E-mails show up Tannenbaum secrets

28 March 2010 - 02:27 By Rob Rose
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A trail of e-mails has sucked Mike Tannenbaum - the financial director of London Stock Exchange-listed Westcity Plc and brother of ponzi-accused Barry - into the centre of SA's biggest financial fraud.

Mike Tannenbaum has denied any links to the scam allegedly conducted through Frankel Chemicals, other than providing "modest personal guarantees" to Barry's largest investor, US lawyer Meir Levin.

Levin invested with Frankel only because he felt safe to do so because of these guarantees. When the scheme collapsed last June, Levin claimed he was "owed" $825-million in capital and interest.

However, e-mails have now surfaced, dated January 29 2009, which show the two brothers discussed specific pharmaceutical deals - the sort that lay at the heart of Barry's scheme.

Barry wrote to Mike: "Payment to suppliers for goods waiting - supplier Lanpharma. Goods is Methyldopa to be sent to Aspen South Africa. Cost of goods $2754000 to be shipped over. We then get paid on delivery of goods ... total margin 35% ... let me know."

This appears to be a discussion of a deal typical of the scheme in which investors would "finance" the purchase of pharmaceuticals and would then be "repaid" a handsome margin when the pharmaceuticals were on-sold to companies like Aspen.

But in some cases the "purchase orders" from Aspen, Novartis and Adcock Ingram were forged, and cash given by new investors was simply used to pay existing investors - a classic ponzi scheme.

Mike forwarded Barry's e-mail to another businessman, saying "this is the trail of the £2-million transaction - there is credit cover and insurance all in place".

On Friday, Mike Tannenbaum admitted to the Sunday Times that this e-mail was "genuine" but firmly rejected any suggestion he played a role in the scheme.

He explained that "Barry asked me, without telling me any detail, if I could introduce any investors to his business and then sent me this e-mail with the details set out".

He added, "thankfully, no one was interested and nothing ever materialised".

Other e-mails - which he also admitted were "genuine" - show a discussion between the brothers about Levin's investment in August last year, after the scandal broke.

Though Mike admitted in November that he gave "modest" guarantees to Levin, he claimed other guarantees for $47-million given in 2006 were "forged" - leaving Levin in the lurch.

Though Mike said he "doesn't know" who forged his signature, the implication is that either Barry or someone closely involved did so.

But in a friendly e-mail exchange dated August 12 last year, when Barry wrote to Mike about Levin's efforts to claim back cash based on the guarantees, the fake signatures were presumably discussed.

Barry wrote: "Signatures don't worry me ... they have already gone civil and cannot change to criminal. We are updating the figures and Meir has been paid back quite a chunk." Mike responded, but the text of his e-mail is hidden.

Barry replied that he had heard nothing. "Let's hope it stays that way. I don't think they have anything to go on. What do you think?"

Mike replied: "Probably right - the signatures worry me and there could be a case there - but if most has been repaid, who knows ... they did have a helluva go at me - at least 7 heavy letters and serious allegations over a 2-month period but my lawyers were very sharp."

In another e-mail exchange on September 9, Mike wrote that Levin "hit me (with) a huge witness statement and a full file, they want my bank statements, correspondence between you and me regarding him - they can't work out what guarantees are still outstanding".

Mike added that "they are making all allegations about conspiracy, fraud, etc - getting so sick of it!".

Barry responded: "I know the feeling. At least we know nothing (went) through accounts, and we had no correspondence on it between us. You need to somehow intimate that I have mentioned to you that I did settle large sums to (Levin) in Israel. I am sure the (Internal Revenue Service in the US) would like to get wind of that".

Barry then apologised, saying "sorry it has come to this. Never in my wildest dreams would I have thought as much".

Mike replied: "Okay - must be careful on e-mails." Barry responded that in future "we messenger", presumably using an Internet messenger service.

However, Mike Tannenbaum told the Sunday Times that those e-mails simply "reflect my frustration that I have personally become embroiled in this fraud investigation when I have done nothing wrong".

Meanwhile, the government task force set up to nail those responsible has denied rumours that it has been disbanded after having produced little in the last 10 months.

Themba Hlengani, spokesman for the Financial Intelligence Centre, said the task team was "still in place, but entering a new phase".

"We believe we've gathered all the information we need, and we're now in the process of converting that into the sort of evidence that will be accepted by a court," he said, adding: ''We believe we have sufficient financial information to prove crimes were committed."

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