Report 65 Business Practices Committee4. The Enquiry in 1998 |
During May 1998 the business practices of Serengeti again come to the attention of the Committee. Detectives of the Commercial Crime Unit (CCU) of the South African Police Services handed three affidavits to officials of the Committee. The following is a brief summary of an affidavit by "X":
It now appeared that Serengeti and/or associated companies did accept money from prospective clients to obtain loans abroad. On 14 May 1998 the Committee resolved to undertake a section 4(1)(c) investigation in to the business practices of Serengeti and Roberts.
Following the decision by the Committee on 14 May 1998, officials of the Committee and Roberts met on several occasions to discuss the business practices of Serengeti. These meetings were held at the offices of Serengeti and at times at the offices of the CCU. The CCU earlier seized files and documents from the Serengeti offices. Most of the meetings was attended by "Y", a legal advisor and employee of Roberts.
| 4.1) | The Serengeti Group of Companies |
A dormant company, Serengeti Holdings (Pty) Ltd, with Roberts as the sole shareholder, was allegedly established to participate in a joint venture investment to buy a well-known franchise in Brooklyn. This company did the administration for the Serengeti Group of companies.
Serengeti Equity Holdings (Pty) Ltd was established to buy a big hospital in Natal. This company, according to Roberts already paid a deposit of R50 000. The directors were Roberts and Joubert (see later). The latter became involved with Serengeti approximately two years ago.
Roberts held ±90 per cent of the shares in Serengeti International Ltd. The other shareholders were AE Roberts, LM Pieterse and HG Maritz. The company was established to trade in "commodities".
Serengeti Diamond Corporation (Pty) Ltd, with Roberts as the sole shareholder, was established to obtain a "rough" licence for the buying and selling of diamonds. The name of Serengeti Ostrich Corporation, an unsuccessful company was changed by special resolution to Serengeti Diamond Cutting Works (Pty) Ltd. The shareholders were Roberts and a A Pienaar. This company "bought diamonds, clot and polished the diamonds and sold the final product to the trade".
Other Serengeti companies were Serengeti Unique Wild Life Experiences (Pty) Ltd, Serengeti Paprikor (Pty) Ltd, Serengeti Ginger Gypsey Fruit Estate (Pty) Ltd and Serengeti Dermal Institute (Pty) Ltd. Roberts alleged that there were no cross shareholdings between the companies mentioned above, although loans were granted and received between them.
| 4.2) | The Scheme |
It was extremely difficult to obtain information from Roberts. He never volunteered any information and had the habit of evading questions put to him. At other times he merely responded to questions by saying that he "... did not remember". The exposition that follows is based on allegations made by Roberts during various discussions.
Roberts alleged that he never approached anyone to obtain overseas loans for them. He emphasised that he was approached by prospective clients. He did, however, about three years ago, tried to negotiate an overseas loan for his own businesses. His attempt to obtain an overseas loan began when he paid between R50 000 and R60 000 to two gentlemen to secure the loan. He needed the loan to buy a chemical factory in Rosslyn. He lost the monies paid by him and he realised that the two gentlemen ran a "seam". He then went overseas himself in an attempt to secure a loan. Loans were "freely available" and the only problem was to set up the required guarantees. The loans that were "granted" and were "freely available" never materialised.
He eventually received a personal loan from a Mr. Seabrook (Seabrook), a friend of his, of Seabrook Investments Limited, based in London. There was no formal loan agreement and Roberts was at liberty to redeem the loan when he was able to do so. When asked how it would be possible to transfer monies abroad without a formal agreement, he said that he rendered services to Seabrook, such as consultation work. The monies Seabrook owed him for these services were then written off against the loan from Seabrook.
After he received the "loan" from Seabrook, he made contact with a "Professor Brocalli". Brocalli was from "... a financial institution in Rome". This Brocalli "... had many contacts with banks". Roberts tried to negotiate for a loan of $1 million. A complicating factor, according to Roberts, in obtaining the loan was that South Africa then had a new government and overseas investors were nervous to invest in South Africa. The loan was approved but then he (Roberts) had too few projects to justify a loan of $10 million. Apparently $10 million was the "minimum" that could be borrowed. He came back to South Africa and took options to buy a number of mines and farms.
His first clients were referred to him by Mr. Allan Urquhart (Urquhart) of Potchefstroom. Urquhart had a number of clients that he could not "assist" and 90 per cent of Roberts' clients were referrals from Urquhart. Roberts "did not know" how Urquhart got to know about him. Roberts did viability studies for these clients before attempting to obtain loans for them. These studies were done by himself and other experts.
