Ponzi scheme: BHI Trust inquiry is
Forensic investigator raises the alarm over the decision to hold an in-camera probe into the swindle in which investors lost billions and calls for the minister of finance to intervene
The master of the Johannesburg High Court has handed down an order for an in-camera inquiry into the affairs of the estimated R2.7 billion BHI Trust Ponzi scheme to establish how much money is left in the fund to disseminate to scores of investors who lost millions when the scheme collapsed.
The order, which was handed down on 13 November, requires that the inquiry into the affairs of the BHI Trust be conducted in terms of section 152(2) of the Insolvency Act 24 of 1936, as amended, opening the door for witnesses to be subpoenaed to give evidence before the inquiry.
However, forensic investigator Bart Henderson, who has had 35 impacted investors’ cases referred to him, which he believes is only the tip of the iceberg, has raised the alarm regarding the secrecy surrounding the closed probe.
He said the order to hold the inquiry in camera was jumping the gun and not in line with the best interests of all of the trust’s investors. Many investors would oppose an application for a final liquidation order.
Henderson also said the police investigation appeared to be moving slowly and called for the minister of finance, Enoch Godongwana, to intervene and launch a commission of inquiry into the matter.
However, the treasury told Mail & Guardian this week that it was not able to intervene.
Evidence of the unravelling and collapse of the BHI Trust emerged after co-trustee Craig Warriner handed himself in to the police and told the Randburg magistrate’s court in the middle of last month that he wanted to plead guilty to a charge of fraud for his alleged “irresponsible” handling of investors’ money.
One of the victims, attorney Werner Cawood, who invested R653658 in the trust, and is believed to be one of thousands of investors, applied for the urgent liquidation of the fund, which was granted on 24 October.
Gert Louwrens, Steyn de Wet and Sumaya Mohamed Ali were appointed joint provisional trustees.
In their first circular to investors on 2 November they noted they could only confirm: “We have been made aware of funds held in a Nedbank account in the name of the trust in the amount of R4785164.96 as of 25 October 2023.”
According to the order handed down this week, the master of the high court in Johannesburg will preside over the inquiry proceedings, which will be conducted by the trustees, and produce a report “if so required by the court” covering:
• The identity of the witnesses who gave evidence before him, the nature and the purpose of the evidence of each such witness, the relevance thereof and the way in which such witnesses’ evidence was of assistance in regard to the matter or matters being investigated;
• What assets or monies, if any, were, or are likely to be, recovered for the benefit of the insolvent estate in consequence of the evidence revealed;
• What liabilities of or claims against the insolvent, if any were, or are likely to be, reduced or extinguished for the benefit of the insolvent estate in consequence to the evidence revealed at the inquiry [sic], and his reasons for stating so and
• The duration of, and costs incurred in, the holding of the inquiry as well as any other matters he deems appropriate.
In addition, it was ordered that the inquiry be held in camera and that “the contents of the application, and motivation and evidence to be taken at the inquiry, be kept confidential and private and not be discussed” without prior permission from the master of the court.
The order grants the master the power to subpoena witnesses to the inquiry and “the authority to request warrants of apprehension from the applicable magistrate for the apprehension of any witness duly summoned who does not comply with the applicable subpoena”.
The BHI Trust’s insolvent estate will pay all the costs of the application, the inquiry and incidental expenses, according to the order.
Henderson questioned the move to start the inquiry before a final liquidation order had been granted.
“It seems the liquidators can’t even wait for the final order, which would have been opposed by quite a number of investors.
“And again, as with Cawood, the liquidators approached the master on an ex parte basis leading to absolutely no transparency in the process,” Henderson said.
He said the requirement in the order that the inquiry be kept “confidential and private” was “most problematic in that regard”.
“To me it seems that the process is robbing investors of say or choice in the process as creditors. Hardly democratic, if you ask me,” he said.
Meanwhile, it emerged this week that several firms associated with either the BHI Trust or Global & Local, the financial intermediary which referred 90% of Henderson’s impacted investors, as well as others mentioned in the media, to the former to invest their money, have had directors in common.
When Investec cut ties with Global & Local on 9 November, the com
pany sent a letter referring its investors, who were previously using an Investec account platform, to another intermediary, Integrity Asset Management.
