Porritt\u2019s arrest in 2002 led to the collapse of an investment fund underwritten by his high-flying Johannesburg-listed company Tigon.<\/p>\n
About 2\u00a0950 investors in the PSC Guaranteed Growth fund \u2014 including a rural Free State school for intellectually handicapped children and, bizarrely, one of Porritt\u2019s sons \u2014 lost a combined R162-million.<\/p>\n
Under Porritt\u2019s management, Tigon had blazed a trail across the JSE and was the best-performing stock for five consecutive years. Investigators later concluded that Porritt\u2019s success was built on a series of frauds designed to manipulate Tigon\u2019s share price and mislead the JSE and investors.<\/p>\n
In 2005 the National Prosecuting Authority (NPA) charged Porritt and his associate Sue Bennett with more than 3\u00a0000 counts including fraud, stock exchange manipulation, contravening foreign exchange controls and racketeering.<\/p>\n
Some of Porritt\u2019s former colleagues pleaded guilty to related charges and spent time in jail. But Porritt and Bennett have fought a decade-long legal rearguard action, and have so far avoided facing the charges. They appeared in court again last month seeking a permanent stay of prosecution.The unprecedented leak of offshore company records was obtained by German newspaper Su?ddeutsche Zeitung<\/em> and shared with the International Consortium of Investigative Journalists (ICIJ), whose partners include amaBhungane.<\/p>\n “collaboration with certain individuals aligned with the state”<\/em><\/strong><\/p>\n The leak bolsters the state\u2019s contention that Porritt masterminded an enormous financial racket. It shows that, between 1986 until his arrest in 2002, Porritt used the Panama-based law firm Mossack Fonseca to incorporate shell companies on his behalf in jurisdictions that offer a high degree of corporate anonymity. There is no evidence that Bennett had any dealings with Mossack Fonseca.<\/p>\n Porritt declined to respond to specific questions because they contained allegations pertaining to his pending criminal trial. He accused amaBhungane of \u201ccollaboration with certain individuals aligned with the state\u201d attempting to influence court proceedings.<\/p>\n He also blamed his businesses\u2019s collapse on unfair targeting by the South African Revenue Service (Sars), acting in concert with his competitors.<\/p>\n Sars could not respond to Porritt\u2019s allegations by the requested deadline.<\/p>\n Content hosted by iono.fm<\/a><\/p>\n Mossack Fonseca helps clients shield their identities by providing nominee directors whose names appear on all official documents, as well as secretarial services for interactions with third parties.<\/p>\n While these services are not illegal, the gaps between what firms such as Mossack Fonseca know about their clients, and what they do for them, is wide open to abuse.<\/p>\n “My identity [must] never be revealed”<\/em><\/strong><\/p>\n Porritt\u2019s early foray into Mossack Fonseca\u2019s offshore world is a classic example. In 1986 his businesses collapsed and his assets were sequestrated.\u00a0 According to the Mercury<\/em>:<\/a> \u201cIt was also around this time that the Gary Patrick Porritt Children\u2019s Fund came into being. Porritt was reported to be a trustee at one point, and the trust owned 15 farms in the Kokstad area.\u201d<\/p>\n The leaked offshore records show that Porritt acquired a Panamanian-incorporated company, Saints International, in December 1986. The following month Porritt sent an urgent message to Mossack Fonseca requesting\u00a0that Saints International\u2019s nominee directors offer to buy two KwaZulu-Natal farms and shares in a potato company owned by the Gary Porritt Children\u2019s Trust.<\/p>\n \u201cThe properties are to be sold by public auction tomorrow. It is imperative that we make our bid prior to the auction or we will lose the deal,\u201d Porrit wrote. \u201cMy identity [must] never be revealed.\u201d<\/p>\n Although Porritt faces no charges with relation to this incident, it demonstrates his early grasp of the benefits of Mossack Fonseca\u2019s services.<\/p>\n The firm did not respond to questions about Porritt, but told the ICIJ that \u201cbefore we agree to work with a client in any way, we conduct a thorough due-diligence process\u201d.<\/p>\n \u201cWe follow both the letter and spirit of the law,\u201d it said. \u201cBecause we do, we have not once in nearly 40 years of operation been charged with criminal wrongdoing.\u201dOver the next 15 years Porritt would open seven other shell companies via Mossack Fonseca and pay the firm tens of thousands of dollars in administration fees from a Swiss bank account. Swiss banking law is notoriously secretive. Until very recently, it prohibited banks from revealing account holders\u2019 identities.<\/p>\n In this way, Porritt could wear a cloak of anonymity whenever he needed to operate beyond the oversight of business colleagues, investors and creditors, as well as regulators, tax- and law enforcement agencies. Crucially, it enabled him to do business with himself, but make it look to outsiders like a legitimate arms-length transaction.<\/p>\n No queries, no payments<\/em><\/strong><\/p>\n Porritt allegedly engaged in multiple frauds in this way, bolstering his companies\u2019 balance sheets by swapping assets and liabilities between companies, creating or erasing vast sums of money at a single stroke.<\/p>\n Most of the companies Porritt opened with Mossack Fonseca were instrumental to his alleged crimes. But it appears from the charge sheet that, although prosecutors knew about the existence of most of these companies and suspected Porritt\u2019s hidden hand behind certain transactions, they did not realise the extent of his secret offshore control over them.<\/p>\n The NPA did not respond to questions.