Seven reasons Orthotouch’s dismal failure must be investigated

It’s critical that the roles and conduct of the decision-makers be probed.
Analysis of bank statements would surely reveal where the R3.4bn paid by investors for 42 properties ended up. Image: Shutterstock

This article should be read in conjunction with a previous article, ‘Where is Hans Klopper?’, which was published on March 4.

Orthotouch and Zephan were put into business rescue late last year, effectively bringing an end to the ‘rescue process’ of the failed Highveld Syndication (HS) schemes. Although a business rescue plan has not been published, it is clear that the 18 700 mostly elderly people who invested R4.6 billion in the schemes may expect to receive only a few cents in the rand.

The business rescue process of the HS companies was led by Hans Klopper, the current head of restructuring at the international auditing and consulting firm BDO.

He was assisted by various individuals, including corporate lawyer Connie Myburgh. Myburgh is also the chairman of the Nova Property Group, the rescue vehicle of the failed Sharemax investment scheme.

Over the past 18 months, Moneyweb conducted a follow-the-money investigation into transactions related to the 79 properties which were originally syndicated as part of the Highveld Syndication (HS).

Read:

The peculiar case of the Picvest billions (Part 1) (Background)
The peculiar case of the Picvest billions (Part 2) (Background)
The peculiar case of the Picvest billions (Part 3) (Overvaluation of properties)
The peculiar case of the Picvest billions (Part 4) (Property transactions prior to HS companies being put into business rescue)
The peculiar case of the Picvest billions (Part 5) (Disposal of properties contradicts the intent of the business rescue plan)
The peculiar case of the Picvest billions (Part 6) (Sale of 31 ‘Orthotouch Properties’ to Accelerate)

This analysis revealed the selloff of virtually all these properties without much, if any, of the proceeds flowing to investors. It is critical that the roles and conduct of the decision-makers, in particular Nic Georgiou, the kingpin of the schemes, Klopper and Myburgh are investigated.

Moneyweb has identified seven aspects that we believe demand investigation.

A forensic investigation should focus on seven developments

1. The non-transfer of properties to the HS companies 

The most blatant development to be investigated is the non-transfer of 42 properties which Georgiou, or entities related to him, sold to HS investors.

Investors paid the R3.4 billion for the unencumbered properties, but they were simply never transferred to the HS companies in which the investors were shareholders. This R3.4 billion remains unaccounted for.

Klopper failed or neglected to investigate this after his appointment as business rescue practitioner (BRP). He stated in his business rescue plan that such an investigation would have been too costly. (The business rescue plan was virtually a carbon copy of the previous offer Georgiou made to investors, which was rejected by investors. It was therefore implemented via the business rescue process.)

In reality, if one takes account of the nature of the assets and the revenue streams their transfers created, it should not have been too difficult to investigate.

Investors’ R3.4 billion was paid into the trust account of attorney Eugene Kruger, who released the monies, apparently before transfer took place. An analysis of bank statements would surely reveal where the money ended up.

Kruger’s release of the R3.4 billion before transfer is not consistent with the usual practice when it comes to transfers and should be investigated.

Klopper’s failure to investigate the matter means Georgiou, and entities related to him, have never been held accountable for the non-transfer of the properties to Orthotouch.

2. The sale of the 42 properties to third parties

In addition to the non-transfer of properties referred to in point one above, Georgiou sold the 42 non-transferred properties to third parties. This means Georgiou sold the properties twice: first to investors through the successful syndication of the properties, and second to third parties, including his son’s listed company, Accelerate.

These transactions also resulted in significant accounting losses at Orthotouch, and have never been explained to investors. It is also not clear how the proceeds were used.

Klopper and Myburgh, as directors of Orthotouch, authorised these sales transactions.

3. The sale of 31 properties to Accelerate

Klopper and Myburgh also approved the sale of 31 properties in December 2013 to Accelerate, the listed entity of Georgiou’s son Michael, for R1.3 billion.