“Global & Local recommend their Investec investors affected by Investec giving Global & Local the boot to go to Integrity Asset Management.
“A director of Integrity Asset Management is Mr Sona Pillay, who is also a director of Rubicon Administration Services, and Rubicon Trust,” Henderson said.
“Rubicon Trust CEO André Christo du Toit was also previously at Rubicon Administration Services where, in May 2009, he took up a position with Rubicon Administration Services, according to his profile on the current Rubicon Trust website.
“This Rubicon Administration is where a certain Kaddy (Kriticos) Cost has sent out emails on behalf of both Rubicon Administration Services and BHI Trust as recently as October 2023,” he said.
BHI Administration was the administrator for BHI Trust, according to papers filed in the Johannesburg high court.
Website archives place Du Toit and Cost at Rubicon Trust as far back as 2012. Company Intellectual Property Commission (CIPC) records place Du Toit, Cost and Pillay at Rubicon Trust as far back as 2014.
Michael Haldane, a financial adviser at Global & Local, was a director of Rubicon Administration in 2007.
Henderson asked: “If this isn’t a potential conflict of interest and less than arm’s length relationships then what is?”
Responding to questions about the directorships, Pillay said Rubicon Administration owned Rubicon Trust from 2012 to 2017.
“In 2018, André and I purchased the shares of Rubicon Trust from Rubicon Admin.
“We then became independent. Rubicon Trust is a fiduciary services company; we provide executorship, trusteeship, directorship and corporate secretarial services,” he said.
“André and I were not part of Rubicon Administration when Rubicon Administration provided admin services to BHI Trust.
“Rubicon Administration is dormant and has been since 2019 — no employees, no contracts, no income, small balance on the bank account,” Pillay said.
“To my knowledge, operations ended on [sic] 2019. I was asked to process deregistration in June 2022 and subsequently was appointed director to ease the processes with CIPC, Sars and the banks.”
However, Henderson said as recently as June Global & Local included in a client proposal the statement that “Rubicon Administrators charge an annual admin fee of 0.24%”, implying that Rubicon Administration is not wound down and still in business with Global & Local and BHI Trust.
Pillay added that he is currently a non-executive director of Integrity
Asset Management, in “purely a fiduciary role because of my experience and expertise gained over the years.
“Mainly to assist and guide the board during meetings and general executive management decisions.”
Du Toit said Pillay had addressed the M&G’S questions, however, he added as far as his employment with Rubicon Administration was concerned: “I joined there in 2009 as an employee to only administer deceased estates, draft wills and register trusts and for no other reason.”
Cost, who is believed to be abroad, could not be reached for comment, while Haldane had not responded to questions at the time of publication.
Global & Local, which last week promised to respond to questions, and was sent several follow-up queries this week after the M&G spoke to the company’s attorney, had also not responded at the time of publication.
The Financial Sector Conduct Authority is investigating the trust, as well as registered financial services providers, in relation to the matter, and the police have confirmed a case of fraud has been opened against Warriner and a second case of fraud was opened two weeks ago.
Hawks spokesperson Katlego Mogale said on Wednesday: “The case is still under investigation, and DPCI [Directorate for Priority Crime Investigation] is not in a position to divulge how far the investigation is.”
Henderson said the police investigation did not seem to be making progress. He called for the minister of finance to launch a commission of inquiry into the BHI Trust’s collapse, saying it was on a similar scale to the Masterbond fiasco, which affected 20 000 investors who lost R600 million in the 1980s and 1990s.
However, the treasury said it would not interfere with the Financial Sector Conduct Authority investigation.
“The BHI Trust matter is currently being investigated by the Financial Sector Conduct Authority (FSCA).
“While the minister of finance is the executive authority overseeing the national treasury and oversight, he cannot perform the investigation and supervisory work that is the constitutional mandate of entities like the FSCA and the South African Reserve Bank (Prudential Authority),” the treasury said.
“The minister of finance cannot and should not interfere in the work of the police to ensure that law enforcement agencies operate independently, without undue influence from the government.”
The BHI Trust is believed to have links to at least 11 other entities, whose names are known to the M&G, both locally and in the UK and the Virgin Islands.