Class action claims R4.6bn from unlicensed Pretoria financial services provider.
By Donwald Pressly – Noseweek, January 2015
Investors in Pickvest, a Pretoria financial services company which is not licensed to operate as a financial services provider, are launching a class-action suit to recover R4.6 billion.
Now called Orthotouch and formerly, PIV Syndication, the company has more than 18,000 investors, most of whom are pensioners terrified of losing their life savings.
Repeated requests for information from the bosses have come to naught.
The Citizen reported in September that the Financial Advisory and Intermediary Services (FAIS) ombud had ruled that it was too late for investors to lay complaints with him.
The ombud noted that Pickvest had promoted property syndications worth R5.3bn; that R4.6bn in outstanding syndications was in business rescue, and that investors were “once again complaining of late interest payments”. He argued that the cut-off date for complaints had been March 30, 2011 – when Pickvest warned investors of a reduction in their monthly income.
In April 2013 Pickvest’s licence to render financial services was withdrawn by the Registrar of Financial Services Providers (FSP) and an appeal by Pickvest was dismissed in February last year.
In the meantime Pickvest reinvented itself as Orthotouch, with all the same old faces on its board except for the addition of the business rescue practitioner Hans Klopper, whose role many investors believe represents a potential conflict of interest.
One pensioner commented online under The Citizen’s story that she had invested R50,000 in 2010. Since then “Pickvest has had to be rescued and now Orthotouch… is in trouble again. [My money] is not available… I initially thought this was a good investment and received a monthly income from it. This has since dwindled to a much smaller amount”.
A host of investors complain that Pickvest and Klopper “don’t answer emails any more”. One said: “When
Orthotouch took over they said we will receive monthly payments starting with 6% interest that will [increase] every year.” Another investor, “Catharina”, wrote in August that Orthotouch owed her seven months’ interest. And “Worried” wrote on 26 August: “My mother is in the same boat. She had a stroke and is bedridden. All her money is invested and she used to live on the interest. Now the grandchildren must pay the rent, buy groceries and medicine…”
Moneyweb reported that the FSP registrar had withdrawn Pickvest’s licence because the company’s directors – among them Durandt Botha, brother of Willie, mastermind of that other property investment disaster, Sharemax (see noses98, 99,108 &116) – had used investors’ money to pay for properties without first taking transfer. This amounted to “a failure to meet the personal standard of honesty and integrity required by the (FAIS) Act of a fit and proper financial services provider”.
Through 22 property syndication schemes called Highveld – most of which are now in business rescue – investors acquired units represented by shares and loan accounts. They made their deposits into a trust account controlled by Pretoria attorneys Eugene Kruger & Co. Pickvest is said to have claimed they were advised by Kruger that the Department of Trade and Industry notice, stipulating that a property syndication was obliged to secure transfer before withdrawing funds from a trust account to pay for properties, did not apply to them.
One investor says it is unclear what happened to the properties supposedly bought, but it is thought that some went to Orthotouch; others to Accelerate, a new Georgiou Group company. After the crash of 2008, the property porfolio was transferred out of Pickvest, some of it to Orthotouch, but it is unclear how the Georgiou Group leveraged the Highveld Syndication money. All that investors know is their monthly payouts were reduced to a trickle in 2011 and have been sporadic ever since.
The nub of the class action is to determine just how much was shifted around, lost, or spent irregularly.
The Orthotouch website says Klopper, a non-executive director, has been “duly appointed Business Rescue Practitioner in the Highveld Syndication Group of Companies”. The big boss is Randburg billionaire property magnate Nicolas Georgiou, who is described as the founder of Orthotouch and who “serves as its sole executive director”. Panagiotis (Panos) Kleovoulou, a former accounts clerk at Nedfin Bank, is another non-executive director, as is Connie Myburgh, a former Hofmeyr Attorneys’ senior partner.
Investors Sharon Vlok of Porterville; Daniel Lamprecht of Mossel Bay; Charlene Jordaan of Pumula, KwaZulu-Natal; and Jean Papandonis of Gauteng have brought an application against 22 respondents including Georgiou; Eugene Kruger Inc; Klopper; Zephan Properties (Pty) Ltd (Bloomberg lists Nicolas Georgiou as the sole director); Orthotouch Ltd; Pickvest (Pty) Ltd; and Highveld Syndication No 19, No 20, No 21 and No 22.
