Peter Madoff sentenced to 10 years for role in Ponzi scheme

Independent online (SA) 2012-10-10: Roy Cokayne The Hawks are investigating allegations that Sharemax Investments committed fraud and probing whether it operated a pyramid or Ponzi scheme. About 40 000 people invested a total of some R4.5 billion in the various schemes promoted and marketed by Sharemax, which if proven to be illegal and a pyramid scheme, will make it the largest case of fraud in South Africa’s history. A pyramid or Ponzi scheme is typically where investments by new investors are used to pay the interest and returns of older investors. Hawks spokesman McIntosh... more »

Bennie Madoff


His alleged Ponzi scheme could inflict $50 billion in losses on society types, retirees and nonprofits. The bigger cost for America comes from the notion that Madoff pulled off the biggest financial fraud in history right under the noses of regulators. Assuming it's all true, the banks and hedge funds that neglected due diligence were stupid and paid for it, while the managers who fed him clients' money — the so-called feeders — were reprehensibly greedy. But to reveal government and industry regulators as grossly incompetent casts a shadow of doubt far and wide, which crimps the free flow of investment capital. That will make this downturn harder on us all.



Read more: http://www.time.com/time/specials/packages/article/0,28804,1877351_1877350_1877337,00.html #ixzz2FfQjHjnW
Peter Madoff ( Below )

Peter Madoff sentenced to 10 years for role in Ponzi scheme
Louis Lanzano / AP
Peter Madoff arrives at a Manhattan federal court Thursday.

Peter Madoff will serve 10 years in prison for his role in his older brother's multibillion-dollar Ponzi scheme, a U.S. judge said on Thursday.

Peter Madoff, 67, pleaded guilty in June to criminal charges including conspiracy to commit securities fraud for falsifying the books and records of the investment advisory company founded by his brother, Bernard Madoff.

He agreed at the time not to oppose a request by prosecutors for a maximum 10-year prison sentence and agreed to an order requiring him to forfeit a symbolic $143.1 billion. U.S. District Court Judge Laura Taylor Swain approved the sentence on Thursday.

"I am deeply ashamed of my conduct," Peter Madoff said at the sentencing. "I accept full responsibility for my actions."

The sentencing comes four years and a week after Bernard Madoff first revealed his epic fraud, which occurred over several decades as the former NASDAQ chairman built a reputation for delivering unparalleled investment results, even in bad times. The revelation came only days after the business sent out statements that made investors think their investments had grown to a total of more than $65 billion.

Customers lost about $20 billion, according to the trustee charged with recovering money for the victims.

Of 13 individuals charged criminally in connection with the fraud, Peter Madoff is the only one, other than his brother, who was a member of the Madoff family. Bernard Madoff, 74, was sentenced in 2009 to a 150-year prison term and was ordered to forfeit $170.8 billion.

Peter Madoff, a lawyer, had been chief compliance officer and a senior managing director at the firm, Bernard L. Madoff Investment Securities.

Prosecutors say Peter Madoff helped create false and misleading documents designed to make it appear that the firm had an effective compliance program. If the firm had such a program, prosecutors said it would have shown that no real trades were taking place.

Peter Madoff also transferred millions of dollars within the Madoff family to avoid tax payments to the Internal Revenue Service and also put his wife on the firm's payroll in a no-show job.

Peter Madoff said at his plea that he had no idea his brother was running a massive Ponzi scheme, paying off longtime investors at times with money from newer investors.

"My family was torn apart as a result of my brother's atrocious conduct," he said. "I was reviled by strangers as well as friends who assumed that I knew about the Ponzi scheme."

The judge said she did not believe Peter Madoff's claim that he knew nothing about his brother's fraud, calling it "frankly not believable," and urged him to tell the truth, even after sentencing.

But he conceded that he followed his brother's instructions and helped him decide which favored friends, clients and family members would receive the $300 million that remained in the company's accounts. The checks were never sent.

Peter Madoff, who joined his brother's firm after graduating from Fordham Law School in 1970, has been free on $5 million bail after he agreed to surrender all of his assets.


Prior to sentencing, his lawyer, John Wing, said in a memorandum that Peter Madoff will "almost certainly live out his remaining days as a jobless pariah, in or out of prison." He called him a victim of his loyalty to his brother, saying he had been mistreated by the sibling who was eight years older and was viewed as "the prince" by his mother.



As part of a forfeiture agreement, Madoff's wife, Marion, and daughter Shana must forfeit nearly all of their assets. The government said those assets and assets that will be forfeited by other family members include several homes, a Ferrari and more than $10 million in cash and securities. It said his wife will be left with $771,733. Besides the Madoff brothers, no other family members have been arrested.


Though Peter Madoff had been the firm's chief compliance officer for nearly four decades, the government marked his start in the conspiracy as 1996, when he created false and misleading compliance documents and false reports for the Securities and Exchange Commission.

The crime worsened after August 2006, when the business was registered with the SEC as an investment adviser, requiring annual filings to guide the SEC's examination programs. Prosecutors say Peter Madoff made "numerous false statements" to create the false appearance that the business represented a small number of highly sophisticated clients.

Since the fraud was revealed, a court-appointed trustee has reached agreements to recover approximately $9.3 billion and is hoping to recover another $3 billion over the next 18 months. About $3 billion has been approved for redistribution to victims through an ongoing claims process.

Five others face trial next year, including Bernard Madoff's longtime secretary. All have pleaded not guilty.

Information from Reuters and the Associated Press was included in this report.



Tags:US Business


FSB linked to Sharemax "licence for hire" scheme

Wife of former Sharemax director is top official at FSB.
JOHANNESBURG - A Financial Services Board (FSB) official used to be involved in a company that “rented” licences to Sharemax brokers.

Sharemax is a failed property syndication promoter.

Rinate Goosen, wife of former Sharemax Director Gert Goosen, is a manager in the FSB’s FAIS enforcement department.

