By Ella Smook and Alex Eliseev
The former CEOs of Pick n Pay and OK Bazaars are just two of hundreds of investors allegedly cheated out of about R10-billion in a massive pyramid scheme.
Sean Summers, the former chief executive of Pick n Pay, would not divulge how much he lost, saying he did not want to add to speculation.
"You learn your lessons and move on. I don't think it serves any purpose. Hundreds of investors are involved and it is going to be a long, drawn-out thing."
Mervyn Serebro, former boss of OK Bazaars, said he was astonished by the news and devastated by what he called a "betrayal".
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Themba Hlengani, of the Financial Intelligence Centre, an independent body reporting to the minister of finance, said the body was aware of the case and was working with the authorities to investigate. He did not divulge further.
But editor of Personal Finance, Bruce Cameron, reported on Thursday that the scheme could "outstrip Fidentia and other scams by billions of rands".
And it is not just the rich who have been ripped off, but vulnerable elderly people could now be facing destitution as a result of their investments.
It is alleged that Barry Tannenbaum, son of Harold Tannenbaum who founded pharmaceutical company Adcock Ingram, together with Johannesburg attorneys Dean Rees and Daryl Leigh, have been running a pyramid scheme promising massive returns on investments.
Investors were told they would score between 15 and 20 percent in three months, and their money would be used to finance the import of chemicals which, among other things, were required for antiretroviral medicines for the treatment of HIV and Aids.
Forged documents were allegedly used to convince investors their money was secure. They were told that banks were not being approached to finance the deals because they moved too slowly in lending short-term cash.
Cameron reported that the fraud was a Ponzi scheme, similar to that structured by jailed New York fraudster Bernie Madoff, with the money of new investors being used to pay off initial investors.
Some local investors have placed as much as R100-million in the scheme with about R1bn coming from local sources.
Rees and Tannenbaum have denied wrongdoing, and are allegedly blaming each other for the scheme, saying they were duped by the other.
Speaking to the Daily News on Wednesday night, Summers said it "would appear the scheme has been fraudulent". He added: "The advantage I have is that I have done everything diligently and above board."
Summers said he was not in a position to comment on the status quo of the investigation, or on Tannenbaum himself, but said that authorities, including the Reserve Bank, were obviously dealing with it. "A lot of action" had been taken.
Despite being determined to move on, Summers said: "Obviously one feels very sad. Yet again somebody has clearly set about setting up a business that has not been what it is purported to be.
Serebro said he was deeply saddened by the betrayal. "This man (Tannenbaum) had, over five years, become a dear friend."
Serebro described reports that he had invested R25m and was now selling his Glenhazel home in Johannesburg as "absolute rubbish".
He conceded, however, that Tannenbaum was such a warm and likable character that he may well have invested that much if he had access to it. He would not reveal his exact investment.
"I'm a big boy. I made a mistake," he said. "I'm just hurting about the relationship. We had become close."
Serebro said he was led to believe he was investing in a company importing pharmaceuticals, including ARVs. He said he did his "homework" and was impressed by the calibre of his co-investors.
"It sounded great. I looked at the people involved... I thought I was a good judge of character," he said. "If truth be told, I thought I was one of a tiny group of people allowed to participate. But when I arrived at the meeting last week, there were about 300 people there. That's a heck of a lot of people who were taken up by the man's warmth."
- This article was originally published on page 1 of Daily News on June 11, 2009
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The real obscenity is that those with unbelievably large sums to "invest" in the scheme actually desire more money than they have already accumulated.
Greed is not the word for this. All of us are greedy, one way or another. It is virtually synonymous with being human.
No, my friends, this is not common or garden greed. This is a profound disease of the soul. An addiction, if you will. If these guys (perps and wealthy victims) were sex addicts getting laid non-stop and still wanting more sex, they would be in rehab, halfway houses, and support groups.
But, for some reason, it is ok and acceptable to be thus obsessed with money. They are labelled "investors" and "entrepreneurs" and serve as role models for the upwardly mobile. In reality, in the depths of their being, they are nothing more than sicko junkies in desperate need of an intervention.
Tannenbaum has done them a favour.
I cannot believe how so many rich,intelligent people got duped. Does it have anything to do with the fact that the Directors of the Fraudulent Company were WHITE?That most people in SA don`t believe that WHITE people can be a bunch of crooks.
Also why aren`t these being described as greedy, corrupt crooks who should be tried quickly and be put in jail.
Cheers
Prepared to go 60/40.
When will people learn? As much as I blame the crooks, surely those who invested in this expecting returns should be culpable for their stupidity