madoff Goes to Jail After Guilty Pleas
By DIANA B. HENRIQUES and JACK HEALY
Bernard L. Madoff was sent to jail to await sentencing after expressing remorse for his Ponzi scheme.
March 13, 2009businessNews Madoff to Plead Guilty; Charges Carry a Life Sentence
By WILLIAM K. RASHBAUM and DIANA B. HENRIQUES
Lawyers for the disgraced financier Bernard L. Madoff told a federal judge that he is expected to plead guilty this week to charges that will result in a life sentence.
March 11, 2009businessNews Madoff Scheme Kept Rippling Outward, Across Borders
By DIANA B. HENRIQUES
Bernard L. Madoff’s fraud, the first worldwide Ponzi scheme, lasted longer, reached wider and cut deeper than anything like it in history.
December 20, 2008businessNews Prominent Trader Accused of Defrauding Clients
By DIANA B. HENRIQUES and ZACHERY KOUWE
Charges say the scheme engineered by Bernard L. Madoff caused $50 billion in losses.
December 12, 2008
businessNews ARTICLES ABOUT BERNARD L. MADOFF
Changing Face of Finance
By WILLIAM ALDEN
The $8.2 billion deal for the New York Stock Exchange showed how the power base in finance has shifted. | Bernard L. Madoff's brother and former chief compliance officer is headed to prison for his role in aiding the Ponzi scheme. | The F.B.I. arrested a former bank executive in Los Angeles in connection with the the accounting scandal at Olympus. | It looks like we'll be heading into Christmas without a deal to avoid the so-called fiscal cliff.
December 21, 2012 Peter Madoff Is Sentenced to 10 Years for His Role in Fraud
By PETER LATTMAN and DIANA B. HENRIQUES
Peter Madoff, Bernard L. Madoff's younger brother, was sentenced to 10 years in prison on Thursday for his role in enabling the extensive fraud that swindled investors out of billions of dollars.
December 20, 2012
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By JESSE EISINGER
Another former employee of SAC Capital Advisors has been accused of insider trading, but investors don’t seem to mind, as they continue to put money into the hedge fund in search of great returns.
December 12, 2012
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December 8, 2012, Saturday
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One of Bernard Madoff's longest-serving employees pleaded guilty on Thursday to falsifying records, a conspiracy that a prosecutor said began in the 1970s at the start of the multibillion-dollar Ponzi scheme.
November 8, 2012, Thursday Charges Expand in a Madoff Case
By REUTERS
Federal prosecutors filed more charges against five people who are accused of helping to defraud customers of Bernard L. Madoff’s investment firm, as far back as the 1970s.
October 2, 2012, Tuesday
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By RICHARD SANDOMIR
Fred Wilpon and Saul Katz, the owners of the Mets who are heavily in debt, will not receive a multi-million dollar payout connected with a settlement in the conviction of Bernard L. Madoff.
September 29, 2012, Saturday
MORE ON BERNARD L. MADOFF AND: New York Mets, Katz, Saul B, Wilpon, Fred, Picard, Irving H, Madoff, Bernard L, Baseball, Frauds and Swindling Guilty Plea Seen for Aide To Madoff
By REUTERS
NEW YORK (Reuters) - One of Bernard Madoff's longest-serving employees is expected to plead guilty to criminal charges in the multibillion-dollar Ponzi scheme , U.S. prosecutors said, the latest among a dozen former employees to face charges. Irwin Lipkin, a former controller of Bernard L. Madoff Investment Securities LLC, will appear in Manhattan federal court on Thursday, prosecutors said in a letter to the judge.
September 13, 2012, Thursday
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By REUTERS
Irwin Lipkin, a former controller of Bernard L. Madoff Investment Securities, will plead guilty to conspiracy to commit securities fraud and falsifying documents, prosecutors told a judge.
September 13, 2012, Thursday
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September 12, 2012, Wednesday
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Liquidators want R30m back from Aurora ‘investors’
Liquidators want R30m back from Aurora ‘investors’
December 23 2012 at 10:32am
By DIANNE HAWKER
REUTERS
File photo: Corrugated iron rusts beneath a disused mine shaft at the Aurora gold mine, 50km east of Johannesburg.
Johannesburg - Liquidators are demanding millions of rands earned from the troubled Aurora mine and allegedly paid to a Johannesburg family while mineworkers starved.
Suliman Bhana and his son Fazel have been taken to court for the return of more than R30-million in gold revenue allegedly paid to family members and business associates.
The Pamodzi Gold liquidators have allegedly linked the Bhana family to several payments they describe as illegal and which they say have contributed to pushing Aurora into liquidation.
Aurora’s directors are Nelson Mandela’s grandson, Zondwa, President Jacob Zuma’s nephew, Khulubuse, and Thulane Ngubane.
Aurora took control of the liquidated Pamodzi mines in November 2009, and began gold mining operations. Aurora and Pamodzi were liquidated, mineworkers were not paid for several months, and numerous assets were allegedly stripped from the mines.
John Walker, lawyer for the liquidators, said there were seven cases in all, targeting the return of money allegedly paid to members of “the Indian community” who, it is claimed, had allegedly invested millions in Aurora. However the liquidators say that in some cases the investors received “up to 100 percent interest back on their alleged investment” while other creditors went unpaid.
This is the second attempt by the liquidators to go after individuals who, they believe, have sunk the former Pamodzi mines into bankruptcy.
In a separate case, the liquidators are aiming to have the directors declared delinquent – a move which could hamper their ability to do business.
However, according to evidence collected at an inquiry by the master of the high court, Aurora had no money to run the mine’s daily operations.
During the inquiry Fazel Bhana testified that as a consultant for Aurora, “my job is to raise money” – for which he and his father, Suliman, offered personal surety.
“It is private equity. I go to the whole Indian community and say ‘guys, here is a mining deal, there is a strong BEE partner and we have got the funding coming, it is going to print money’. There was nothing wrong with the deal,” Fazel Bhana testified at the inquiry.
There were no written agreements with the investors, according to Fazel Bhana, and the understanding was that their money would be paid back when R200m in international funding materialised.
“Everybody wanted the money back when our funding came through and the funding never materialised, so we had to borrow from Peter to pay Paul in the end,” Fazel Bhana testified.
In an affidavit in one of the seven cases, liquidator Christiaan de Wet said Aurora had failed to divulge that it did not have cash and had “purportedly”borrowed money from investors, a fact which may have hampered its bid for control of the Pamodzi mining operations.
He added that the local Indian community “consisted, however, of family members of Fazel and Suliman Bhana”.
De Wet said: “Clearly the intention was to prefer the (family) clandestinely.”
De Wet said the payments were kept from the Aurora directors. He referred to testimony during the inquiry where Ngubane was so shocked to hear of the payments, that he requested a break.
Ngubane said: “There is no way we could have… paid those investors from that time (November 2009 to April 2010), no ways. No ways.”
In his testimony, Fazel Bhana said the investors were “paid from the operational cash flow” from December 2009.
Meanwhile, Aurora financial manager Brett du Toit testified that Fazel and Suliman Bhana were the ones truly running the company.
“They took over all the financials, they took over the function of deciding what needs to get paid, what doesn’t need to get paid and my input was no longer really required,” he said.
Du Toit said Aurora “basically had the employees as their banking account” because “they got the work, the toil, the production from the employees, got the gold and did not pay the employees for that period of time”.
Suliman Bhana referred questions to lawyer David Swartz, who represents all the family members.
Bhana would not comment on the case, but told The Sunday Independent “there’s a lot of false allegations going on”.
Swartz, who also represents Mandela and Ngubane, said before the cases could go ahead, he would approach the court to get the liquidators to come up with R8m to cover legal costs. He has requested R1m for each of the seven cases relating to the R30m, and another R1m for the case against the directors.
These cases will have to be heard in court.
Swartz would not comment on the merits of the case against his clients, saying only that they are opposing all applications relating to the R30m in payments.
