History revisited: Ponzi accomplice cheekily accused Investec of fraud for calling in loans

Tannenbaum’s top agent, Dean Rees, tried unsuccessfully to block bank’s R34m in mortgage claims by accusing it of devious dealing.

In June 2009 Noseweek was the first to expose Barry Tannenbaum’s R3-billion cash pyramid or Ponzi scheme – an illegal form of gambling. Major players who were tempted to participate in the “game” that started in 2004 and crashed in 2009 included scores of South Africa’s ultra-rich. (See "From Noseweek's exposé" below.)

The scheme generated a turnover of over R3bn (some estimates put it at double that), capping Brett Kebble’s massive gold share frauds.

A more recent follow-up investigation by Noseweek (nose245) has found that, despite extensive and extremely costly investigations by insolvency trustees and forensic auditors, a lot of the money that flowed in and out of the scheme to offshore bank accounts remains unaccounted for. Of the money that was recovered, most was seized by the state as the proceeds of crime.

And the two main perpetrators, Tannenbaum himself and top accomplice Dean Rees, remain safely ensconced abroad – in Australia and Switzerland respectively – out of reach of South African law enforcement agencies.

Noseweek’s recent research has found one further ironic chapter in the story that largely escaped media attention: how Rees attempted to dodge a R34-million claim Investec brought against him by accusing the bank of devious dealing and fraud. 

Dean Rees on his boat

Dean Rees was one of Tannenbaum’s top collaborators, along with lawyer Darryl Leigh, in a multi-billion-rand Ponzi scheme that was launched in 2004 and went bang in 2009.

The Ponzi scheme, with its too-good-to-be-true promises of quick profits, attracted hundreds of wealthy South Africans. The funds deposited with the scheme were ostensibly going to be used to fund the importation of raw materials used to manufacture drugs for the treatment of HIV/Aids. However, Tannenbaum faked the documentation used to prove that the scheme was lawful and ultimately the plan fell apart, as all such cash pyramids inevitable do, when the flow of new investments no longer grew fast enough to cover the profits promised to earlier investors.

The battle between Rees and Investec started in June 2012 when Investec filed a court case against Rees as well as his business partners Benjamin and Edward Jowitt. Edward Jowitt was also one of the larger investors in the Ponzi scheme.

Investec submitted 14 claims totalling R34m, excluding interest.

The 14 claims were backed by loan agreements between Investec and a number of companies in which Rees had an interest.
The majority of these principal debtors who concluded loan agreements with Investec, had been put into liquidation following an application by Rees himself to the high court when they all defaulted on their debt obligations.

Rees wrote in an affidavit that seven of these “principal debtors” were wound up by the high court in 2010 and 2011 while in July 2010, a further two were wound up by way of voluntary resolutions by the members.

To ward off Investec’s claims, Rees accused Investec of misconduct and tried to discredit the supporting documents on which Investec based their claims by calling for handwriting analysis of the signatures on these documents in an attempt to prove forgery.

In addition, Rees alleged that Investec had colluded with the liquidator of the wound-up companies and that Investec conspired with auctioneers to sell certain of the properties owned by these entities for prices well below their actual value.

He also alleged that Investec had not adequately accounted for the proceeds of the sales or dividends received from the wound-up companies.

However, an acting judge at the South Gauteng High Court and later five judges of the Supreme Court of Appeal largely pooh-poohed Rees’s allegations.

On top of facing the Investec claim, Rees’s own South African estate was placed in the hands of insolvency practitioners in 2009 by the courts after the Ponzi scheme went under and investors scrambled to get their money back.

In addition, in 2011 the National Prosecuting Authority’s (NPA) Asset Forfeiture Unit (AFU) confiscated his Ferrari 599 GTB Fiorano that he bought for R4m as the car was considered to have been bought with the proceeds of crime.

Private Boeing

Rees had fled to Switzerland in early 2009 in a Boeing he had hired for the occasion, after making off with tens of millions of rand in loot, and he remains at large as the NPA has never applied for his extradition.

On July 13, 2012, the defendants gave notice of their intention to defend the action. On August 1, 2012, Mirielle Ackermann, then Investec recoveries officer, launched a summary judgment application against Rees and Edward Jowitt.

