Documents recently filed in the Cape High Court claim that Investec Bank and its attorneys, Edward Nathan Sonnenbergs, employed private investigators to illegally tap the telephones of some of the bank's own employees, and to install telephone-bugging equipment at the homes and offices of various clients and their relatives.
They are even alleged to have tapped the telephone lines of lawyers representing clients in legal proceedings against the bank.
Investec is also said to have gained illegal access to the private telephone records of employees and clients, and to have acquired their private banking records from other banks – the latter obtained by fraudulent or corrupt means, since they did not have the warrants required by law.
The scandal also involves the old Scorpions (Special Crime Investigation Unit) and the Western Cape regional prosecuting authority, who, for years, it now transpires, have simply ignored orders from higher up to investigate these serious charges, or have grasped at the feeblest excuses to close their files on the matter – without seeking evidence or interviewing witnesses.
Angry complainants are now openly speculating about corruption in senior police circles. Another possible explanation: police and prosecutors may knowingly have received the tainted evidence produced by Investec's illegal investigations and used it in some newsworthy prosecutions, and now fear prosecution and massive damages claims should this become public knowledge.
The head of the National Prosecuting Authority (NPA), advocate Menzi Simelane, last month ordered a fresh investigation into the matter, but the the continuing reluctance of senior Cape policemen to take on the investigation has become so obvious that the complainants have petitioned the regional police chief to have a senior detective brought in from Gauteng to do the job.
The evidence relating to unlawful telephone tapping was filed at court last month by the defendants in a case already made notorious by the compromising role played in it by Investec’s former chairman (and Sonnenbergs senior partner), Hugh Herman. (See nose117.) The case was initially launched – for reasons noseweek can only speculate about – in the name of Investec's hatchet man, the ghastly Robert Gottlieb. But since his cover was blown in noseweek Gottlieb has been replaced as plaintiff in the case by Investec Business Services Ltd.
Investec is seeking to recover R4.5m (plus 10-years’-worth of interest) from five men who signed surety for a well-known Cape Town property development – the Victoria Junction Hotel – that was funded by Metboard (now Investec Property Finance division) more than ten years ago. They are: Ian Geoffrey Chait; his sons Anton and Stuart; Naftali Novick and Ian Fife. All were once Hugh Herman's mates and co-speculators in various property ventures. Which is why, many thought, Investec was being so tardy in pursuing the case. (It was launched only in 2006 – and even then they were in no rush.)
So tardy, in fact, that when noseweek first reported on the case a year ago, we were prompted to ask: What is Investec hiding?
In their recently filed court papers the defendants appear to have discovered an answer to that question – and it's not Hugh Herman's personal business relationship with them; it's something much more serious. They reckon it's all about a ruthless scheme the bank bosses allegedly devised in 1997 to turn one of Investec's many loss-making acquisitions into a massive profit opportunity – at the expense of their insurers and the property developers who had the misfortune to be clients of Investec's then newly-acquired, and vastly over-extended, Metboard property finance division.
First step in the scheme: find evidence to support a claim that Metboard's losses were due to fraud and serious mismanagement on the part of their own staff. That way, Investec could claim the losses from their insurers, Lloyds of London. To this end they acquired the services of Warren Goldblatt's already notorious firm of private investigators, Associated Intelligence Network (AIN) – who, for a substantial fee, provided illegal telephone taps and a bent policeman prepared to demand records from banks, under false pretences. (Readers will recall that Goldblatt provided the same services to CorpCapital when he illegally tapped Nic Frangos’s telephones.)
They succeeded, by hook and by crook, in acquiring sufficient evidence to persuade the director of Investec's property finance division, Alletta “Laetitia” Peyper – after four years of postponed court hearings – to agree to a plea bargain, in terms of which she pleaded guilty to various charges, for which she was fined R300,000 and given a six-year suspended prison sentence. That was enough to persuade Lloyds to pay out some R62m on Investec's claim.
