Durbanite Patrick Stapleton (pictured), notoriously linked with the once-thriving venture capital company Edwafin in the early 2000s, apparently pulled the same scam twice, only this time he did not get away with it.
Last month, the Durban Specialised Commercial Crimes Court handed down a 10-year sentence following the 66-year-old’s conviction on 147 counts of fraud on 15 June last year.
The so-called “Ponzi kingpin” was also found guilty of one count each of contravening the Banks Act and the Financial Advisory and Intermediary Services (FAIS) Act.
His company, Dynamic Group CC, was convicted of one count each, of contravention of the Banks Act and contravention of the FAIS Act and sentenced to a fine of R10 000 for each count. Each fine was suspended for three years.
The conviction and sentencing follow his arrest and that of his son, Michael (42), on charges of fraud in 2017. The son pleaded guilty on 17 April 2019 and was sentenced to five years’ direct imprisonment.
According to Lieutenant Colonel Simphiwe Mhlongo of the Directorate for Priority Crime Investigation (Hawks), Patrick “and his accomplices” operated two companies known as Dynamic Group CC and GPN Consulting from 2010 to 2014.
Purporting to be involved in the research and development of an off-road mining motor vehicle, these companies operated as an investment scheme.
Natasha Kara, regional spokesperson: Director of Public Prosecutions (DPP) KwaZulu-Natal, says the father and son approached factory employees who were either being retrenched or were retiring.
“They mispresented to these people that they (the Stapletons) were involved in the research and development of an off-road mining motor vehicle and a paint business known as Umbala Paints,” Kara says.
Most of the 147 investors were manual workers who invested their retirement funds, and retrenchment or severance packages to the total of R11.5 million.
Mhlongo says investors were promised lucrative returns, but these did not transpire.
Handing down the sentence on 28 September, Magistrate Garth Davis stated that the Stapletons’ businesses were not viable and a Ponzi scheme.
Rewind to Edwafin
Although this is the first time that Patrick has been convicted for running a Ponzi scheme, it is not the first time that his name has been linked to one.
Around the time that the Stapletons were said to have begun targeting investors for their Dynamic Group scheme, another investment company of which Patrick was the chief executive – Edwafin – was being lambasted in the media after its debenture holders brought liquidation orders against the firm and its management.
In May 2009, Edwafin was placed under provisional liquidation by the High Court in Pietermaritzburg. The 1 600 backers, who together lost about R230m, were warned to prepare for no return on their money.
Edwafin and one of its subsidiaries, Edwabond Captial Options, were subsequently stripped of their FSP licences.
A FAIS Ombud ruling concerning investments made via an FSP in Edwafin Investment Holdings and published on 25 January 2012 stated that the FSP bore all the hallmarks of a pyramid scheme.
Read: Edwafin chickens come home to roost
Providing background to the case, Noluntu Bam, the then Ombud for Financial Services Providers, stated that Edwafin was a venture capital company and the majority shareholders in Dynamic Motor Company, Edwabond, Rainbow Paints, and Edwafin Foundation.
The information presented in the ruling goes on to share how Edwafin came to prominence in 2005 with a debenture offer that promised investors returns of 18% and in some instances even higher.
The firm procured venture capital for investment in other companies – which mostly happened to be wholly-owned subsidiaries – by way of selling debentures to members of the public. Each debenture was repayable after the expiration of a period of five years. During that period the debentures would bear interest at a specified rate.
“It was borrowing money from members of the general public, mainly pensioners and teachers in an attempt to fund its investments,” the ruling read.
According to the then Financial Services Board, Edwafin issued debentures in terms of the Companies Act and marketed them through Edwabond.
All seemed to be going swimmingly until October 2008 when the firm stopped paying interest to investors.
According to the winding-up ruling handed down in the High Court in May 2009, Edwafin blamed its “cash flow crisis” on the global financial crisis of 2008. Mention was also made of an R27m failed investment in Dynamic Motor Company (DMC), which added to its financial woes. DMC was stated to be a developer and a manufacturer of two types of vehicles – an all-terrain utility vehicle for use in the agricultural, general utility, leisure, and mining markets known by the brand name of Damara, and a sub-surface mine vehicle.
Down the rabbit hole
In June 2010, IOL reported that Judge Pete Combrinck, who had been overseeing an interrogation of the liquidated company, had concluded in a “leaked” report that Edwafin was running a Ponzi scheme. Besides criminal and civil action being taken against Stapleton and other directors, the judge said it was “essential” that the inquiry continue and that other directors, bank officials, auditors and attorneys be interrogated.
To date, there is no trace of the millions invested in Edwafin.
The Edwafin liquidation website was active until 2018.
The last update provided by the appointed liquidators, Berrangè Incorporated, was posted in 2015. It stated that the liquidation process had run its course.
“Unfortunately, creditors have elected not to place the liquidators in funds to drive the litigation, as such, all claims have prescribed and there is little or no hope of civil recovery,” the post read.
Taryn Odell, corporate recoveries administrator at Berrangè Incorporated, says the firm handed over their records to the Durban Commercial Crimes Unit in 2016.
Odell says firm correspondence shows that all 225 boxes of the firm’s Edwafin records were delivered to Lt Col Anton Booysen, “who will continue to investigate the matter utilising state funds, in an attempt to arrest those who misappropriated investors’ funds”.
Booysen has since retired.
Moonstone contacted the crime unit, as well as Kara, asking for an update on the investigation into Edwafin. No feedback has yet been received.
An investor who lost everything
Edwafin investor Anthea Marè purchased debentures to the total value of R450 000 in 2006. She was promised a 20% return on her investment. Now 57, Marè says she invested the money that was left to her after her husband’s death with Edwafin, thinking it would one day be her pension.
“I have nothing. I can’t find work. I have a problem with my throat, and you know living costs are expensive.”
In 2015, after years of fighting to get her money back, Marè says her friend showed her an article in the Natal Witness.
“It said there wasn’t any money, that there was nothing that we could do, that we weren’t going to get anything back. My heart dropped to my stomach. I didn’t know if I should scream or what.”
She believes the millions allegedly embezzled from investors “are still floating around out there”, and there are still people benefiting from it.
“It wasn’t just Stapleton. No ways. What about the rest who were involved, those who helped him? They are too clever,” Marè says.
I invested R300.000 in Edwafin and in 2005 and 2007 I lost all that money in 2008 and 2009 and today I have nothing I must live on an old age pension of R2000 a month and with a very ill wife and up till today I have nothing .I am now 80 yrs old by that time I was 62 yrs old and still struggling
The person who came to my house were Carol Gardener who promised us that we will get a good income every month now what about her I see that Patrick Stapleton gets nailed there were a whole group of them lied to the investees by that time there were about 2000 investees who all lost there pension fund money even my daughter lost R100.000 and she didn’t even get a cent from that money. My friend who passed away invested R1.700.000 and didn’t even get a cent from his money this what with all of us