Size doesn't count

Bernard Madoff and Dealstream's Russell Leigh have a lot in common. As do their clients.

In both instances, large and supposedly legitimate schemes were run by charismatic men. Both of them made good returns for their clients when the markets were booming. Both of them went bust when the tide turned.

But, when the business went awry, Madoff did not run off to hide in some country where extradition is difficult, if not impossible, while Leigh did when he fled to Israel.

Leigh's alleged fraud was a lot smaller than Madoff's. When all of the calculations are in, Leigh's misdemeanours may amount to about R1 billion, versus Madoff's $50 billion, but in this instance, size doesn't count. Because what we have discovered is that conmen are still alive and well. No amount of legislation, financial advice or supposed sophistication on the part of investors will stop people trying to swindle others out of their money. And very little stops investors from following their hearts rather than their heads, especially when greed is involved.

But another disturbing difference in these two cases is that Madoff will face a jury in the US and will probably end up going to jail for quite some time. In South Africa, there is no one to put in the dock. Leigh gapped it before most people knew that Dealstream had gone bust and he seems to feel little compulsion to return home and face the music.

And is he out there trading again? If that's who and what you are - a trader - you can bet he's back in the game.

Ren'ee Bonorchis, editor at large, Business Day

From what has been said of his movements, Leigh flew first to London and then made his way to Israel. It would appear that at some point he left Israel, possibly to go to the US, where it has been said he was accumulating clients' money in order to invest in a pharmaceutical company - no doubt another ruse. He probably just went there to get his hands on more cash and then return to Israel.

Sadly for investors and any other claimants, Leigh did not skip South Africa with millions in his pockets. He used most of the missing funds to pay off debts with Rand Merchant Bank - the money he owes is mostly gone.

He's now said to be back in Israel and you've got to wonder what his days are like. Does he wake up with a knot in his stomach? Does he miss his family? His wife and child are back in South Africa and their large family home is up for sale.

And does he worry about his safety? Some of the people he cheated out of money are said to have contacts that stretch into many corners of the globe.

And is he out there trading again? If that's who and what you are - a trader - you can bet he's back in the game. He's probably sitting in a coffee shop with a laptop, reading the news from South Africa while shorting the shares he knows have a huge overhang thanks to him. A good ending for the story would be if he traded up a storm, made back all the money he lost for his clients and then returned to South Africa to pay people back and face the charges against him. But a sadder ending would be if he was never seen again and his misdemeanours went unpunished.

The latter is the most likely scenario because unlike in the US, where it's almost impossible for white-collar criminals to escape the law, it is evidently pretty easy for financial conmen in South Africa to disappear. Remember the case of Jack Milne? A few years back he took investors' money and vanished. It wasn't the police who found him - it was a journalist.

With Leigh, the people who are out of pocket have very little hope that the National Prosecuting Authority will have the resources to track him down. Again, it may have to be the private sector that goes out to find him, but why would the companies involved throw good money after bad?

That may be the real difference between white-collar crime in the US and South Africa. In South Africa, you can still get away with it with little fear of prosecution. It's a sad indictment of our legal system. But, if you had to look back at financial scandals in the past 10 years, or just at insider trading cases, many of them haven't made it to court despite stacks of evidence.

So what can we learn from Dealstream? In this instance, the regulators did not step in to protect investors even when they knew things were looking odd. The companies Leigh worked with moved to protect themselves, but no one else. The authorities couldn't stop Leigh from getting on a plane, much less tracking him down thereafter. The lesson is "buyer beware". And despite South Africa having sophisticated financial legislation, it appears that buyers in this country need to beware much more so than those in other climes.

* Ren'ee Bonorchis is Business Day's editor at large.