ALEC HOGG: David
Shapiro, you know the
top story today – Dealstream.
DAVID SHAPIRO: I heard.
ALEC HOGG: Dave, you came
out, you spoke about what
caused the Dealstream
disaster, in your opinion. We
are going to have more on that
tomorrow, I think. We've got
Mr Leigh working on a whole
bunch of new questions,
including those that you posed.
DAVID SHAPIRO: Ja. For
those who haven't read the
story, my biggest concerns
were his back office. And,
having been in broking for so
long, very difficult to run a
trading operation without the
logistics behind you – and
looking after clients’ money.
You know, that’s the MS Global
[story] at the moment – you
know the whole issue that’s
happening there. It's the same
thing. Suddenly, when clients’
money is shifted from Peter to
pay Paul it's a major concern.
But Alec, my biggest concern,
and something that still has
not been answered, is how he
managed to operate outside of
regulation. There’s no
regulation or Act that governs
those kind of operations. That
to me is the biggest concern,
and it's still going on. Under
what jurisdiction or regulation
do CFDs operate?
ALEC HOGG: It is quite
incredible. You’ve got a
Financial Services Board,
you’ve got the Johannesburg
Stock Exchange in this case.
You have the Financial
Services Board in the
Sharemax case. There were so
many articles written by the
late Deon Basson about
Sharemax. I do recall engaging
with the people at one point in
time and finding them rather
odious characters – but I hadn't
done the work Deon had done.
He came up, pointed a lot of
fingers. Julius Cobbett of
Moneyweb has been pointing
fingers for years, and nothing
happened. And now we've got
a disaster of R4.5bn, 35 000
people scrambling around
trying to grasp any straw to
see if they can get some of
their money back.
DAVID SHAPIRO: Alec, what
people assume on the outside
is that these are controlled and
regulated bodies because, if
you look at banks, they are
tightly regulated. We know
how our banks held up against
the crisis. The stock exchange
– and you can ask Russell
Loubser – is a very, very well-
run body in terms of controlling
its members. But I felt that
maybe they knew, because
back side of the deals were
coming from Dealstream onto
the single-stock futures or onto
those markets, because he had
to in some cases regulate
them or hedge them. So he
was doing it through the stock
exchange, through the back
end…
ALEC HOGG: Are
investigations still going on
there?
DAVID SHAPIRO: If they do it
thoroughly, I think there are
going to be a lot of people who
were in high positions who will
have to answer to how an
operation of this magnitude
was allowed to continue
without someone clamping
down on them.
ALEC HOGG: Russell Leigh
reckons there was just
excessive gambling. He is
sitting in Israel, ran away from
South Africa, so I guess you’ve
got to take what he says from
that context. I don’t think he is
saying he was innocent, but I
think he is saying he’s not the
only one who caused the whole
disaster and others should also
be exposed.
DAVID SHAPIRO: Of course.
I'm sure there will be others.
But excessive gambling –
that’s up to you, and that’s up
to the regulatory body to make
sure – when I said Russell was
overtrading, it means that he
never had the right capital
against the kind of deals that
he was doing, which happens
in every other regulated body.
ALEC HOGG: What about the
Sharemax story, David? Have
you been on it?
DAVID SHAPIRO: Not as
closely as you have. But this is
the property one. This is one
you exposed – how many years
ago? How many years ago did
you have them in the studio
asking questions which were
never followed up?
ALEC HOGG: I also was
talking to a lawyer friend of
mine over the weekend, and
he said what is happening at
the Fidentia issue is
unconscionable. The lawyers
and other people are feeding
at the trough, and grabbing
fees out of this thing, and of
course the losers are the
poorest of the poor. The
widows and orphans are blue-
collar workers. These are
people who had only a few
thousand rand to rely on,
anyway, and those are going
up in smoke with the lawyers
who are, according to my
lawyer friend, fiddling by the
day as the day goes on. All of
this is unconscionable.
DAVID SHAPIRO: But it takes
so long to bring it to court or to
get it sorted out. In America,
the MS Global issue, Jon
Corzine is in front of Congress,
straight away, right away,
asking questions, and it will be
sorted out soonest. But here it
just goes on and on.
ALEC HOGG: I guess the
lobbyists here are within the
professional bodies, not within
the polictical bodies. But we'll
get there. We will get there.
There are developments, Vavi
now calling for those politicians
– how crazy is that? You are in
politics, but you can do
business with the government.
DAVID SHAPIRO: Ja, I know.
ALEC HOGG: That’s absurd.
DAVID SHAPIRO: It just
shows you that people want to
go into politics so they can do
business. It just gets them in.