There suddenly seems to be a flurry of very high-risk “investments” being sold. And most have some or all the attributes of failure written all over them: hard-sell pressure tactics, the failure to disclose properly, promises of wealth, and unlisted companies as the investment vehicle.
Most have been spotted by Personal Finance readers and reported to us. Interestingly, the readers’ suspicions about the risk of the products were confirmed when they checked the names by googling them – one quick way to spot problem investments.
Gerry Anderson, the Financial Services Board (FSB) deputy executive in charge of market conduct and consumer education, says prospective investors should not fall for any sales talk, especially promises of a listing on a stock exchange in the near future. Investors, as far as possible, should also make sure that they are dealing with reputable individuals and entities.
“As far as the ‘listing carrot’ is concerned, it helps if investors contact the JSE or other appropriate exchanges prior to their purchasing shares,” Anderson says.
Here are two examples:
LRDC
The company LRDC allegedly manages oil blocks in Liberia. The claims of the promoters are that you can buy shares at US$1.50 a share, with the share due to list in about six months. They claim the price will go to about $3.40 pre-listing and after listing will “shoot up to about $7 to $10”.
The shares are being sold out of an office in Lonehill North, Johannesburg. When our reader, who prefers to remain anonymous, went to the office, those in attendance included Allan Curtin and André (also known as “AJ”) Muller.
He was told about the President of Liberia, Ellen Johnson Sirleaf, and how she was doing wonderful things.
The promoters claimed that Sirleaf’s son had been in South Africa recently to confirm that LRDC would be given a mandate to exploit the oil blocks, putting the company on track to list.
He was shown diagrams of the blocks and geological surveys done to prove the oil was there and was told that blocks were being snatched up by companies such as Chevron and Petrobras.
They claimed that Deutsche Bank was handling the listing and produced the business card of Robin Bartels, a director of Deutsche Bank in Germany.
The reason Muller was at the meeting was because he had some of his shares to sell, as he was “experiencing cash-flow problems”.
Muller had two certificates reflecting a significant number of shares. He also showed our reader apparent evidence of some calls from Sirleaf’s son he claimed he had taken during the meeting.
Now to reveal the problems.
* Deutsche Bank does have a director in Germany by the name of Robin Bartels. The only problem is that neither Deutsche Bank nor Bartels have heard of LRDC and deny they are involved in any such listing.
* Muller was involved in selling the dud shares of the Global Afrika Resource & Energy Corporation (Garek), a scam that has cost investors millions. Investors were told their R5 a share would transform into R20 a share on the listing of the company. A Department of Trade and Industry investigation has revealed that the Garek shares are worthless, and the Ombud for Financial Services Providers has ordered advisers to repay a number of investors in the scheme. One adviser is being investigated by the serious economic offences unit and the special commercial crimes unit of the South African Police Service.
* Garek was associated with another unlisted company, Resourcefin Strategies International (RSI). RSI shared directors with Garek, including Kevin Watson (Garek’s chief executive), Samuel Jackson and Anthony Illingworth. Illingworth’s signature appears on the LRDC share certificates as secretary of the company.
* In a brief interview, Muller, also a director of RSI, denied he was selling shares on behalf of LRDC; he was merely a shareholder selling his own shares. The same modus operandi used to sell Garek shares is being used in the sale of LRDC shares. The Garek shares were sold by third parties, such as Muller, who claimed to own the shares.
* Muller was deregistered by the FSB as a financial services provider (FSP) in 2009 after the adverse findings of an FSB inspection. Muller was also a representative of Capital Investments (a property syndication promoter in the Western Cape, whose licence has also been withdrawn by the FSB). He is not legally allowed to sell any shares to the public as he is no longer an FSP.
* Garek-related unlisted companies included another one linked to Liberia: the International Finance Corporation of Liberia Ltd.
Pan African Refineries
The owner of the company, Juan Meyer, offered me between four and six percent a month to lend him money to “increase my buying power of raw material, thus increasing my sales turnover”. He has also been making similar offers in newspaper advertisements.