The sale resulted in only R30 million flowing to Orthotouch. According to Moneyweb’s calculations, Orthotouch suffered a loss of R782 million in the process.

Sixteen of the 31 properties formed part of the 42 properties that were never transferred to Orthotouch.

4. Conflict of interest? 

Shortly after Klopper was appointed HS business rescue practitioner, he was appointed to the Orthotouch board, ostensibly to support and protect the interests of investors. He therefore had a double fiduciary duty which was to represent and protect the interests of investors while performing his duties as a director mainly to ensure full implementation of the business rescue plan and subsequently the Scheme of Arrangement under Section 155

He failed in both these responsibilities.

This may well have resulted in a conflict of interest, potentially creating an untenable scenario where Klopper could not fulfil his fiduciary duties as BRP and director of Orthotouch. For example, if Klopper took legal action against Orthotouch in his capacity as BRP for the non-implementation of the business rescue plan or the Section 155 SOA, he would in effect have taken legal action against himself as a director of Orthotouch.

The extent of the conflict, if any, will become evident if Klopper’s remuneration during this process is analysed.

Klopper has never disclosed how much he was paid as a director of Orthotouch or as BRP.

In another example of what may point to Klopper’s compromised position, Klopper and Myburgh did not take action against Zephan, as the underwriter of the scheme, when Zephan unilaterally and in contravention of the Section 155 SOA terminated all interest payments to investors who supported the legal processes against Georgiou and related parties.

5. Sale of properties to the Delta Property Group

In the Section 155 SOA, Georgiou “pledged” to transfer 14 properties which did not form part of the original 79 syndicated properties to Orthotouch. It was mooted as proof of Georgiou’s commitment to the scheme.

Not only did this not happen, but Georgiou sold the properties a year later to the Delta Property Group.

These sale transactions resulted, according to the Moneyweb investigation, in an R272.9  million loss for Orthotouch. Klopper and Myburgh, as directors of Orthotouch, approved the transactions.*

6. Why are the HS companies not in liquidation?

Despite the developments listed above, which were to the apparent detriment of investors, Klopper has not put the HS companies into liquidation. Even after Orthotouch and Zephan were put into business rescue in December last year, the HS companies remain under business rescue.

From Moneyweb’s investigation, it is clear that virtually all the properties in the HS companies were sold to third parties in questionable circumstances, and that a Section 417 investigation into the conduct of Klopper, Myburgh and Georgiou seems warranted.

A Section 417 inquiry is aimed at investigating events leading up to the liquidation of a company to ascertain whether any assets were stripped or looted.

7. Klopper approached Jacques du Toit to become BRP of Zephan and Orthotouch

Jacques Du Toit confirmed during the Orthotouch and Zephan creditors’ meeting that Klopper was one of the parties who approached him to become the business rescue practitioner of the companies. Georgiou’s lawyer, Mario Kyriacou, also acted as Du Toit’s advisor during the meeting. Du Toit’s impartiality and independence may therefore be open to question. The last thing investors need is a soft approach on developments listed above and the roles played therein by Georgiou, Klopper and Myburgh.

It is also critical that the new business rescue practitioner draft his own business plan, and not follow Klopper’s example to publish a business rescue plan that was based on a previous plan Georgiou put to investors, but which was rejected.

The interests of the HS investors would, in Moneyweb’s view, be better served and justice may finally prevail albeit late if Orthotouch is liquidated and a Section 417 Inquiry is held.

One thing investors should bear in mind is that the trail of properties and such vast sums of money can always be traced.

*  After the publication of the article, the amount of the accounting loss related to the Delta transactions was amended to R272.9 million. Moneyweb regrets the error.

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

AUTHOR PROFILE

COMMENTS   28

You must be signed in to comment.

SIGN IN SIGN UP

It seems that Ryk van Niekerk is conducting a vendetta against Klopper without revealing the true facts and rely on good dollop of emotional language to hype up his case against Klopper.

Let’s start at the beginning.