Step two: Since Investec had recovered its losses from Lloyds, it ran no risk in “winding up” Metboard's business, by freezing the credit line previously afforded its clients and calling up their loans. (That was Robert Gottlieb’s job.) Then, finally, when they could not immediately repay the loans, they could be put into liquidation and Investec could sell or buy up their properties for a song. (Enter Lennie “The Liquidator” Katz, all the way from Edward Nathan Sonnenbergs. By October 1998 noseweek was able to report that Lennie had managed to put 37 of Metboard’s clients into liquidation in just three months.) Whatever Investec managed to lay its hands on that way would be “pure profit”.
Investec seized and sold off the Chaits’ Victoria Junction development to Protea Hotels for half the cost of construction, while keeping a healthy stake in it for themselves.
Property developer Justin Lewis claims Investec unlawfully liquidated his Keurbooms River Lodge development then bought the hotel itself only to sell it very soon afterwards for an enormous profit. He has been campaigning for police action for the past 11 years. Another client, Le Roux Construction, was liquidated and their property, Cape Town Lodge, was sold for about R3m to an Investec consultant, Raymond Gnesin. The lodge is now worth twenty to thirty times more.
It has taken some of their major property development clients, who were ruined in the process, ten years to discover what hit them – and what it was really all about. And they are definitely not happy: they've gone to court and they've called in the cops.
Now that they’ve understood Investec’s scheme, the Chaits and their partners have decided to fight back: they’ve lodged a counter-claim against Investec for damages totalling R170m.
How did they find out? In his court papers filed last month, Stuart Chait tells how he first learned, earlier this year, of the damning letter written in March 2004 to Ben Avenant at the Directorate of Special Operations (Serious Economic Offences) by Peyper's attorney, Michael Murphy.
In the letter, now annexed to Chait's court papers, Murphy formally reported to the state investigating authorities what he knew about the telephone tapping, and other illegal interventions, that had been carried out at Investec's behest and on their behalf. (According to the letter, Murphy had already informally informed Avenant about these matters in late 2003.)
Murphy declares: “This is a formal request that the issues herein be taken up at the highest levels of your offices with a view to an investigation being launched into all of this.”
Murphy reported that, in an endeavour to find evidence which would be used in his wife's defence, Jan Peyper had contacted Les Haupt, manager of the old Provincial Building Society division of Investec, who has also been fired. Haupt “had at some stage suggested that Investec had engaged in various illegal acts as part of a strategem to sustain a fraudulent insurance claim”. He told Jan Peyper that he had ascertained that Investec's “programme” had included:
- “The tapping of telephone lines at Investec offices, at the offices of lawyers and businessmen and at private homes” and;
- “Accessing private information of persons linked directly to Investec, and also of others, such as the spouses and family [sic] of these persons.”
Haupt told Peyper that he had heard tape recordings of Peyper’s telephone conversations with members of his family and with business associates and friends. The tapes were listened to by the Investec executives who had commissioned them, and by Investec's lawyers.
Jan Peyper then hired well-known former police officer Leonard Knipe (then an investigator employed by George Fivaz and Associates) to investigate the matter.
Knipe established that Investec had commissioned Associated Intelligence Network (AIN) to do the job in 1997. The AIN team had consisted of Warren Goldblatt (CEO of AIN), Seun Briel (a former Telkom employee who specialised in “telephone monitoring”, Gert Olivier (a policeman “on leave from the SAPS”), Johan Rademeyer, an ex-recce who had worked for Investec and for AIN, Peter Ryan of Investec, Leonard Katz (of Sonnenberg Hoffmann and Galombik – now Edward Nathan Sonnenbergs) and “David, an AIN employee”.
In summary, Knipe reported that Rademeyer had become involved in “an assignment commissioned by Investec Bank head office, Johannesburg”, shortly after taking employment with AIN in early 1997. Goldblatt, who managed the Investec account, explained to Rademeyer that AIN had been commissioned by Ciaran Whelan at Investec head office to conduct “investigations at the behest of the bank”.