However, Rinate Goosen’s involvement with a company called Unlisted Securities South Africa (USSA) may be seen by some as a black mark on her career.

USSA came under scrutiny by Fais Ombud Noluntu Bam last week. In her latest determination against a Sharemax broker Bam wrote that USSA’s business amounted to “nothing short of the hiring out of a licence for a small monthly fee”.

Many brokers were not licensed to sell Sharemax’s share-and-debenture products. Gert Goosen solved this problem by setting up USSA, a company licensed to sell both shares and debentures. For a small fee of R150 per month, a Sharemax broker could become a “representative” of USSA.

Bam’s determination describes how USSA helped Sharemax brokers to obtain the necessary licence to sell property syndication products. At its peak USSA had 1 376 representatives listed on its FSB licence.

Bam’s determination can be downloaded here.

Rinate Goosen is still listed on the USSA website as the company’s compliance officer. Her husband Gert Goosen is USSA’s sole director and key individual. Gert was also a director of compliance at Sharemax. Gert Goosen is also reportedly the brother-in-law of former Sharemax managing director Willie Botha.

At the time of its collapse, in September 2010, Sharemax’s 33 syndication companies owed R4.5bn to about 30 000 investors.

USSA’s high number of representatives has raised eyebrows in financial services circles. Paul Kruger, editor of Moonstone Monitor, a publication associated with compliance company Moonstone, asks why USSA was allowed to operate as it did.

Kruger says it would have been “impossible” for USSA to fulfil its obligations correctly. He notes that an FSB notice, effective 2009, requires financial services providers to “directly supervise” representatives selling shares and debentures.

Says Kruger: “With 1 376 representatives under supervision, it would have been impossible for USSA’s one key individual to comply with this requirement.”

Moneyweb approached Rinate Goosen for a response but she replied that she was not available for comment.

Moneyweb asked the FSB's Gerry Anderson to comment on Rinate Goosen’s links to Sharemax.

Anderson confirmed that Rinate Goosen was employed by the FSB from 1991 to 1999. She left the FSB in 1999 to join Liberty Collective Investments (which later became Stanlib) where she spent five years in a compliance officer position. Goosen later joined USSA where she spent at least four years as that company’s compliance officer.

Last year Rinate Goosen was re-employed by the FSB. This means that she was not employed by the FSB while her husband worked for Sharemax.

Anderson denies there is any conflict of interest: “At the time of her re-employment, it was known to the FSB what the position of her husband was. It is not believed that there is a conflict of interest. Rinate was employed on her own merits and despite being married to Mr Goosen, based on career history.”

Financial journalist and long-time Sharemax critic Deon Basson has also questioned the FSB on its relationship with the property syndication company.

Basson wrote to Anderson in March 2007 to ask about a paragraph that appeared in a Sharemax newsletter. The paragraph read as follows:

Sharemax’s compliance awareness week that ran from 1 to 7 February 2007 was a big success. The closing speech was by Mr. Gerry Anderson, deputy chief executive of the Financial Services Board and responsible for the implementation of FAIS, at Sharemax House. It was a privilege to be able to listen to him and he was pleased with Sharemax’s role in compliance."

Anderson comments: “I was asked at the time (a reasonable request) by Sharemax to address a group of representatives, both connected to it and independent, on the FAIS Act. Such presentation did take place and the duration was about an hour. This is seen as regulatory assistance and I find it strange that, notwithstanding the fact that similar presentations are given to many groups by senior staff of the FSB, this is singled out specifically.”

Click here to read Basson’s full correspondence with Anderson.

TIMELINE
1991 Rinate Goosen joins FSB
1999 Willie Botha starts Sharemax
Rinate Goosen leaves FSB to become compliance manager for Liberty Collective Investments (later Stanlib).
2004 Gert Goosen's USSA is licenced with the Financial Services Board. Rinate Goosen is its compliance officer
USSA offers brokers a solution to Sharemax brokers who require a licence to sell property syndication schemes
The solution costs R150 a month
At its peak, USSA had 1376 broker representatives yet only one key individual and one compliance officer
2005 Gert Goosen is appointed a director of Sharemax
2008 FSB issues notice 104 of 2008 which requires financial services providers to "directly supervise" representatives who sell shares and debentures
2009 Sharemax collapses
2011 Rinate Goosen rejoins FSB as a manager in the Fais enforcement department
2012 Fais Ombud Noluntu Bam describes USSA's business as "“nothing short of the hiring out of a license for a small monthly fee”.

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Adviser told to refund pensioner’s Sharemax investment

December 21 2012 at 08:40am
By Roy Cokayne


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The ombud for financial advisory and intermediary services (Fais) has ordered a financial adviser to repay a pensioner R815 000 after he advised her to invest in property syndication schemes run by Sharemax Investments.

This is the seventh determination by the Fais ombud against brokers for advice given to their clients to invest in Sharemax schemes, most of which to date have involved D Risk Insurance Consultants and/or financial advisor Deeb Raymond Risk from Edenvale.

Risk claimed that the Fais ombud should not entertain the complaint because the claim by Jannet Ann Schott Bujok exceeded R800 000.

However, Fais ombud Noluntu Bam said the complaint related to three investments made on the advice of Risk on three different occasions and were in effect three different “causes of action”.

“Each claim in respect of each cause of action is less than R800 000. Therefore, all three claims fall within the jurisdiction of this office.”

Bam said Bujok had invested a total of R815 000 in two Sharemax schemes, had not been paid any income since August 2010 and by all indications had lost her capital.

She ruled that Risk had failed to comply with the code of conduct for providers of financial advisory services in advising Bujok, a pensioner from Westdene, Johannesburg.

Bujok said she had first met Risk in September 2008 and was an inexperienced investor.

She said Risk, who had invested her money in Sharemax-syndicated Zambezi Retail Park and The Villa, told her the investment was low to medium risk and promised there would be “high gains” when the centres were sold in mid-2010.

Bujok moved money from existing investments with Stanlib, Momentum and Glacier International and signed forms for an investment of R575 000 in Zambezi Retail Park.