18700 Investors invested in various HS schemes which were ‘too good to be true’ and got their fingers burnt. If one had to investigate the so-called investors in other schemes like Sharemax, Hannes Pretorius, et al you will find a number of idiots (as defined by Einstein) amongst them. Greed driven without fully understanding what the investment entails.

Secondly, it is very easy with the benefit of hind site to be a smart ass and tell every one what should have been done.

In his article yesterday ‘Where is Hans Klopper?’ he failed to mention that the absence of the elephant in the room can simply be explained that Hans Klopper was not an affected party and had no legal locus standi to be allowed in the meeting or any legal obligation.

I am not going to educate Ryk on the Business Rescue process, as he is clearly out of his depth and don’t fully understand the Practitioner’s role. Suffice to say that there is pre-commencement issues that, due to time constraints imposed by the Act and sheer cost involved cannot be investigated.

When people have lost money mainly because of their own greed by investing in high return schemes it is seldom that they will take responsibility. There must be someone to blame.

It is very convenient to blame the practitioner who came on the scene of the accident after it happened. But also grossly unfair especially if the BR process is not fully understood.

There is much in the article which can be questioned and readers are well advised to read it with great circumspection. Remember Ryk’s version is only one side of the story. He is a journalist not a legal or financial expert with regard to the business rescue, which is complex in itself with many unresolved legal interpretations.

The true facts will come out as things unfold and it will be wise to not get ahead of things.

Ja, smartass. At lease Ryk is doing something.

Logic 1 hour ago
Whether Hans fulfilled his duties or not only the court will decide on. God forbid if there is no investigation into this matter after Ryk has spend time and effort to get to the core of this Pickvest misery.Therefore then there is no hope for our country where pensioners have been stripped from their hard worked savings!!! An example should be set for forthcoming looters

Investor47, you are CLEARLY a HANS KLOPPER supporter (maybe even the man himself?)
You can try the ‘smoke and mirror” approach … BY BLAMING IT ON THE IDIOT INVESTORS?!
I quote you: “….If one had to investigate the so-called investors in other schemes like Sharemax, Hannes Pretorius, et al you will find a number of idiots (as defined by Einstein) amongst them. Greed driven without fully understanding what the investment entails.”

SO, MY QUESTION TO YOU THEN IS: Even if the Investors are idiots (not “fully understanding what the investment entails.”) DOES THAT GIVE PEOPLE WHO KNOW LAW INSIDE OUT THE RIGHT TO TAKE ADVANTAGE OF THEIR SHORTCOMINGS? (ie: not that knowledgeable)

IF THE TRUTH BE TOLD, I think a lot of stuff will come out …but it should have been out a long time ago! I don’t think we are getting ahead of things here, we are still far behind!

QUESTION NO:2, Why are people that THAT KNOW anything (Mr Klopper, Connie Myburgh, Nic Georgiou’s Son’s (Michael and George) not coming forward?? Everything is done cloak and dagger style.

NOT EVEN THE 3RD PARTY WHO IS SELLING THE ACCELERATE SHARE OPTION AS SETTLEMENT TO INVESTORS (At a pittance, I might add) IS REVEALING HIS/HER IDENTITY.

So, tell me Investor47, it seems like you might know the answer to the BIGGEST QUESTION that IS always evaded… WHAT HAS HAPPENED TO THE MISSING BILLIONS????

Obviously some people like to read what they want to see. I clearly said “you will find a number of idiots (as defined by Einstein) amongst them. Greed driven without fully understanding what the investment entails.” This refers to a few investors who appear to be gullible to “too good to be true” schemes.

I apologise if my reference to ‘idiots’ offended, as it was not intended to refer to the wider body of investors, but rather those few who repeatedly invest in these types of schemes.

My point is that investors should also take responsibility for their own actions and not blame a business rescue practitioner, who came in when things went horribly pear-shaped. But I also understand the emotions of somebody who has lost their money and have empathy with them.