“The cases are still in their infancy and we haven’t filed responding affidavits yet. We’re not going to talk very much at this stage. We are waiting for the court to decide,” he said. - Sunday Independent
December 23 2012 at 10:32am
By DIANNE HAWKER
REUTERS
File photo: Corrugated iron rusts beneath a disused mine shaft at the Aurora gold mine, 50km east of Johannesburg.
Johannesburg - Liquidators are demanding millions of rands earned from the troubled Aurora mine and allegedly paid to a Johannesburg family while mineworkers starved.
Suliman Bhana and his son Fazel have been taken to court for the return of more than R30-million in gold revenue allegedly paid to family members and business associates.
The Pamodzi Gold liquidators have allegedly linked the Bhana family to several payments they describe as illegal and which they say have contributed to pushing Aurora into liquidation.
Aurora’s directors are Nelson Mandela’s grandson, Zondwa, President Jacob Zuma’s nephew, Khulubuse, and Thulane Ngubane.
Aurora took control of the liquidated Pamodzi mines in November 2009, and began gold mining operations. Aurora and Pamodzi were liquidated, mineworkers were not paid for several months, and numerous assets were allegedly stripped from the mines.
John Walker, lawyer for the liquidators, said there were seven cases in all, targeting the return of money allegedly paid to members of “the Indian community” who, it is claimed, had allegedly invested millions in Aurora. However the liquidators say that in some cases the investors received “up to 100 percent interest back on their alleged investment” while other creditors went unpaid.
This is the second attempt by the liquidators to go after individuals who, they believe, have sunk the former Pamodzi mines into bankruptcy.
In a separate case, the liquidators are aiming to have the directors declared delinquent – a move which could hamper their ability to do business.
However, according to evidence collected at an inquiry by the master of the high court, Aurora had no money to run the mine’s daily operations.
During the inquiry Fazel Bhana testified that as a consultant for Aurora, “my job is to raise money” – for which he and his father, Suliman, offered personal surety.
“It is private equity. I go to the whole Indian community and say ‘guys, here is a mining deal, there is a strong BEE partner and we have got the funding coming, it is going to print money’. There was nothing wrong with the deal,” Fazel Bhana testified at the inquiry.
There were no written agreements with the investors, according to Fazel Bhana, and the understanding was that their money would be paid back when R200m in international funding materialised.
“Everybody wanted the money back when our funding came through and the funding never materialised, so we had to borrow from Peter to pay Paul in the end,” Fazel Bhana testified.
In an affidavit in one of the seven cases, liquidator Christiaan de Wet said Aurora had failed to divulge that it did not have cash and had “purportedly”borrowed money from investors, a fact which may have hampered its bid for control of the Pamodzi mining operations.
He added that the local Indian community “consisted, however, of family members of Fazel and Suliman Bhana”.
De Wet said: “Clearly the intention was to prefer the (family) clandestinely.”
De Wet said the payments were kept from the Aurora directors. He referred to testimony during the inquiry where Ngubane was so shocked to hear of the payments, that he requested a break.
Ngubane said: “There is no way we could have… paid those investors from that time (November 2009 to April 2010), no ways. No ways.”
In his testimony, Fazel Bhana said the investors were “paid from the operational cash flow” from December 2009.
Meanwhile, Aurora financial manager Brett du Toit testified that Fazel and Suliman Bhana were the ones truly running the company.
“They took over all the financials, they took over the function of deciding what needs to get paid, what doesn’t need to get paid and my input was no longer really required,” he said.
Du Toit said Aurora “basically had the employees as their banking account” because “they got the work, the toil, the production from the employees, got the gold and did not pay the employees for that period of time”.
Suliman Bhana referred questions to lawyer David Swartz, who represents all the family members.
Bhana would not comment on the case, but told The Sunday Independent “there’s a lot of false allegations going on”.
Swartz, who also represents Mandela and Ngubane, said before the cases could go ahead, he would approach the court to get the liquidators to come up with R8m to cover legal costs. He has requested R1m for each of the seven cases relating to the R30m, and another R1m for the case against the directors.
These cases will have to be heard in court.
Swartz would not comment on the merits of the case against his clients, saying only that they are opposing all applications relating to the R30m in payments.
“The cases are still in their infancy and we haven’t filed responding affidavits yet. We’re not going to talk very much at this stage. We are waiting for the court to decide,” he said. - Sunday Independent
Reserve Bank launches anti-pyramid scheme campaign
The Reserve Bank invites people to report suspected illegal deposit-taking (Pyramid or Ponzi) schemes to sarb-banksup@resbank.co.za. Alternatively call 0800 677 772 or SMS the Primedia Crime line on 32211.
South Africa
Author: Julius Cobbett|
2012
Reserve Bank launches anti-pyramid scheme campaign
Investigations are lengthy and prosecutions few; thus prevention is better than cure.
If you fall victim to a pyramid scheme, it is unlikely that the authorities will have much success in getting your money back. Once liquidators and their attorneys have feasted on the carcass, there is seldom anything left for investors. Schemes are known to collapse long before the Reserve Bank has arrived at any conclusions of wrongdoing. And successful prosecution of perpetrators is rare.
Seemingly aware of these problems, the Reserve Bank has embarked on a campaign to educate citizens on how to spot and avoid pyramid, illegal deposit-taking, and other dubious schemes.
Educational advertisements will be aired on radio and television and journalists have been asked to assist in getting the message across. The campaign message is: Beware of oMashayana (crooks). If it sounds too good to be true, it probably is. Speak to your bank or an authorised financial services provider.
Speaking at a media briefing held in Johannesburg on Thursday, Hlengani Mathebula, Group Head of Strategy and Communications at the SARB cautioned the public against illegal deposit-taking schemes. Mathebula says these schemes target the vulnerable, such as pensioners and people who have available cash from bonuses, death benefits, RAF payouts etc.
But Mathebula also noted that the rich and financially savvy are not immune from pyramid schemes. It is difficult to forget the list of businessmen who were allegedly conned by Barry Tannenbaum for example.
Mathebula declined to answer a question asking him to list some recent successful prosecutions of pyramid-scheme kingpins. He acknowledged that the prosecutions issue is a “big problem”.
Similarly, Reserve Bank investigations into dubious scheme can take years, and the schemes are known to collapse before action can be taken. Mathebula responded that the length of investigations is the result of the complexity of the scheme in question. Mathebula says that it is important to be thorough, and follow every possible lead to ensure that the scheme does not resurface in another guise.
To illustrate the lack of faith some people have in criminal prosecutions, consider a recent statement made by Hans Klopper, the business rescue practitioner appointed to a number of property syndication schemes promoted by Pickvest (formerly Picvest and PIC Syndications).
The Pickvest syndication structure was placed under business rescue before the Reseve Bank could conclude an investigation to determine whether its schemes were illegally accepting deposits.
In response to a question about criminal prosecution, Klopper wrote: “Insofar as you have made reference to possible criminal prosecution we believe that this is fact the most unlikely of outcomes that will benefit the investors. Having said this, it has been brought to my attention that there has not been a successful criminal prosecution for a commercial crime in Gauteng during the last two years. It would, likewise, become a costly exercise and I am not sure how this will in any event benefit investors.”
The Reserve Bank invites people to report suspected illegal deposit-taking (Pyramid or Ponzi) schemes to sarb-banksup@resbank.co.za. Alternatively call 0800 677 772 or SMS the Primedia Crime line on 32211.
Property mogul wants to list R7.6bn portfolio
The Reserve Bank invites people to report suspected illegal deposit-taking (Pyramid or Ponzi) schemes to sarb-banksup@resbank.co.za. Alternatively call 0800 677 772 or SMS the Primedia Crime line on 32211.
----------------------------------------------------------------------
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We are completely independent and deal with all disputes fairly and impartially. ... How to Complain page, or for more information, phone us on (012) 470-9080 ...