<\/p>\n In 1989 Mossack Fonseca provided Porritt with a marketing and loan agreement between a Porritt company, Effective Barter (Natal) and Fleur de Lys of Bordeaux. The agreement appears to have been for Fleur de Lys to market Effective Barter\u2019s wines overseas.<\/p>\n Porritt submitted a tax refund claim of nearly R200-million for this marketing expenditure that led to a 20-year tax dispute between him and Sars.<\/p>\n Prosecutors now believe the agreement was a sham: \u201cThis loan account due by Effective Barter was running into millions of rands [but] it never received any queries with respect to this loan, nor were any payments ever made to Fleur de Lys of Bordeaux with regard to the repayment.\u201d<\/p>\n Mossack Fonseca\u2019s records confirm their suspicions: Porritt secretly controlled both parties to the loan agreement.<\/p>\n The charge sheet further alleges that between 1988 and 2001, Effective Barter falsely claimed R303-million in cumulative tax losses that included the agreement with Fleur de Lys. It claims that Porritt tried to offset the taxes owed by his other companies \u2014 including\u00a0companies that drove Tigon\u2019s share price \u2014 against Effective Barter\u2019s huge false claim.<\/p>\n “<\/em><\/strong>a fac?ade and [an] artificial scheme”<\/em><\/strong><\/p>\n In 1995, Porritt listed Tigon on the JSE. The following year, Tigon announced that it had raised nearly R50-million from issuing shares. A company called Gold Star bought 1.5-million Tigon shares.<\/p>\n The state alleges that Gold Star never paid for its shares and the leaked records show Porritt controlled Gold Star, having registered it on the Pacific island of Niue.<\/p>\n Tigon subsidiaries supposedly provided Gold Star with investment advice and claimed to have earned performance fees for Tigon in return. But the state alleges that Gold Star and others never paid any money to Tigon, and that it was \u201ca fac?ade and [an] artificial scheme, with the intended effect that the Tigon group would report profits based on the performance of its own share price which … would in turn further increase the market price of the shares thereby artificially creating further profits\u201d.<\/p>\n This alleged scam is central to the charges Porritt faces of overstating Tigon\u2019s earnings by R26-million over two financial years.<\/p>\n Porritt later opened two more shell companies via Mossack Fonseca, which he used to conduct ever more audacious transactions. He allegedly claimed fictitious profits for Tigon by selling hugely overvalued and largely intangible intellectual property and trademarks to another JSE-listed company he controlled, Shawcell Telecommunications.<\/p>\n Shawcell in turn claimed tax allowances against the same assets. At various times, nominal ownership of the intellectual property and trademarks passed through Porritt\u2019s Mossack Fonseca-incorporated companies.<\/p>\n “<\/em><\/strong>a large asset base outside SA”<\/em><\/strong><\/p>\n By 2000, Tigon\u2019s headline earnings per share was galloping along at an annual average return of 145%. The PSC Guaranteed Growth Fund \u2014 which prosecutors claim was de facto managed by Porritt \u2014 persuaded 2\u00a0950 investors to invest R162-million in Tigon and Shawcell shares.<\/p>\n Among the drawcards for investors, says the charge sheet, was that Tigon claimed to have \u201ca large asset base outside SA through operations conducted through its foreign subsidiaries\u201d. But at least one of these subsidiaries was a Mossack Fonseca- administered shell company.<\/p>\n When the fund collapsed in 2003, liquidators tried to trace the money back through Porritt\u2019s web of companies and failed. Mossack Fonseca\u2019s staff only realised something was amiss when their bills for Porritt were being returned undelivered. They finally looked him up online and learned of his arrest almost 18 months before.<\/p>\n \u201cThe name of our company is not mentioned in any of the [news] items,\u201d wrote a relieved staffer, \u201cbut taking into account the bad reputation that this could bring, I suggest [we] resign as directors and registered agent of all [his] companies.\u201d<\/p>\n A vast global data leak has shed new light on one of SA’s most notorious corporate scandals – that which surrounds KZN farmer-accountant Gary Porritt.<\/p>\n","protected":false},"author":2,"featured_media":22574,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[2],"tags":[],"class_list":["post-4430","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stories"],"acf":[],"_links":{"self":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts\/4430","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/comments?post=4430"}],"version-history":[{"count":0,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts\/4430\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/media\/22574"}],"wp:attachment":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/media?parent=4430"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/categories?post=4430"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/tags?post=4430"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![](\"http:\/\/cdn.mg.co.za\/content\/images\/2016\/04\/04\/20160317garyporrittdp-14.jpg\")
<\/p>\n![](\"http:\/\/cdn.mg.co.za\/content\/images\/2016\/04\/04\/20160317garyporritt7.jpg\")
<\/p>\n![](\"http:\/\/cdn.mg.co.za\/content\/images\/2016\/04\/04\/20160317garyporritt8.jpg\")
<\/p>\n![](\"http:\/\/cdn.mg.co.za\/content\/images\/2016\/04\/04\/20160317garyporritt6.jpg\")
<\/p>\n![](\"http:\/\/cdn.mg.co.za\/content\/images\/2016\/04\/04\/20160317garyporritt2.jpg\")
<\/p>\n![](\"https:\/\/amabhungane.org\/wp-content\/uploads\/2018\/03\/250x106.jpg\")
<\/a>
\nThe amaBhungane Centre for Investigative Journalism\u00a0produced this story. Like it? Be an amaB supporter<\/a> and help us do more. Know more? Send us\u00a0<\/em>a tip-off.<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"