Who is to blame for the property market that has not shown a real return since 2012? The estate agent or the conveyancing attorney? I think not.

Not even banks are totally risk-free as we all know.

Having some experience in business rescue I understand the process and just cautioned readers that everything Ryk writes is not necessarily factually correct or properly tested, and should be read with some circumspection. There are some glaring issues which show a lack of understanding of the business rescue process and readers are taking it at face value.

For those who think I am Hans Klopper. Sorry to disappoint you.

Great Opinion, thanks for that MR HANS KLOPPER!

Kloppers how stupid do you think we are, this is clearly you. This is not the first time assets have disappeared under your watch. Its time you are brought to book

Anybody recognise the bullying, foul language and legalise way of writing in this comment? Its very obvious who wrote this, LOL!

SMH!

So let’s take this scenario. An unsophisticated guy in rural Limpopo gets taken in by a pyramid scheme operator and loses his meager savings. The mastermind is brought to trial. His defense? “But, your honour, the Limpopo victim is an idiot! He deserved to be ripped off by me! He’s not fit to have any money!”

How will that one work out for the operator in court? Not good, I would think. Likewise, your pathetic attempted defense of Klopper probably indicates that you’re either the man himself, or one of his cronies.

I have been in tears reading this article.
Ryk thank you, thank you!
You have single handedly carried out such a thorough investigation (particularly over the last 18 months!)
You have highlighted and succinctly pointed out all the key factors of this saga.
IT IS HAS HAD SUCH CATASTROPHIC ON (ALMOST ALL) 18 000 INVESTORS WHO ARE AFFECTED.
Why have I been in tears?
They are tears of frustration because for almost a decade, NOT ONE of the ‘watchdogs’ (SARS Crime unit, CIPC, IRBA, HAWKS, DA, AFRIFORM, FIC, etc etc) who have been constantly informed of this saga, have done NOTHING to date.
Makes me wonder… who is controlling whom?

They are also tears of relief, that all of this is “out there”
By constantly bringing all this info out into the public arena Ryk, the people in BIG BUSINESS should by now, also start to question the Integrity of the names that keep cropping up (Bad publicity is NOT always good publicity!)

If the so-called ‘watch dogs’ don’t want to do their due diligence then maybe the ‘business public’ can also start to ask the correct questions?

MR JACQUES DU TOIT, (newly appointed Business Rescue Practitioner) I appeal to you (AGAIN), to DO YOUR JOB AND REPORT ALL OF THIS!

YOU ARE COMING IN AT THE END OF A LONG LINE OF QUESTIONABLE DEEDS, DO YOU HONESTLY WANT TO BE ASSOCIATED WITH THEM?? THINK LONG TERM ABOUT YOUR CAREER, NOT YOUR IMMEDIATE SALARY.

Ryk more than this info to ask for an investigation cannot be done. Authorities have to come to the party NOW and start investigating the detail that YOU are giving them on a plate. Everything that you mentioned was put to Hans in 2011 but conveniently the cost aspect was given as a smokescreen. The SO CALLED DISPUTE was the core of the beginning of the end. Mr Rikus Myburgh former CEO of Pickvest and Bosman Visser should be approached to present ALL revelant contracts between him and Georgio seeing that the problem originated from the dispute BETWEEN RIKUS MYBURGH AND ZEPHAN/GEORGIO but golden handshakes were dished out and Christmas came early for some people. Derick Reichel who acted as the Financial Director of Pickvest is currently employed by the Georgio’s should also be brought to the table to determine what,why and be whom was he instructed to fulfill his duties.

When the sh.. hit the fan Rikus Myburgh ran for the hills. Never saw him on Pickvest’s premises again.

Any banks been called to open their books ?

Duncan I agree the Banks should also be questioned. They knew when the business bank accounts of the Georgio’s boomed rapidly the funds came from Bosman Visser(investors money) but Georgio developments with bank funding kept rising like mushrooms

Spoiler alert: Nothing is investigated.