In November 2008 she invested a further R20 000 in The Villa. She met Risk again in May 2010 after deciding to dissolve her offshore trust, which led to another R220 000 investment in The Villa in June 2010.

Bujok said that no other financial products had been discussed or offered by Risk.

“Alarm bells rang” at the end of August 2010 when Sharemax failed to pay her monthly interest and Risk was unable to offer any plausible explanation, Bujok added.

Bam found that Risk was negligent because he had failed to apply his mind to how much risk Bujok could tolerate and failed to recommend a product appropriate to Bujok’s risk tolerance and financial needs.

She also found that by marketing the high-risk Sharemax schemes as low- to medium-risk investments, Risk had failed to act with due skill, care and diligence in the interests of his client and the integrity of the financial services industry.

Bam said Risk contended that a decision could not be made on the question of his negligence until a decision had been made on the legality of Sharemax’s funding model. However, she stressed that none of the issues ventilated in this determination were dependent on that inquiry.

She said Risk’s contention that the complaint was premature must also fail because the issue was not whether Bujok would recover some monies in the future, but whether the advice was appropriate given Bujok’s circumstances.




Sharemax used investors’ money to buy ‘empty companies with no value’

October 29 2012 at 08:00am
By Roy Cokayne


Roy Cokayne

INVESTIGATIONS by the Office of the Ombud for Financial Services Providers (Fais Ombud) into the activities of Sharemax Investments found that investors’ money was used to buy “empty firms with no value” from Sharemax.

Fais Ombud Noluntu Bam said on Friday that it had also found that the promoters and the directors of the many companies involved in the group as well as the administrators were “substantially the same people”.

Investors were also “duped” into believing the Public Property Syndication Association would provide protection and money raised from investors through public companies was loaned to private entities without any due diligence on the firms and their ability to repay the loans, it said.

Business Report earlier this month reported that the Hawks were investigating allegations of fraud committed by Sharemax and whether the company was operating a pyramid or Ponzi scheme. About 40 000 investors had financed about R4.5 billion in the various schemes promoted and marketed by Sharemax, which, if proven to be illegal and a pyramid scheme, will make it the largest fraud in South African history.

Bam made the Sharemax comments at the launch of the Fais Ombud’s annual report on Friday when referring to a determination by her office to a complaint lodged by 70-year-old pensioner Elise Barnes against D Risk Financial Consultants and Deeb Risk.

Barnes invested R1.4 million in Zambezi Retail Park and R400 000 in The Villa on the basis of advice given by Risk, who was ordered by the Fais Ombud to pay Barnes R800 000 in respect of the Zambezi Retail Park investment, the maximum amount for which the Fais Ombud can issue determinations, and the full R400 000 for her investment in The Villa.

Bam said Barnes and several other investors were still waiting for their capital to be repaid.

After a High Court review application instituted by Risk was dismissed with costs, they had heard he had since lodged an appeal with the board of appeal of the Financial Services Board.

There was a substantial rise in the number of new complaints lodged with the Fais Ombud, and that fell within the office’s jurisdiction to 7 944 from 8 821 in the previous year, Bam said, adding that the amount of money it had put back in the hands of consumers increased by 26.8 percent to R44.1m from R34.7m in the previous year.

The past financial year had confirmed fears of “a rise in the number of consumers who put their hard-earned savings into black holes on the basis of lamentably bad advice wrapped in fancy presentations and accompanied by marketing material devoid of any fact, which could enable consumers to make informed decisions”.

She referred to criticism of her office, particularly for rewriting complaints and for not allowing live testimony of witnesses and cross examination of witnesses.

Bam said the courts had ruled that there was nothing unconstitutional or impermissible with the inquisitorial approach adopted by the Fais Ombud.


Special Investigations

Author: Julius Cobbett|13 November 2012 11:18

FSB official's husband pays 13% return

Transparency lacking in former Sharemax director’s investment scheme.
JOHANNESBURG - Former Sharemax director Gert Goosen has emerged as the key player at a scheme that pays investors 13% a year. The scheme is run through a private company called Meadow Star Investments 62. Goosen is Meadow Star’s sole director. It is unclear how it generates its return.

Gert Goosen is married to Rinate Goosen, manager of the Fais Enforcement division at the Financial Services Board (FSB). Gert Goosen is also the brother-in-law of Sharemax founder Willie Botha.

Meadow Star Investments was registered in 2002. But it is believed that Goosen, and his business, Preston Financial Solutions, started marketing Meadow Star to clients in 2010 – when Sharemax-promoted syndication schemes ran into difficulties.

At the time of writing, neither Gert nor Rinate Goosen had responded to requests for comment.

Moneyweb is aware of one Preston Financial Solutions client, a pensioner, whose entire portfolio was invested in Sharemax syndications and Meadow Star.

Moneyweb has in its possession a statement by Preston to the client which reflects these investments, as well as a ‘beneficiary certificate’ issued by Meadow Star. The beneficiary certificate claims that Meadow Star is a nominee company that holds “various assets/investments/ordinary shares/ debentures” on behalf of its clients.

It is unclear why Goosen thought it appropriate to advise an elderly client to invest in an unlisted private company, in which he is the sole director.

There is no disclosure of what these assets might be or how the 13% return is generated.

Gert and Rinate Goosen used to operate a company called Unlisted Securities Services South Africa (USSA). This company allowed brokers to sell Sharemax products under its licence. At its peak, USSA had 1 376 representatives. The company’s business was recently described by Fais Ombud Noluntu Bam as “nothing short of the hiring out of a licence for a small monthly fee.”

Nevertheless, the FSB’s Gerry Anderson says Rinate Goosen is “well qualified and extremely competent.” Anderson says Goosen was “employed on her own merits and despite being married to Mr Goosen, based on career history.”

Rinate Goosen’s career history includes a five-year stint as USSA’s compliance officer. It has been alleged that USSA could not possibly comply with the FAIS Act with only one key individual (Gert Goosen) and one compliance officer (Rinate Goosen) to supervise as many as 1 376 representative Sharemax brokers.