Roberts acted as the authorised agent ("gemagtigde agent") of Urquhart's clients, although, according to Roberts, they were in a technical sense still the clients of Urquhart. These clients had to pay his "direct" costs, such as airfares and travelling costs and the viability studies. The clients allegedly paid Urquhart who in turn paid Roberts. All the clients knew that the loans were to be obtained overseas, because the clients were previously turned down by South African banks.
The following is a direct translation what Roberts said about these loans on 1 June 1998.
"Loans were granted everywhere The institutions said: "Yes, we have money give me a guarantee - a farm, building or patent No, we do not want South African guarantees, but we require foreign guarantees". I then worked on this issue. I found a foreign insurance company that was prepared to give a guarantee and I found the guarantee. Then there was a catch 22 situation. The person that gave the guarantee wanted a mortgage registered over the South African property. This was not always possible and I had to go back overseas on many occasions ("moes menige keer teruggaan" ) to confess to the persons that I did not carry out a due diligence".
When asked whether he ever succeeded in bringing in money from abroad for his clients Roberts answered in the affirmative. It was agreed that a meeting would be held at the offices of the CCU to verify from the files and documents that loans have indeed been obtained.
Insert PG 9 of No. 20053
During discussions on 29 May 1998 Roberts said that "Trafford Investments Limited' was a financing house. It now seemed that "Stafford" was "Pleased to advise that xyz loan application has received favourable consideration". The letter was signed by Roberts for and on the behalf of "Stafford". In another letter, to Finboer Diensburo BK, Roberts signed as "Director - Southern African Office". (Roberts did not explain the exact relationship between Trafford, the Southern Africa Office and himself).
| 4.4) | Relevant Letters |
| 4.4.1) | A letter dated 30 November 1994 |
Roberts wrote, inter alia, to "PVZ" Associates:
"3. We confirm that we have strong international links with financial sources able to provide the required finance. We require a retainer of Ring 000-00 (one hundred thousand rand) on commencement of any assignment. You will be invoiced monthly for all travel, accommodation and other expenses. You will receive periodic progress reports. Our past experience has shown that the successful conclusion of a project funding scenario is from 6 weeks to 5 months 3 weeks. The norm is 3 months. Except for the direct expenses incurred the retainer is fully refundable at the end of 6 months in the event that we are not successful. We like to feel that you pay for results not promises".
Comments:
| a) | Roberts certainly had no "... strong international links with financial sources able to provide the required finance". |
| b) | The requirement of a retainer of R100 000 shows that Roberts was, contrary what he told officials of the Committee in 1995, involved in obtaining loans abroad for prospective clients, or pretended to do so. |
| c) | "Our past experience has shown that the successful conclusion of a project funding scenario is from 6 weeks to 5 months 3 weeks. The norm is 3 months". This statement by Roberts was misleading and constituted a harmful business in terms of the Act. He did not mislead "PVZ" Associates by accident, but by design. There was no past experience and there was certainly no "... norm of 3 months". |
| 4.4.2) | A letter dated 17 April 1997 |
This letter, dated 17 April 1997, was sent to all the clients or Serengeti and seemed to indicate that Roberts was stalling his clients. The letter, set out below, is somewhat incomprehensible and was translated from a very poor Afrikaans.
"LOAN APPLICATION
Following our letter dated 5 March 1997 as to the state of affairs and plan of action to resolve the issue as soon as possible, we inform you as follows:
To date we have achieved the following:
| 1) | We acquired loan possibilities ("lenings moontlikhede") at six entities. |
| 2) | Guarantees and collateral were arranged ("bekon") at three entities. |
| 3) | The elements to resolve the issue is now in place ("Die elemente om die aangeleentheid nou af te handei is in plek"). Although we realise that it can happen, we are not able to give a date and time for the completion, because there is enormous (geweldige) administrative work to be done. |
Therefore the following was decided:
| 1) | To close your file in terms of the agreement set out in our letter of 5 March 1997 and to refund you the costs provided by you within thirty days and thus to absorb the costs ourselves. |
The conclusion is:
| 1) | You are at liberty to again apply according to correct business principles. We will thus conclude a contract whereby you will pay the costs according to an agreed tariff. There is thus also a risk factor on your shoulders and we will thus be compensated for the time and labour pertaining to your application. |
| 2) | Up to now enormous ("geweldige") discussions took place over the issue and much unnecessarily and useless attention was given to a situation over which \nre had no control . |
| 3) | The principles ("beginsels") of a loan has basic guidelines: |
a business plan
guarantee of repayment
attractive ("gunstige") interest rates
good business principles, etc
| 4) | Discipline and patience by all concerned is an important element that was until now lacking because of some parties' unilateral actions that were often based on unfounded hearsay. It was therefore decided to handle all future negotiations in writing to avoid any misunderstanding. |
You will be contacted as soon as possible to resolve the issue. You can contact Dr Joubert telephonically should you require more information. Should it happen that it is not possible to immediately talk to you, leave your name and telephone number so that you can be called back.
