FELICITY DUNCAN: Barry Tannebaum allegedly persuaded a number of wealthy people to invest in his pharmaceutical supply business, but it turned out he was using forged documents to make it appear that the business was bigger than it really was. He was using money from new investors to pay existing ones. Last week Friday an investor in his scheme applied in the High Court to have him declared insolvent. Now, as the story of the Ponzi scheme evolves, it's becoming clear that many hundreds of people were caught. Paul Winer is the head of liquidation, insolvency and corporate recovery at Werksmans Attorneys, and his firm is representing a number of Tannenbaum's victims.
FELICITY DUNCAN: Now, Paul, when you say you are representing the victims, are you putting any actual legal action...

PAUL WINER: No. At the moment it seems as if we are getting more and more calls from people who are victims, trying to ascertain what is going on.

JULIUS COBBETT: Do you know how many people have been involved?

PAUL WINER: It's very difficult to tell because there was a meeting at a firm of attorneys last week where I believe approximately 200 investors came to that meeting. But with these types of scams a lot of well-to-do people and people in the limelight and well known in the business community don't attend.

JULIUS COBBETT: And what do the investors hope to gain from the sequestration of Tannenbaum's estate?

PAUL WINER: I should imagine none of the people that we represent were actually involved in the sequestration, but they would hope that there are certain recoveries, that the trustee will look at foreign jurisdictions and try and recover assets if there are any assets.

FELICITY DUNCAN: Are there any assets to your knowledge that are actually held here in South Africa?

PAUL WINER: A lot of rumours. I do know that, for example, Tannebaum has a substantial loan account in a  company known as Euro Chemicals (Pty) Ltd, which trades as Frankel Chemicals, and that seems to be the company that was doing the business here.

FELICITY DUNCAN: Thanks very much. We have just heard from a lawyer involved in the Tannenbaum case, and in a  moment we will hear from a forensic accountant, Andre Prakke of AE Prakke & Co. But first of all, Wayne, what do you think of this whole Ponzi scheme drama?

WAYNE McCURRIE: It's not the first one and it won't be the last one. People seem to think that a get-rich-quick scheme works. People just believe in it. But whenever you evaluate any investment that you approach, think logically. If banks are paying you 10% interest, why would anyone pay you 100% or 200% interest if everything was legitimate? If you had a contract to supply something to a JSE-listed company, and it's a contract, you just go to the bank and raise money at 10% - why must you pay 100%? People must just think. But unfortunately, no matter how much legislation, no matter how much exposure, people are just greedy and they love get-rich-quick schemes.

FELICITY DUNCAN: Ja, and it seems it doesn't matter if you are a widow or a CEO...

WAYNE McCURRIE: It doesn't matter who it is. It's such a good marketing thing. You hear about it from a  friend who made money. Marketing people would love to have that for their product, where it's endorsed by personal friends to someone else. It sells like wildfire - that's a Ponzi scheme. You hear about it at a dinner party or at work from someone you know and respect, a friend of yours. They say it's a quick win - you are going to make money.

FELICITY DUNCAN: Andre, thanks for joining us this evening. Now, as far as I can tell, the scheme has been going on for a couple of years. How is it possible that no-one suspected anything sooner?

ANDRE PRAKKE: Well, by misrepresenting to the investors, which is apparently what's been taking place, and by falsifying documents.

FELICITY DUNCAN: So they were just convincing enough to keep people ignorant?

ANDRE PRAKKE: Yes, and you can do it very effectively today.

FELICITY DUNCAN: From a  legal point of view, they've applied and had Tannenbaum's personal estate put into sequestration. He's been liquidated. What is the next step from there, once there's a liquidation? What actually happens?

ANDRE PRAKKE: Well, I would imagine the first thing, and Paul can assist here, is what the liquidator or curator would do is to attach the documents and have access to documents which will actually allow him to at least start understanding what happened - where the money came from and where it went to.

FELICITY DUNCAN: For investors is there a danger that they could face some sort of punishment just for being involved in the scheme?

ANDRE PRAKKE: Yes, there's various, depending on what their motives were. If they knew what was going on I suppose there could be some kind of sanction, for instance. For the innocent ones, if they got money that was belonging to someone else in terms of Section 26 of the Insolvency Act and ... they will probably have to repay it. And then, given the nature of this representation that was made to the public of the trading company and there was no trading, SARS is also sitting and waiting to have its share of the cake, which is going to be substantial in this one.

FELICITY DUNCAN: André Prakke is a forensic accountant.

• Subscribe to a daily email of transcripts from Moneyweb Radio - click here

ABOUT THE INTERVIEWER