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Top ten
Author: Moneyweb|
24 December 2012 11:23
Moneyweb’s top ten stories of 2012
Mainly dominated by the events surrounding the death of Herman Pretorius
SA’s richest person worth R61bn
A list of South Africa's ten richest men and woman.
Former hedge fund boss dies in shooting incident
Herman Pretorius allegedly shoots his former business partner Julian Williams dead in his Cape Town offices.
Former hedge fund boss`s returns questioned
Former hedge fund boss Herman Pretorius and his company, Abante, delivered returns for his investors – in the region of 20% a year, was it too good to be true?
Herman Pretorius’s R1.8bn scheme is bankrupt – lawyer
RVAF’s only remaining trustee has no knowledge of where the funds were invested.
Herman Pretorius: Brokers will pay for bad advice
Complaints with the Fais Ombud could bankrupt financial advisers in R1.8bn scam.
I had money with Herman Pretorius
One of Herman Pretorius’s investors was a fund manager at unit trust company 4i Asset Management.
Capitec now offers R230 000 unsecured loan
This is substantially higher than any of the offerings at South Africa’s four largest banks.
SA’'s top performing unit trust funds
What to consider before you invest.
A look inside SA's most expensive house
Generous cash offers turned down as owners seek their original R300m.
SA’s hottest jobs
What employers want, and what they’ll pay.
Property
Author: Julius Cobbett|
21 December 2012 14:51
Property mogul wants to list R7.6bn portfolio
New listing will affect 18 000 investors in the failed Pickvest syndication schemes.
JOHANNESBURG - The Georgiou Group wants to list a portfolio of properties on the JSE. The estimated size of the portfolio is R7.6bn. This would make it bigger than listed funds such as Sycom Property Fund, Fortress Income Fund and Premium Properties.
The portfolio’s flagship property will be the Fourways Mall, north of Johannesburg.
The Georgiou Group is a large private portfolio founded by 68-year-old property mogul Nic Georgiou. The listing would not be Georgiou’s first foray into the public investment space; for the past few years he has been involved with the controversial property syndication promoter Pickvest (formerly PIC Syndications).
Georgiou sold properties to Pickvest investors and also “guaranteed” their returns through head lease and buy-back agreements.
In September 2011, eight Pickvest-promoted property syndication schemes worth R4.6bn entered business rescue proceedings. Hans Klopper was appointed business rescue practitioner to all eight schemes.
Late last year investors voted in overwhelming favour for a scheme which would see them become creditors of a Georgiou-owned company called Orthotouch. The rescue scheme proposed that Orthotouch pay investors income of 6% a year, increasing by 25 basis points each year. After five years, in December 2016, investors are due full repayment of their capital.
Rumours of Georgiou’s attempted JSE listing have been circulating for the past few months. The proposed listing was confirmed this month by Klopper in an announcement on the Orthotouch website.
“In terms of the revised business plan recently approved by the board, Orthotouch will participate in a strategic decision by the Georgiou Group to list a property portfolio of approximately R7,6 billion on the on the Johannesburg Stock Exchange. The commercial property portfolio includes Fourways Mall (one of the country’s premier commercial developments in Northern Johannesburg) and approximately R2.9 billion of the Orthotouch properties. This listing is due to take place in April 2013,” writes Klopper.
As a result of the transaction, Klopper says that a “substantial portion of Orthotouch’s assets will be converted into shares in the listed entity, which will be highly regulated – the JSE being widely regarded to be one of the top regulated Stock Exchanges in the world.”
Klopper’s update did not reveal who the directors of the listed entity would be, or whether approval to list has yet been sought from the JSE. Approached for comment, Klopper declined to provide further details: “What was contained in my communication dated 12th December 2012 to investors in the Highveld Syndication companies was what I prepared to divulge at this stage and which was cleared with the role players involved in the matter.”
In October Moneyweb reported that the original business rescue plan had not gone quite as planned. The article reported the following facts:
As part of the rescue plan, Georgiou was supposed to transfer properties worth billions to Orthotouch. However, nine months into the plan, most if not all of the properties had not yet been transferred;
Several properties that were supposed to be transferred to Orthotouch had been sold. The proceeds of these sales amounted to more than R400m;
Orthotouch chairman, lawyer Jannie Nel, had his services terminated.
Prior to publication, a draft copy of the article was sent to Orthotouch spokesman Theo Koutsoudis. Koutsoudis claimed the article was “fraught with inaccuracies and innuendos”. However, Koutsoudis has declined to identify even one of the alleged inaccuracies, despite repeated invitations to do so.
On December 21, Moneyweb received the following letter from Orthotouch director Hans Klopper:
Dear Julius
HIGHVELD SYNDICATION 15 – 18 \ 20 – 22 LIMITED (UNDER BUSINESS RESCUE)
YOUR ARTICLE IN MONEYWEB OF 3 OCTOBER 2012 – PROPERTY MOGUL STUMBLES IN R4,6BN SYNDICATION RESCUE
1. Pursuant to previous correspondence (including that exchanged between yourself and Theo Koutsoudis). I address you hereunder in my capacity as a Director of Orthotouch and also as the Business Rescue Practitioner in the Highveld Syndication Companies.
2. Your above article was written after the draft thereof had been sent to Theo Koutsoudis for comment and he had written to you stating that it was “fraught with inaccuracies and innuendos”. You did not seek to change the article in any way and merely appended the letter written by Koutsoudis. Thereafter, on 15 October 2012 you advised me by e-mail that “the contents of the article were checked thoroughly”.
3. With respect, such contents could not have been checked thoroughly as a number of glaring inaccuracies appear therein, not least of all the following:
3.1. It is absolutely incorrect that “Investors accepted a proposal by Georgiou to repay them after five years”. After the Syndication Companies were placed under Business Rescue by their Directors, Orthotouch Limited (the shares in which are owned by Nic Georgiou through the NAG Trust) offered to purchase from them all their properties and rights to take transfer of properties on the basis that the price would be paid in 5 years and interest would be paid monthly. The Offer was included in the Plan which was accepted by an overwhelming majority of shareholders (in excess of 99% of more than 11500 out of 18 231 present or represented at the meeting of creditors).
3.2. The entire Plan was a bail-out of the HS Companies, which but for the Plan would have been liquidated with devastating losses for their Investors.
3.3. It is equally incorrect and misleading that “Georgiou was supposed to transfer properties worth billions of rand to a public company called Orthotouch”. Orthotouch has not had the cash resources to enable it to take transfer of the properties which are registered in HS15 to 18, or the rights to properties which vest in HS19 to 22. Orthotouch, in tems of the Plan, as at the date of its adoption, had a loan from Zephan Properties (Pty) Ltd of R1,6 billion of which R500 million was subordinated. The HS Companies and Zephan are and at all times were willing to transfer the properties and will complete the process when the resource of Orthotouch required to implement the transfer are in place.
3.4. As will clearly appear from the Plan it was always envisaged that properties would be sold and/or redeveloped.
3.5. The article states “Georgiou and his family own property jewels such as the Fourways Mall, Cedar Square, and Loch Logan Waterfront in Bloemfontein.” None of the properties mentioned above ever belonged to or were involved with Zephan and/or Orthotouch and/or any of the HS companies. There can be no reason whatsoever to mention these properties in this article other than to fuel sensationalism and speculation.
3.6. The report states “Moneyweb can also reveal that valuable properties that were supposed to be transferred to Orthotouch have been sold. The proceeds of these sales amount to more than R400m. Some of the larger properties sold include: Southdale Shopping Centre for R175m; 1 Centex Close, Sandton for R99m; Pembury Lodge for R45m; Safeside, Mpumalanga for R15m; and 5-7 Main Road, Melville for R13m.”
