Donor Accused in Ponzi Scheme

By COLlive Reporter

South African philanthropist Barry Tannenbaum of Johannesburg, a donor to Chabad causes, is being accused of one of the biggest frauds in history – the suspected fleecing of up to $1.5 billion from wealthy South African investors.

He is denying the allegations.

Asked if he had perpetrated the scam, Barry Tannenbaum pointed to two men in rumpled casual clothes in his office and said: “That’s just what we are busy discussing at the moment.”

Asked if he had set up a Ponzi scheme – a pyramid investment rort like that used by Bernard Madoff in his $US65 billion ($80 billion) scam – Mr. Tannenbaum said, “absolutely not”.

Mr. Tannenbaum is accused of offering 200 per cent annual returns to investors in his pharmaceutical ingredient importation businesses, Frankel International and Frankel Chemical Corp, and forging orders from big drug companies to back his claims.

The allegations have rocked the South African establishment. Mr. Tannenbaum is the grandson of the founder of the pharmaceutical giant Adcock-Ingram. His father, Harold, is not only known for power and wealth but for piety. The estimated 400 investors so far thought to be caught in the scheme are drawn from the ranks of the business elite in South Africa, Germany, the United States and Australia.

Mr. Tannenbaum is well-liked, and reportedly had a “sterling” reputation in Johannesburg’s elite business circles. His family is one of the most highly respected in Johannesburg.

Mr. Tannenbaum also has registered a string of businesses in Australia, including Oxygen Pharmaceuticals and Frankel International.

It was reported by the South African investigative magazine Noseweek that a Johannesburg businessman, Christopher Leppan, applied to the High Court in Johannesburg to have Mr. Tannenbaum declared bankrupt after demanding the return of his capital and interest only to discover that Mr. Tannenbaum had closed his accounts and moved to Australia.

Investors include well-known South African business figures such as Sean Summers, who invested more than 50 million rand ($7.7 million) and says he is now owed more than 100 million rand, and Mervyn Serebro, who invested 25 million rand and believes he is now owed more than 50 million rand, Noseweek said.

It is not yet known how much money is supposed to have disappeared.

A private investigation firm has posted online documents it claims are fraudulent orders for AIDS drugs that were used in the alleged scam.

Mr. Tannenbaum, who had frequently vacationed in the Indian Ocean resort of Umhlanga, South Africa since his schoolboy days, had enjoyed a friendship with the local Chabad Shliach Rabbi Shlomo Wainer. In 2006 Tannenbaum donated a new Torah scroll to the Chabad Synagogue.