How the Ponzi king ruined an opera star
What compelled con man Barry Tannenbaum to commit the biggest fraud in South Africa’s history? And what enticed hard-nosed businessmen and celebrities to gamble on his dodgy promises? In this edited extract from his book ‘The Grand Scam’, Rob Rose looks a
JUNE Kraus is a break from the mould of the usual Tannenbaum victim. She isn’t a lawyer; she isn’t a highly paid executive; she isn’t even an architect. In fact, Kraus, a Salzburg-trained opera singer, has never had what you might call a real job in her life.
Born in New York to parents who had escaped Hitler’s concentration camps, she trained at the world-famous Juilliard School of Music in 1966 before being invited to take master classes in opera, concert and art songs in Austria’s Alpine town of Salzburg at the prestigious Mozarteum, nearly two centuries old.
Even among such august company, Kraus was precociously talented. In her first year as a professional at the Salzburg Opera House, she sang an astounding six leading roles — kicking off a European stint in which she had 33 leading roles in musical productions from Vienna to Verona.
In 1986, when she moved to South Africa — where she has performed for Nelson Mandela, among others — it was something of a cultural coup for the country. It was also, fatefully, where she met Dean Rees two decades later.
“I was one of the first 60 investors,” Kraus says, echoing a line that was peddled frequently to all Tannenbaum’s victims.
Despite her more than two decades in South Africa, Kraus’s American East Coast accent hasn’t faded. She speaks purposely and warily, as if the scars of having been swindled once are still raw. Nor has her bitterness towards Tannenbaum diminished in the years since she was scammed.
“I met Rees [Tannenbaum’s agent] through a friend, who told me it was a fabulous investment,” she says.
“I had a meeting with Rees and Tannenbaum in 2007. They took me to the Design Quarter [near Fourways, north of Johannesburg] and bought me expensive champagne.”
As the French champagne flowed at the meeting, attended by more than 50 would-be investors, Kraus’s immediate thoughts about Tannenbaum were unflattering.
“Tannenbaum had no personality,” she says. “He was fat, dysmorphic, an unappetising person. He looked like a bean bag with tiny eyes, a tiny mouth, a small nose. He didn’t smile, he had no charm, no expression. You wouldn’t remember him if you passed him in Sandton City the next day.”
But Kraus says it wasn’t Tannenbaum who convinced her: it was Rees.
She is hardly any more complimentary about Rees, though, describing him bitterly as “a slimy eel, a bit creepy and a bit flashy with his cars”.
Nevertheless, the seduction tactic worked. Kraus took her entire inheritance of R6-million and paid it into an overseas bank account in the tax shelter of the Isle of Man — a bank account belonging to Rees.
The first year of investment, she says, worked out well. Statements arrived punctually, detailing exactly how her investment was rocketing.
Excited about what she was earning — at least what the statements claimed she was earning — Kraus then told her son, Daniel Kraus, about this sensational investment.
But Daniel, the founder of stockalert.co.za, a registered futures and currency dealer and regular talking head on financial television shows on CN- BC Africa and Summit Television, was immediately suspicious.
“He said to me don’t believe it — it’s a Ponzi scheme. But to me it sounded legal and above board, so I kept rolling my investment,” she says.
When you speak to Daniel Kraus, the first thing he says is that if he finds Barry Tannenbaum, he’ll kill him. He’s exaggerating, as you’d expect from a cocksure stock-market trader who trades in absolutes, but there’s more than a fleck of steel in his voice when he says it.
“I told her from day one it was a scam, and two years later it came out that it actually was,” says Daniel. “I mean, I knew it was fishy, but I didn’t think it was an actual Ponzi scheme.”
Daniel says the money that Tannenbaum took “would have been our inheritance, but now it’s all been pissed down the drain”.
When Daniel challenged his mother on this “investment”, June would always show him the “statements” sent to her by Rees as “evidence” that it was legitimate.
“I couldn’t believe how amateurish it looked,” he says. “They were just PDF files with numbers.
I’d say to her: ‘Mom, this isn’t from a bank, it’s not a bank-generated document. It’s just a PDF — I could make this at home in 10 minutes.’ “She’d always reply: ‘No, no, here’s the signature and everything.’ ”
What made it “extra fishy”, he says, is that Rees had warned her repeatedly not to breathe a word to anyone about the scheme — supposedly because it was a “niche investment for only six to 10 people”.
“What legitimate business operates like that?” he asks.
By the time it went bust, June had every cent tied up with Tannenbaum.
On paper, she was worth more than R11-million. In reality, she hadn’t a shiny rand left.
“I ended up with zero,” says June today. “My son had to give me R60 000 just so I could get through the year. I realised I needed to do something, so I started my own business. I started my own life.”
From being a wealthy, virtually retired singer who worked when she felt like it, a cash-strapped June Kraus hit the performance trail with purpose.
First, she founded the June Kraus Performance Academy to teach kids everything she knew about the parabola of performance singing, then she hit the concert trail with vigour from mid-2009.
Daniel says that his mother still gets tearful about the episode, having squandered an inheritance that her parents had worked for after escaping from a concentration camp.
“‘I imagine that she’d rather not be working, but her business has become a huge success. A lot of those kids she teaches to sing idolise her, so, in a way, I
He looked like a bean bag with tiny eyes, a tiny mouth, a small nose. He had no charm
suppose some good has come of it,” he says.
That might be a bitter consolation when your inheritance, built up over six decades, has been sucked away without a second thought by a sociopath living thousands of miles away. But it’s something. Not everyone had a silver lining.
Rose is the editor of Business Times. ‘The Grand Scam’ is published by Zebra Press (recommended price R220)