Anderson denies that Gert Goosen’s business, Preston Financial Solutions, presents a conflict of interest for the FSB. He says Preston is supervised by the Fais supervision team headed by James Molefe, which is “completely segregated” from Rinate Goosen’s Fais enforcement department.

“The FSB is a responsible regulator, and will not allow any conflicts of interest, even if only perceived, to interfere with its regulatory mandate.”

Last month Anderson told Moneyweb that Preston Financial Solutions was “dormant.” Said Anderson: “Basically, Mr Goosen is currently unemployed.”

However, the fact that Preston Financial Solutions still has clients who are invested in both Meadow Star and Sharemax syndication companies suggests that it is not entirely dormant.






Sharemax faces probe for Banks Act breach
June 21 2012 at 05:00am
By Roy Cokayne

Comment on this story


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Roy Cokayne


THE REGISTRAR of banks has finally lodged a criminal complaint against Sharemax Investments, and the 33 property syndication companies it promoted, for alleged contraventions of the Banks Act.

About 40 000 shareholders invested R4.5 billion through Sharemax’s various property syndications.

The alleged contraventions are being investigated by the Serious Economic Offences Unit at the Directorate for Priority Crime Investigations, the Hawks.

Anyone found guilty of contraventions of the Banks Act is liable to a fine or imprisonment for a maximum period of 10 years or to both a fine and imprisonment.

Michael Blackbeard, the deputy registrar of banks at the Reserve Bank, confirmed this week that the statutory managers appointed to the Sharemax group of companies had, after being requested to do so, informed the Serious Economic Offences Unit of the SAPS that they were satisfied that Sharemax’s funding models contravened the Banks Act.

Blackbeard stressed that this was an administrative finding by the registrar’s office and “not a finding on criminality on the part of the persons involved in the scheme”.

“Criminal investigations and prosecutions are an area of responsibility of the SAPS and National Prosecuting Authority and it is for them to decide how to proceed,” he said.

Dominique Haese, the former financial director of Sharemax Investments and a director of many of the group companies, failed to comment.

The registrar of banks concluded in 2010 that Sharemax’s funding models contravened the Banks Act.

This resulted in the office appointing statutory managers to the Sharemax group of companies and its various property syndications in September 2010 to manage the repayment of funds illegally obtained from the public.

Business Report asked Blackbeard last year why criminal charges for contraventions of the Banks Act had not yet been lodged against Sharemax.

He said the main concern of the office was for the various Sharemax-related companies to resolve their concerns and to give effect to the office’s directive to repay investors’ funds.

He said the office’s mandate was very limited and focused on contraventions of the Banks Act but it would “in due course” instruct the managers to lay a charge with the SAPS.

Blackbeard added that the office was aware the SAPS was already investigating some of the “members” who had been involved in Sharemax schemes and it would provide the necessary assistance to the police and prosecuting authorities.

He previously confirmed that the registrar’s office had been challenged by Sharemax’s lawyers, which culminated in legal arguments relating to the proper interpretation of certain legal prescriptions.

Sharemax ceased making monthly payments to investors at the end of August 2010 when new investor funds dried up.

While under statutory management, the directors of Sharemax proposed a scheme of arrangement and offer of compromise to investors.

These schemes were sanctioned by the North Gauteng High Court in January, leading to the lifting of the statutory management directive.
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Hawks look into fraud claims at Sharemax
October 10 2012
By Roy Cokayne



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Roy Cokayne


The Hawks are investigating allegations that Sharemax Investments committed fraud and probing whether it operated a pyramid or Ponzi scheme.

About 40 000 people invested a total of some R4.5 billion in the various schemes promoted and marketed by Sharemax, which if proven to be illegal and a pyramid scheme, will make it the largest case of fraud in South Africa’s history.

A pyramid or Ponzi scheme is typically where investments by new investors are used to pay the interest and returns of older investors.

Hawks spokesman McIntosh Polela confirmed that the investigations by the elite crime-fighting unit were under way.

Attempts to obtain comment from Dominique Haese, who was financial director of Sharemax Investments and is now managing and financial director of Frontier Asset Management, which manages Sharemax’s property portfolio, were unsuccessful.

Polela said Hawks detectives were still gathering information and stressed the investigation was in its early stages.

Noluntu Bam, the Financial Advisory and Intermediary Services (Fais) Ombud, in a determination released yesterday, alluded to The Villa, the partially completed R3.5bn retail development near Pretoria that was promoted and marketed to investors by Sharemax, being a pyramid or Ponzi scheme.

“Given that The Villa had no income whatsoever other than investors’ money, the inescapable conclusion is that no matter how it was packaged, rental income was ultimately paid out of investors’ capital.”

Bam added The Villa was funded through a single unlisted company that was “not subject to the stringent regulatory requirements of the JSE”, did not have any track record, was “devoid of any meaningful assets”, and the method of appointment of directors itself should have raised questions about corporate governance and investor protection.

She ordered financial advisor Marthinus David Ras and/or Perfecsure Lewens Makelaars in Pretoria to repay Western Cape pensioner Iona Cowan the R800 000 she had invested in The Villa.

The registrar of banks investigated Sharemax’s funding model and decided in 2010 that it contravened the Banks Act. It only reported this contravention to the Hawks in March.

The comments by the Fais Ombud and confirmation by the Hawks that it was investigating criminal acts allegedly perpetrated by Sharemax, has cast a huge shadow over the legality of the scheme of arrangement and offer of compromise to shareholders and investors in Sharemax, that was sanctioned by the North Gauteng High Court in January.

The registrar of banks tacitly consented to the scheme of arrangement because Sharemax was under its statutory management when the scheme of arrangement was presented to court for sanctioning.

The registrar of banks appointed statutory managers to manage the repayment of funds illegally obtained from the investors in Sharemax’s various schemes in September 2010 when Sharemax defaulted on payments to investors at the end of August 2010.

