Chabad Donor Allegedly Runs Massive South African Ponzi Scheme

Barry Tannenbaum gave Chabad a Sefer Torah in 2006.

Audio from the Australian Broadcasting Company:

Barry Tannenbaum holds the Torah Scroll under the canopy with Chabad's Rabbi Shlomo Wainer.

MoneyWeb:

Special investigations
Reserve Bank, Sars, NPA to investigate SA's biggest ponzi scheme
Investors may have to repay dividends, liquidator to be appointed next week, Aspen denies claims made by Tannenbaum.
Nicky Smith, Renee Bonorchis, Moneyweb
14 June 2009 15:53 

A South African court will next week appoint a liquidator for the local estate of Barry Tannenbaum, who is being accused of defrauding investors of as much as R15bn through a "ponzi scheme".

The Master of the High Court in Pretoria on Friday granted an application to appoint a liquidator, Ian Levitt, a lawyer for one of the investors, said. The liquidator will be appointed June 17, he added. Tannenbaum denies the allegations.

Also on Friday a special Task Team* comprising investigators from the Financial Intelligence Centre, the South African Revenue Service (Sars), the South African Reserve Bank, the South African Police Service's (SAPS) Serious Economic Offences Unit and the National Prosecuting Authority (NPA) was established.

The team will "look into allegations of possible fraud, money laundering, tax evasion and foreign exchange control violation against Barry Tannenbaum and associated entities" Sars said in a statement released Sunday.  

"The NPA indicated that prosecutors from the Specialised Commercial Crime Unit will work closely with detectives from SAPS to evaluate evidence and to determine whether to prosecute any of the persons or entities involved in this scheme. The NPA's Asset Forfeiture Unit will also consider whether any assets can be frozen or forfeited as proceeds of unlawful activity," the Sars statement said. 

Lost money
Losses tied to Tannenbaum may exceed the more than R1bn lost by Fidentia Asset Management, which was placed under administration in 2007 amid allegations the company stole client funds. Murdered South African mining magnate Brett Kebble's estate is being sued for R2bn by companies he used to run, saying he illegally sold assets.

Tannenbaum encouraged investors to put money in his companies, Frankel International and Frankel Chemicals, by offering "massive returns" on investments, according to a website started by Warren Goldblatt, an investigator hired by one of Tannenbaum's investors. Goldblatt says he uncovered the scheme. Tannenbaum now lives in Australia.

Tannenbaum's lawyer, Darryl Ackerman, on June 10 denied that his client was involved in fraud and declined further comment. 

Investors including Sean Summers, the former chief executive officer of the nation's second-largest food retailer, Pick n Pay, say they have lost money.
Levitt's client, Christopher Leppan, on June 5 successfully applied to the South Gauteng High Court for the "provisional sequestration" of Tannenbaum's local assets after an investigation led by Goldblatt's Specialised Services Group, Levitt said.

Forged signatures, orders
Tannenbaum, grandson of one of Adcock Ingram's four founders, Hymie Tannenbaum, invited people to invest in financing the importation of pharmaceutical ingredients, providing guarantees that he had secured supply and procurement contracts with well-known drug makers, including Aspen Pharmacare, the largest generic drug company in southern hemisphere, according to Goldblatt.
"Aspen holds the largest value in my book," Tannenbaum wrote in an e-mail dated March 5 to James Patterson, a guarantor on a loan for Frankel International from Virgin Islands- registered Sudworth, according to information posted on Goldblatt's website.

Aspen, in a statement to South Africa's stock exchange on Friday, said it bought selected raw materials from Frankel and denied claims made by Tannenbaum that the company owed him R700m. Documents representing Aspen purchase orders were "fraudulently prepared using forged purchase order templates and forged signatures representing Aspen personnel".

Investors may have to repay dividends they received from Tannenbaum if they are found to be proceeds from crime, Goldblatt said in a telephone interview on Friday.
"We live in a society filled with greed," he added. "I wonder how many of those people brought in friends so they could get themselves out?"

Hendrik du Toit, the CEO of Investec Asset Management, which manages about $55bn, said South African regulators cannot be blamed for not picking up on the scheme.

"The regulator has done extremely well on the banks," he said. "These non-regulated schemes need to be avoided, period. Regulators will never cater for the protection of the very high net worth individuals - they ought to be able to look after themselves."