3.7. If one reads the Plan it is very clear that 1 Centex Close never formed part of the Business Rescue Plan in the first place. The report is also inaccurate in that The Southdale Sale only effectively realised about R160 m and Pembury Lodge had not at that date been transferred. Of more concern, the report fails to state that all proceeds are applied towards servicing the Zephan Loan and the other expenses of Orhotouch including the servicing of the post commencement finance, interest and operating costs. This was dealt with in my report to all investors dated 13th August 2012 and that is on our website.
3.8. The books and records of Orthotouch are kept properly and are audited by Grant Thornton (formerly BDO of Pretoria).
3.9. Indeed the former Chairman has been replaced and this for sound and cogent business reasons.
4. As an investigative journalist you are surely aware of the covert activities of a handful of individuals who for their own purposes wish nothing more than to derail the Orthotouch process. These persons have no concern for the HS Investors and would rather see the assets in the hands of liquidators (no doubt for their own gain).
5. Though you are on record as saying that you are no lawyer, as an experienced journalist you must surely by now have studied and acquainted yourself with the Business Rescue Plan (“the Plan”) which has been in the Public Domain for over a year. It is abundantly clear therefore that to the extent that you quote the Plan incorrectly, or allow it to be misquoted in your blog, you do so deliberately. This of course brings both your personal motives and the integrity of your reporting into question.
6. Nowhere in the Plan does Nic Georgiou personally guarantee any payment. Zephan was asked to guarantee payment as certain properties were (and still are) registered in its name, and N Georgiou Trust was asked to do so as it is the sole shareholder in Zephan.
7. In your e-mail to Koutsoudis you suggested that Mr Georgiou should clarify his billionaire status as “it would be inadvisable for someone who is not a billionaire to ‘guarantee’ schemes worth multiples of billions”. This was a blatant endeavour to justify the sensationalistic spin which you create in your article by referring to Mr Georgiou as an “apparent billionaire” (a phrase which you seem to take pride of having personally penned if one reads your blog).
8. As far as your blog is concerned, you allowed to be published thereon a number of messages which are racist and/or defamatory and/or offensive. Some, submitted by the authors hereunder were removed by Moneyweb after complaints were made to you by Koutsoudis:
8.1. MOTORBIKEJONES;
8.2. Luthor_lionel;
8.3. dalavan;
8.4. grahamcr;
8.5. unePluiebreve;
8.6. dave (2 posts);
8.7. Ortotouch;
8.8. History; and
8.9. Mzansi Magic.
9. Today I checked your blog and found the following messages still appear thereon. I comment on each under the author as follows:
9.1. dg • 3 months ago
9.1.1. In the context of your article “they” can only be the Georgious or Orthotouch. Nowhere has there been any suggestion of “laundering money” and apart from being defamatory the only purpose of this comment is to create more sensationalism.
9.2. Kwe • 3 months ago
9.2.1. By no stretch of the imagination could Orthotouch or the Business Rescue be a Ponzi scheme. Another clear attempt at sensationalism.
9.3. sometime • 3 months ago
9.3.1. The Business Plan is clearly defined in the Business Rescue Plan. You took the time to clarify to Luther_lionel that the term “apparent billionaire” was penned by you. Did you not see fit to point out what the definition was of the Business Plan? Clearly you prefer the negativity of any statement made even one which is devoid of any substance or reason.
9.4. Sharemax Investor • 3 months ago
9.4.1. Who is Glynnis and what has she or Sharemax to do with Orthotouch or the Georgious? Yet again pure conjecture and sensationalism.
9.5. dube • 3 months ago
9.5.1. Yet again conjecture and sensationalism.
9.6. african dream • 3 months ago
9.6.1. All of which property?
9.7. Rietrot • 3 months ago
9.7.1. A reverse listing into a cash shell that couldn't make it in the first place????? Mr R3000/hr, for 22 hours a day????? Sensationalism in its purest form and to what end other than to demean the Georgious – and possibly derail a listing which benefits the HS Investors?
9.8. Pierre Hough • 4 days ago
9.8.1. This individual on this occasion has shed anonymity.
9.8.2. He is very well known and you no doubt know his reputation full well. You might in fact recall that I telephoned you some time earlier this year and told you about mr Hough’s interaction with me and how he told me one morning early during or about the second week of October 2011 upon me returning his that he was still in a Casino and that he was part of a Group to take over the South African Government within a month or two thereafter.
9.8.3. I will not elaborate further than to state that his “facts” are not correct, and his conclusions defamatory. It is significant that Moneyweb and you have chosen to associate yourselves with this post. Do you also state in regard to these “facts” that you have checked the contents thoroughly?
10. The covert actions above referred to have already caused substantial damages and claims are presently being formulated against those persons already identified. I find it disgusting that you as an investigative journalist for a reputable publication, and Moneyweb itself, endorse (without investigation of their veracity and despite the demeaning content) such offensive and damaging messages.
11. In due course the question will arise whether there is some underlying motive on your part or whether this is purely in an endeavor to increase your readership. In no way can it be suggested that the posts on this blog in any way serve the public interests.
12. All rights are reserved on behalf of Orthotouch, the Highveld Companies under Business Rescue, the individuals involved therein and not least of all the HS Investors.
Yours faithfully
J F KLOPPER
BUSINESS RESCUE PRACTITIONER
Property
Author: Julius Cobbett|
03 October 2012 23:13
Property mogul stumbles in R4.6bn syndication rescue
Nic Georgiou fails to transfer buildings worth billions.
JOHANNESBURG - A plan by apparent property billionaire Nic Georgiou to repay R4.6bn to about 18 000 investors has got off to an inauspicious start. Nine months into the plan, Georgiou has failed to transfer properties worth billions of rand to provide security to investors.
The rescue plan is for eight syndication schemes sold by Pickvest (formerly PIC Syndications). These syndication companies were placed under business rescue late last year. Investors accepted a proposal by Georgiou to repay them after five years. See: R4.6bn Pickvest rescue hinges on property billionaire.
Georgiou and his family own property jewels such as the Fourways Mall, Cedar Square, and Loch Logan Waterfront in Bloemfontein.
As part of the rescue plan, Georgiou was supposed to transfer properties worth billions of rand to a public company called Orthotouch. This would provide investors with some security should Georgiou fail to meet his obligations.
However, nine months after the rescue plan’s adoption, most, if not all, of the properties have not yet been transferred into Orthotouch’s name.
Orthotouch legal adviser Theo Koutsoudis has declined to comment on the failure to transfer properties. Says Koutsoudis: “I confirm that I am at this stage not authorised to divulge any information suffice it to state that the Business Rescue Plan is proceeding despite efforts to derail the process by persons pursuing their personal agendas.”
Moneyweb can also reveal that valuable properties that were supposed to be transferred to Orthotouch have been sold. The proceeds of these sales amount to more than R400m. Some of the larger properties sold include: Southdale Shopping Centre for R175m; 1 Centex Close, Sandton for R99m; Pembury Lodge for R45m; Safeside, Mpumalanga for R15m; and 5-7 Main Road, Melville for R13m.
Koutsoudis has similarly declined to comment on what money from the sales of the above properties was used for.
There has also been a shakeup at Orthotouch board level. Chairman Jannie Nel recently had his services terminated. Nel declined to comment on his departure from Orthotouch.
Nel’s departure leaves Orthotouch with four directors: Nic Georgiou, Panos Kleopvoulou, Hans Klopper and Connie Myburgh.
Under the rescue plan, Georgiou, through Orthotouch, promises to pay investors in the syndication companies a reduced monthly income for five years. At the end of the five-year period, Orthotouch promises to repay investors their full R4.6bn. See: Pickvest: Billionaire gets five years to repay investors.
The success of Orthotouch will depend on the directors’ ability to increase the net value of its property portfolio to R4.6bn after five years. Inflation will assist the directors with this task but will also erode the value of the final payment to investors.
There is a concern that by selling the buildings mentioned above, Georgiou is eroding the total value of the assets that are pledged to Orthotouch, reducing the likelihood that their net value will ever reach R4.6bn.
