Watch out for rip-off foreign 'investments'
South Africans are losing huge sums to scam artists who take the
money and run, writes LUCIENNE FILD - June 4, 2000 Sunday Times sundaytimes.co.za
'THEIR brochures and newsletters looked so professional. I was
convinced the company was for real. I knew I was taking a risk, but
thought: he who doesn't dare doesn't win."
These are the words of a devastated Johannesburg pensioner who recently
lost R18 000 of his savings to a bogus foreign investment company.
His is one of many sad tales. There is the George businessman who
lost R300 000 to the same company. And the Financial Services Board
(FSB) is investigating complaints by 28 investors who were cheated
out of sizeable amounts of money - most losses reported to the FSB
range between US40 000 (R280 000) and 150 000 (just over R1-million).
The company accused of defrauding these investors is Mendes Prior.
But this is not the only foreign company operating illegally in SA.
Jim Millar, MD of the Financial Fitness College in Johannesburg,
says every week desperate investors phone him for help once they
realise their money has disappeared together with the company. Many
are victims of Mendes Prior, but recent cases he had to deal with
also involved companies known as Vantage International Management
Group Incorporated (Thailand) and Conrad Asset Management (Cayman
Islands, Luxembourg, Philippines, Sao Paulo).
Foreign investment companies promoting their business in SA without
approval from the FSB are doing so illegally. Thus far only 31 have
Last year, the FSB closed down a Johannesburg call centre illegally
canvassing clients for Mendes Prior. By then, the centre had contacted
15 000 investors. Russel Michaels, FSB manager of communications
and liaison, says many could have been conned out of a lot of money.
But most victims don't report their losses to the FSB because they
are deeply embarrassed or because they used money which had been
transferred offshore illegally.
Johannesburg businessman Tony Silva was about to invest just over
5 000 (R35 000) with Mendes Prior three weeks ago. The Smart Investor
magazine hit the streets just then with an article on a Johannesburg
couple conned out of R700 000 by a foreign company (Brattford Consultancy).
Hoping to warn others he contacted BT Money.
Mendes Prior phoned him four months ago. The calls are long distance
and therefore get priority treatment from receptionists and secretaries.
The representative asked if he would be interested in investing offshore. "I
said I might, but would need more information."
During March Silva received newsletters from Mendes Prior, and a
colour brochure on the company. Three weeks ago Karen Baker, claiming
to be a portfolio manager with Mendes Prior Europe, contacted Silva.
She told him about an excellent investment opportunity in a US IT
company called Dynacs Inc, due to have listed this Thursday.
"She told me Mendes Prior had secured an allotment of shares
in Dynacs. She said the shares were set to at least triple in price
on the first day of trading and that Mendes Prior would sell on the
same day to get the best return. I agreed to buy a minimum of 400
at 13 each."
Two days later he received an invoice, a share registration form,
a W8 form or certificate of foreign status, and an application form.
The pensioner tells a similar story, but he was under the impression
the "excellent" opportunity came in the form of shares
in Renaissance Properties in the US. He was told Mendes Prior had
inside information that the company was about to strike a big deal
which would cause its share price to triple. Everything is possible
on the stock exchange, he thought, and transferred the R18 000. He
never heard from Mendes Prior again despite numerous e-mails and
costly phone calls. "Whenever I phoned I was told everyone is
in a meeting. Nobody ever returned my calls. "
When Silva contacted us he indicated that Mendes Prior was still
expecting his transfer and would contact him. Together with the FSB
we drew up questions every investor should ask before placing money
with a foreign company. Silva agreed to pose these questions to a
Mendes Prior representative:
Silva posed these questions to the Mendes Prior person two days
later. He couldn't answer any questions and promised to have the
portfolio manager contact Silva. Baker phoned the next day. On the
first question she said the details were either provided by a market
research team or by a client. On the second, she said she would have
to get back to him.
On who its brokers were, Baker said the company didn't use brokers
but transferring agents. She was not able to refer him to other clients
since that information was confidential. He hasn't heard from Mendes
Don't waste your time flying overseas to look up the offices of
Mendes Prior or any other bogus company, Michaels says. They are
mostly phantoms and there are no offices.
These companies hire message service companies to take its calls
to make it seem as if there is an office. Unfortunately most investors
rely on very basic research when transferring their savings to bogus
offshore investment companies. If someone answers the phone on the
other side, most are satisfied that the operation is legitimate.
Michaels says some companies even provide local contact details
to make the investor believe they are dealing with a local company.
But when you phone that number you are probably dealing with a call
centre or message service. You are also unlikely to get a representative
of the company to come to the phone. There will always be an excuse.
While the chances of investors getting their money back are slim,
says Michaels, the FSB is pursuing all avenues to help.
He says the FSB has linked up with Interpol to try to stop Mendes
Prior from operating. It is under criminal investigation in the Czech
Republic and authorities in Indonesia report Mendes Prior has not
been approved there either.