*The Task Team is appealing to all investors who had dealings with Tannenbaum and his associates to provide information that can assist investigators. Information can be provided on a confidential basis to the Task Team at the following email address: [email protected] or in the form of a suspicious transaction report to the website of the FIC - www.fic.gov.za 

Tannenbaum has been living in Australia for two years and, as iAfrica.com reports, South Africa and Australia do not have an extradition treaty:

Tarring Tannenbaum
Mon, 15 Jun 2009 13:41

The lead investigator into what is believed is South Africa’s largest Ponzi scheme says he has no doubt that the scheme’s alleged mastermind, Barry Tannenbaum, is guilty.

The South African businessman allegedly defrauded hundreds of wealthy South Africans of over R10-billion.

Warren Goldblatt, head of investigating company SSG, says the evidence against Tannenbaum is damning.

He claims that over 400 South Africans were robbed of the millions they invested. Goldblatt also says many more foreign investors were also caught out but have not come forward fearing they will be publicly embarrassed for being conned.

A specialised task team comprised of South Africa’s top financial and security agencies, including the Reserve Bank, South African Revenue Service and Asset Forfeiture Unit, has been set up to investigate the case.

Tannenbaum’s attorney Darryl Ackerman has remained tight-lipped about his client’s situation, refusing to be drawn on whether he would return to South Africa.

"I’m not talking to the media to compromise Mr. Tannenbaum or to point fingers at anyone."

Meanwhile, some of the investors who were burnt held a meeting in Midrand on Sunday to discuss a way forward.

They resolved to appoint a trustee to lead a team to probe the scheme.

One of Tannenbaum’s recruiters, Dean Rees, was present at the meeting.

"It’s outrageous that he [Rees] claims that he never defrauded anyone," says Goldblatt.

Werksman attorney Eric Levenstein explained that once a trustee has been appointed by investors the process of recovery of some of the misappropriated money could begin.

Tannenbaum, who has denied any guilt, has been living in Australia for two years, something which Levenstein commented would make it difficult to have him extradited.

South Africa and Australia do not have an extradition treaty.

Eyewitness News 

The JTA:

Alleged swindler denies scam, rejects Madoff comparison
June 14, 2009

SYDNEY, Australia (JTA) -- A South African-born Jewish businessman accused of defrauding hundreds of investors is rejecting the comparison with Bernie Madoff.

Barry Tannenbaum, 43, who now lives in Sydney, issued a statement to the media on Friday saying he categorically rejected as “conjecture and speculation” the “wild allegations” that he swindled more than 300 local and foreign investors out of about $1.2 billion. The alleged scam is being described as South Africa’s biggest corporate fraud.

Tannenbaum is alleged to have built a pyramid scheme in which he allegedly offered investors up to 200 percent annual returns. His company, Frankel Chemicals, was allegedly involved in the import of major quantities of chemicals on behalf of South Africa’s pharmaceutical giants, including Adcock Ingram, founded by Tannebaum’s grandfather, Hymie.

Local and international media have likened him to Madoff, the American businessman who pleaded guilty to defrauding investors of some $65 billion -- the largest investor fraud by a single person. But Tannenbaum rejected the comparison outright.

“I have read with amazement that I have been guilty of a multibillion-rand scam and that I am compared to Bernie Madoff in the USA,” he said in a statement.

“As has happened with other companies that have from time to time found themselves in a financial predicament, particularly in the present climate, I have found myself in such a situation," the statement continued. “I state categorically that I am not sitting with millions. I have not amassed some fortune that I have spirited away, and in due course an audit will bear out this statement, if people are still interested in hearing the truth.”

The High Court in Pretoria agreed last week  to allow the appointment of a liquidator.

Tannenbaum is pictured on the Lubavitch.org [sic] [should be: Lubavitch.com]Web site holding a Torah scroll he helped donate to a Chabad House in South Africa in 2006.

The Lubavitch.com story on Tannenbaum's donation of a Sefer Torah to Chabad.

Please click to enlarge. The full text of the article follows below the images:

 

A New Torah Comes To Umhlanga Rocks
UMHLANGA, KWAZULU NATAL, SOUTH AFRICA -- (July 6, 2006)
Rebecca Rosenthal

