Reprieve for accused Ponzi scam lawyer

Court overturns order freezing assets of Tannenbaum associate, writes Rob Rose

Lawyer Dean Rees, accused of helping fraud suspect Barry Tannenbaum to construct a R12.5-billion Ponzi scheme, scored a victory this week when a court order freezing his assets was lifted in the Johannesburg High Court.

In October, arrest warrants were issued for Tannenbaum, who now lives in Australia, and for Rees, who lives in Switzerland.

This week, senior officials in the task force investigating South Africa's largest-ever investment scam told the Sunday Times they expect extradition proceedings against Tannenbaum and Rees to begin by October.

The scam drew in 880 investors, including former Pick n Pay boss Sean Summers and Dimension Data chairman Jeremy Ord.

Dubai-based property company Barwa was also swindled out of $30.3-million by Tannenbaum's scheme - and has tried to pin the blame on Rees.

But while Barwa got a provisional sequestration order against Rees last November - effectively freezing his assets - Judge Percy Blieden lifted the order completely this week.

This is a blow to Barwa's managers, who are desperate to salvage some cash, and will have also been noted by the task force led by the National Prosecuting Authority.

In this week's ruling, Judge Blieden said the case was "bristling with disputes of fact" - with Rees' furiously denying he played any role in the fraud, and Barwa adamant that he was, in their words, "the man".

The judge said it would be "an incorrect exercise" of his discretion to refer the case to a trial for oral evidence - at which the Rees and Barwa versions of events could be tested to see who was lying.

The problem for Barwa is that it tried to sequestrate Rees to collect a debt that was in dispute. In most sequestration cases, the debt is usually clear enough.

Judge Blieden ruled that, on the facts presented to him, "it cannot be said that the probabilities favour either side", so he lifted the provisional sequestration.

In court two weeks ago, Barwa's lawyer Nazeer Cassim argued that if Rees' sequestration was lifted, "we suspect there'll be no assets left".

But Judge Blieden said "no evidence of any nature was placed before the court to substantiate this perceived danger".

Speaking from Switzerland, Rees told Business Times this ruling will have repercussions for the criminal proceedings against him.

"If, on a balance of probabilities, they can't prove that I was a party to any fraud, I don't see how they'll be able to prove that beyond a reasonable doubt in any criminal case, given the documentation I have."

But investigators in the criminal case flatly rejected Rees's claim.

Said one: "If he thinks a sequestration application has any bearing on a criminal matter, he's sadly misinformed."

For one thing, investigators argue, the task team has gathered far more evidence against Rees than Barwa was able to for its sequestration claim.

But Rees fired back: "On a criminal basis, I was just as duped as anyone else in this scheme, and there's no basis for me to be pursued by anyone, let alone charged."

Rees says he represented less than a quarter - 210 - of the investors in Tannenbaum's scheme, so he wasn't the big fish some believe he is.

But as an agent, Rees was paid about R70-million in commissions between 2007 and 2009.

This week's action was the latest round in a series of legal actions by Barwa against Rees that have achieved few tangible results.

First, Barwa froze Rees's assets in London, but this was overturned last August. Besides the sequestration, Barwa have also lodged a court claim to reclaim their $30.3-million from Rees.

None of these legal skirmishes have helped the 880 investors, who are facing something of an assault from trustees who are meant to be winding up Tannenbaum's estate.

A secret insolvency inquiry into Tannenbaum's estate started in April and continues at the offices of Rosebank law firm Brooks & Brand, with one investor after another being hauled in to testify under subpoena.

One investor, who has already testified, said it appears the trustees are simply looking to punish people who have already lost money.

"They want everyone who made a profit to repay everything, but they also want anyone who was paid anything in the six months before Tannenbaum's sequestration to repay - even if they're a net loser," he said.

Contacted this week about this claim, trustee Shirish Kalian referred all questions to his lawyer, Alec Brooks. Brooks said he could not answer questions as this was a "secret inquiry".

This came after the SA Revenue Service sent letters to investors in December saying they had to pay tax on any profits they made, "irrespective of the fact that he or she later had to pay (any proceeds) to the liquidators of the scheme".

There appears to be little sympathy for the investors from the criminal investigators, however.

"From the information we've gathered, I estimate that only about 10% of the investors have nothing to hide from a tax or legal perspective," said one investigator.