The first applicant, Vlok, bought R1 million in shares in Highveld 19; Lamprecht bought shares in Highveld 20, 21 and 22 for R250,000 each; Jordaan invested R2.21m in Highveld 21; and Papandonis invested just over R800,000 in four of the Highveld syndications: 17, 19, 20 and 21.
Vlok said their claims are principally aimed at the directors and other individuals in their personal capacities because of their alleged fraudulent and/or reckless conduct that had resulted in investors losing much, if not all, of their investments. The business rescue operation had not been a success and they feared they would lose their capital.
Another investor, Henry Smith, said the group would argue that various front companies – including Pickvest and one called Zephan – were used to launder property transactions.
Dissatisfied investors have appointed Somerset West attorney J P Joubert to manage a trust account on their behalf while they pursue legal action.
Vlok argues in her papers that Georgiou, the first respondent, was central to all the schemes: “I am informed that he is one of the biggest private property developers in the country”. Among the respondents are Georgiou’s two sons, Michael and George, directors of various property holding companies within the Georgiou Group. Vlok says the group “is a quintessential family business… started by Georgiou senior (the father and first respondent)”.
The scale of the Georgiou business can be assessed from a Stock Exchange News Service (Sens) notice issued in November 2013, in which the group announced its intention to list a new company, Accelerate Property Fund Ltd. The notice describes the Georgiou Group as “property owning companies, supplying rental space in South Africa to the retail, commercial, industrial and hospitality sectors” and that it was founded by Nicolas Georgiou approximately 46 years ago.
The pre-listing Sens statement was intended to provide information for select investors “with regards to the private placing… up to 480,000,000 shares in the share capital of Accelerate”. The offer was conditional on a minimum subscription amount of R2,047,956,000.
In December it was listed as having former SA Reserve Bank governor Tito Mboweni as its non-executive chairman. Michael Georgiou is the CEO. On listing, the fund had an initial portfolio independently valued at over R5.9bn. Among its ten largest properties are Fourways Mall, Cedar Square, the Leaping Frog and Oceana House.
Accelerate is not involved in or referred to in the class action.
Meanwhile the Orthotouch website, where Highveld’s assets are listed, enumerates just ten properties. All are part of a Randburg development called Barnbury Cross. A number of them are listed as available at R0/m2 – hardly encouraging.
Business rescue practitioner Klopper said he was too busy to answer calls.
What is intriguing is Klopper’s stated intention not to interact with some of the investors who have tried to communicate with him online. One, Elna Visagie, was told by Klopper that he would not engage with her “on any forum”. In replying to another investor, identified only as Smith – who had asked about the “dumping” of Highveld assets into Orthotouch (in December 2012) – Klopper ranted on about financial journalist Magnus Heysteck’s podcast on Moneyweb. He accused Heysteck of lying about Pickvest’s being under business rescue. “It is not the legal position. If you do not believe it, please listen again”.
As for the snubbed Elna Visagie, who also wanted to know where her investments had gone, Kloppers said: “Insofar as Mrs Visagie is concerned, she is not included in this email. I do not give you permission to but you will most probably forward this to her – she can then tell you about how she defamed me.”
It amounts to a great deal of distracting information – none relevant – offered by a man who is clearly practised at evading questions.
On Hello Peter, the website on which consumers report good and bad service, there is a complaint about Orthotouch from “Gerda”: “The 108-page document for the meeting on 12 November… is so complicated that most people will not understand it – and we [are expected to] sign proxy forms!”
Moneyweb reported that tensions ran high at the meeting attended by 1,500 of the investors in Pretoria on November 12. Obvious absentees were Klopper and representatives of Orthotouch. The main speaker was Michael Kyriakides, a property professional with links to the Georgiou family but who said he was independent. He reported that the current structure was not viable because rental income on the Highveld properties – which in terms of the business rescue process owns the syndicated properties – was insufficient for interest payments pledged to investors.
He was quoted as saying detractors had influenced banks not to provide the R200m loan needed to upgrade and maintain the properties. No vote was taken on a possible restructuring of Orthotouch.
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