Tannenbaum escapes to Runaway Bay

Ponzi scam accused moves house due to 'death threats' - as SARS targets his investors, writes Rob Rose

Barry Tannenbaum, fingered by authorities as the mastermind of a R12.5-billion Ponzi scam, is living in a waterfront suburb on Australia's Gold Coast known as Runaway Bay.

The scam, the largest in South Africa's history, suckered some of the country's savviest investors, including former Pick n Pay boss Sean Summers, former JSE head Norman Lowenthal and ex-OK Bazaars head Mervyn Serebro.

Tannenbaum disappeared from his 2.1-million Australian-dollar house in Sydney's exclusive suburb of St Ives in November, sparking talk that he had fled the country.

However, Business Times has established that he is now renting an apartment in Runaway Bay, a small suburb of less than 9000 people.

His lawyer, Darryl Ackerman, confirmed Tannenbaum's location, saying he had only moved there because he had received death threats while living in the house in St Ives.

"This is the reason why they left St Ives, and if you publish the article it would rebound to their detriment, forcing them to find some other location," he said.

Sources in the area have confirmed to Business Times that they have seen Tannenbaum and his wife Debbie shopping in Runaway Bay.

Documents confirm that Debbie has lodged a A$335000 deposit on another Gold Coast property, in a suburb known as Surfer's Paradise.

However, Ackerman denied that she had since bought any property.

"Long before any problems arose, it was Debbie's hope to purchase a property on the Gold Coast. This transaction was not then, and never has been, finalised," he said.

He said that "neither Barry nor Debbie are in any position to finance any grandiose idea of a new home".

It is understood that South African authorities, who issued an arrest warrant for Tannenbaum and lawyer Dean Rees in October, are aware of Tannenbaum's new location.

While it is understood that the National Prosecuting Authority (NPA) is intent on extraditing Tannenbaum to South Africa, the process might become more difficult as Tannenbaum was due to sit the Australian citizenship test on September 16 last year.

Ackerman confirmed that the process by which Tannenbaum is applying for citizenship "has not been finalised".

With Tannenbaum in Australia, the South African authorities are putting pressure on his investors.

In December, the South African Revenue Service (SARS) sent a letter to investors giving them 21 days to come clean on every investment they had in the scheme.

In one investor's letter, dated December 9 and now in the possession of Business Times, SARS said it wanted all his tax returns, copies of all bank statements reflecting deposits to Tannenbaum and "copies of all correspondence between yourself and the major role-players".

Crucially, SARS has revealed for the first time that investors in the scheme will be hit with a tax bill for any money made from Tannenbaum. SARS said they would have to pay this tax "irrespective of the fact that he or she later had to pay (any proceeds) to the liquidators of the scheme".

In December, the trustees appointed to wind up Tannenbaum's estate said they had not at that stage decided whether to force investors to pay back everything they got from Tannenbaum, including their original capital.

If the trustees go this route, it would mean that investors, who may already have been left penniless, could be hit with a double blow - the tax and the repayment.

A lawyer representing a number of investors said: "It seems they're targeting soft targets locally, and of course people should pay their tax, but surely the authorities should be focusing on the perpetrators of this scam sitting overseas."

SARS spokesman Adrian Lackay said the letters sent to investors were simply part of the investigative process to obtain a complete picture of the scheme.

"Each agency of government is pursuing the matter, not only in terms of its own legal mandate, but also in terms of a common approach that seeks to prevent our financial system being breached," he said.

However, the local approach contrasts to that of the US, where that country's Internal Revenue Service issued a directive allowing investors who had been defrauded by Bernie Madoff and Allen Stanford to claim "theft losses" as deductions on their tax returns - effectively giving them money back.

Meanwhile, Dean Rees, the lawyer against whom the authorities have also issued an arrest warrant, will go to the Johannesburg High Court next month to fight efforts to have his estate finally sequestrated - as has happened with Tannenbaum.

The company pursuing Rees is Qatari real estate company Barwa that invested R250-million with Tannenbaum.

While Barwa initially succeeded in having Rees's assets frozen in a London court in July, this has since been overturned.

Barwa's appeal against that decision was dismissed on January 8.