We thank you for your cooperation in these extremely difficult circumstances to find a speedy solution.
Yours sincerely
Director
for and on behalf SERENGETI INTERNATIONAL LTD"
Comments:
Roberts still pretended to be able to obtain loans. He stated: "You are at liberty to again apply according to correct business principles". There were apparently no moneys available, yet he promised to refund "... costs provided by you within thirty days and thus to absorb the costs ourselves".
| 4.4.3) | A letter dated 14 May 1997 |
On 14 May 1997 Roberts wrote to "XYZ Safari Corporation"
"The negotiations, arrangements, etc will be completed within 90 days".
Comments:
Roberts very well knew that this statement was misleading.
| 4.5) | Meetings Held |
| 4.5.1) | Meeting with Roberts and "Y" on 24 June 1998 |
On 24 June 1998 officials met with Roberts and "Y" at the offices of the CCU. It was earlier agreed that a meeting would take place on 24 June 1998 with the bookkeeper of Serengeti. The bookkeeper would have given the outstanding information required by the officials but was not present. Roberts said that he could answer all questions. The first question put to him was about R150 000 that was paid into the Serengeti Holdings (Pty) Ltd account on 30 March 1998. Roberts was asked who paid this amount into the account. The question was put to Roberts at 08h40 and by 09h10, after going through a number of books/documents, he was unable to answer the question.
It was agreed that a meeting with the bookkeeper was now overdue. For various reasons the first date that suited Roberts was 15 July 1998. It was agreed that this meeting were to take place at the offices of the CCU. While arranging this date Roberts suggested that he appoint an auditor to write up the "mess". He asked that the official support him when he put this proposal to the investigating officer of the SAPS. At an earlier meeting Roberts gave the name of his auditor.
| 4.5.2) | Meeting with Urquhart on 30 June 1998 |
On 30 June 1998 an official held discussions with Urquhart at the offices of the Committee. Urquhart said that he previously owned a business, Finburo CC, and that he was a financial advisor and business consultant. He tried to assist a certain farmer with his financial affairs. This farmer told him (Urquhart) about Roberts and Trafford Investments and that Roberts tried to obtain an bverseas loan for him (the farmer). This is how he (Urquhart) came to know Roberts. He met Roberts at the offices of Serengeti. Roberts showed him "bank guarantees" and once, while he was with Roberts, he (Urquhart), spoke to one of the financiers overseas. Urquhart was asked how he knew that he in fact spoke to someone overseas. He conceded that the call could have been a local one.
He was "impressed" with the way Roberts talked, the "bank guarantees" and the call to the "overseas financier". This is why he referred some of his clients to Roberts. He said that he received monies from clients and passed this on to Roberts. At times he issued cash cheques to Roberts for overseas expenses.
Urquhart was asked why he kept on referring clients to Roberts when no loans were forthcoming. He said that up to a certain stage he believed that the monies would indeed be made available. Urquhart undertook to furnish the Committee with certain documentation, such as:
| a) | all monies received from clients by him (Urquhart) on the behalf of Roberts, the names and addresses of the persons the monies were received from and the relevant dates, |
| b) | all monies paid by him to Roberts and the relevant dates, |
| c) | the cash that was handed to Roberts. |
The official was to meet with Urquhart on 13 July 1998 to obtain this information. Urquhart did not turn up for the meeting because he "... did not have enough time to obtain the required information". It was agreed that he would visit the offices of the Committee on 20 July 1998.
| 4.5.3) | Meeting with Roberts, Mrs. Roberts and "'y" on 15 July 1998 |
An official met with Roberts, Mrs. Roberts (the bookkeeper) and "Y" at the offices of the CCU. Mrs. Roberts said, in Afrikaans, that the books were in a mess ("gemors"). Roberts did not repudiate this statement but said that not one cent was missing.
A spot check revealed that the following monies were received on the dates mentioned:
| 24 October 1995: Van dan Berg | R50 000 |
| 5 December 1995: Rademeyer | R50 000 |
| 15 December 1995: Steenkamp | R50 000 |
| 27 December 1995: ??? | R20 000 (1) |
| 27 December 1995: ??? | R2 000 (1) |
| 5 January 1996: Silwerbome Boerdery | R200 000 |
| 7 May 1996: Small Business Consultants Potch | R100 000 (2) |
| 17 August 1996: SNS Finansiele Dienste | R317 000 (2) |
(1) It could not be established where these monies came from.
