Julian Williams

It was estimated today that losses from a ponzi scheme involving the deceased Cape businessmen who were shot dead last week might exceed R2 billion. The Financial Services Board had visited fund manager Herman Pretorius last week Thursday, the day he died.

Eyewitness News reported today that editor of the Weekend Argus’ Personal Finance section, Bruce Cameron, said he believed a scheme in which two Cape businessmen lost their lives last week might see losses in the R2 billion region.

A bloody business meeting in Cape Town last week drew attention to the books of the Relative Value Arbitrage Fund (RVAF), where one of the fund’s controllers, Herman Pretorius, was visited by financial services board inspectors the day he died.

After the visit, Pretorius shot and killed his business associate, Julian Williams, before turning the gun on himself.

A Gordon’s Bay resident, Jacky, said she cannot believe how many people, including her mother were taken:

We’re not all financially in a situation where we can take an extra mouth to feed or an extra medical aid. It puts a lot of pressure on a family. I’m sorry to say this, but Mr Pretorius’ family are living very well at the moment.

Moneyweb has been tracking this story very closely and has dug up some startling information about the two men.

In an email directed to Julius Cobbett, a Moneyweb journalist, the day before Williams died, Williams said that he was stunned at the abuse directed at him by clients of his former business partner Herman Pretorius.

Cobbett writes:

Williams and I had been corresponding by phone and e-mail about investments Herman Pretorius had made on behalf of his clients. Pretorius traded under the name “Abante”. He had an unknown number of fiercely loyal investors who come from small Western-Cape towns, such as Moorreesburg, Porterville, Hopefield, Malmesbury, Durbanville and Riversdale.

In an e-mail sent Wednesday last week, the day before he died, Williams wrote: “I am stunned that abuse is being directed at me from investors in ‘Abante’. I can only presume [Pretorius’s] ‘Abante’ investments refer to the RVAF, but I must confess I don’t have a knowledge of what else Pretorius is promoting”.

Williams concluded: “It appears that a lot of the abuse seems to be coming from Pretorius’s network of brokers and, I must say, some of the stories I am hearing are quite bizarre.”

Enter today’s news of the estimated R2 billion losses associated with RVAF:

Pretorius had been running an investment scheme called the Relative Value Arbitrage Fund (RVAF). The fund’s investors appear to have had the utmost faith in Pretorius, accepting the reported returns at face value. These returns were consistently around 20% a year, even through the financial crisis of 2008. Pretorius was not registered with the Financial Services Board (FSB) and the fund had no third-party administrator. Investors in reputable hedge funds usually receive their statements from an independent administrator. This provides them with comfort that the returns are in fact genuine. Investors in the RVAF received statements directly from Pretorius. The statements are basic in the extreme.

The RVAF was not the only investment promoted by Pretorius and brokers affiliated to him. In 2006 he started selling preference shares in SA Superalloys, a public company directed by Williams and his business partner, James Ngculu, a former ANC MP.

The preference shares paid a dividend of 20% and had a lifespan of three years. In 2009, new prefs were issued with a lower, but still generous dividend of 15%. This year no dividends were paid, which sparked some unhappiness among Pretorius’s investors. At last count, some R140 million was owed to 500 preference shareholders.

It seems Pretorius and his brokers blamed Williams for the dividends’ evaporation.

Cobbett had put in his investigative work however, and had been tracking the story for quite some time. Then the two men were dead.

Cobbett continues:

E-mails received from investors, and their comments under my articles, speak of a strong loyalty towards Pretorius and anger towards Williams.

One apparent investor, “John”, even wrote of the man who allegedly gunned Williams down at his place of work: “Herman was the innocent party in this. He was a gentleman and didn’t want to let down his investors. My thoughts are with his family.” John added: “I am afraid Julian was a vicious, arrogant man who has damaged many peoples’ lives.”

In an e-mail dated July 6, Williams wrote to this reporter: “I am discouraged that I am taking so much abuse over this [SA Superalloys dividend] matter, but I think many of these investors have been with Pretorius since the early nineties so I think it is difficult to get a fair hearing – they are very loyal to him.”

On June 14, Moneyweb published an article which noted that some financial advisers had questioned Pretorius’s high returns.  See: Former hedge fund boss’s returns questioned. On May 31 I visited Pretorius at his offices in Cape Town. Pretorius enthused about various private-equity ventures he was busy with, but failed to answer questions about the RVAF, which was the focus of my investigation. On June 6 a draft copy of the article was sent to Pretorius with the invitation to correct possible factual errors or offer additional comment. He did not respond. A further final draft was sent at midday on June 13, the day before publication. Again, no response was received.

The article prompted e-mails from outraged investors.

One investor wrote to me on July 21: “I have been looking into my investments at Abante and have also done a thorough due diligence to establish if my investment is safe. As far as I am concerned I foresee no problem with any investment that I have at Abante. I believe that your source is either uninformed or is trying to sow doubt in the minds of the investors. I believe your source is a certain Julian Williams and I believe that Williams will be the one who will have to apologise for the lies being published by him.”

For the record, my “source” was not Julian Williams. I was alerted to Herman Pretorius and Abante initially by the relative of an investor and, later, by concerned financial advisers.

On Tuesday this week, it all began to make sense, as Cobbett explains:

The Financial Services Board (FSB) visited fund manager Herman Pretorius last week Thursday, the day he died. On Tuesday morning, the FSB’s Gerry Anderson confirmed that a “team of FSB inspectors visited” Pretorius’s offices. Anderson is the FSB’s deputy registrar for financial services providers.

Earlier this month, on July 10, Anderson told this reporter that the FSB had engaged with Herman Pretorius with regard to his activities during 2011. Said Anderson: “Such engagement cannot be seen as formal investigation.

However, Anderson said that a case had been opened against Herman Pretorius after he received information from Moneyweb: “Upon receipt of your recent information, we have opened a case on Herman Pretorius and are looking at the matter.”

The FSB’s visit indicates that Thursday must have been an extremely stressful day for Pretorius. He had scheduled a meeting that evening in Moorreesburg to address clients about the status of their investments. Pretorius also had a meeting that afternoon with his former business partner, Julian Williams. It was at this meeting that Pretorius allegedly shot Williams twice before turning the gun on himself.

Pretorius had received a number of withdrawal requests from investors in his Relative Value Arbitrage Fund (RVAF). These investors had been persuaded that the RVAF was perhaps not as safe as they had been led to believe.

It is likely that withdrawal requests were sparked by an article published by Moneyweb in June, which noted that Pretorius’s high returns had been questioned by financial advisers.

Wow.. That is some startling information.

Do you know anything further about this? Tell us in the comments field below. Check out the timeline of events on the Moneyweb website HERE.

[Source: Moneyweb]