Sharemax defaulted when the registrar’s decision that its funding model contravened the Banks Act became public knowledge, resulting in new investments into its schemes drying up. page 16

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Sharemax law firm accused of extortion
27 July | 05:00

By Roy Cokayne
Roy Cokayne


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Hawks look into fraud claims at Sharemax
Independent online
(SA)2012-10-10 Advisers warned about dodging the law
(SA)2011-01-17 Failed syndication: pensioner paid back R60 000 (SA)2012-07-08
Ombud side-steps bid to halt syndication rulings
(SA)2012-04-15 Ombud orders broker to repay Sharemax scheme client
(SA)2012-02-20 Risky investment costs adviser R800 000
(SA)2011-11-06 Bam digs in her heels against bad advice
(SA)2012-08-17 Another ruling against adviser who’ll challenge ombud in court

Sanlam Limited :

Ponzi scheme alert:

How to know when it really is to good to be true

12/14/2012| 03:05am US/Eastern

The extended economic downturn and interest rates hovering around the 5 or 6% mark make investment returns all too elusive right now. With many South Africans, in particular retirees, struggling to make ends meet, it is fertile ground for fraudulent investment schemes - known popularly as Ponzi schemes - to flourish.

South Africans seem to repeatedly entrust their hard-earned savings to operations which, at best, have short-term track records and, at worst, knowingly sell promises that they are unable to deliver on. Investors buy into these promises without fully understanding how these operators achieve their alleged returns.

Over the past five years the following schemes - which have had traumatic consequences for unsuspecting investors - come to mind: Fidentia, Leaderguard, Sharemax, King Group and most recently, the Herman Pretorius saga. There is a golden thread running through this list; each one promised a return far superior to that of the financial market, at a very low risk. In hindsight, such promises were too good to be true. But why do we continue to move from one such scandal to the next?

Spotting a Ponzi or pyramid scheme is actually relatively easy - here is a checklist to arm yourself against fraudsters.

1.Insist on proof that the investment vehicle is registered with the Financial Services Board (FSB). If it isn't, and your money gets lost, you have no recourse avenues open.

"We provided well for our retirement and enjoyed life, now we are 70 and have nothing." Herman Pretorius (HP) victim.

2.Compare the interest rates on offer to the global and local landscape (e.g. interest rates and economic growth rates). If the national interest rates are at 5 or 6%, and someone is offering you a guaranteed return of 30%, it is likely to be a fraudulent scheme. Having realistic expectations of investment returns is the cornerstone of any investment strategy.
3.Be wary of consistent returns. By their very nature, financial markets are fluid instruments fluctuating daily. If a scheme offers consistent guaranteed returns and it is not underwritten by an insurer or bank, it is most likely not invested in secure financial instruments and should, therefore, be deeply scrutinised.
4.Look closely at the track record of the institution and individual offering the investment opportunity. And this means not just taking their word for it. Contact the FSB, contact the editor of the personal finance section of the newspaper, ask reputable brokers for their opinion. In an economic downturn your best bets are very well established investment houses with solid track records and healthy cash reserves. Don't be fooled by professional looking documentation or reporting.

"My husband did not want to invest initially, because he was very conservative. The monthly statements showed very impressive growth. This convinced us to use some of our other investments to live off, as we did not want to disinvest from such a wonderful investment." HP victim.

5.Practice steps 1 to 4 above no matter who you hear about the scheme through. Unfortunately, many unsuspecting investors are introduced to Ponzi schemes through intermediaries, friends and family and this provides them with a comfort factor. This does not mean they are safe. It is possible that those family and friends will equally become victims.
6.Don't be comforted if the scheme has paid out regularly to those family or friends. This is a classic characteristic of a Ponzi scheme. In order to appear legitimate they pay out, as promised, for a period of time to allow word-of-mouth to market the scheme on their behalf. Then when there are enough investors, they pull the plug and make off with the money.

"We heard about it from friends, they all invested and received great returns. All our friends and family were invested and now have nothing to live off." HP victim.

7.Trust your instincts. Common sense and gut feel can be great defenses against falling for Ponzi schemes. Ask yourself why you have been given an opportunity to make fabulous returns on your investment. Why have you been so lucky to get this unbelievable opportunity to multiply your wealth? What's so special about you?

"Herman did a PowerPoint presentation to us and was very impressive one-on-one. He managed to make us trust him and the Christian angle he brought in made us trust him even more - how could someone who talked like that not be genuine?" HP victim.

8.Be extremely wary of "opportunities" to invest your money in franchises or investments that require you to bring in subsequent investors to increase your profit or recoup your initial investment. No legitimate investment house employs this strategy - in short, it is a very big clue that something dodgy is brewing.
"Stick to the old companies with a good reputation, and don't go with the new kid on the block." HP victim.

Whatever your reason for investing, it is vital to have a goal, a timeline and reasonable expectations. By investing in regulated investment products - such as unit trusts or mutual funds - you are investing in products that have an enormous amount of governance.

Before investing, you must be sure that you are trusting your funds to a person, people or an institution that has shown that it can consistently deliver returns over an extended period of time. Long-standing institutions with proven track records, are often the wisest choice.

Sanlam, for instance, has been in business for 94 years and has a wide range of funds.With the current low interest rate environment in mind, we have developed two new collective investment schemes (unit trusts), the Sanlam Stable Growth and SIM Market Allocator Fund. These funds assist retirees who need to both grow, and live off, their capital. They are secure investment options that are governed by the Collective Investment Schemes Control Act and are backed by the financial strength of Sanlam.

Please contact an accredited financial advisor to discuss these collective investment schemes.

Content within this section:

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( MOONSTONE )

Rent a Licence

By Paul Kruger on 12 Oct 2012 Industry News
The latest determination by the Ombud again concerns an investment in Sharemax. The Ombud ordered the respondent to buy back the shares at the price it was sold to the complainant.

