Treoc firm ‘a pyramid scheme’

2011-10-29 15:31

A company linked to the Treoc group, one of South Africa’s largest property schemes – with nearly R5 billion in investments – has been found to be a pyramid scheme, according to an official inquiry.

The executive chairperson and founder of Treoc Limited is the flamboyant Somerset West property developer Coert Coetzee. His “Treoc Way” approach to property investments allows young first-time buyers, who would normally only be able to afford to pay for one property, to own as many as four.

The scheme allows buyers to use trusts that have been created by Coetzee’s Treoc network to buy multiple properties financed through different banks.

The bank loans are mainly financed with income from rentals, while the founder of the trust remains responsible for the outstanding balance.

But Media24 Investigations has obtained documents that show that Treoc Capital, one of the Treoc stable’s financing arms, was liquidated earlier this year, and that investigations by concerned investors and liquidators shortly before a confidential inquiry labelled it a pyramid scheme.

Treoc Capital promised investors 24% a year in returns on their investments, but was unable to meet its obligations, leading to the investigations and hearing.

The investigations also found that Treoc Capital operated as a bank without a banking licence.

Some of the investors who brought the initial liquidation action have started to prepare a criminal complaint against Coetzee, who denies any responsibility, and one of his colleagues, Treoc Capital chief Ian Deyzel, who plays a key part in the Treoc group.

The findings were reported to the Reserve Bank, but the bank has declined to take action pending a police investigation.

Coetzee, who is planning a public listing of Treoc, this week said he had nothing to do with Treoc Capital and the loan scheme it operated as he had resigned from his executive and non-executive positions at a number of Treoc entities, including Treoc Capital, in 2006.

The liquidation of Treoc Capital – a company that acted as a bridging finance vehicle for property investors in which Treoc Limited, the holding company for Treoc entities, was a shareholder – followed a 2009 sequestration hearing into Surf Trust.

Surf Trust was owned by a young investor who owned multiple properties using the “Treoc Way” and who was unable to service his debt
to the banks.

Werner Britz, whose monthly income was less than R20 000, had a shortfall exceeding R20?000 on the payment of his properties worth more than R3 million obtained with Treoc’s assistance.

Planet Administrators liquidator Ryno Engelbrecht, whose company was involved in the hearings into both Surf Trust and Treoc Capital, said this week that he intended to use provisions of the Companies Act to investigate the possibility that certain creditors had benefited before the liquidation of Treoc Capital.

Coetzee this week told a group of top property experts attending a Real Estate Investor Group property development seminar that investors should buy more property by using rental income to repay bank loans.

It is unclear how exposed South Africa’s largest commercial banks were to Treoc-linked loans.

Absa and Nedbank did not respond to requests for comment.

First National Bank head of home loans, Jan Kleynhans, said while a few loans had been processed about three years ago, no current ones had
been processed.

Standard Bank’s Erik Larsen said the bank had no direct exposure to Treoc, but it could have financed some of the trusts that were part of the investment scheme.

“We would have had no way of knowing this (link to Treoc) as it was not disclosed upfront and it would be difficult to trace. We will obviously continue with our investigation,” he said.

Coetzee on Friday launched his new book, Sien die lig of sien jou gat! (See the light or see your backside!).

 

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