The court hearing into the matter was held on 18 and 19 February 2013 at the South Gauteng High Court in Johannesburg. Acting Judge AJ Hutton gave judgment on March 5, 2013.

Hutton said that Investec’s combined summons was a work of “epic proportions”. “The particulars of claim run to some 250 pages… These claims are supported by annexures which run to a further 700 pages. The annexures consist of various loan agreements, mortgage bonds, deeds of suretyship, certificates of balance and the like.”

In the particulars of claim, Investec indicated that either a judgment by default had been made against the relevant principal debtor or that the principal debtor had been wound up, Hutton said.

The Aljebani Trust, of which Benjamin Jowitt was a trustee, and Rees allegedly provided sureties for the indebtedness of the principal debtor in each of the claims. Edward Jowitt allegedly provided surety for two of the claims.

Rees argued that Investec had nullified his suretyships as a result of the bank freezing his company accounts.
He accused Investec of manipulating the debtors into defaulting in terms of the loan agreements by unlawfully freezing their accounts, and that this prejudiced the sureties and released him from these obligations.

These sureties were “removed sureties”, Rees alleged.

“I find the contention that the respondents are ‘removed sureties’…to be wholly unconvincing. In my view no bona fide defence has been disclosed on this score,” Hutton said.

Rees also accused Investec of having a “collusive relationship” with his former business partner, Christopher Harris, who in most instances was a co-surety in respect of the principal debtors in the Investec summons, either personally or on behalf of one or more of his trusts.

However, Hutton said that Rees’s allegations accusing Investec of collusion with Harris were devoid of any detail whatsoever.

“Sweeping assertions of misconduct are made in Rees’ affidavit, but are not backed up with anything of substance.

“I find that the manner in which the defence of prejudice has been averred to be needlessly bald, vague and sketchy. I cannot, in these circumstances, find that the defence of prejudice has been bona fide raised,” said Acting Judge Hutton.

Rees claimed that Harris had negotiated with Investec regarding the debt defaults and had been successful in securing his position to the detriment of Rees and Edward Jowitt.

In one of the claims, Investec relied on a suretyship that was not signed by Rees.

The allegations made by Rees relating to the claims were not set out with sufficient particularity to defeat what was prima facie evidence established by the certificates of indebtedness which Investec relied upon as proof of its various demands, the judge said.

“Accordingly, I do not believe that any bona fide defence has been raised in this regard,” Hutton said.
Hutton found that one suretyship relied on by Investec was of inferior quality.

“Investec pleads that it is the only copy in its possession. Mr Rees has seized on this and states that this is one of the documents he would wish to have analysed by a handwriting expert. He also denies that he signed the suretyship. The document attached to the particulars of claim is certainly of a poor quality, but it is not so illegible that the essential requirements of a valid suretyship cannot be easily ascertained from it,” Hutton said.

The names of the creditor and the principal debtor, as well as the limitation of the surety’s liability to R5m, can be “discerned with great difficulty”, the judge said.

Rees’s denial that he bound himself as a surety in this instance was “an opportunistic one which is not worthy of credit,” Hutton said.

“In the circumstances, I conclude that, save in the respects specifically conceded by Investec’s counsel, the respondents have failed to demonstrate the existence of a bona fide defence.

“In my view, Investec, as the overwhelmingly successful party, is entitled to its costs on the attorney and client scale, as agreed to in the suretyships, including the costs occasioned by the employment of two counsel,” Hutton said.

In his judgment, Hutton granted summary judgment to Investec for 13 out of 14 claims totalling R31.9m, excluding interest.

Of that amount of R31.9m, R26.6m was payable by Rees, and R5.3m was jointly and severally payable by Rees and Edward Jowitt.

Jowitt and Rees challenged Hutton’s judgment, and the South Gauteng High Court granted leave to appeal to the Supreme Court of Appeal (SCA) in Bloemfontein.

The high court granted Rees leave to defend one of the claims as to the suretyship that Investec relied upon in support of that claim as it was allegedly not signed by Rees.

Investec also dropped its application for penalty interest concerning the claims.

