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 Oct week 3 articles here 2008...

DEALSTREAM DEBTS COULD BE HIGHER - Renee Bonorchis

Wed, 29 Oct 2008

DEALSTREAM may have flinched 27.3m shares worth R17m from its client VOX TELECOM. VOX chairman Tony van Marken has said this could mean that the debts that DEALSTREAM CE Russell Leigh left behind when he fled to Israel could be higher than originally estimated. DEALSTREAM JSE-regulated trades was owed R214.4m.



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JOHN FRASER: Dealstream is very bad news – the collapse of that institution has left all sorts of ripples, and one of which is, of course, the impact on Vox Telecom. They appear to have had 27 million shares invested in Dealstream, I believe on behalf of some of their employees, a pension fund or something, and in essence they’re saying that those shares appear to have gone missing and as a result of the exposure to the Dealstream disaster their headline earnings a share are going to halve, down by 45% - 55% for the year to August. Presumably if you were a shareholder in Vox, you’d be asking some quite serious questions about why they were so careless.

JONATHAN FISHER: Sure - the exposure was way beyond what shareholders would have expected. I believe that financial impact is to the tune of R30 million which is big for a company like Dealstream – that is a once off item, so it won’t happen again. It’s not nice for shareholders to get a surprise like that. I think the news was a red in the market. It’s been out there for probably six weeks or so. The price didn’t do much on the back of this announcement, and I guess we’re going to have to look at Vox going forward. Their results are going to be released shortly, within the next two weeks, but to have that kind of exposure beyond your control is not a nice surprise.

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Vox Telecom's earnings a share for the year to August were expected to be 45 percent lower because of the collapse of Dealstream, the JSE-listed company said yesterday. Headline earnings a share would be 55 percent lower during the period.

The company said that if the effects of Dealstream were excluded, earnings a share and headline earnings a share would have grown by between 20 percent and 30 percent. Last month Vox said it had not entered into contracts in which it had liability to Dealstream, but the company held R30 million of its cash, which it warned could be difficult to recover.



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Dealstream's Leigh avoids investigation

October 29, 2008 Edition 1
Mzwandile Jacks Johannesburg
Russell Leigh, the former chief executive of Dealstream, had indicated he would not return to South Africa to help with the probe into the collapse of the derivatives brokerage firm because he had received threats to his life, Bernard Levenstein, the curator, said yesterday.
Levenstein told Business Report this could make his investigation difficult.
Dealstream had defaulted on R167 million in debts to Rand Merchant Bank (RMB).
Levenstein, who has been communicating via e-mail with Leigh, said the former Dealstream chief executive was concerned about his safety in South Africa.
He said Leigh told him he was in Israel, but he did not have evidence to prove this.
"He has called me from a secret phone number and I do not have his numbers," Levenstein said. "He said his safety had been compromised."
Leigh emerged about two weeks ago, after disappearing last month.
"At this point investigations are ongoing," said Levenstein. "Any evidence of criminal misconduct will be referred to the relevant authorities, who may decide to conduct an extradition."

Levenstein said he had received complaints from investors who claimed to have lost money when Dealstream collapsed. "The names will be in my report, which will come out on November 10."
Levenstein had earlier said that Investec, which held accounts on behalf of Dealstream and its clients, might come under investigation should it be implicated in the probe.

He said Investec could be investigated just like RMB, Dealstream management and staff, including Leigh.

Levenstein insisted that at the moment Investec was not being investigated, but all the other parties involved in business dealings with Dealstream would face an extensive probe.
A Johannesburg-based analyst, whose company does not allow him to be identified, said that if the curator wanted to get to the bottom of the matter he would have to probe Investec now and not wait for what came out of the investigation.
"When they investigate Investec, it is not to say the investment banker is guilty. It is just to try to get right to the core of the issues," the analyst said. "I think even though Investec was not named in the Financial Services Board [FSB] report as one of the parties to be investigated, they need to look at them."
A report released recently by the FSB recommends that RMB's role in the extension of credit be investigated. It also recommends that Dealstream's status as an authorised user of the JSE since its inception be investigated too.




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South Africa: Dealstream's Failure Leaves Tangled Web

Business Day (Johannesburg)

30 October 2008
Posted to the web 30 October 2008

Renée Bonorchis
Johannesburg

BERNARD Levenstein, curator of failed brokerage Dealstream, said yesterday he was still in touch with Dealstream's CE, Russell Leigh, and if there was enough evidence charges would be laid against Leigh along with an attempt to extradite him from Israel.

Dealstream has become one of the most scandalous financial collapses in SA in the past decade. It was a small company but had large clients, and big names from Investec to Rand Merchant Bank (RMB) and the JSE have been pulled into the debacle.

Levenstein, working in Leigh's offices in Johannesburg, said the office was being dismantled where possible, but selling Dealstream's assets would not fetch much.

Dealstream traded in regulated single stock futures and unregulated contracts for difference . Last month the company started to default on its payments to its clearing agent, RMB.

When Dealstream went under at the end last month and Leigh fled the country, the Financial Services Board (FSB) did a preliminary investigation and found R134m was missing from client accounts and that Dealstream's account had just R15,5m in it.

Levenstein said he had met with RMB and Investec. He had Investec's data and could track the cash movements of Dealstream and its clients.

Ciaran Whelan, Investec's head of risk, said there had been contact with Levenstein, but Investec had not handed over clients' funds because there were competing claims for the funds.

"The money probably went back to Dealstream to pay its margins," Whelan said when asked about where Dealstream's clients' money may have disappeared to.

Levenstein said yesterday many investors were registering their claims against Dealstream via its website and it was possible claims would amount to more than the missing R134m.

On Tuesday, Vox Telecom issued a statement showing that two of its directors had their entire holdings in Vox wiped out while another four had their holdings significantly depleted. This would be in addition to the disappearance of Vox's share scheme, worth R17m. There is also the fact that Vox's share price has fallen more than 60% since the news of Dealstream's disintegration. Vox has lost R1,47bn off its market capitalisation thanks to Dealstream's damage to its reputation.

Levenstein's first progress report, which is not public, went to the FSB last week. His final report goes to the courts on November 10.

At that point there may be a challenge against those appointed as the provisional curator and the provisional liquidator, since both parties are linked to the Gobodo group.

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