Whether Hans fulfilled his duties or not only the court will decide on. God forbid if there is no investigation into this matter after Ryk has spend time and effort to get to the core of this Pickvest misery.Therefore then there is no hope for our country where pensioners have been stripped from their hard worked savings!!! An example should be set for forthcoming looters

But I thought that the last resort Mike Bolhuis was going to sort this out.

https://www.moneyweb.co.za/in-depth/investigations/mike-bolhuis-enters-the-orthotouch-fray/#comment-578174

Bwaaaa haaaa haaa ha!!
I did wonder what happened with that..?
Kinda fizzled out like a DAMP SQUIB didn’t it!?

Im pretty sure I can guess what happened. Remember he was backing Helhard Penke’s crooked deal! Henke is Georgiou’s servant.

@Apateonas, I think you mean HELGARD HANCKE????

Thanks for the giggle.

Don’t be silly! ! Mnr Du Toit want have to work after this job.

Compare this with the 36One “solicitation”.

https://www.moneyweb.co.za/investing/the-other-kind-of-illegal-solicitation/

36one was fined R350,000 for referring to an investment product which was not “approved”. No one was swindled or even invested in the product. The procedure police (compliance officers) were all 36One like a wet blanket.

Then you have this which involves a bunch of vulnerable investors and a couple of billion. Seems a bit asymmetric.

Investor 47 I think you need some sleep desperately Surely with all the research in detail done by Ironman Ryk who relentlessly steamed ahead to get some answers for 18000+ investors which Hans did not even make an effort for,the Moneyweb report cannot be a fairytale???? Maybe you are also blinded by the Georgio light or being informed to polish Hans Klopper image

The circumstances of the picvest scheme and the missing billions is a tragedy for all the investors who have lost the vast majority of their life savings. I for one hope that a proper investigation is done by experts so that the investors and the broader public can find out exactly what went wrong and who is to blame. I however don’t believe that Ryk van Niekerk is the one I’ll believe to make an impartial and well-informed ruling on this matter. If all of you don’t realise, he has his own vested interest in trying to punt this story to his mob of angry followers. If you have a reasonable knowledge of commercial law and you listen to Ryk van Niekerk speak on this topic as if he is an “expert” (for example I heard him being interviewed on television on the SAA business rescue) you will realise that he actually has no idea what he is talking about and is totally out of his depth. I have no idea if Klopper is to blame, but what is clear is that there were various culpable parties before he arrived on the scene. It’s particularly interesting how the brokers who scored huge commissions in selling this bad investment to investors have somehow been absolved from any responsibility and are some of the leaders of the anti-Klopper mob.

Com lawyer The big question is WHEN HANS ARRIVED AT THE SCENE AND OBSERVED THAT THERE WERE MANY CULPABLE PARTIES INVOLVED why didn’t he investigate this “tragedy” by starting at the beginning THE DISPUTE!!!
The buyer Rikus Myburgh must prove that he paid ALL the funds over to the seller Nic Georgio and the seller must prove that he received a shortfall of R800m + WHY DID THIS NOT HAPPEN?? Surely recons are done daily on statements. Easy 1 2 3

Oh Please Investor 47

Stop your soft talk to try confuse the public about this scam. Billions R4.6 were exploited in a manner that any sane person can comprehend.If you think funds can be channelled ruthlessly without anybody blinking an eye think again.
There are rules in life and if you do not adhere to them then your fingers get burned and that is exactly the case now.REMEMBER PAPERTRAILS CAN NEVER BE IGNORED.WHERE IS THE R4.6 BILLION HARD EARNED CASH FROM INVESTORS??? Don’t try to derail the investors conclusion. This is not a fairytale story

Don’t try to shift the focus from this misery from WHERE IS THE R4.6 B to “greed” of investors and brokers The court already ruled in Nov 2019 that the product was bought because there was an expectancy of performance !

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

NEWSLETTERS WEB APP SHOP PORTFOLIO TOOL TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company: