US Investigators Kroll Gave All-Clear to Alleged Ponzi Pair
By James Doran
31 August 2009
• Kroll screened scheme and was satisfied
• 'Swindle' cost wealthy South Africans £150m
Kroll, the secretive investigations consultancy, is facing embarrassment after giving a clean bill of health to a pair of alleged fraudsters who are accused of running a $248m (£150m) Ponzi scheme.
The revelation is a blow for Kroll as the American firm is still reeling from the discovery that one of its top investigators gave a similar endorsement to Sir Allen Stanford, the Texas billionaire accused of orchestrating a $7bn Ponzi scheme.
In June 2007 Kroll was asked to investigate Barry Tannenbaum, a South African, and Dean Rees on behalf of a New York-based asset management firm that was considering investingplacing a large investment with the pair.
The due diligence investigation found nothing untoward with either Tannenbaum or Rees and is said to have shown both men in a "very positive light", according to sources.
Since then Tannenbaum and Rees have been accused of running a scheme involving the importation of antiretroviral drugs into South Africa for the treatment of HIV. They are being investigated by South African police.
Tannenbaum, 37, allegedly promised 400 wealthy South Africans that he would reap returns of 15% every 12 weeks by selling the raw ingredients for Aids drugs to pharmaceutical companies.
But in 2008 it emerged that investors had not seen a return for a year or more.
A group of angry investors hired a team of private investigators who claimed that many of the contracts with the pharmaceutical firms were forged.
The investigators went to the South African authorities this summer and a taskforce of five national law enforcement agencies started an investigation into Tannenbaum.
Rees, meanwhile, is accused of luring in the wealthy clients. Both men deny any wrongdoing.Documents seen by the Guardian show that Kroll Background Screening conducted a thorough investigation of both Tannenbaum and Rees on 18 June 2007.
The finished Kroll report is understood to have been passed on to others, unwittingly pushing even more potential victims into Tannenbaum's alleged fraud.
Kroll declined to comment on the report.
Tannenbaum is currently in Sydney, where he claims the accusations against him are false.
"The accusation of me running a Ponzi Scheme is unfounded and drivel. I was not running a Ponzi scheme at all," he said.
He expressed relief at the discovery of the Kroll report, however, and suggested that it could be helpful in his ongoing battle to clear his name.
"Thank goodness there is, at last, someone who believes that I am not all evil," Tannenbaum said.
Rees, who is understood to be living in Switzerland, could not be reached for comment.
Electri International, a Maryland based foundation for electrical contractors, is suing Kroll over $6.3m (£3.8m) it placed with Stanford International Bank, Sir Allen's Antigua-based operation, even though it paid Kroll Associates $15,000 in fees, plus expenses, to conduct due diligence on the bank.
Kroll was further embarrassed in the case as it is alleged that Thomas Cash, in charge of Kroll divisions in Florida and the Caribbean, had a close relationship with Sir Allen Stanford.