Meet Belvedere Ponzi buster David Marchant – Kellermann’s nemesis

David Marchant, editor and publisher of OffshoreAlert, specialises in tracking down fraudsters who use offshore financial centres. His latest and potentially greatest expose’ is the Belvedere Management Ponzi scheme operated out of Mauritius by two South Africans – Cobus Kellermann and David Cosgrove. In this special podcast, Marchant talked to me about how he came across the scam, how it operated, why the fraudsters chose Mauritius and how he rates the chances of those South Africans who were fleeced getting their money back. Apologies for the quality of the audio. We had some disruptions to our studio which have since been addressed. – Alec Hogg

Joining us is David Marchant, the man who started the whole Belvedere exposé. David, just take us back. Offshore Alert is your organisation. What is it that you specialise in?

Well, I’m an investigative journalist who specialises in investigating and exposing serious financial crime that’s committed in or through offshore financial centres.

The story that has caused so many ructions here in South Africa: how long did it take you to finger Belvedere Management?

Well, I first became aware of Belvedere two years ago and started collecting documents, but I got sidetracked with other investigations and running a business and I only started to really apply myself to investigating and exposing it probably three or four months ago.  I made a decision that I needed to get this out right before it collapses under the weight of its own activity, which all frauds do.

In South Africa, we know David Cosgrove, who has a very patchy record, and of course, Cobus Kellermann, who now seems to have left the country in a hurry (he went off the radar for five days but since re-emerged to defend himself).  How did it all work?

David Cosgrove - 50% Cobus Kellermann's partner in the Belvedere Ponzi scheme
David Cosgrove – 50% Cobus Kellermann’s partner in the Belvedere Ponzi scheme

Basically, most frauds can be broken down into simple terms.  In this case, you had a group under the control of David Cosgrove and Cobus Kellermann, and helped by Kenneth Maillard.  They set up hundreds of hedge funds and most of the hedge funds (or possibly, all of them) were operated by other people, who went forth into the world raising money from investors, and they were very successful.  They’ve raised a minimum of hundreds of millions of Dollars (probably billions of Dollars) and it all went into structures created by Belvedere Group.  Money was kicked up to Belvedere and many of these funds (possibly all of them) were involved in fraud.  At the end of the day, you’re just talking about a transfer of money from thousands of investors around the world, into the pockets of Cosgrove, Kellermann, Maillard, and others.

Let’s talk about those others because the name deVere comes into the picture on numerous occasions.  Here in South Africa, we’ve uncovered that it is an organisation that’s driven by hard salesmen.  They don’t pay any basic salaries to their employees.  They give them a share of whatever they raise.  Have the names deVere and Nigel Green (the Chief Executive/Founder there) come up in your investigations?

Well, I’m familiar with Nigel Green and deVere in this particular case.  DeVere specialises in basically selling investments to the investing public.  In this particular case, they have clients who were invested in at least one of the funds run by Belvedere and they have been trying to recover money on behalf of investors who’ve been defrauded in this scheme.  There’s nothing to indicate that they are part of Belvedere.  They just raise money for many different schemes around the world.  In this particular case, I know they have been actively trying to recover money for their clients.

DeVere’s principal, Nigel Green, is very close to Cobus Kellermann.  Indeed, Kellermann was phoning the company regularly according to people I know who were on the inside there, and that would suggest that the relationship was perhaps a little closer than the one you’ve just painted for us.

Well, I don’t know anything about that but it could be that they were trying to find out what happened to their money, and he was calling them to give them one lie after another.  I don’t have any personal knowledge of that but that’s certainly a plausible scenario.

There’s also a company called U.A.M. from Switzerland that deVere had about $50m invested in – managed by Cobus Kellermann as well, which they’re battling to get their money out of – so one hears what you’re saying there.  Is it your assessment then that perhaps deVere is not a party that is implicated here, even though it’s quite a nice anagram of Belvedere (the last six letters) but more of an injured party?

Well, I think the injured parties are their clients.  My understanding of this is that deVere goes out and raises money to invest in different schemes.  Some of those schemes will undoubtedly fail.  Some of them will succeed.  My direct experience, just relating to Belvedere is that deVere has made extensive efforts to try to find out what happened to investors’ money.  I believe they have recovered substantial amounts and they’re seeking to recover the balance.

Cape Town money manager Kobus Kellerman - one of two SA kingpins behind the Belvedere Ponzi scam
Cape Town money manager Kobus Kellerman – one of two SA kingpins behind Belvedere Ponzi scam

From the way you’re reading this, the real problem individuals here are Kellermann and Cosgrove.

Yes.  DeVere isn’t the story here.  Belvedere Management Group is the story and that is controlled by David Cosgrove and Cobus Kellermann.  Kenneth Maillard’s role seems to be primarily to provide false Net Asset Values to investors and there are many others.  The scope of this fraud is breathtaking.  It’s astonishing.  There’s probably never been a fraud like this in the history of finance, just in terms of the complexity, the number of investors, the number of jurisdictions involved, and the number of shell companies involved.  It is truly staggering.

Where’s the money gone, David?

It’s gone the way of all frauds – a lot of it into the pockets of the people running it.  A lot of money was kicked up to Kellermann and Cosgrove.  They basically had a piece of every action and there was a lot of action here.  From every fund, money was kicked back up to them in the form of administration fees or investment management fees.  Any way they could get money out, they were getting money out.  There were a lot of related party activities that were basically insider dealing – the effect of which, was to transfer millions of Dollars from investors into the pockets of Cosgrove and Kellermann.

That wouldn’t have been all the money, though.  There would have been some of the money, presumably invested somewhere.  Do you have any insight into where that is and where indeed, investors might be looking to recover?

A lot of the investments are worthless.  A lot of it was in property, which I believe in some cases either doesn’t exist or has been massively marked up.  In at least one case in Stellenbosch in South Africa, one Belvedere company sold a property to another Belvedere company at a grossly inflated price and this just seems to have been part of a scheme to embezzle substantial amounts of money.  Where has the money gone?  You’re talking about a massively complicated recovery exercise.  I’m sure substantial amounts of it have disappeared by way of expensive vacations, expensive meals, expensive bottles of wine, and has been spent on things that cannot be recovered.  Some of it would have been invested in fixed assets, such as property.  No doubt, the ownership of that property is probably concealed through offshore trusts and shell companies.  It’s going to require an unbelievable effort on the part of liquidators to unravel this and unfortunately for investors, most of the assets recovered are likely to go to pay the fees and expenses of the liquidators.

The Mauritian authorities: what’s their role been?

Well, there’s a reason that Cosgrove and Kellermann chose Mauritius as a base.  This group has been around since at least 2008.  I’m sure Mauritius was chosen because you could more or less do whatever you wanted to do.  Notwithstanding that, the Mauritius Financial Services Commission did suspend a couple of funds last October and within days of the OffshoreAlert exposé, revoked the business licenses of the same two companies.  Look, it’s a small country with limited expertise.  I’m not sure that it’s the most honest country in the world from what my research indicates, and it was chosen for a reason but there are many jurisdictions similar to that.  What’s remarkable about this is that the Kijani Commodity Fund, which is a $130m Ponzi scheme (a small component in this); after it was essentially shut down in Mauritius, it found a home in the Cayman Islands, which is amazing because the Cayman Islands is a sophisticated, well-run jurisdiction.  They really dropped the ball on this one.  It’s quite surprising that something too fraudulent for Mauritius would be allowed into Cayman.

David Marchant: Not worried about retribution from crooks - "I'm no pushover."
David Marchant: Not concerned about retribution from crooks – “I’m no pushover.”

David, OffshoreAlert – your business – has done an enormous service to the community and not least, to the people in South Africa in exposing all of this.  Do you ever fear for your own safety?

Well, I’ve been exposing financial crime since OffshoreAlert was launched in 1997.  The first person I exposed is currently serving 17 years in prison in the United States for fraud and money laundering.  When I was exposing him, he had a T-shirt made that read (in Spanish) ‘David Marchand is only alive because killing him would be a crime’.  I came to terms with the risks involved in my work.  Many years ago, I was threatened by a Russian via telephone.  Russians are very rough.  They think nothing of killing journalists in Russia, although it’s a different kettle of fish in the United States.  I didn’t sleep at my home for a few days.  When I put the key in the ignition of my car, I half expected it to explode.  I had to go through a mental exercise.  If I wanted to continue doing this then I had to come to terms with the risk.  If I couldn’t come to terms with the risk, I should get out of the business.  I therefore processed the information, which is something that I do very well and I haven’t worried ever since then.

My attitude has basically been ‘F-it’.  I’m not going to be a pushover for anyone.

If you want to come after me I’m not going to go down lightly, whether it’s physically or financially.  I’ve been sued many times.  I’ve spent more than half-a-million Dollars on legal fees, defending libel actions.  In total, since OffshoreAlert was formed, I’ve spent $1.3m on my own legal fees since 1997, one way or the other.  I’m no pushover.  My mentality is that I’m going to do my job professionally and competently, and always treat people fairly. But if crooks want to cause me problems, then I have a few surprises in store for them.  I’m smarter than they are.  I’m more aggressive than they are.  They can’t defeat me.  That’s my mentality.

