Report 73 Business Practices Committee

Officials of the Committee met Messrs VdDussen and Deysel at the offices of RealityNet (Pty) Ltd(6) (RealityNet) on 30 September 1998. In letter to clients the name Nico van der Dussen appeared at the top of the letters. He described himself as an "Economic Risk Analyst". At the bottom of these letters were printed "in association with RealityNet" and "Intellectual capital working for financial services consumers".

VdDussen gave the officials a copy of an agreement signed on 8 March 1997 between himself and Coetzee. Coetzee signed the agreement in his personal capacity as well as in his capacity as trustee for certain Dia-Logos companies yet to be established. The essence of the agreement was that VdDussen sold a number of rights to Coetzee. These rights included VdDussen's "KEER" model, trade secrets, immaterial goods, copyright, goodwill and know-how. "KEER"(7) was an acronym for "Kontra Ekspansionele Ekonomiese Realitietsmodel". The English equivalent would be "Contra Expansionility Economic Reality Model".

This model included (translated directly from the Afrikaans) "... the reconstructuring mechanism developed by and thought out by VdDussen and which relates to the restructuring of persons' insurance portfolios with a view to low risk high return by using debt as an investment instrument and the setting up of additional expendable cash flow and matters relating thereto".(8)

The crux of this "model" was that VdDussen's clients should surrender their existing policies, use this money to pay off existing bonds and take out new life cover at a much reduced monthly premium, but with the same cover. The result of this "restructuring" was allegedly that the clients then enjoyed a substantially increased cash flow and a substantially lower total debt.

VdDussen presented 10 examples of real life situations to the officials where the application of his "KEER" model dramatically increased these clients' cash flows. Among these clients were a butcher, a farmer, a dentist, a preacher, a copy writer, an ophthalmologist, a garage owner, a businessman, a teacher and a medical doctor. The combined additional cash flows achieved by VdDussen for these clients were R85 091 per month.

The agreement made provision for a restraint of trade for five years by VdDussen that he would not market or sell the "KEER" model himself. The agreement further stipulated that VdDussen would receive R25 million for these rights. The R25 million was made up as follows:

VdDussen told the officials that he had sold some of the shares that he was to have received from Metanoia to Fourie. The deal between VdDussen and Coetzee did not materialise and VdDussen did not receive the shares in Metanoia. He thus sold shares in Metanoia that he did not own. He did, however, pay the Fouries R4 167 per month on their investments.(9) This is equal to an interest rate of 20 per cent per annum on the investment of R250 000. VdDussen said that he paid interest on a monthly basis to ±20 clients because of their investments in the "development process" of the model. He faxed the Committee the names of 11 of his clients and the monthly repayments made to each of them.

An official asked VdDussen how he financed the monthly interest payments. He said "... with difficulty" ("met moeite"). When pressed for an answer to the question, he explained that he received monies from people he knew who invested in "risk consortiums" (see section 11). An official asked him whether he used the monies paid by these clients to pay the interest as set out above. He answered in the affirmative. The official said that he wanted to make sure of VdDussen's answer. He repeated the question and VdDussen again answered in the affirmative.

The "KEER" model holds great expectations for VdDussen. In a letter dated 18 March 1998 to Fourie he inter alia stated (directly translated from the Afrikaans):

"The concept of financial restructuring and recirculation is increasingly being accepted as a reality on different levels and in different forums - with regard to both the macro economic relevance thereof and seen from an increasingly attainable grassroots implementation potential. In short this means that our vision of fifteen years ago now has the potential of a billion rand industry with enormous positive potential with regard to both the family and small business economic households and through this also the macro economic environment."(10)

VdDussen further stated:

"It is no secret that I am willing to go to jail for that I believe in and anyone who alleges that he/she does not know for what I stand, does not want to know it. However, I do not believe to accept personal responsibility towards those who are responsible for their own losses".(11)

It was suggested to VdDussen that he should address the Committee. He did so on 8 October 1998.