The SCA matter was heard on February 20, 2014, and five judges considered the issue. They were at the time: SCA Deputy President Justice Kenneth Mthiyane, Justice Carole Lewis, Justice Visvanathan Ponnan, Justice Mandisa Maya, who is now President of the SCA, and Madam Justice Halima Saldulker.

The SCA ruling, written by Saldulker, with the other four judges concurring, stated that Rees’s affidavit did not dispute that many loan agreements had been concluded between the principal debtors and Investec and that mortgage bonds had been registered against various immovable properties as security for the debts owed to Investec.

Besides, various deeds of suretyship had been concluded as additional security for Investec’s debts, and each of the principal debtors had defaulted on its obligations to Investec, Saldulker said.

Rees’s contention about “removed sureties” had not been explained, Saldulker said.

“Rees’s affidavit is replete with conjecture and speculation for which there was no factual foundation.

“In my view, Mr Rees was sparse with the truth and deliberately vague,” the judge said. His claim of prejudice was hollow and smacked of desperation, as did his charge that Ackermann’s affidavit lacked effectiveness. 

“Looking at the matter at the ‘end of the day’ and all the documents that [were] properly before it, it cannot be said that the high court erred in granting summary judgment against the appellants,” the judge wrote.

“The result is that the appeal must fail,” Saldulker said, and so the SCA dismissed the appeal with costs.

When approached shortly before this issue of Noseweek went to press, Investec declined to reveal how much they succeeded in collecting of the R34m that they claimed from the indebted companies and Rees as surety.

From Noseweek’s exposé in June 2009…

Barry Tannenbaum

A  decade ago scores of South Africa’s rich and famous were caught up in Barry Tannenbaum’s illegal ponzi scheme, a fraudulent scheme on a scale to rival that of Brett Kebble.

Noseweek had the names of many, starting with former Pick n Pay CEO Sean Summers, who invested over R50m, and who claims he is now owed over R100m. Just so he shouldn’t feel too bad about it, former CEO of OK Bazaars Mervyn Serebro invested R25m and believed he was by then owed over R50m.

The 400 investors were believed to have lost R2 billion or more between them. All of it has disappeared, most of it via a Hong Kong bank account, to... well, only Barry Tannenbaum and two or three of his local recruiting agents know where.

Many were so seduced by greed, that they emptied their offshore dollar and euro accounts into Tannenbaum’s account. By the time Noseweek’s exposé appeared in June 2009 they were frantically selling the fancy cars they’d bought in a fit of euphoria only months earlier.

“If you’re looking for a good deal,” we told readers, “go to Investment Cars in Bryanston, who have on offer a new stock of good-as-new Porsches, Lamborghinis, Rollses and Bentleys, only slightly used by Tannenbaum’s victims. Poor Mr Serebro has even put his house up for sale.”

Shortly thereafter about 200 of the investors attended a meeting at the offices of attorneys Routledge Modise in Sandton. The meeting was chaired by a partner in the firm, Warren Drue, who introduced himself as a fellow investor. There to represent a whole clutch of Cape investors who had put in over R100m between them were attorneys Craig Delport (see past noses about him) and Richard Goudvis. Surprisingly, also there to address them was Dean Rees.

It has been estimated by some of those in the know that Rees made “hundreds of millions” out of commissions he earned by recruiting investors for the scheme. That February, when Tannenbaum had already defaulted on interest payments two months in a row and some investors had started asking nasty questions, Rees hired a private Boeing and flew to Switzerland with his wife and two small children. Talk had it that he had bought a house in Lausanne for several million euros, and another in Barcelona.

Back in Johannesburg, he was booked into a suite at the Michaelangelo (R10,000 a night) to attend the meeting of panicked investors at Routledge Modise’s office – apparently hoping to persuade them he was as much a victim as they were, and was “on their side” in attempting to recover their money.

Despite his best efforts – and attorney Drue’s attempts to protect him from unsympathetic questioners – the majority of investors present clearly weren’t going to take Rees’s word for it. His Prada shoes, Ed Hardy Jeans ($1,000 a pair) and spectacular gold watch did not help the situation at all. (Friends said he has a collection of “investment” watches equal to that of the late great Brett Kebble.) Immediately after the meeting Rees booked out of the Michaelangelo and was on a flight back to Switzerland.

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