Tannenbaum kingpin hit by R159m ruling

High-flying fugitive Dean Rees, the lawyer accused of being one of the masterminds of Barry Tannenbaum's Ponzi scheme, was smacked with a court order on Friday to repay R158.9-million to swindled investors.

More than 880 investors - including former CEOs of Pick n Pay and the JSE as well as British and Australian CEOs - were suckered into ploughing billions into South Africa's biggest white-collar con, ostensibly to buy components of Aids drugs, until it went belly-up in May 2009.

But less than 0.05% of the more than R3.6-billion that went through Tannenbaum's account was used for this. Instead, he forged invoices from drug giants such as Aspen to make the deals look legitimate, and used the cash to repay earlier investors - earning the 47-year old Tannenbaum the title of SA's Bernie Madoff.

While Tannenbaum remains in hiding near Runaway Bay on Australia's gold coast where he works at insurance company Qantum, Rees moved to Switzerland in 2009. Warrants of arrest have been issued for both, but the National Prosecuting Authority has yet to extradite either.

On Friday, Judge Boissie Mbha of the High Court in Johannesburg ruled that Rees had to pay R158.9-million to the trustees of Tannenbaum's estate, saying he was an integral cog in Tannenbaum's swindle. The trustees have already recovered R114-million paid to another lawyer who acted as an agent, sports-car enthusiast Darryl Leigh.

Mbha's judgment will be devastating for Rees's efforts to claim he had no idea it was a scam, and that he too was simply conned by Tannenbaum, grandson of the founder of drug maker Adcock Ingram.

"[The evidence] proves beyond any doubt that Rees knew he was robbing Peter to pay Paul and himself. I am satisfied that he knew he was running a Ponzi scheme to defraud the investors," the judge ruled.

Tannenbaum's bank statements show that Rees was paid R150.9-million in the heady days from 2007 to 2009 before the scheme collapsed.

The trustees argued that these were "commissions" for luring other investors into the scheme - a claim Rees denied hotly.

But the witnesses who testified painted a picture of a man living a lavish lifestyle fuelled by Ponzi money. Mbha said the evidence showed that fancy gold watches, first-class air travel, entertainment, booze and home renovations were all bought with the more than R170-million that flowed through his various accounts.

Pedro Pinho, Rees's former accountant, told the court how he "noticed from early on that there were a lot of Rees's expenses which were quite obviously personal in nature and not business-related, going through [his] accounts" from investors' money.

Said Mbha: "Rees even referred to investors as 'those idiots', thus displaying his total and callous disregard for investors. Clearly, he never gave a second thought to the immorality of using monies entrusted to him to bankroll his, and his wife's, lavish lifestyle."

E-mails between Tannenbaum and Rees were produced to prove both of them knew it was a scam. In one e-mail in October 2008, eight months before the crash, Tannenbaum wrote to Rees: "Feels as if the rivers are slowing - know what I mean?"

Rees's lawyers argued in court that much of this evidence was simply "hearsay" and that there was no way he knew it was a scam.

However, this judgment may prove a pyrrhic victory for the trustees of Tannenbaum's estate, who have sought to recover cash which can then, theoretically, be divided among the investors.

Rees moved to a chateau in Switzerland in 2009, and has few assets left in South Africa. Said a person close to the trustees: "A judgment is a judgment. To find his assets and get the money, well that's another story."