An interesting aspect emerging from this case concerns how the respondent, Martiens Ras, was able to “legally” give advice on unlisted shares and debentures, despite having no experience in this field.

It appears that he was listed as a representative of FSP Network, trading as Unlisted Securities South Africa (USSA). His application form for appointment as a representative of USSA was completed on 19 May 2009, and he advised the client for the first time on 24 May of the same year.

It seems that the FSP Network only existed to enable intermediaries, who did not qualify to market licence category 1.8 and 1.10 products, to do so.

A check on the FSB website reveals that the FSP Network licence had lapsed. One is still able to download the application form for appointment as representative from their website. Alternatively, you can get it from your nearest Sharemax consultant.

The questions in the application form mainly concern the competency requirements, and verification of the applicant’s educational qualifications and experience. The latter is then used to determine whether he/she should be appointed as a representative or one working under supervision.

A report in Moneyweb states that Gert Goosen was the key individual of USSA, and the application form for appointment as representative shows him as the director of the business. Goosen was also Sharemax’s director of compliance.

In the determination in question, the Ombud pointed out that Ras had indicated on the USSA application form that he had no experience in shares and debentures. Yet, a few days later, he concluded the R800 000 deal, using only the prospectus of the Sharemax syndication.

In fact, he did not discuss it with the client – he indicated that he “…gave her time to go through it”. Furthermore, the Ombud states that there is “…no evidence whatsoever of any disclosure in respect of fees, commissions, method of termination or applicable penalties.”

The convoluted relationship between Sharemax, USSA and advisors placing business with Sharemax becomes evident from the following chain of events. When Ras submitted the application form to Sharemax, he gave the details of his own company, Perfecsure Lewens Makelaars. This FSP is not licenced to sell unlisted shares and debentures.

In her determination, the Ombud states:

“Given the reference to USSA, enquiries were directed to Mr G. Goosen, previously a key individual of USSA. Mr Goosen replied on 30th November 2010. The crux of his response was that respondent was at the time a representative of USSA, however, complainant’s business was not submitted under USSA but as confirmed by the documentation, under the name and licence number of Perfecsure.”

The fact of the matter is that there is an obligation on the product provider to ensure that intermediaries who submit business are properly and duly licensed. To comply with this regulation, they should not have accepted the business from Ras, or have insisted that he submit it under his USSA representative status.

This question was also put to Sharemax by the Ombud. She reports on this as follows in her determination:

“Mr Goosen, in essence, evaded the question and replied as follows: ‘In order to sell products promoted by Sharemax Investments, a person needs to be a representative of a FSP that is licensed for financial products 1.8 and 1.10. The procedure followed by Sharemax Investments is that when a person wants to promote the products syndicated by Sharemax, they need to enter into an agreement with Sharemax, In addition to that they also need to provide proof that they are licensed for financial products 1.8 and 1.10.’”

We believe that, at one stage, USSA had more than 2 500 representatives under supervision, yet only one key individual and one compliance officer. Apart from the physical impossibility of fulfilling their obligations correctly, one has to ask why USSA was allowed to stay in operation?

Membership of USSA cost its representatives R150 per month. Compared to the 6% commission rumoured to have been paid in these kinds of investments, it was not a shabby deal. For USSA, earning R150 per month from each of its representatives, was not bad either.

And no prizes for guessing who the biggest losers were in this setup
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Beware investment advisers' promises

11 Jul 2012 | Thuli Zungu's Consumer Line

THOHOYANDOU man must wait for a Financial Advisory and Intermediary and Services (FAIS) ombudsman's determination to know the fate of his R1 million investment.
inShare.0
WATCHDOG: Ombudsman Noluntu Bam enforces the industry code of practice.

Industry ombudsman can get your money back if you are badly served.

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Richard Netshisaulu, 56, regrets ever listening to his financial adviser, Breteus Koetzer, who recommended that he move his money to a Sharemax investment.

Netshisaulu, of Mutale village in Thohoyandou, says he had his his R1million safely invested with Standard Bank and Liberty Life when Koetzer assured him that there were no risks involved in moving his money to Sharemax.

Netshisaulu says Koetzer has been his financial adviser for many years.

"I did not doubt his advice since he had previously helped draft my will, which Standard Bank has kept.

"He actually helped me withdraw my money before he invested it in Sharemax," says Netshisaulu.

Sharemax, a real estate property investment company, engages in renting, operating and managing shops and offices. It now operates as a subsidiary of Realcor Holdings.

Netshisaulu says the investment was for two years but he got the shock of his life when he received a letter notifying him that he had to wait for a further six years since Sharemax had been taken over by another company.

He says Koetzer worked for Standard Bank and he believes the bank should be held liable for the incorrect "expert" advice its employee gave him to his detriment.

Kershia Singh, a media relations officer at Standard Bank, says the the bank was aware of the matter.

"This issue is currently before the FAIS ombud. As such, Standard Bank is not in a position to comment until the process has run its course," she says.

A week ago FAIS ombudsman Noluntu Bam ordered D Risk Insurance Consultants and Deeb Raymond Risk to refund Lionel and Catherine Walters' R300000 after giving their clients wrong investment advice.

They, too, were advised to invest their money with Sharemax in The Villa, a public property syndicate.

At the time the pensioners were largely reliant on income from their investment to support themselves.

A monthly income was paid until July 2010, when it stopped.

They later received news that Sharemax was experiencing cash flow problems and the monthly payments would not be made.

"Considering our risk profile, the advice we were given was clearly not a product of due skill, care and diligence. The advice was neither fair, honest nor appropriate," the pensioners said.

Bam has brought a smile to their faces.

She ordered D Risk Insurance Consultants and Deeb Raymond Risk to refund their R300,000 plus interest before the end of July.

She said D Risk had failed to disclose the material aspect of risk in the Sharemax The Villa investment.

The consultants failed to act with due skill and diligence in the interest of their clients and with the integrity demanded by the code of the financial service industry.