Rademeyer was told that the investigation would last four to six months, and he would be required to be away from home for that period. When he asked why, Goldblatt told him that Investec head office wanted AIN to tap the telephone lines of all the alleged suspects in Cape Town during that time. Rademeyer was to head a team that would be sent to Cape Town (from Johannesburg) to conduct the telephone monitoring. The team would include Olivier and David.
Gert Olivier had the rank of captain and was a member of the riot squad in Alexandra, Johannesburg. He took leave to accompany the team to Cape Town. (Shortly afterwards he resigned from the police and joined the full-time staff of AIN.) It took Olivier his entire three weeks’ leave to obtain the bank statements of the alleged suspects. To quote Murphy's letter: “He would and did use his official position to obtain banking details and statements of suspected persons. Whenever it was necessary to question people, Olivier would produce his appointment certificate to make it appear that their investigations had official sanction.”
On their arrival in Cape Town, the team were given “a more detailed briefing on the whole matter” by attorney Leonard Katz, at Sonnenbergs, who also told them they could get more details from Ryan at Investec. Katz then gave Rademeyer the following list of names of alleged suspects:
“Les Haupt, Shahied Noor, Faizel Noor, Leonard Fourie, Rashad Khan Attorneys, Mariam Noor and Associates, and Beryl Lamjopoullis.” (More names would be added later.)
A few days after their arrival in Cape Town, Goldblatt and Rademeyer met again with Katz and Investec's Peter Ryan in a boardroom at Investec’s Cape Town offices. Katz opened the meeting by outlining the problem. Goldblatt then informed them what his instructions were from Investec head office in Johannesburg and that they were to:
- obtain bank records and statements of identified persons and their spouses, and
- monitor (“tap”) telephone lines of the identified persons at their homes and offices ... until instructed to stop by Investec head office. This monitoring was done without legal sanction.
The report notes: “At the meeting Katz raised concerns about the manner and methods to be used in the investigation. Goldblatt justified it by saying that Whelan at Investec head office had authorised the above method of investigation.”
At the meeting Goldblatt also informed Katz and Ryan that he had in his employ, on a contract basis, a former Telkom employee, Seun Briel, who specialised in telephone monitoring. Katz raised concerns about the possible detection of Briel, but Goldblatt explained that he operated in a van identical to vehicles used by Telkom. Briel would be instructed to travel to Cape Town in this vehicle to join forces with the team. (Briel also wore a Telkom uniform.)
Seun Briel subsequently did all the monitoring installations at the addresses supplied by Investec. He would visit each site daily to collect the cassette tapes and replace them. Knipe found that “installations were done at offices and houses virtually across the Peninsula – Blaauwberg, Hout Bay, Sea Point, Grassy Park, Claremont, Wynberg.” Briel occasionally showed his colleagues where he had concealed the cassette recorders, inter alia at Haupt's house in Blauwberg and at Lamjopoullis's flat in Three Anchor Bay.
(Earlier this year, when the defendants in the current matter in the Cape High Court obtained a copy of Murphy's “report” they went to the old offices that used to be occupied by the 406 Fairweather Trust – the entity they had established to undertake the Victoria Junction development – and found the old phone monitoring devices still in their hiding places. Photographs of the devices in position are annexed to Chait’s latest court papers. They had clearly been added to the list of those Investec wanted monitored.
Seun Briel confirmed in an affidavit, signed in May this year, that he had done the telephone monitoring as described in Knipe and Murphy’s report.
According to Murphy’s letter, the taped conversations included:
- a conversation between Haupt and Lamjopoullis;
- two conversations between attorney Rashad Khan and an advocate regarding a case they were working on;
- various conversations between attorney Mariam Noor and other attorneys, and one between her and an advocate about the case of a mutual client; various telephone conversations Jan Peyper had with business associates.
The report states that Rademeyer visited Katz at Sonnenbergs on “not less than three occasions”, when he played cassettes to Katz of monitored conversatons that he thought might have a bearing on the investigation. One conversation that Katz specifically wanted to hear was one between Herman Niewoudt (Haupt's labour attorney) and Haupt – the reason being that there was an upcoming internal hearing with Haupt, and Katz wanted to know what he discussed with his labour attorney.