Prior to publication a copy of this article was sent to Koutsoudis. He was invited to correct possible factual errors and offer any comment he may have. Koutsoudis responded:
Dear Julius
Your draft article is fraught with inaccuracies and innuendos. Your quote from my email states clearly that the Business Plan is proceeding. It follows that all funds are being utilised in terms of the Business Plan. Your statement that "Koutsoudis has similarly declined to comment on what money from the sales of the above properties was used for" is clearly therefore inserted purely for sensationalistic reasons.
Neither I nor the Board are prepared to make any further comments at this time, and certainly not within the time you stipulate.
All our rights are reserved.
Yours sincerely
Theo Koutsoudis
On December 21, Moneyweb received the following letter from Orthotouch director Hans Klopper:
Dear Julius
HIGHVELD SYNDICATION 15 – 18 \ 20 – 22 LIMITED (UNDER BUSINESS RESCUE)
YOUR ARTICLE IN MONEYWEB OF 3 OCTOBER 2012 – PROPERTY MOGUL STUMBLES IN R4,6BN SYNDICATION RESCUE
1. Pursuant to previous correspondence (including that exchanged between yourself and Theo Koutsoudis). I address you hereunder in my capacity as a Director of Orthotouch and also as the Business Rescue Practitioner in the Highveld Syndication Companies.
2. Your above article was written after the draft thereof had been sent to Theo Koutsoudis for comment and he had written to you stating that it was “fraught with inaccuracies and innuendos”. You did not seek to change the article in any way and merely appended the letter written by Koutsoudis. Thereafter, on 15 October 2012 you advised me by e-mail that “the contents of the article were checked thoroughly”.
3. With respect, such contents could not have been checked thoroughly as a number of glaring inaccuracies appear therein, not least of all the following:
3.1. It is absolutely incorrect that “Investors accepted a proposal by Georgiou to repay them after five years”. After the Syndication Companies were placed under Business Rescue by their Directors, Orthotouch Limited (the shares in which are owned by Nic Georgiou through the NAG Trust) offered to purchase from them all their properties and rights to take transfer of properties on the basis that the price would be paid in 5 years and interest would be paid monthly. The Offer was included in the Plan which was accepted by an overwhelming majority of shareholders (in excess of 99% of more than 11500 out of 18 231 present or represented at the meeting of creditors).
3.2. The entire Plan was a bail-out of the HS Companies, which but for the Plan would have been liquidated with devastating losses for their Investors.
3.3. It is equally incorrect and misleading that “Georgiou was supposed to transfer properties worth billions of rand to a public company called Orthotouch”. Orthotouch has not had the cash resources to enable it to take transfer of the properties which are registered in HS15 to 18, or the rights to properties which vest in HS19 to 22. Orthotouch, in tems of the Plan, as at the date of its adoption, had a loan from Zephan Properties (Pty) Ltd of R1,6 billion of which R500 million was subordinated. The HS Companies and Zephan are and at all times were willing to transfer the properties and will complete the process when the resource of Orthotouch required to implement the transfer are in place.
3.4. As will clearly appear from the Plan it was always envisaged that properties would be sold and/or redeveloped.
3.5. The article states “Georgiou and his family own property jewels such as the Fourways Mall, Cedar Square, and Loch Logan Waterfront in Bloemfontein.” None of the properties mentioned above ever belonged to or were involved with Zephan and/or Orthotouch and/or any of the HS companies. There can be no reason whatsoever to mention these properties in this article other than to fuel sensationalism and speculation.
3.6. The report states “Moneyweb can also reveal that valuable properties that were supposed to be transferred to Orthotouch have been sold. The proceeds of these sales amount to more than R400m. Some of the larger properties sold include: Southdale Shopping Centre for R175m; 1 Centex Close, Sandton for R99m; Pembury Lodge for R45m; Safeside, Mpumalanga for R15m; and 5-7 Main Road, Melville for R13m.”
3.7. If one reads the Plan it is very clear that 1 Centex Close never formed part of the Business Rescue Plan in the first place. The report is also inaccurate in that The Southdale Sale only effectively realised about R160 m and Pembury Lodge had not at that date been transferred. Of more concern, the report fails to state that all proceeds are applied towards servicing the Zephan Loan and the other expenses of Orhotouch including the servicing of the post commencement finance, interest and operating costs. This was dealt with in my report to all investors dated 13th August 2012 and that is on our website.
3.8. The books and records of Orthotouch are kept properly and are audited by Grant Thornton (formerly BDO of Pretoria).
3.9. Indeed the former Chairman has been replaced and this for sound and cogent business reasons.
4. As an investigative journalist you are surely aware of the covert activities of a handful of individuals who for their own purposes wish nothing more than to derail the Orthotouch process. These persons have no concern for the HS Investors and would rather see the assets in the hands of liquidators (no doubt for their own gain).
5. Though you are on record as saying that you are no lawyer, as an experienced journalist you must surely by now have studied and acquainted yourself with the Business Rescue Plan (“the Plan”) which has been in the Public Domain for over a year. It is abundantly clear therefore that to the extent that you quote the Plan incorrectly, or allow it to be misquoted in your blog, you do so deliberately. This of course brings both your personal motives and the integrity of your reporting into question.
6. Nowhere in the Plan does Nic Georgiou personally guarantee any payment. Zephan was asked to guarantee payment as certain properties were (and still are) registered in its name, and N Georgiou Trust was asked to do so as it is the sole shareholder in Zephan.
7. In your e-mail to Koutsoudis you suggested that Mr Georgiou should clarify his billionaire status as “it would be inadvisable for someone who is not a billionaire to ‘guarantee’ schemes worth multiples of billions”. This was a blatant endeavour to justify the sensationalistic spin which you create in your article by referring to Mr Georgiou as an “apparent billionaire” (a phrase which you seem to take pride of having personally penned if one reads your blog).
8. As far as your blog is concerned, you allowed to be published thereon a number of messages which are racist and/or defamatory and/or offensive. Some, submitted by the authors hereunder were removed by Moneyweb after complaints were made to you by Koutsoudis:
8.1. MOTORBIKEJONES;
8.2. Luthor_lionel;
8.3. dalavan;
8.4. grahamcr;
8.5. unePluiebreve;
8.6. dave (2 posts);
8.7. Ortotouch;
8.8. History; and
8.9. Mzansi Magic.
9. Today I checked your blog and found the following messages still appear thereon. I comment on each under the author as follows:
9.1. dg • 3 months ago
9.1.1. In the context of your article “they” can only be the Georgious or Orthotouch. Nowhere has there been any suggestion of “laundering money” and apart from being defamatory the only purpose of this comment is to create more sensationalism.
9.2. Kwe • 3 months ago
9.2.1. By no stretch of the imagination could Orthotouch or the Business Rescue be a Ponzi scheme. Another clear attempt at sensationalism.
9.3. sometime • 3 months ago
9.3.1. The Business Plan is clearly defined in the Business Rescue Plan. You took the time to clarify to Luther_lionel that the term “apparent billionaire” was penned by you. Did you not see fit to point out what the definition was of the Business Plan? Clearly you prefer the negativity of any statement made even one which is devoid of any substance or reason.
9.4. Sharemax Investor • 3 months ago
9.4.1. Who is Glynnis and what has she or Sharemax to do with Orthotouch or the Georgious? Yet again pure conjecture and sensationalism.
9.5. dube • 3 months ago
9.5.1. Yet again conjecture and sensationalism.
9.6. african dream • 3 months ago
9.6.1. All of which property?
9.7. Rietrot • 3 months ago
9.7.1. A reverse listing into a cash shell that couldn't make it in the first place????? Mr R3000/hr, for 22 hours a day????? Sensationalism in its purest form and to what end other than to demean the Georgious – and possibly derail a listing which benefits the HS Investors?