•It is essential for consumers to invest money with reputable and long-standing financial institutions so that in the event of problems consumers will not lose their money.
For example, two months ago Bam ordered Standard Bank to give a refund to a consumer who had been defrauded by an employee of the bank.

Nelson Tshitema of Mapetla, Soweto, was defrauded of R400,000 under the pretext that his nest egg was being moved to a better performing investment.

Tshitema said the problem started after he received a phone call from a financial adviser from the bank five years ago.

The bank employee, Lazarus Mocwiri, and a Liberty Life financial consultant, Sipho Dlamini, invited Tshitema to Standard Bank's Smal Street branch in Johannesburg, and advised him to move his money to another investment.

He says he valued their expertise because he had previously dealt with them, so he took their advice.

"I agreed because I trusted the two gentlemen from the bank. I had a debit order for R25,000 to Unit Trust-Stanlib .

"They suggested that I cancel it and invest the money with Liberty Life for five years.

"They also advised me to invest R600,000 with Discovery Life for five years and R400,000 in gold shares for a year," Tshitema says.

Given that the Standard Bank employee had asked him to go to the branch to discuss the matter, Tshitema believed it was an investment product of Standard Bank.

Also, the fact that Mocwiri was employed by Standard Bank gave Tshitema the impression that he was acting on behalf of the bank.

Unbeknown to Tshitema he became a victim of a fraudulent scheme devised by an employee of the bank.

Tshitema became concerned when he realised he was not getting any information from the bank about his Growth Coin investment.

It later transpired that Tshitema's money was invested in a company belonging to Mocwiri and Dlamini and that all his money had been used.

Bam has now also brought a smile to this investor's face.

She has ordered Standard Bank to refund Tshitema the R400,000, with interest, that was fraudulently transferred to Mocwiri's account.

In determining Tshitema's case, Bam said Standard Bank had failed to put in place adequate systems to prevent fraud.

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Bad advice means you pay up
December 2 2012 at 12:25pm
By Bruce Cameron



Mis-selling financial products, even in the name of a religious affiliation, and even when the targeted person has since died, will not get any miscreant product-flogger off the hook.

Financial advice ombud Noluntu Bam made this clear this week in yet another determination on a mis-sold high-risk property syndication, which has failed.

The targets of the mis-selling were Roelof Germishuys, who invested R600 000 and his wife Maria, who invested R585 000, on the advice of the product flogger, Bernard Marc Edgcumbe of Bellville, Western Cape.

Wheelchair-bound Roelof Germishuys, who retired in 2004 at the age of 60 because of ill-health, used part of his pension savings for the investment. Germishuys has since died.

But his executrix, Louise Danielz of BOE Private Clients, did not let matters lie. She continued with a complaint to the financial advice ombud that the Germishuyses had already initiated.

Bam has determined that jointly and severally responsible for making good to the Germishuys estate and Germishuys’s widow are Edgcumbe and various financial advice companies associated with Edgcumbe: UC Private Wealth, trading as Liberty Moon Investments; Mountain Brokers; and Mountain Brokers Trust, all of the Western Cape. All four were registered with the Financial Services Board (FSB) as financial service providers. Their licences have since lapsed.

Edgcumbe advised the Germishuyses to invest in a property syndication known as Fairhaven Estate, which was sponsored by the now-bankrupt Western Cape-based property syndication company, Genesis (formerly the Property Inter Action group, which was founded by Marelize Lombard).

The syndication was marketed as a low-risk investment providing annual returns of 25 percent on capital and income of 15 percent paid monthly.

And in doing so, the company claimed the business was managed on what it called “uncompromised ethics and on sound biblical business principles”, calling itself a “mature Christ company”.

The company was also among those instrumental in establishing the South African Association of Property Syndicators.

Edgcumbe, in common with many other property syndication product-floggers, tried to challenge the authority of the ombud to rule on the complaint, even producing what turned out to be a fraudulent legal opinion which he claimed had been given to the FSB.

Bam says in her determination that Edgcumbe had:

* Contravened the Financial Advisory and Intermediary Services Act by selling a product that he was not licensed to sell;

* Never undertaken a proper due diligence of Genesis or even had a clue what governance arrangements were in place at the company;

* Failed to appreciate the risk of the property syndication investment;

* Failed to follow proper procedures in having the Germishuyses switch investments into the property syndication; and

* Failed to disclose he was paid commission of R51 903 (4.38 percent of the total amount invested).


Adviser’s liabilities to former clients mount

The cost to financial adviser Deeb Risk and his company, D Risk Insurance, of advising pensioners to invest in property syndication schemes ticked up again this week, when financial advice ombud Noluntu Bam handed down yet another determination against them.

Bam ordered Risk and D Risk Insurance, which is based in Edenvale, to repay R170 000 to 86-year-old Margaret Posgate, whom he advised to invest in the now-imploding Sharemax Zambezi property syndication scheme.

The latest determination brings to R4.06 million the total amount that Risk must repay to seven pensioners, all of whom are over the age of 70.

Risk, who in September failed to have the High Court block Bam from issuing determinations against him, is still waiting to hear whether his applications to the Financial Services Board (FSB) Appeal Board for leave to appeal against Bam’s determinations will be granted, and if so, whether any of his appeals will succeed.

Risk, with his High Court application, wanted to force the pensioners to take the lengthy and expensive route of suing him in the High Court for their losses.

In the meantime, the R4.06 million that Risk must repay is rising steadily, because interest at a rate of 15.5 percent a year is due on any amount that Risk does not refund within seven days of each of the seven determinations made against him.

Risk remains licensed as a financial services provider.

In her latest ruling against Risk, Bam found that he had contravened the Financial Advisory and Intermediary Services Act and its code of conduct on numerous counts when he advised Posgate to invest in the Zambezi scheme.

Thapelo Mamuno, the FSB’s legal adviser, says the appeals by Risk and his company are at various stages.

