Brooks & Brand vs Sunday Times: Business Times

Complainant:  Brooks & Brand

Lodged by:  Alec Brooks

Article:  Lawyers gorge on Ponzi cash – Still no money for Tannenbaum’s victims

Author of article: Loni Prinsloo

Date: 18 September 2014

Respondent: Sunday Times: Business Times

Complaint

Brooks & Brand (B&B) are complaining about a front-page article published in the Sunday Times: Business Times of 3 August 2014, headlined Lawyers gorge on Ponzi cash – Still no money for Tannenbaum’s victims.

Brooks says that:

  • the journalist neglected to take several of the statements in his response to the newspaper into account, or simply omitted them (details below); and
  • some statements in the story were consequently inaccurate/misleading (details below).

He adds that the reporting was malicious and sensationalist.

The text

The introductory sentence to the article, written by Loni Prinsloo, explains in a nutshell what the story is about. It reads: “Lawyers and trustees meant to be recovering cash for victims of Barry Tannenbaum’s Ponzi scheme are instead gorging on cash they have collected from investors.”

She also reported amounts lodged in court showed that of the R100-million collected so far, R53.8-million was sucked up in legal and administration fees, and that accounts showed that lawyers Brooks & Brand have claimed R33-million from the estate. “By contrast, hundreds of investors who ploughed an estimated R12.5-billion into the scheme…have yet to see a cent. This is not the first time that liquidators and lawyers have drained money collected ostensibly for victims of a fraud.”

Zooming in on the B&B arguments

Information omitted

B&B complain that the journalist neglected to state the following, which formed part of his response to the newspaper, explaining where some of its legal costs went:

  • “…40 days of insolvency enquiries in South Africa, the payment of witness fees and travelling expenses for more than 200 witnesses, the transcription of the enquiry record, sheriffs’ fees for the subpoenae and many photocopies which were made”;
  • “…senior counsel were employed in the bigger and more complicated matters”;
  • “…approximately 75 000 pages [and a further 12 000 pages]…had to be…copied for the various actions”;
  • “…the Tannenbaum estate had incurred substantial legal fees and disbursements”;
  • “…[senior and junior counsel]had incurred additional legal fees and disbursements”;
  • “…the expenses of the Australian trip”; and
  • “…the payment of [its and]other attorneys”.

Brooks adds that the article also did not mention the:

  • absence of information due to Tannenbaum hiding in Australia (several references to this effect were made);
  • contingency fee arrangements;
  • tracing costs;
  • interlocutory applications in SA and Australia for recognition;
  • extent of the forensic reports;
  • Australian legal expenses; and
  • fact that their invoices were itemized, vouched for and approved on a monthly basis.

Inaccurate, misleading statements

B&B complain that the following statements in the story were inaccurate/misleading:

  • “Lawyers and trustees meant to be recovering cash for victims of Barry Tannenbaum’s Ponzi scheme are instead gorging on cash they have collected from investors”;
  • “This is not the first time that liquidators and lawyers have drained money collected ostensibly for victims of a fraud”; and
  • “However, the accounts show that lawyers Brooks & Brand have claimed R33-million from the estate…”

Malicious, sensationalist

B&B complain that all of the above amounted to malicious and sensationalist reporting.

The Sunday Times’s response

Smuts says that while she agrees the headline and the introductory sentence were “interpretative”, this was justified in both instances “as they were based on facts”.

These “facts” include that:

  • R53.8-million out of R100-million recovered from the Ponzi scheme have gone towards legal and administration fees;
  • investors who have lost money have not been reimbursed; and
  • some investors said the legal fees were “iniquitous” (attorney Cloete Murray has lodged an objection to these fees with the master of the high court, and John Storey – a former investment banker who lost about R3-million – said an attorney working on recovering the investments had said this would be his “retirement plan”).

Smuts also says that the story reflected Brooks’s salient answers to Prinsloo’s questions, “detailing the kind of work that has been done to recover the money”.

She concludes: “We did not say that the lawyers and trustees are not doing any work on recovering the missing money, and we accept that substantial work has been done [in this regard]. We are saying [though]that there has been a bonanza for lawyers and trustees and not much tangible benefit for trustees (probably meaning ‘investors’).”

My considerations

My first task is to decide whether the story reflected the salient explanations for the legal costs, as provided by Brooks in his response to the reporter’s questions. More succinctly: Did Prinsloo adequately reflect why the legal costs were so high (which represents the gist of the complaint)? The other side of this coin, of course, is the use of the word “gorge” both in the headline and in the article. Given the reasons for the high legal costs, was the newspaper justified in using that word in relation to B&B?

So then, Prinsloo reported the following in connection with legal costs, saying that Brooks “defended” these fees in stating that lawyers for the trustees:

  • had to travel to Australia to cross-examine Tannenbaum in court;
  • needed to obtain more than 87 000 pages of documents; and
  • lodged 120 court cases and hired top-dollar legal counsel (it is not clear if the latter statement can be attributed to Brooks – it was nevertheless reported).

Brooks reportedly also said that Tannenbaum’s admissions in Australia “helped the trustees recover R35-million from one of the winners in the estate and pushed down the tax claim on the estate from R747-million to R32.7-million”.

Having compared Brooks’s explanations for some of the expenses with those proffered in the story (as outlined above), I am persuaded that Prinsloo did indeed cover the salient points in the trustees’ response to her questions. I am certainly not going to argue that the newspaper should have mentioned all the other reasons.

This leaves me with the use of the word “gorge”. The Free Dictionary (online) inter alia defines this word as “to devour (swallow) greedily” or “to eat gluttonously”.

Smuts is correct in that this word (which was used in both the headline and the introductory sentence) is “interpretative”.

However, even though B&B may indeed have been “gorging”, I do not believe that it was for the newspaper to make this judgment and to state it as fact. It should have sufficed to use the phrase “drained money” (as the story in fact did) – that could have been justified, given the fact that R53.8-million out of R100-million recovered from the Ponzi scheme have (undisputedly) gone towards legal and administration fees.

The use of the word “gorge”, though, implies that there were reasons for the large expenses other than those given to the newspaper, and that those reasons had to do with greediness on the part of B&B.

In this case, I believe that the newspaper had enough reason to attribute such a statement to a source (although not all allegations are publishable) – which, in fact, is implied in the reporting of Murray’s views. To state “greediness” as fact, though, took the matter just one bridge too far. The use of this word as fact, I submit, was unfair and must have caused B&B some unnecessary harm.

Given the rest of the story, though, I do not have enough grounds to attribute either malice or sensationalism to the reporter.

Finding

The complaint is dismissed, save for the use of the word “gorge” in both the headline and in the first sentence of the article. This is in breach of Sect, 2.1 of the Press Code that states: “The press shall take care to report news…fairly.”

Sanction

Sunday Times: Business Times is directed to publish an apology to B&B on its front-page for having used the word “gorge” in both the headline and the first sentence of the story. The newspaper is also directed to provide this office with the text prior to publication, and to end it with the words: “Visit www.presscouncil.org.za for the full finding.”

If the story appears on its website, the apology should be attached to that story as well.

Appeal

Our Complaints Procedures lay down that within seven working days of receipt of this decision, either party may apply for leave to appeal to the Chairperson of the SA Press Adjudication Panel, Judge Bernard Ngoepe, fully setting out the grounds of appeal. He can be contacted at Khanyim@ombudsman.org.za.

Johan Retief

Press Ombudsman