Moment of truth for Tigon saga in sight

Psychologists say there’s a phenomenon that many people who blatantly do wrong have a tendency to punish themselves even though they are able to present a resolute picture to the world. The fear and tension that, for example, go hand in hand with fraud, later become too much for them so that they even experience health problems.

A classic example is that of a skilled computer programmer in New York who automatically transferred minute amounts of interest on savings accounts at a large financial institution to his own account. The money streamed in, but he later had such qualms of conscience that he himself went to the authorities to make a statement about his stealing.  In other words, he blew the whistle on himself.

When the marathon case against Gary Porritt and Sue Bennett – it’s been dragging on for 14 years – resumed in the South Gauteng High Court last week, it was evident that they – especially Porritt – are paying a very high price for the ongoing court battles to fend off their trial on more than 3 000 charges of fraud, racketeering and contraventions of the Income Tax Act, Companies Act and Stock Exchange Control Act.

At one stage, Porritt went and lay down flat on his back in one of the small passages with his hand on his forehead. Bennett revived him with water. This happened just before the hearing started. Up until now they have, according to reports, already spent about R23m in legal fees, which has apparently been paid by certain trusts that own several farms in the Southern Drakensberg in KwaZulu-Natal.
 
They are conducting their own defence. This has already led to some odd situations such as when Porritt during an earlier hearing held his hand up in the air so that the judge and the prosecutor should talk slower as he was taking down notes. Judge Brian Spilg eventually ordered him to stop holding his hand up in the air for him.

There was also a discussion about their application for legal aid, but it was turned down. Bennett had in fact withdrawn her application when it appeared that her financial situation would first have to be investigated before legal aid would be considered. 

Porritt was the founder and chief executive of a financial services company, Tigon Ltd, which was listed on the JSE in 1995. Bennett was executive director. Porritt was very active in takeovers. 
A key witness in the case is Jack Milne, who was the head of the Progressive Systems College, which offered courses to the public on how to invest in shares on the JSE. Seminars were held that were well attended because Milne had created the impression that he could sniff out good investments on the bourse. 

Milne, who earlier appeared in court on the same fraud charges as Porritt and Bennet, pleaded guilty and was sentenced to five years in jail of which he served 11 months. Thereafter he disappeared off the scene. He was later tracked to the Western Cape by a journalist, who found that he was somewhat tatty in appearance and sad that he could no longer practise his old profession of investment specialist as his credibility was ruined. 

When Milne and Porritt met in 1999, it didn’t take long for them to conceive a plan to make piles of money. This was to establish an asset management business that is somewhat similar to a unit trust and in which the public could invest, with the difference that the growth is guaranteed by Tigon. It was a plan that looked too good to be true. 

According to Milne they wanted to avoid that the scheme should be subject to the watchful eyes of the JSE and the Financial Services Board. So it was decided to establish an unlisted company and to sell shares to the public. 

This money would then be used to buy shares in the listed Tigon. This is how Progressive Systems College Guaranteed Growth (PSCGG) came into being. The college’s sales staff marketed the shares and about three thousand people invested money that they would never see again, apparently partly based on Milne’s reputation.

Milne admitted that the prospectus that was issued contained misrepresentations to mislead the public. Some organisations, such as F&T Weekly (a precursor of finweek) smelt a rat at an early stage and its top investigative journalist, the late Deon Basson, began to warn the public that everything was not above board. 

Nevertheless, the scheme continued marketing shares by, among others, advertising in a Sunday paper, which vaguely referred to beneficial positions that the scheme had apparently taken on the commodities markets (such as coffee). 

According to Milne, the decline in trust led to a growing number of people who wanted to sell their shares back to the scheme. To such an extent, that the scheme ran out of money. He approached Porritt to make available R400m, which he never saw. Porritt had apparently used some of the scheme’s funds to finance some of Tigon’s takeovers. PSCGG collapsed in 2002 when Tigon failed to honour its guarantee and the almost 3 000 investors lost around R162m in the process. Tigon was liquidated in 2005.

However, last week it looked as if Judge Spilg’s patience was wearing thin and that Porritt and Bennett’s moment of truth had finally arrived after all the years. It seems questionable that they will, once again, be able to avoid a trial using clever legal moves. Maybe we will even get to hear of some of the companies that Porritt established in certain Caribbean jurisdictions, which offer a great degree of anonymity.

Lucas de Lange is a former editor of finweek and an author of two books on investment.