Trail of debt
In a Ponzi scheme, the early investors are paid dividends from investments made by later investors, rather than from any actual profit earned by the company.
I know of friends in South Africa induced to invest who lost all their savings. The sense of Tannenbaum’s betrayal of their trust remains palpable since the story was broken by South Africa’s Financial Mail in July 2009.
The SARS investigation, which drew in all the major South African government institutions and auditors at KPMG, came to the conclusion that: “Tannenbaum was indeed the mastermind and operator of this illegal multiplication scheme.”
Following the article in the SMH and other Fairfax papers in June 2009 as well as the ABC, Tannenbaum professed his innocence, claiming in a letter to the press that “categorically” he was not “sitting with millions”.
“I have not amassed some fortune that I have spirited away, and in due course an audit will bear out this statement, if people are still interested in hearing the truth,” he said before all but disappearing from the public eye. No audit has ever been carried out to clear his name.
In January 2010, the last mention of Barry Tannenbaum in the Australian press appeared when Fairfax ran a story about him fleeing St Ives for Runaway Bay. It was reported soon after an arrest warrant had been issued for Tannenbaum by the South African police. The short piece said he had fled “a stuffy little office above a strip of shops around the corner from his St Ives home” only to “pop up in the Surfers Paradise suburb of Runaway Bay”.
As an Australian resident since mid-2007, Tannenbaum has received the full legal protection of the Australian judiciary system. In August last year, the Queensland division of the Federal Court declined an application by the South African trustees of Tannenbaum’s bankrupt estate to administer and realise any assets he had accrued in Australia. The ruling was made on the basis that South Africa was not the “centre of the debtor’s main interests”, as he had “severed all ties” with the country of his birth.
The Australian court documents confirm what is known in the SARS investigation – that Tannenbaum raised $390 million between 2004 and 2009. Of this vast sum, just 0.05% was on-loaned by Tannenbaum for the purpose of purchasing pharmaceutical ingredients. According to the court documents, 44.8 million rand ($4.78 million) was used by Tannenbaum for personal transactions, “with a substantial portion being spent on gambling”.
He transferred $US31.7 million into an account held by Bartan Group Pty Ltd (Bartan – shortening of Barry + Tannenbaum), an Australian incorporated company, with an ANZ bank account, now in liquidation. Of this money, $US14 million was transferred into other entities controlled by Tannenbaum or to persons associated with him.
The sole shareholder of Bartan is another Australian incorporated company, Bardeb Nominees Pty Ltd, with shares held solely by Tannenbaum and his wife, Deborah. Bartan was wound up by an order of the Supreme Court of New South Wales on March 9, 2010.
Safe in Runaway Bay
The Federal Court court documents note that a report issued about Bartan’s affairs in April 2010 was “noteworthy for its paucity of information concerning the affairs of that company” but does include assets of $586,523 (made up of $150 in cash with the balance being investments in two other entities) and contingent assets of some $21 million.
During the court case, Tannenbaum claimed he had assets of less than $8000 and just $1700 in the bank, while his liabilities were $90,000 on his credit card, an $85,000 loan from “friends” and a $185,000 vehicle finance lease. Judge Logan remarked:
“It may very well be that his decision to quit South Africa was inherently bound up with a desire not in the future to be dealt with under the law of that country in respect of his involvement in the scheme described and a related desire to enjoy the benefits of proceeds repatriated to Australia.
“It is not necessary in this proceeding conclusively to determine whether or not or to what extent he has enjoyed the proceeds but there is no doubt on the evidence that substantial funds sourced from South Africa were transferred to Australian entities controlled by he and his wife.”
Tannenbaum declined to reveal his Queensland address, claiming he did not have a permanent home, directing the court to a Sydney solicitor. According to SARS, the money Tannenbaum earned was paid into various companies of which he was either a director or member – nine registered in South Africa and five in Australia, including the Bartan Group and Frankel International.
This article was first published at Larry Schlesinger’s blog Freshly Worded and appeared on Crikey.