The larger the amount I invested, with a minimum of R1 million, the higher the rate of interest, he said in an email message.
Interest can be paid out monthly, quarterly or annually, depending on which you would prefer.
“How much do you want to invest and when?” he asked in his final sentence.
Nothing at all, actually, Mr Meyer.
I asked an expert in the industry whether this kind of offer was realistic. The reply I got was: “The return on investment may be possible if he is importing gold from Africa and turning the money over five to 10 times a month. The problem would be to obtain an import permit to bring the gold legally into SA. I would be surprised if he has import authorisation issued by the Precious Metals Regulator. If he is buying the gold locally, I can’t see such margins.”
When I told Meyer who I was his interest in me dried up and he has not answered any of my emails since then.
Meyer hit the news last year when he was arrested by airport customs officials. The arrest came after Meyer’s earlier detention by the police in May last year when, by his account to The Star newspaper, he was transporting nearly 30kg of just-melted gold, which he said he was entitled to do as a licensed gold dealer.
Meyer, a former associate of Czech businessman Radovan Krejcir, was detained at OR Tambo International on returning to the country from business in Zimbabwe and warned to present himself at the Garsfontein police station in connection with charges of theft dating back to more than four years ago.
Meyer’s arrest followed his providing an affidavit as part of dossier on corruption gathered by security expert Paul O’Sullivan. O’Sullivan, the former head of security at OR Tambo International, compiled an 86-page dossier centred on the affairs of Krejcir. The dossier also contains allegations relating to the murder of strip-club king Lolly Jackson, several other unsolved murders and multi-million-rand money laundering schemes. Meyer has claimed that Krejcir wanted to take over his gold refinery and had threatened him, and accused police of harassing him.
Krejcir has appeared in court on charges of fraud and corruption and is being questioned by police about the death of local crime boss Cyril Beeka.
SHARE-TRACKING SOFTWARE SOUNDS TOO GOOD TO BE TRUE
Watch out for two companies, Blue Everest Technology and Absolute Technologies, which sell share trading software called ShareTrackin on behalf of a company called Investor’s Choice.
Personal Finance is receiving more and more complaints about the high-pressure selling tactics behind what is quite sophisticated computer technology. Complaints about the selling tactics can also be found on the website hellopeter.com.
The two companies operate a cold calling telephone sales operation that seeks to set up sales meetings. Buyers are lured with promises that they will receive enormous “guaranteed” returns from their purchases.
The Consumer Protection Act, which is now in force, prohibits companies from promising you high, guaranteed returns.
The sales people refuse to give many details over the phone or even a telephone number on which to respond. And, according to complainants, once they have your telephone number they do not let go, calling sometimes twice a week.
The two companies are not listed in the telephone directory. However, a packaging company, also called Absolute Technologies, based in Pinelands, Cape Town, receives many calls from disgruntled customers of the share trading software.
The correct telephone number of the two sales companies is 021 802 5391. The business address is Unit 15, 1st Floor, Block D, Balfour Office Park, corner Edmar and Roger roads, Bellville. The managing director is Corné du Plooy.
Among other things, buyers are told that there is a seven-day cooling-off period on signing. But the main complaint is that they receive no refund when they return the package. And the cooling-off period allegedly comes with a condition that the package should not be opened.
Neither Du Plooy nor any representative of Investor’s Choice returned the calls of Personal Finance. I was, however, called by Marika Droskie, purporting to be the legal adviser for Investor’s Choice and another associated company, C&K Moneyline, who started off by trying to dictate the terms of telephone conversation, such as saying the conversation was off the record. She said she was calling as a consequence of my call to Du Plooy. She kept trying to talk me down when I tried to tell her how Personal Finance operates and how we would not have the terms of the discussion dictated by her.
At Droskie’s request I sent her questions about the cost of the system and the connections between Investor’s Choice and the two sales companies. Her response was a childish, vituperative, personal attack on me, answering none of the questions.
Remember, if there was a fail-safe computer share trading system, it is unlikely that anyone would sell it.