/ 16 April 2010

‘Enormous’ Ponzi scare

Hundreds of millions of rands have disappeared in an apparent Ponzi scheme believed to have operated in the Western Cape, Gauteng and KwaZulu-Natal.

As many as 400 investors appear to have been duped into investing with a Cape Town-based firm, World Focus 899, run by husband-and-wife team Jasmin and Maksuud Ebrahim.

About R250-million is estimated to have flowed into the scheme from Cape-based investors, and informed sources believe that total investments may have reached the R500-million mark.

The company was placed under provisional liquidation in the Western Cape High Court on Friday last week and Judge Siraj Desai ordered that the matter be referred to the Hawks crime investigation unit.

Peter Whelan, an attorney at law firm Bowman Gilfillan who brought the matter to court on behalf of 88 claimants, said the scheme was “potentially enormous”.

“It has done huge damage to the people involved,” he said.

World Focus is purported to have offered investors trucking contracts in which they invested R150 000 to lease a truck contracted to carry commodities such as coal. They were promised monthly returns of between R12 000 and R15 000 a month for three years or returns of more than 280% over the contract period. It is believed that in some cases other investors were promised returns of more than 700%.

Contracts signed between World Focus and its investors include a clause that states that World Focus refuses to deal with any financial institution, or to provide them with the principal contract or copies of it, or supply confirmation of income.

The company allegedly also offered investors other opportunities, such as investing in a property fund (the property was said to be in Brazil), a water-purification project in Central Africa and citrus- and olive-growing ventures.

The alleged scam appears to have been running for about five years, according to Whelan.

In an affidavit a Cape-based businesswoman, Zireena Osman, outlines a “suite” of agreements she signed with World Focus in 2009, including investments in the trucking scheme, which promised returns of 288%, the property venture, offering returns of 172%, and the water-purification project, offering returns of 300%. She invested R1,3-million with World Focus and P.R.O.W.D Investments, of which Jasmin Ebrahim is a director.

Osman invested R240 000 for her father and her three children.

She and other aggrieved investors took the matter to court.

Supporting affidavits were supplied by two women, Sharifa Natha and Shiyaam Marlie, who acted as agents for Ebrahim in recruiting potential investors. Both of them also invested money with World Focus and Marlie was also introduced to P.R.O.W.D.

They were paid commissions to recruit other investors.

Natha’s affidavit says she introduced about 300 investors to the scheme and that she is owed more than R1-million in investments and R2,2-million in unpaid commissions.

Wheels come off
Initially the scheme brought returns to its investors, but it appears the wheels began to come off in September last year, when Natha’s commission payments became erratic or were short.

Osman claims her problems began in November, when “the entire picture changed”.

Then, in December, Jasmin Ebrahim allegedly told Natha that no investors would be paid that month. Instead they would receive a double payment at the end of January.

But these were not made “timeously” because of what was described as “system problems”, according to Natha’s statement.

At the end of March, by which time investors had became increasingly concerned, Ebrahim told Natha that World Focus’s accounts had been frozen, that it was under investigation by the Financial Services Board (FSB), that an unknown “holding company” that owned World Focus was being investigated by the “Black Economic Empowerment and Tender Board for tender rigging” and that World Focus was trying to pursue money owed to it by third parties.

But Whelan argues that all these claims were an attempt to “throw investors off” and at least one of them appears to be unfounded.

The FSB told the Mail & Guardian that, while a complaint had been lodged against the company, it was outside the ambit of the body to investigate it and it had not been pursued.

Documents show that as late as February this year attempts were being made to present World Focus as a going concern. An income statement and balance sheet were provided showing income of R59-million, expenses of R23,6-million and net income of R35,4-million. Assets apparently amounted to more than R1,4-billion.

But Whelan said that this, too, was an attempt to throw investors off and that it was unlikely that the company had significant assets.

According to the court papers, investigations into World Focus indicated that the company has few or no assets of any real value.

In the light of two extremely differing statements of financial health, Osman’s affidavit calls for an in-depth investigation by a liquidator into the financial affairs of the Ebrahims’ companies.

The core investors appear to have come from the Cape Muslim community, but a source said that the widespread nature of the scheme suggested that people from across the country and from all segments of society were likely to have been targeted. The source said that an estimated 40 agents were believed to be recruiting investors. These included businesspeople, advocates and doctors, who were duped by the promise of huge returns.

It is understood that many investors cashed in retirement policies or pensions and took out loans to get involved and have been left in dire straits.

“They have been frivolous with the livelihoods of people — some are affluent but some are destitute,” said the source.

Neither Jasmin Ebrahim nor World Focus responded to requests for comment.

What the Net said
In researching the story the Mail & Guardian came across a post on Answerit24.com asking for advice about World Focus 899, posted 14 months ago.

“In short, you give [invest] R150k and they give you R15k back per month? — The return is very high; however, I am aware of some people — whom I do not know well enough to inquire more from — who have received every month, for a few months now, the R15k from this,” reads the post by “daydreamer1”.

“It sounds dodgy, as the returns are 100%+ per annum and also the company name is used with different numbers after the CCs. I heard that they invest in transportation like trucks — or at least, that is what they are telling people.”

Responses to the post overwhelmingly warn daydreamer1 against investing.

“Sounds very dodgy to me. It is probably a pyramid scheme and, like with all pyramid schemes, the people who get in first make money but the rest [vast majority] lose,” warns “closed”.

“Definitely phoney; finance houses have to invest your money elsewhere where they will be earning a return higher than their payouts to their investors in order for them to break even,” says “socrates”.

“In the current financial scenario, there is no investment I know of that gives a return like the one they are talking about.”

Writes “monboddo”: “Do yourself a favour and phone the financial services board in Pretoria — they will know if these are registered investors. I can GUARANTEE you that it’s a scam and that you should really stay away from it.”

Attempts to reach daydreamer1 were unsuccessful.