9.8. Pierre Hough • 4 days ago
9.8.1. This individual on this occasion has shed anonymity.
9.8.2. He is very well known and you no doubt know his reputation full well. You might in fact recall that I telephoned you some time earlier this year and told you about mr Hough’s interaction with me and how he told me one morning early during or about the second week of October 2011 upon me returning his that he was still in a Casino and that he was part of a Group to take over the South African Government within a month or two thereafter.
9.8.3. I will not elaborate further than to state that his “facts” are not correct, and his conclusions defamatory. It is significant that Moneyweb and you have chosen to associate yourselves with this post. Do you also state in regard to these “facts” that you have checked the contents thoroughly?
10. The covert actions above referred to have already caused substantial damages and claims are presently being formulated against those persons already identified. I find it disgusting that you as an investigative journalist for a reputable publication, and Moneyweb itself, endorse (without investigation of their veracity and despite the demeaning content) such offensive and damaging messages.
11. In due course the question will arise whether there is some underlying motive on your part or whether this is purely in an endeavor to increase your readership. In no way can it be suggested that the posts on this blog in any way serve the public interests.
12. All rights are reserved on behalf of Orthotouch, the Highveld Companies under Business Rescue, the individuals involved therein and not least of all the HS Investors.
Yours faithfully
J F KLOPPER
BUSINESS RESCUE PRACTITIONER
Right of reply
Author: Hans Klopper|
24 December 2012 09:34
Pickvest: Moneyweb got it wrong, says business rescue practitioner
Hans Klopper responds to an article on the rescue of Pickvest syndication companies.
Orthotouch director and business rescue practitioner of the Highveld syndication companies Hans Klopper has responded to a Moneyweb article published on October 3, 2012. The article can be read here: Property mogul stumbles in R4.6bn syndication rescue.
Dear Julius
HIGHVELD SYNDICATION 15 – 18 \ 20 – 22 LIMITED (UNDER BUSINESS RESCUE)
YOUR ARTICLE IN MONEYWEB OF 3 OCTOBER 2012 – PROPERTY MOGUL STUMBLES IN R4,6BN SYNDICATION RESCUE
1. Pursuant to previous correspondence (including that exchanged between yourself and Theo Koutsoudis). I address you hereunder in my capacity as a Director of Orthotouch and also as the Business Rescue Practitioner in the Highveld Syndication Companies.
2. Your above article was written after the draft thereof had been sent to Theo Koutsoudis for comment and he had written to you stating that it was “fraught with inaccuracies and innuendos”. You did not seek to change the article in any way and merely appended the letter written by Koutsoudis. Thereafter, on 15 October 2012 you advised me by e-mail that “the contents of the article were checked thoroughly”.
3. With respect, such contents could not have been checked thoroughly as a number of glaring inaccuracies appear therein, not least of all the following:
3.1. It is absolutely incorrect that “Investors accepted a proposal by Georgiou to repay them after five years”. After the Syndication Companies were placed under Business Rescue by their Directors, Orthotouch Limited (the shares in which are owned by Nic Georgiou through the NAG Trust) offered to purchase from them all their properties and rights to take transfer of properties on the basis that the price would be paid in 5 years and interest would be paid monthly. The Offer was included in the Plan which was accepted by an overwhelming majority of shareholders (in excess of 99% of more than 11500 out of 18 231 present or represented at the meeting of creditors).
3.2. The entire Plan was a bail-out of the HS Companies, which but for the Plan would have been liquidated with devastating losses for their Investors.
3.3. It is equally incorrect and misleading that “Georgiou was supposed to transfer properties worth billions of rand to a public company called Orthotouch”. Orthotouch has not had the cash resources to enable it to take transfer of the properties which are registered in HS15 to 18, or the rights to properties which vest in HS19 to 22. Orthotouch, in tems of the Plan, as at the date of its adoption, had a loan from Zephan Properties (Pty) Ltd of R1,6 billion of which R500 million was subordinated. The HS Companies and Zephan are and at all times were willing to transfer the properties and will complete the process when the resource of Orthotouch required to implement the transfer are in place.
3.4. As will clearly appear from the Plan it was always envisaged that properties would be sold and/or redeveloped.
3.5. The article states “Georgiou and his family own property jewels such as the Fourways Mall, Cedar Square, and Loch Logan Waterfront in Bloemfontein.” None of the properties mentioned above ever belonged to or were involved with Zephan and/or Orthotouch and/or any of the HS companies. There can be no reason whatsoever to mention these properties in this article other than to fuel sensationalism and speculation.
3.6. The report states “Moneyweb can also reveal that valuable properties that were supposed to be transferred to Orthotouch have been sold. The proceeds of these sales amount to more than R400m. Some of the larger properties sold include: Southdale Shopping Centre for R175m; 1 Centex Close, Sandton for R99m; Pembury Lodge for R45m; Safeside, Mpumalanga for R15m; and 5-7 Main Road, Melville for R13m.”
3.7. If one reads the Plan it is very clear that 1 Centex Close never formed part of the Business Rescue Plan in the first place. The report is also inaccurate in that The Southdale Sale only effectively realised about R160 m and Pembury Lodge had not at that date been transferred. Of more concern, the report fails to state that all proceeds are applied towards servicing the Zephan Loan and the other expenses of Orhotouch including the servicing of the post commencement finance, interest and operating costs. This was dealt with in my report to all investors dated 13th August 2012 and that is on our website.
3.8. The books and records of Orthotouch are kept properly and are audited by Grant Thornton (formerly BDO of Pretoria).
3.9. Indeed the former Chairman has been replaced and this for sound and cogent business reasons.
4. As an investigative journalist you are surely aware of the covert activities of a handful of individuals who for their own purposes wish nothing more than to derail the Orthotouch process. These persons have no concern for the HS Investors and would rather see the assets in the hands of liquidators (no doubt for their own gain).
5. Though you are on record as saying that you are no lawyer, as an experienced journalist you must surely by now have studied and acquainted yourself with the Business Rescue Plan (“the Plan”) which has been in the Public Domain for over a year. It is abundantly clear therefore that to the extent that you quote the Plan incorrectly, or allow it to be misquoted in your blog, you do so deliberately. This of course brings both your personal motives and the integrity of your reporting into question.
6. Nowhere in the Plan does Nic Georgiou personally guarantee any payment. Zephan was asked to guarantee payment as certain properties were (and still are) registered in its name, and N Georgiou Trust was asked to do so as it is the sole shareholder in Zephan.
7. In your e-mail to Koutsoudis you suggested that Mr Georgiou should clarify his billionaire status as “it would be inadvisable for someone who is not a billionaire to ‘guarantee’ schemes worth multiples of billions”. This was a blatant endeavour to justify the sensationalistic spin which you create in your article by referring to Mr Georgiou as an “apparent billionaire” (a phrase which you seem to take pride of having personally penned if one reads your blog).
8. As far as your blog is concerned, you allowed to be published thereon a number of messages which are racist and/or defamatory and/or offensive. Some, submitted by the authors hereunder were removed by Moneyweb after complaints were made to you by Koutsoudis:
8.1. MOTORBIKEJONES;
8.2. Luthor_lionel;
8.3. dalavan;
8.4. grahamcr;
8.5. unePluiebreve;
8.6. dave (2 posts);
8.7. Ortotouch;
8.8. History; and
8.9. Mzansi Magic.
9. Today I checked your blog and found the following messages still appear thereon. I comment on each under the author as follows:
9.1. dg • 3 months ago
9.1.1. In the context of your article “they” can only be the Georgious or Orthotouch. Nowhere has there been any suggestion of “laundering money” and apart from being defamatory the only purpose of this comment is to create more sensationalism.
9.2. Kwe • 3 months ago
9.2.1. By no stretch of the imagination could Orthotouch or the Business Rescue be a Ponzi scheme. Another clear attempt at sensationalism.