He says Risk has launched applications for leave to appeal against the ombud’s determinations; for condonation, to the extent that it is necessary, for launching his applications late; for an order that various determinations by the ombud be suspended pending the outcome of the applications for leave to appeal; and, if the applications for leave to appeal are successful, to appeal against the determinations.

The appeals involve five determinations. They do not as yet include the latest two determinations. In four of the five determinations, the complainants have opposed the appeals, while the fifth is still deciding on his course of action.

In two of the applications, Risk has been allowed until December 5 to file replying papers. Opposing and replying papers in one determination have been submitted to the chairperson of the Appeal Board.

Mamuno says leave to appeal must be granted before the Appeal Board can consider the appeals.


Insurance broker told to pay

Short-term insurance salespeople beware: you must inform your clients if an insurer adds any condition to a policy after it has been taken out. If you do not, you may very well have to pay a claim out of your own pocket. This is what happened to insurance broker Willem Lombard and his company, Consult Us Brokers of Klerksdorp.

According to a determination issued by financial advice ombud Noluntu Bam, Otto Fourie of Pretoria, on the advice of Lombard, took out a household and vehicle insurance policy with Zurich in 2006. In 2008, the policy was moved to BSG Hollard.

There was a robbery on Fourie’s property in November 2008, and he lodged a claim for R120 369.

Hollard repudiated the claim, because Fourie did not have security bars on the windows of his home or security gates on the doors. These conditions had become requirements of the cover after Hollard took on the insurance risk.

Fourie complained to the Office of the Ombudsman for Short-term Insurance, which endorsed Hollard’s repudiation of the claim but referred Fourie’s complaint to the office of the financial advice ombud.

Bam determined that Lombard should have brought the additional requirement to Fourie’s attention so that he could have made “an informed decision” whether or not he was prepared to accept the condition added by the insurer.

“It was as a result of the failure to properly and timeously inform the complainant of the insurer’s requirement that ultimately led to the rejection of the theft claim by the insurer,” she says.

Bam did not name the amount of money that Lombard must pay Fourie. The ombud says she cannot do so because the amount has not been assessed by a claims adjuster.

She says, however, that if a settlement cannot be reached, the matter can be referred back to her office for a ruling on how much Lombard must pay.


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In the News

Property syndication rules coming soon - 13 February
Roy Cokayne
Pretoria - The trade and industry department will soon publish draft regulations to control the conduct of companies involved in public property syndication investments.

Ebrahim Mohamed, the chief director of the office of consumer protection in the department's consumer and corporate regulation division, said on Friday that the draft regulations would be published in the Government Gazette, allowing 30 days for public comment.

The department hoped to publish the final regulations by the end of March. Attempts to clean up conduct in the industry follow an investigation by the department's consumer affairs committee into property syndication scams in October 2004.

Mohamed said in 2004 that the syndicates were being accused of defrauding unsuspecting and inexperienced investors. He warned the public and small investors to be careful of public property syndication scams.

A public property syndication comprises a group of investors who pool their funds to invest in a company whose sole asset is a commercial, retail or industrial property.

These investors then share in the profits and losses, and enjoy the benefits of net rental growth through a share of income, together with any future capital growth that may be reflected by the increased value of shares.

But Mohamed said it was relatively easy to mislead consumers when marketing public property syndications.

"The property could ... be sold at an inflated price ... or investors could be left in the dark regarding the terms of the rental agreements."

Sharemax Investments is one of the largest companies to specialise in unlisted commercial property investments, despite receiving bad publicity in the past.

Willie Botha, Sharemax's managing director, said it had successfully launched 29 projects since 1999 and managed more than 15 000 property investors' assets worth more than R1.5 million.

Botha stressed that all of Sharemax's projects were properly registered with the registrar of companies before they were offered to the public.

He added that the revival of the property market had opened the door to excellent growth for Sharemax's investors. Botha said there was demand from certain listed and other companies to purchase several properties in Sharemax portfolio.

He said the first successful transaction of this kind was when an offer of R46.5 million was accepted for the Groenkloof Plaza shopping centre in Pretoria, which was registered in the name of its shareholders in May 2003 for R35.85 million.

The combined gross return for the investors in Groenkloof Plaza was 58.51 percent over two years and eight months.

Botha said offers on 19 other buildings in Sharemax's portfolio were being considered. They would provide additional capital growth of more than R200 million to its investment clients.

Business Report website


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Overpricing stifles property - 26 January
Superinflated asking prices flattened holiday home sales in Port Elizabeth, St Francis Bay and Jeffreys Bay this past season.
Local estate agents report the quietest festive trading in some years in spite of good viewing numbers and follow up interest, with many of the fewer than normal offers to purchase faltering on price agreement between the two parties, according to a market survey.

John Cooper, a franchise holder in the three areas, reports the only real interest surfacing in Jeffreys Bay vacant stands where the CEI local franchise recorded 19 stand sales, all to non residents, and only one existing home transaction. Average selling price of stands was around R350 000.

Activity in the normally equally popular, but pricier St Francis Bay, according to Cooper was "very quiet" also as a result of the shorter holiday season and possibly the crisis in the supply of petrol at that time.

One tendered offer of R1.5m to purchase a R1.6m home was not only rejected by the seller but its price in response to the interest was immediately bumped up to R1.7m.

An owner broker in Port Elizabeth also reports a slower than normal market. December sales for the agency of 24 units was about half of a normal month with a high portion being generated by company transfers.

Potgieter also sees good movement in the niche markets, such as the Walmer golfing estates, particularly from black and Asian buyers purchasing in the price range of R2.5m.

Cooper senses a market improvement by April when he expects sellers to come to terms that market bottlenecks are a result of their own making.

Given the recent and still to come industrial development in Port Elizabeth and Mossel Bay and the region's cost of living and lower crime rate, Cooper is forecasting strong emigration into the area during the next four years from inland regions further motivated by the region supporting some of the lowest coastal property prices in the country.

"It's big enough to be a city with good facilities and commensurate opportunity, but still small enough for people to feel comfortable."

Fin24 website


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