A strapping Zulu tribesman, garbed in sheepskins and colorful, woven cloaks, resplendent in his five-foot tall headdress of cattle horns, feathers dyed blood red and black, furs and mirror-studded mosaics led the parade in honor of a new Torah to be housed in the new Chabad Outreach Center of Umhlanga, Kwazulu Natal, on the north coast of South Africa. Leaping as he strode along the route, the Zulu  - and his two-wheeled rickshaw cart - added a dash of local color to the procession of 200 well wishers and community members who danced and sang their way to the center on 11 Flamingo Road, dedicated in memory of Shana Weisman by her brothers, Brett and Mark Levy.
Umhlanga Rocks sounds exotic but it is a familiar and favorite beachside spot for Johannesburg residents on long weekend getaways and holidays. Chabad Umhlanga's weekly Shabbat minyan fluctuates between 10 and 50 congregants during the year, and surges to over 300 in the high season. Barry Tannenbaum of Johannesburg vacationed in the attractive Indian Ocean resort town since his schoolboy days. He and his wife, Debbie, purchased an apartment in Umhlanga and prefer spending Shabbat and Jewish holidays there, away from Johannesburg, where walking to synagogue 'can be dangerous,' Tannenbaum said. 'Umhlanga is a nice haven. You feel safe.'

Tannenbaum met Rabbi Shlomo Wainer, Chabad representative in Umhlanga and South Africa's North Coast and noted the synagogue had but one Torah, an inconvenience for any growing community. Tannenbaum and a friend sponsored the purchase of a new Torah scroll. As Rabbi Wainer cradled the new Torah under the canopy, Zachary, 3, and Rebecca, 6, Tannenbaum hitched a ride in the rickshaw. Tannenbaum glanced round and felt a 'high that hit my heart,' he said. 'It felt like my bar mitzvah again.'

When Rabbi Wainer planned the grand opening, he phoned Mark and Brett Levy to set the date. The Levys were instrumental in the purchase and renovation of the new building. June 18, as it turned out, coincided with the birthday of the Levys's sister, Shana Weisman, in whose memory the new outreach center is named. 'It got very quiet on the phone,' said Rabbi Wainer, but he's used chancing upon divinely guided happenstance. Miracles have cropped up ever since Rabbi Shlomo and Devorah Wainers arrived in Umhlanga almost 13 years ago, not the least of which was overcoming delicate zoning issues to open the center.

Under a warm and smiling sun, the norm in Umhlanga, crowd numbers climbed to over 250 by the time the procession reached the entrance and walkway of the new center. Several prominent rabbis and Chabad representatives from Johannesburg and Pretoria offered words of blessing.  Rabbinical students from the Yeshiva Gedolah in Johannesburg danced and sang with community members. Councillor Chetty, of the executive council of the Ethekwini municipality, delivered greetings on behalf of the mayor of Durban, the major city closest to Umhlanga Rocks.

Jack Mailich a year-round Umhlanga resident, said the event 'put Umhlanga Rocks Chabad on the map' and 'let people all over the country and overseas know they can come to this tourist and holiday resort, which boasts all the facilities Jewish people could want - plus, plus.' A Jewish family on a cruise to South Africa from New York turned up at the outreach center the other day, having asked a taxi driver if there were any Jewish community centers in the area. 'They couldn't believe the reception they got. They were made to feel very welcome and comfortable,' said Mailich.

Numbers of visitors to Umhlanga grow by the year, and the new center is positioned right in the middle of the prime hotel and timeshare strip to serve them. Peak season, guests arrive from Adelaide and Perth, Australia; London; United States; but most drive five hours or fly in under an hour from Johannesburg. Reasonably priced real estate, in contrast to Cape Town's skyrocketing prices, drive more and more investment in Umhlanga. Several buildings, 20, 30 stories in height, are under construction. The village of Umhlanga, once a fisherman's port of call, is expanding, bringing hotels, corporations, jobs, and with them the prospect of greater numbers of year round Jewish residents.  

Some visitors to Chabad arrive on foot. On the Friday before the big opening event, 11,000 runners sped through Umhlanga during the annual Comrades Marathon, a 90 km race from Pietermaritzburg to Durban. Rabbi Wainer pitches a mobile Chabad center for exhausted runners, refueling them with carbs - bananas and other fruits, water and a quick wrapping of tefillin before sending them on their way.

For more information on Chabad of Umhlanga, go to www.chabadnc.com.

A South African Jew writes:

A nice Jewish boy does it again! South Africa's answer to Bernie Madoff. No prizes for guessing who he donated a Sefer Torah to in 2006 - you got it! Chabad of the North Coast (an upmarket holiday area in SA) - this was of course plastered all over the local sunday newspapers - great for the safety of the Jews in SA. If only chabad were as meticulous in matters financial as they are in matters of kashrut. However, that, as you know is the sad irony - the more meticulous they are in matters of kashrut, the more money they make. However, if they were to do the same amount of due diligence on their donors as they do on their food suppliers, most of their income stream would dry up. So, we see once again, how inconsistency in the frum world is the nature of the game.