A great mentality to have as an investigative journalist, particularly when there’s so much at stake.  If we pull it all together, from what you’ve uncovered, deVere is sure they’re a high pressure sales organisation.  They raise money.  They pay good/high commissions to their salesmen, but they are taking that money in and finding homes for it – not necessarily homes that they think are going to be bad homes.  Presumably, they’re looking for good homes.  On the other hand, Cobus Kellermann and his partner David Cosgrove, are the crooks in all of this.

The masterminds of this scheme are Cosgrove and Kellermann.  Nothing in my research indicated that deVere are involved with this, except inasmuch as they raise money as they do for all investment schemes and some of their clients’ money went into this.  Investors have to do their own due diligence.  With deVere’s salespeople for example, who are trying to sell you on something; you’re the one who makes the decision.

You can’t rely on the broker.  You can’t rely on regulators.  You can’t rely on law enforcement.  You can’t rely on your legal advisors or your accountant.

You have to rely on yourself and there’s no such thing as an investment scheme that will realistically, pay you good returns with no risk.  Risk is directly proportionate with the reward and if any investment scheme is offering you fixed returns, it’s a Ponzi scheme.  It’s as simple as that.  When you invest money, there’s only one honest sales pitch.  Your investment could go up, down, or stay the same – that’s it.  If somebody’s offering fixed returns, it means that they are paying those returns out of new money coming in because with the underlying investment, there’s no way of knowing whether it’s going to go up in value or down in value.  Therefore, if you’re paying fixed returns, you’re running a Ponzi scheme.

In South Africa in 2012, there was a spectacular homicide where a chap called Herman Pretorius went into the offices of his business partner Julian Williams, in the Foreshore of Cape Town (a very public area).  He shot him in the head, shot himself in the head, and it was uncovered that there was a R3bn Ponzi scheme run under Basileus.  Cobus Kellermann was involved in that as well through a company that’s still listed, called BK1.  Did you come across any of these in your investigation (BK1, Pretorius, Williams, or Basileus)?

Yes, I came across them inasmuch as I read articles that had appeared in the South African press.  I’m not sure whether the property in Stellenbosch that was sold by one Belvedere company to another, just for the purpose of grossly inflating its value so that it could show up on the books of one of their fraudulent schemes as being worth a lot more than it was…  I’m not sure if that involved BK One.  I can’t remember.  They were basically arguing over money.  Even the crooks argue amongst themselves.  You’re dealing with thoroughly dishonest people.  Maybe the guy who shot Williams and then committed suicide…  Maybe he hadn’t received his fair share of fraud.  Who knows?

How is this all going to end?  What happens from here?

It’s going to end badly.  All frauds end badly.  No fraud in history has ever ended well.  You are going to have a situation where probably tens of thousands (it could even be hundreds of thousands) of investors have had their investments wiped out.  In the saddest cases, the investments will represent people’s life savings.  In the very saddest cases, those people are going to be retired people who have no reasonable expectation of earning any more money in their lifetime or certainly, any more significant money.  The chances of investors receiving a meaningful dividend in an asset recovery exercise are slim.  I would expect substantial assets to be recovered and I would expect the proceeds of that to go to pay for professional fees and expenses as part of the asset recovery process.  That’s just the way it works.  Unfortunately, in investing, once you’re defrauded you stay defrauded.

David, just to close off with; in your experience, I’d like to just run by what’s happened with Biznews in the last 24 hours.  We’ve been running stories with links through to your exposé.  There was an attack on our website yesterday and again this morning – a cyber-attack, that is.  Some of the links have been changed.  They’re not linking through clearly.  People are worried about your story and others seeing it.  In your experience, is this the way the fraudsters will react?

In my experience, fraudsters will do anything to protect what they love most and what they love most is money.  We had a record amount of traffic to our site yesterday and most of that was driven by residents of South Africa – traffic from South Africa to went through the roof yesterday.  They hate the truth.  The truth is the enemy of the liar.  You have helped to bring the truth to your readership in South Africa.  This poses a threat to the criminals and make no mistake; they are criminals.  The only question is ‘do they become convicted criminals or un-convicted criminals’.  You should take it as a compliment.  It’s the most sincere compliment that the crooks have attempted to disrupt your business.

* Click here to read the “back story” and access links to all the coverage of the Belvedere saga.

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