Investors fear billions lost in alleged pyramid scheme

It notes that with nearly R2bn already unaccounted for, and speculation that sums of up to R15bn are involved, SA-born Barry Tannenbaum's investment scheme looks set to become SA's largest corporate scandal, dwarfing Fidentia and Masterbond. The FM says its investigation has uncovered a trail of deceit and tracks how SA businessmen and investors got caught in a trap. Tannenbaum, who lives in Sydney, Australia, persuaded people to invest in his companies - Frankel International and Frankel Chemicals - by offering returns of up to 216%/year. The FM says that among those drawn into the scheme are former Pick n Pay boss Sean Summers, ex-Bond Exchange CEO Tom Lawless and former JSE chair Norman Lowenthal. At the same time, blue-chip JSE firms Adcock Ingram and Aspen Pharmacare have been dragged into Tannenbaum's slipstream, even though the CEOs - Jonathan Louw and Stephen Saad - did not invest personally. The report says the scale of losses is not yet clear: by Friday, the debtors' book (against which Tannenbaum 'borrowed' from investors) officially stood at R1.76bn. The FM says at least 400 investors - in SA and countries like the US and Australia - are involved. Warren Drue, an attorney at Routledge Modise who invested in the scheme, is quoted as saying: 'We've all been devastated ... it appears there was no fundamental business, so the money we've invested must be gone.' Full Financial Mail report (subscription needed)

Summers has confirmed he was a victim, says a FIN24 report. Speaking on the World at Six, Talk Radio 702's business show, Summers said people made mistakes in life and this was one of his. He stopped short, however, of confirming additional speculation by investigative magazine Noseweek that he'd lost an initial sum of R50m. According to Noseweek, Tannenbaum's involvement emerged in Johannesburg High Court documents in which another scheme victim, Christopher Leppan, brought an application against Tannenbaum to have him declared bankrupt. Speaking to Talk Radio 702, however, Summers urged caution, saying there had been a lot of media speculation recently. Leppan told the court, Noseweek said, that he'd been persuaded to invest in a scheme devised by Tannenbaum to finance the importation of raw material required for the local manufacture of pharmaceuticals. It was so profitable, Tannenbaum is reported to have said, that Leppan could expect a 20% return on his money every 12 weeks. Leppan is said to have invested R25m while Mervyn Serebro, the former CEO of OK Bazaars, invested over R25m and is owed R50m in terms of the scheme. 'An estimated... 400 investors are believed to have lost R2bn or more. All of it has disappeared, most via a Hong Kong bank account,' Noseweek reported. Full report on the FIN24 site