9.3. sometime • 3 months ago
9.3.1. The Business Plan is clearly defined in the Business Rescue Plan. You took the time to clarify to Luther_lionel that the term “apparent billionaire” was penned by you. Did you not see fit to point out what the definition was of the Business Plan? Clearly you prefer the negativity of any statement made even one which is devoid of any substance or reason.
9.4. Sharemax Investor • 3 months ago
9.4.1. Who is Glynnis and what has she or Sharemax to do with Orthotouch or the Georgious? Yet again pure conjecture and sensationalism.
9.5. dube • 3 months ago
9.5.1. Yet again conjecture and sensationalism.
9.6. african dream • 3 months ago
9.6.1. All of which property?
9.7. Rietrot • 3 months ago
9.7.1. A reverse listing into a cash shell that couldn't make it in the first place????? Mr R3000/hr, for 22 hours a day????? Sensationalism in its purest form and to what end other than to demean the Georgious – and possibly derail a listing which benefits the HS Investors?
9.8. Pierre Hough • 4 days ago
9.8.1. This individual on this occasion has shed anonymity.
9.8.2. He is very well known and you no doubt know his reputation full well. You might in fact recall that I telephoned you some time earlier this year and told you about mr Hough’s interaction with me and how he told me one morning early during or about the second week of October 2011 upon me returning his that he was still in a Casino and that he was part of a Group to take over the South African Government within a month or two thereafter.
9.8.3. I will not elaborate further than to state that his “facts” are not correct, and his conclusions defamatory. It is significant that Moneyweb and you have chosen to associate yourselves with this post. Do you also state in regard to these “facts” that you have checked the contents thoroughly?
10. The covert actions above referred to have already caused substantial damages and claims are presently being formulated against those persons already identified. I find it disgusting that you as an investigative journalist for a reputable publication, and Moneyweb itself, endorse (without investigation of their veracity and despite the demeaning content) such offensive and damaging messages.
11. In due course the question will arise whether there is some underlying motive on your part or whether this is purely in an endeavor to increase your readership. In no way can it be suggested that the posts on this blog in any way serve the public interests.
12. All rights are reserved on behalf of Orthotouch, the Highveld Companies under Business Rescue, the individuals involved therein and not least of all the HS Investors.
Yours faithfully
J F KLOPPER
BUSINESS RESCUE PRACTITIONER
Right of reply
Author: Hans Klopper|
24 December 2012 09:34
Pickvest: Moneyweb got it wrong, says business rescue practitioner
Hans Klopper responds to an article on the rescue of Pickvest syndication companies.
Orthotouch director and business rescue practitioner of the Highveld syndication companies Hans Klopper has responded to a Moneyweb article published on October 3, 2012. The article can be read here: Property mogul stumbles in R4.6bn syndication rescue.
Dear Julius
HIGHVELD SYNDICATION 15 – 18 \ 20 – 22 LIMITED (UNDER BUSINESS RESCUE)
YOUR ARTICLE IN MONEYWEB OF 3 OCTOBER 2012 – PROPERTY MOGUL STUMBLES IN R4,6BN SYNDICATION RESCUE
1. Pursuant to previous correspondence (including that exchanged between yourself and Theo Koutsoudis). I address you hereunder in my capacity as a Director of Orthotouch and also as the Business Rescue Practitioner in the Highveld Syndication Companies.
2. Your above article was written after the draft thereof had been sent to Theo Koutsoudis for comment and he had written to you stating that it was “fraught with inaccuracies and innuendos”. You did not seek to change the article in any way and merely appended the letter written by Koutsoudis. Thereafter, on 15 October 2012 you advised me by e-mail that “the contents of the article were checked thoroughly”.
3. With respect, such contents could not have been checked thoroughly as a number of glaring inaccuracies appear therein, not least of all the following:
3.1. It is absolutely incorrect that “Investors accepted a proposal by Georgiou to repay them after five years”. After the Syndication Companies were placed under Business Rescue by their Directors, Orthotouch Limited (the shares in which are owned by Nic Georgiou through the NAG Trust) offered to purchase from them all their properties and rights to take transfer of properties on the basis that the price would be paid in 5 years and interest would be paid monthly. The Offer was included in the Plan which was accepted by an overwhelming majority of shareholders (in excess of 99% of more than 11500 out of 18 231 present or represented at the meeting of creditors).
3.2. The entire Plan was a bail-out of the HS Companies, which but for the Plan would have been liquidated with devastating losses for their Investors.
3.3. It is equally incorrect and misleading that “Georgiou was supposed to transfer properties worth billions of rand to a public company called Orthotouch”. Orthotouch has not had the cash resources to enable it to take transfer of the properties which are registered in HS15 to 18, or the rights to properties which vest in HS19 to 22. Orthotouch, in tems of the Plan, as at the date of its adoption, had a loan from Zephan Properties (Pty) Ltd of R1,6 billion of which R500 million was subordinated. The HS Companies and Zephan are and at all times were willing to transfer the properties and will complete the process when the resource of Orthotouch required to implement the transfer are in place.
3.4. As will clearly appear from the Plan it was always envisaged that properties would be sold and/or redeveloped.
3.5. The article states “Georgiou and his family own property jewels such as the Fourways Mall, Cedar Square, and Loch Logan Waterfront in Bloemfontein.” None of the properties mentioned above ever belonged to or were involved with Zephan and/or Orthotouch and/or any of the HS companies. There can be no reason whatsoever to mention these properties in this article other than to fuel sensationalism and speculation.
3.6. The report states “Moneyweb can also reveal that valuable properties that were supposed to be transferred to Orthotouch have been sold. The proceeds of these sales amount to more than R400m. Some of the larger properties sold include: Southdale Shopping Centre for R175m; 1 Centex Close, Sandton for R99m; Pembury Lodge for R45m; Safeside, Mpumalanga for R15m; and 5-7 Main Road, Melville for R13m.”
3.7. If one reads the Plan it is very clear that 1 Centex Close never formed part of the Business Rescue Plan in the first place. The report is also inaccurate in that The Southdale Sale only effectively realised about R160 m and Pembury Lodge had not at that date been transferred. Of more concern, the report fails to state that all proceeds are applied towards servicing the Zephan Loan and the other expenses of Orhotouch including the servicing of the post commencement finance, interest and operating costs. This was dealt with in my report to all investors dated 13th August 2012 and that is on our website.
3.8. The books and records of Orthotouch are kept properly and are audited by Grant Thornton (formerly BDO of Pretoria).
3.9. Indeed the former Chairman has been replaced and this for sound and cogent business reasons.
4. As an investigative journalist you are surely aware of the covert activities of a handful of individuals who for their own purposes wish nothing more than to derail the Orthotouch process. These persons have no concern for the HS Investors and would rather see the assets in the hands of liquidators (no doubt for their own gain).
5. Though you are on record as saying that you are no lawyer, as an experienced journalist you must surely by now have studied and acquainted yourself with the Business Rescue Plan (“the Plan”) which has been in the Public Domain for over a year. It is abundantly clear therefore that to the extent that you quote the Plan incorrectly, or allow it to be misquoted in your blog, you do so deliberately. This of course brings both your personal motives and the integrity of your reporting into question.
6. Nowhere in the Plan does Nic Georgiou personally guarantee any payment. Zephan was asked to guarantee payment as certain properties were (and still are) registered in its name, and N Georgiou Trust was asked to do so as it is the sole shareholder in Zephan.
7. In your e-mail to Koutsoudis you suggested that Mr Georgiou should clarify his billionaire status as “it would be inadvisable for someone who is not a billionaire to ‘guarantee’ schemes worth multiples of billions”. This was a blatant endeavour to justify the sensationalistic spin which you create in your article by referring to Mr Georgiou as an “apparent billionaire” (a phrase which you seem to take pride of having personally penned if one reads your blog).