(2) These amounts were received from Urquhart.
The amounts received were debited to the clients on unbound pages in their files. The normal procedure would have been to open a ledger. It also appeared that the funds of the various Serengeti companies and that of Roberts had been commingled. Funds were moved from one Serengeti company to another as the need for cash arose. During the spot check it appeared that Roberts also paid some expenses from his personal account. It could not be determined whether any of the monies received found its way into Roberts' personal accounts. The "messy" books and absence of financial statements prevented a conclusive assessment of the companies' or Robert's financial position.
Roberts was told at this meeting that he could address the Committee if he wished to do so. "Y" asked if they could bring along an advocate.
| 4.5.4) | Meeting with Urquhart on 20 July 1998 |
Officials of the Committee again met with Urquhart on 20 July 1998. From documents obtained from Urquhart it appeared that during the period 25 March 1996 to 24 May 1996 he received R828 000 from Serengeti's clients and paid R650 000 over to Serengeti. The difference, ±R178 000, was retained by him as commission for services rendered.
Urquhart handed over copies of the following deposit slips of amounts paid into the Serengeti account:
30 March 1996: R150 000
02 April 9996: R50 000
11 April 1996: R20 000
18 April 1996: R250 000
07 May 1996: R100 000
Urquhart gave the officials a copy of a letter dated 7 February 1996 from Trafford Investments Limited, to the attorneys of a Serengeti client. This letter was signed by Roberts as "Director - Southern African Office". The following is a quote from this letter:
"We are pleased to advice that our principals in London have agreed to a loan of R5 million in respect of the abovementioned client. It is anticipated that guarantees could be issued by the 29th February 1996 upon approval of the loan application which is being made to the South African Monetary Authorities (SARB)".
In a letter dated 20 February 1998 from Trafford Investments Limited, P O Box 1, SARK, GB-Channel Islands, to the Serengeti client it is stated:
"We are pleased to advice that you (sic) loan application has received favourable consideration. The conditions pertaining to the loan is (sic):
Amount: $1 530 000
Period: 5 years
Interest: 8.5% per annum payable six monthly in arrears
Lender: Trafford and/or assigns".
| 4.5.5) | Meeting with "S" and "G" on 23 July 1998 |
On 23 July 1998 officials of the Committee met with Messrs "S" and "G". They were anxious to obtain loans for their respective businesses. They said they responded to an advertisement placed by Urquhart in the "Landbouweekblacf. The advertisement allegedly stated that loans could be obtained at "lower rates". Originally Urquhart would have raised a loan for them with the Bank of Africa, but after the bank closed down he (Urquhart) told them about Roberts that already obtained loans for others from abroad. These loans were ostensibly available at an interest rate of 8.5 per cent per annum. Urquhart did viability studies for them and he was paid a commission for this "work" .
"'S" was a top broker for a well-known insurance company when he got involved with Roberts. He and tap officials of the insurance company developed an elaborate plan to pay Roberts his commission and refund the proposed "loans". It appears that "S" cleared the plan with his seniors at the insurance company. The "investment and policy" plan were to work as follows:
Assume "X" needed R1 million. "X" would then apply for a foreign loan of R2 million from Roberts. Interest on the foreign loan was payable after one year in arrear. The idea was that once "X" received the R2 million loan, he would invest R1 million with the insurance company. This investment would yield a monthly income and this income would have been used to pay the premiums on a policy which would yield enough after 5 or more years to repay the loan. The commission "S" received for selling the policy was paid immediately paid to him by the insurance company. He used these commissions to pay Roberts' fees. Payments of the premiums on the policies was deferred for three months. All those involved thought by that time (three months) the foreign loans would have been made available and that the payment of the premium would thus pose no problem.
"S" handed photocopies of certain documents to officials of the Committee. One of these was of a cheque of R317 000 in favour of Serengeti Moldings drawn the brokerage firm of "S". The idea was Roberts would pay this and other monies over to the insurance company. On 12 August 1996 a Serengeti Moldings cheque of more than R360 000 (the actual amount on the photocopy was blurry) was paid into the account of the insurance company (the destination bank was Adderley Street, Cape Town). "S" and "G" maintained that before the cheque could be cleared, payment thereof was stopped by Roberts.
At one stage "S", "G" another person and Roberts went to London to finalise the "loan" and arrange and pay for exchange rate cover. They took R137 000 in travellers cheques with them. In London they exchanged these cheques at a Bureau de Change for pound sterling. Roberts then left them and later returned with a "receipt". It appeared to "S" and "G" that Roberts invested the money for his own account. "S" now owes the insurance company a considerable amount of money and he will probably be sequestrated.