Seun Briel was also required to install monitoring devices on the telephones of various staff members at Investec itself.
The report notes: “David Schenker, from Investec Cape Town, only became aware of the instruction to monitor the office telephones in his area after the installation had been completed. He was furious that he had not been consulted and wanted the devices removed immediately. Whelan, from head office, misled Schenker into believing that the devices had been removed, and Rademeyer and his team also were instructed to pretend that this was the case.
While in Cape Town the team first stayed at the Protea Hotel, then moved to the Dolphin Beach Hotel. Their hotel bills were paid by AIN. The investigation lasted from April to July 1997. At the end of it all, Rademeyer held a stash of 180 tapes of illegally recorded telephone conversations.
Apparently quoting Knipe, Murphy adds: “During the course of the Investec investigation it came to Rademeyer's knowledge that Goldblatt had, through AIN, supplied Whelan at his private residence with security guards and security services free of charge.”
Murphy concludes: “On the evidence, it seems clear that the investigation, and the manner in which it was conducted, was carried out in accordance with the direct instructions of Investec and in direct contravention of the law and our client's fundamental rights.
“The probabilities seem overwhelming that the investigation was one by Investec and that it was launched to substantiate a significant claim with Lloyds of London.
“I do not believe it would be an exaggeration to say ... that the conduct dealt with above is criminal, that it is conduct that must not be allowed to recur and that those who authorised it must be called to account. The consequences for these persons and entities will be serious, I am sure. The banking licence of Investec could be at risk.
“I would appreciate it if you would ensure that this letter is laid before the NDPP, and that your office give consideration to taking the appropriate steps to verify what is set out above and then bring proceedings against those responsible.”
Murphy got no response. Nothing. Six years later there has still been no police investigation. All subsequent complainants have hit a brick wall when they have approached police and prosecutors in Cape Town. Hopefully, in the coming month, Mr Menzi Simelane will establish why – and who in his Western Cape office is so determined to protect Leonard Katz from prosecution and Ciaran Whelan from being exposed as a person not fit to direct a public company.
Noseweek called Steve Levetan, the attorney at Edward Nathan Sonnenbergs in Cape Town representing Investec in the case against the Chaits and their partners, to ask for comment on the latest developments and disclosures. “The Chait action? I’m very much aware of it,” he says. Noseweek mentioned the allegations concerning phone tapping and asked if he could let us have a look at his set of court papers. No: “These papers are kept by the Registrar confidentially, until the matter is called. And it hasn’t been called in court because it was postponed.
“It was due to be heard on 3 June, and it’s been postponed to 31 January 2011. The Chaits asked for leave to file a counter-claim and that was granted after an application that was made and opposed. Ultimately the judge president postponed it to 31 January. The matter is sub judice. The allegation [about phone bugging and the like] is still being looked at and I’m not in a position to comment.”
Why was the plaintiff now listed as Investec Business Services when previously it was Robert Gottlieb?
“Gottlieb – it's disgraceful what you said about him in your last article – was acting as trustee for a trust [set up by Investec as a ‘lending vehicle’]. Now the trustee of the trust is Investec Business Services.”
Subsequent to speaking to Levetan noseweek gained access to the court record, and to Investec’s reply to the charges contained in Chait’s papers. Investec’s response to the charge that they commissioned and connived at illegal telephone tapping: “The office telephones of Peyper and Leslie Arthur Haupt were tapped during an investigation into irregularities. Investec instructed AIN to perform the above on its behalf. AIN was not authorised, either expressly or otherwise, to tap any telephone outside of its mandate referred to above. Investec have no knowledge of the further allegations in this regard, and put the defendants to the proof thereof.”
On the subject of putting the squeeze on Metboard’s bond clients, Investec admits only that “a number of Investec’s mortgage bond clients were placed in liquidation and/or foreclosed on by Investec. All further allegations in this regard are denied”.
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