FSB flags farm sale in Ponzi probe

A puzzling Stellenbosch farm sale could prove to be the undoing of Cape Town fund manager Cobus Kellermann, whose company, Belvedere Management, has been accused of masterminding a R200-billion global Ponzi scheme.

Until now, the South African regulator - the Financial Services Board (FSB) - has remained largely silent over the Belvedere scandal, while it waited for the outcome of an international investigation.

This week, in the wake of a damning affidavit produced by an investigator for the Guernsey Financial Services Commission, FSB deputy executive officer Caroline da Silva said that the Stellenbosch property had also raised red flags in South Africa.

Property records show that, in October 2010, a Mauritian investment fund allegedly run by Kellermann called "Lancelot Stellenbosch Mountain Retreat", sold the farm for R72.8-million to another fund run by Kellermann - Transholding Investments.

However, Lancelot had bought that farm from Black River Development only two years before for R28.5-million - a steep revaluation done without independent assessment, which investigators say was "highly questionable".

The 31ha farm, situated near the Delaire and Tokara wine estates 3-kilometres east of Stellenbosch, was initially zoned for development as a nature reserve and resort. But people close to these transactions say this development never happened, and the municipal permissions eventually expired.

Da Silva said this week that real estate was not a common investment for funds.

"It's unusual for investment managers to buy property. They tend to look for more liquid options," she said.

The FSB, which is also investigating Belvedere as part of the global investigation originating in Guernsey, said it will decide what action to take at the end of May, when it expected to get the full commission report.

Belvedere came onto the public radar in March, when Miami-based publication OffshoreAlert claimed the fund manager was engaged in widespread fraudulent activity that closely resembled a Ponzi scheme.

block_quotes_start The funds were intended to be used to develop the property. It is suspected that little or no development was actually undertaken block_quotes_end

Belvedere's owners - Kellermann, Irish businessman David Cosgrove and Mauritian Kenneth Maillard - denied wrongdoing. But the activities of the company began looking questionable after two of its Mauritius-based funds, and more recently three Guernsey funds, were shut down.

Now, court documents lodged by the Guernsey commission on April 22, to justify placing three funds managed by the Belvedere-linked Lancelot under administration, have provided concrete details of suspicious trades.

They include information from a 1000-page affidavit which highlights irregular investments, breaches of trust and possible money laundering. The documents also raise questions about the net asset value of some of Belvedere's funds, suggesting some of those funds may have been overvalued to mislead investors.

The affidavit, by investigator Paul Yabsley, also contradicts Kellermann's comments to Business Times in March when he said he had little to do with Belvedere's day-to-day activities as he was just an "absentee shareholder" of Stonewood, which held 51% of the fund-management company.

story_article_left1

Yabsley said Kellermann acted "unilaterally with little or no oversight of his activities" and was instrumental in moving "traditional investments" in Guernsey and Mauritius to higher-risk private equity and property investments in South Africa.

"Kellermann and Cosgrove are the majority shareholders in most of the companies forming the Belvedere Group," he said.

Yabsley takes issue particularly with the Stellenbosch farm transactions, particularly as there was no independent valuation of the property.

"The funds paid by (Lancelot Stellenbosch Mountain Retreat) were intended to be used to develop the property. It is suspected that little or no development was actually undertaken," he said.

Yabsley said it was "highly questionable" that the value of the Stellenbosch property could have increased so sharply "in what was a depressed market".

The Guernsey commission also pointed out what it termed "significant and systemic conflicts of interest" in four transactions , in which Kellermann and Cosgrove owned or managed the entities involved.

Speaking from Cape Town this week, Kellermann said he was co-operating with the Guernsey authorities. "My lawyers have been in contact with officials and I have made submissions to them," he said.

Still, the Royal Court of Guernsey apparently accepted Yabsley's report as it immediately placed three Belvedere funds under administration.

The FSB's Da Silva said that as soon as she gets the full report from the Guernsey regulators, "we can take action and this could mean involving the revenue service or Treasury."

But she is comfortable that the five funds in South Africa to which Kellermann has links are not in any danger.

"These funds are managed under collective investment schemes and these are tightly controlled in South Africa. These funds have trustees [separate] from the fund manager and the funds are all accounted for in South Africa," she said.