A DAMNING forensic report about financial
wrongdoing at controversial Auction Alliance (AA) has implicated a
string of auctioneers, liquidators, attorneys, bank officials and
prominent individuals in hundreds of millions of rand of secret
commission payments.
Although some similar transactions have been reported in the past, the forensic report, a copy of which Business Day has in is possession, shows how they were only the tip of the iceberg involving financial wrongdoing at the firm.
Auction Alliance and its founder and MD Rael Levitt brought an urgent interdict in the High Court in Johannesburg last night to prevent Business Day from publishing the report’s contents.
However, Judge Lotter Wepener turned down the application, with costs.
The report is the product of a forensic investigation that was carried out by auditor Allan Greyling in 2012, ironically at the behest of the board of Auction Alliance.
With the co-operation of senior staff and the assistance of 400 gigabytes of e-mail traffic, as well as company financial records, the Accounts at Law (A@L) produced a damning and detailed 86-page report.
But it has been gathering dust while a sequence of legal disputes, first about "ghost bidding" and later search warrants, which the forensic report was also subject to, wended their way through the courts.
Among other things, the report claims that hefty commissions were paid to counterparties that may have encouraged early foreclosures in order to facilitate auction business.
It also found that in the eight years that the investigation covered, the firm paid out referral commissions to the tune of R205m. These third-party payments would often fetch 10% and more of Auction Alliance’s tally.
For example, from July 2011 to February 2012, R13.6m of these payments were made from a total of R109m the firm had earned in its own legitimate sales commissions for the same period.
In the vast majority of cases, it appears the referral commissions were not declared either by Auction Alliance or by the recipients, a body of well-known professionals linked in one way or another to Auction Alliance’s property market activities.
While none of this looks good for Auction Alliance or Mr Levitt, those who were paid the kickbacks now have a lot to answer.
Named and shamed in the report are staff from some of the country’s top legal firms, well-known liquidators and financial advisers as well as officials at all of the banks.
Some of the shadiest activities contained in the report appear to be linked to liquidators, in particular the alleged barefaced siphoning of commissions by some of those involved in the liquidation of Dave King’s various enterprises in 2011.
In the King matters and others, A@L found a string of liquidators who were "receiving referral commissions in matters where they are the liquidators and disguising these payments to related party entities". Two of those named as main culprits in this regard were Hans Klopper and Rynette Pieters of Independent Trustees and The Bidding Gallery.
Both vehemently deny the claims.
Staff from Investec, FNB, Absa, Nedbank and Standard Bank were also on Auction Alliance’s indirect payroll. The report alleges that between them, the bank staff members were financially rewarded to the tune of R4.1m for pushing auctions and sales their way.
The report also provides extensive detail on a scheme allegedly headed by a former employee of Auction Alliance, who somehow channelled millions of rand in so-called commissions to companies that Mr Levitt may have had an interest in, as well as a company that is held by Mr Levitt’s financial adviser, apparently on his behalf. The A@L report has never seen the light of day, until now.
Auction Alliance put a halt to Mr Greyling’s investigations before more detailed evidence could emerge, citing financial constraints on the part of Auction Alliance in the wake of the adverse media coverage.
Mr Greyling duly wrapped up his work and sent the report to Auction Alliance, who then buried it.
In mid-2012, the Hawks began to investigate the media allegations, although that probe has stalled.
In its closing lines, the report argues that not only was Auction Alliance "in breach of its fudiciary obligations", it also "acted in contravention of various statutes".
However, Mr Greyling’s lawyer last night said he objected to the publication of the report, citing confidentiality and legal privilege.
fiona.forde@gmail.com
Although some similar transactions have been reported in the past, the forensic report, a copy of which Business Day has in is possession, shows how they were only the tip of the iceberg involving financial wrongdoing at the firm.
Auction Alliance and its founder and MD Rael Levitt brought an urgent interdict in the High Court in Johannesburg last night to prevent Business Day from publishing the report’s contents.
However, Judge Lotter Wepener turned down the application, with costs.
The report is the product of a forensic investigation that was carried out by auditor Allan Greyling in 2012, ironically at the behest of the board of Auction Alliance.
With the co-operation of senior staff and the assistance of 400 gigabytes of e-mail traffic, as well as company financial records, the Accounts at Law (A@L) produced a damning and detailed 86-page report.
But it has been gathering dust while a sequence of legal disputes, first about "ghost bidding" and later search warrants, which the forensic report was also subject to, wended their way through the courts.
Among other things, the report claims that hefty commissions were paid to counterparties that may have encouraged early foreclosures in order to facilitate auction business.
It also found that in the eight years that the investigation covered, the firm paid out referral commissions to the tune of R205m. These third-party payments would often fetch 10% and more of Auction Alliance’s tally.
For example, from July 2011 to February 2012, R13.6m of these payments were made from a total of R109m the firm had earned in its own legitimate sales commissions for the same period.
In the vast majority of cases, it appears the referral commissions were not declared either by Auction Alliance or by the recipients, a body of well-known professionals linked in one way or another to Auction Alliance’s property market activities.
While none of this looks good for Auction Alliance or Mr Levitt, those who were paid the kickbacks now have a lot to answer.
Named and shamed in the report are staff from some of the country’s top legal firms, well-known liquidators and financial advisers as well as officials at all of the banks.
Some of the shadiest activities contained in the report appear to be linked to liquidators, in particular the alleged barefaced siphoning of commissions by some of those involved in the liquidation of Dave King’s various enterprises in 2011.
In the King matters and others, A@L found a string of liquidators who were "receiving referral commissions in matters where they are the liquidators and disguising these payments to related party entities". Two of those named as main culprits in this regard were Hans Klopper and Rynette Pieters of Independent Trustees and The Bidding Gallery.
Both vehemently deny the claims.
Staff from Investec, FNB, Absa, Nedbank and Standard Bank were also on Auction Alliance’s indirect payroll. The report alleges that between them, the bank staff members were financially rewarded to the tune of R4.1m for pushing auctions and sales their way.
The report also provides extensive detail on a scheme allegedly headed by a former employee of Auction Alliance, who somehow channelled millions of rand in so-called commissions to companies that Mr Levitt may have had an interest in, as well as a company that is held by Mr Levitt’s financial adviser, apparently on his behalf. The A@L report has never seen the light of day, until now.
Auction Alliance put a halt to Mr Greyling’s investigations before more detailed evidence could emerge, citing financial constraints on the part of Auction Alliance in the wake of the adverse media coverage.
Mr Greyling duly wrapped up his work and sent the report to Auction Alliance, who then buried it.
In mid-2012, the Hawks began to investigate the media allegations, although that probe has stalled.
In its closing lines, the report argues that not only was Auction Alliance "in breach of its fudiciary obligations", it also "acted in contravention of various statutes".
However, Mr Greyling’s lawyer last night said he objected to the publication of the report, citing confidentiality and legal privilege.
fiona.forde@gmail.com
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