8. As far as your blog is concerned, you allowed to be published thereon a number of messages which are racist and/or defamatory and/or offensive. Some, submitted by the authors hereunder were removed by Moneyweb after complaints were made to you by Koutsoudis:
8.1. MOTORBIKEJONES;
8.2. Luthor_lionel;
8.3. dalavan;
8.4. grahamcr;
8.5. unePluiebreve;
8.6. dave (2 posts);
8.7. Ortotouch;
8.8. History; and
8.9. Mzansi Magic.
9. Today I checked your blog and found the following messages still appear thereon. I comment on each under the author as follows:
9.1. dg • 3 months ago
9.1.1. In the context of your article “they” can only be the Georgious or Orthotouch. Nowhere has there been any suggestion of “laundering money” and apart from being defamatory the only purpose of this comment is to create more sensationalism.
9.2. Kwe • 3 months ago
9.2.1. By no stretch of the imagination could Orthotouch or the Business Rescue be a Ponzi scheme. Another clear attempt at sensationalism.
9.3. sometime • 3 months ago
9.3.1. The Business Plan is clearly defined in the Business Rescue Plan. You took the time to clarify to Luther_lionel that the term “apparent billionaire” was penned by you. Did you not see fit to point out what the definition was of the Business Plan? Clearly you prefer the negativity of any statement made even one which is devoid of any substance or reason.
9.4. Sharemax Investor • 3 months ago
9.4.1. Who is Glynnis and what has she or Sharemax to do with Orthotouch or the Georgious? Yet again pure conjecture and sensationalism.
9.5. dube • 3 months ago
9.5.1. Yet again conjecture and sensationalism.
9.6. african dream • 3 months ago
9.6.1. All of which property?
9.7. Rietrot • 3 months ago
9.7.1. A reverse listing into a cash shell that couldn't make it in the first place????? Mr R3000/hr, for 22 hours a day????? Sensationalism in its purest form and to what end other than to demean the Georgious – and possibly derail a listing which benefits the HS Investors?
9.8. Pierre Hough • 4 days ago
9.8.1. This individual on this occasion has shed anonymity.
9.8.2. He is very well known and you no doubt know his reputation full well. You might in fact recall that I telephoned you some time earlier this year and told you about mr Hough’s interaction with me and how he told me one morning early during or about the second week of October 2011 upon me returning his that he was still in a Casino and that he was part of a Group to take over the South African Government within a month or two thereafter.
9.8.3. I will not elaborate further than to state that his “facts” are not correct, and his conclusions defamatory. It is significant that Moneyweb and you have chosen to associate yourselves with this post. Do you also state in regard to these “facts” that you have checked the contents thoroughly?
10. The covert actions above referred to have already caused substantial damages and claims are presently being formulated against those persons already identified. I find it disgusting that you as an investigative journalist for a reputable publication, and Moneyweb itself, endorse (without investigation of their veracity and despite the demeaning content) such offensive and damaging messages.
11. In due course the question will arise whether there is some underlying motive on your part or whether this is purely in an endeavor to increase your readership. In no way can it be suggested that the posts on this blog in any way serve the public interests.
12. All rights are reserved on behalf of Orthotouch, the Highveld Companies under Business Rescue, the individuals involved therein and not least of all the HS Investors.
Yours faithfully
J F KLOPPER
BUSINESS RESCUE PRACTITIONER
--------------------------------------------------------------------------------
LEGAL ISSUES: Report published in 2011
Author: Julius Cobbett|
19 July 2011 03:44
Did Pickvest break the law?
Was it illegal for attorney to release up to R3.5bn in investors’ money?
JOHANNESBURG - Did the directors of Pickvest (formerly Picvest and PIC Syndications) and their attorney break the law? They allowed up to R3.5bn of their investors’ money to be released before properties were transferred into the syndication vehicle. This has left the investors in the precarious position of owning no property, as reported by Moneyweb on April 11 this year.
To release investors’ money prior to the transfer of properties is an apparent contravention of a March 2006 notice issued by then Department of Trade and Industry Minister Mandisi Mpahlwa. A copy of the notice can be downloaded here.
The notice states that funds received from property syndication investors must be placed into a trust account that is protected by legislation. “Funds shall only be withdrawn from the trust account in the event of registration of the transfer of the property into the syndication vehicle...”
Funds received from investors in Pickvest’s four most recent syndications, Highveld 19-22, were paid into the trust account of attorney Eugene Kruger. This money was released to the seller of the properties, Nic Georgiou, before transfer had taken place. The earliest of these syndications, Highveld 19, was sold to investors in January 2007. The latest, Highveld 22, was sold in August 2010.
There has been ample time for the buildings to be transferred to investors but this has still not happened. The transfers have since been put on ice while investors consider whether they wish to accept a restructure proposal put to them by Georgiou.
Pickvest CEO Rikus Myburgh denies that his company and its lawyer has broken the law by releasing investor funds.
He says: “The [notice] only relates to property syndications by way of private placing, governed by Consumer Affairs Act, by any means other than through a registered prospectus, governed by the Companies Act. All the Picvest prospectuses were correctly and fully registered at the Department of Trade and Industry at the relevant time.”
Myburgh has not provided Moneyweb with any independent legal opinion that supports Pickvest’s interpretation of the notice.
Moneyweb asked the Department of Trade and Industry (DTI), which issued the notice, whether it agrees with Myburgh’s interpretation.
Aubrey Mathope, who heads the DTI’s Consumer and Corporate Regulation Division, tells Moneyweb that the notice applies to any entity that falls under the definition “public property syndication scheme”.
The definition* does not exclude syndication schemes sold through a prospectus.
Mathope advises investors who wish to complain about the transfer of their funds to contact the National Consumer Commission at ncc@thedti.co.za or 0860 266 786 .
One man who is convinced that Pickvest broke the law is business strategist Pierre Hough. He claims to have assisted two clients to get a full refund from Pickvest, with interest, after he threatened to lay charges against the company.
Hough says he sent a letter of demand to Pickvest in September last year, in which he accused the company of breaching the Banks Act, as well as the DTI notice.
“PIC promptly responded by repaying two of my clients money instead of facing the charges I was going to file against them and their attorney Eugene Kruger in Pretoria.”
When Moneyweb alerted Myburgh to Hough’s claims, he denied knowledge of any investors being refunded. However, when Moneyweb provided Myburgh with specific details of the refunds, he claimed that the investors referred to “were not refunded but their shares had been re-sold to other investors”.
However, this response is hard for Hough to swallow. For one thing, if the shares were sold through normal channels, they would have to have been sold at a healthy profit. That’s because Pickvest investors who sell their shares are liable for 10.5% fee to Pickvest.
But Hough’s clients received their full investment amount back, with interest. If the 10.5% fee was paid, it was not by them. Furthermore, the money they received came directly from Eugene Kruger’s trust account. Hough even claims that the interest calculations were done by one Sanja Elzerman in Kruger’s offices.
Myburgh maintains that the shares “were sold under standard re-sale procedures, ie supply and demand”.
Moneyweb’s efforts to obtain a respected legal opinion on whether Pickvest breached the DTI notice have so far proven fruitless. We welcome correspondence from any legal experts who have an opinion on the matter.
*According to the Gazette, “‘public property syndication scheme’ means the assembly of a group of investors invited, by word of mouth or through the use of electronic and print media, inter alia, radio, television, telephone, newspaper and magazine advertising, brochures and direct mail, to participate in such schemes by investing in entities which could be companies close corporations, trusts, partnerships or individuals, whose sole asset(s) are commercial, retail, industrial or residential properties, and where the investors share in the profits and losses in these properties and or enjoy the benefits of net rental growth therefrom through proportionate share of income.”
Last week a copy of this article was sent to Pickvest for its comment. Director Derik Reichel acknowledged receipt, but no response had been received by Monday. After publication, we received the following cryptic reply from Myburgh:
Dear Julius,
Thank you for stepping right into the trap. We are looking forward to the opportunity with same exposure to rectify your blunder, as promised by Alec.
Kind regards,
Rikus
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