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Tannenbaum investors received R3.1bn, says Sars

Amounts invested ranged from R1 000 to just under R1bn.

Barry Tannenbaum’s 2011 South African Revenue Service (Sars) tax assessment names 399 investors, how much they put in and how much they got out.

Tannenbaum, kingpin of South Africa’s R12.5 billion pharmaceutical Ponzi scheme, which operated between 2004 and 2009, now lives in Runaway Bay on Australia’s Gold Coast.

Sars says that amounts invested by investors ranged from R1 000 to just short of R1 billion. Investors contacted by Moneyweb denied the amounts quoted by Sars, saying they were inaccurate.

Several investors said that the high numbers calculated by Sars were due to Tannenbaum, “rolling the same R10 million over and over and over.”

Moneyweb relied on a Sars tax assessment of Tannenbaum. Sars assessed Tannenbaum’s income for the period 2004 to 2009 at just under R445 million. With arrear income tax, interest and penalties the amount demanded is R748 million.

The tax assessment made its way into the public domain as part of some 30 000 pages of documentary evidence that the trustees were legally obliged to hand over to anyone against whom they are litigating.

If the figures are as inaccurate as investors claim, it is a serious indictment on the quality of Sars’ investigation.

Sars is prohibited by section 4 of the Income Tax Act from commenting on the affairs of any taxpayer and therefore this story.

Largest investor

Sars has identified the largest investor in Tannenbaum’s Ponzi scheme, at nearly R1bn, as Arnold Sharp. He is named together with his companies, First Technology and Berniebee Investments. Sharp and his companies allegedly received R885m from Tannenbaum.

Not so, Sharp said in response: “It is now an established fact that neither I personally nor First Technology were ever investors with Barry Tannenbaum. Your proposed article is factually incorrect.”

Sandton-based investment company, Jawmend Rossi Capital (Pty) Ltd (JMR) is shown to have made two separate investments totalling just under R585 million. Sars says that JMR received R1.57bn but the trustees are suing JMR for only R139m – the profit they allege JMR had made.

Former South African and now New York attorney, Meir Levin, allegedly invested almost R256 million and received just over R32 million. Rob Rose, writing in Troublemaker, an anthology of South African investigative journalism, said that Levin claims to have lost $825 million in the scheme. This equates to just over R8.4bn – based on R9.80 to the USD.

In August 2004 he invested $425 000 and kept on reinvesting his returns which, he alleges, grew by 1 941% in 1 826 days.

South Point Management Services and former OK Bazaars supremo, Mervyn Serebro, allegedly invested almost R44.5m and received R44.4m. Sars said South Point and Serebro’s loss equalled just under R60 000.

In August 2010 the insolvency trustees sued Serebro for just over R4.7 million. They said he had invested approximately R11m and had received R16m: Serebro settled the lawsuit by agreeing to pay to the trustees R2.5 million, which equalled 53% of his profit. In Tannenbaum’s tax assessment, Sars alleged that Serebro was one of the five ‘so-called agents” of the scheme: The other four named are JB Rosenberg, Ben Jowitt, Andrew Armstrong and Craig Delport.”

Serebro’s attorney disputes Sars’ allegations and told Moneyweb: “The assertion that Mr Serebro was an agent of Tannenbaum is deplorable and unpalatable. This is the furthest thing from the truth.”

Serebro’s alleged own list of people that he had introduced to the scheme is below. He gave it to investors after the scheme crashed.

Moneyweb’s analysis of Sars’ spreadsheet shows that an alleged 4,838% was made by a certain S Haarhof who invested R117 350 and received just under R5.7 million.

Next were Dean Rees and Darryl Leigh, described by Sars as, “key roleplayers” in the scheme. Rees and his company, Suscito Investments, allegedly invested R1.5m and received almost R69m during 2008 and 2009. His profit over the two-year period was R67m.

Dean Rees, has been described by Noseweek magazine as being the largest beneficiary of the scheme. Last month, the trustees served summons on Rees for R570 million. Brian Biebuyck, attorney for Dean Rees told Moneyweb: “There are so many inaccuracies in your proposed article that to comment would entail re-writing the article, which our client declines to do.”

A certain M Harris invested R225 000 in the scheme in 2004, and other amounts along the way totalling R690 362 and allegedly achieved a return of 4 058% over the six-year period. The pay-outs amounted to almost R69m.

M D Moritz/Red Auto is named as having made a 2 759% return between 2007 and 2009 from an investment of R500 000. Sars alleges that the firm received R13.8m from the scheme. Red Auto told Moneyweb that it invested a large amount through the company. It got nothing back and had to pay R500 000 to Tannenbaum’s trustees. The linking of M D Moritz was allegedly an error by Sars.

Of the 399 investors on the Sars list the following returns were allegedly made for the entire period of the investment:

  • 3 made 4 000 to 5 000%
  • 1 made 2 000 to 2 999%
  • 4 made 1 000 to 1 999%
  • 12 made 500 to 999%
  • 21 made 100 to 499%
  • 23 made 0 to 99%
  • 103 received 0.18% and 99.87% of their capital back

According to Sars:

  • 155 investors paid in R318m and got nothing back – and average investment of R2,05m;
  • 76 investors received R90m, without having invested a cent – an average of R1,2m.

Click here for the Sars list of investors from which it compiled Tannenbaum’s tax assessment.

See the table below for inflow and outflow amounts from 26 accounts at nine institutions:

Banking Institution Total Inflows Total Outflows
ABSA -2,468,185 2 493,102
Diners Club -1 092,707 246,830
Discovery -1 198,163 1 100,170
FNB -3 807,652 355,415
Investec -2 393,789,061 2 393,271,219
Mercantile Bank -7 381 11,189
Nedbank -679,486 1 795,808
RMB -1 433,851,466 1 417,849,479
Standard Bank -93,855,217 94,303,186
Total -3 930,749,318 3 911,426,398
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