Insiders raise the alarm over the business practices of AllQuotes and BuyDirect.

When one receives anonymous tip-offs about unethical business practices, there is always the concern that the information is accurate and not just a disgruntled employee taking a dig. So when I received detailed information on the business dealings of AllQuotes and BuyDirect, and several related companies, I spent nearly three weeks trying to verify as much of the information as possible.

AllQuotes and BuyDirect are online businesses which sell “licenses” to individuals who then participate in the revenue generated from these sites. Recently the company launched MiBiz, another e-commerce venture based on a mobile business app and is selling licenses for R39 000 to R50 000 each.

I was able to publish the information below in City Press on 3 July but there was further information which required verification. A great deal has come to light since publishing and I am still working on confirming all new information but people need to know that dealing with these companies is not advised.

The facts published so far

Over the last two years AllQuotes ‒ an online listing business ‒ and BuyDirect ‒ an e-commerce site ‒ have sold over 2 000 licenses in their business for R50 000 per license with the promise of a share of revenue from the websites.

In October last year investors, who have invested well over R100 million in what was marketed as a “passive income” opportunity, stopped receiving income or dividends despite ongoing promises and reassurance from the directors.

Promises to investors that the group will be listing on the JSE have not materialised. I was informed by the companies’ auditor, Pieter Grobler of PWG Auditors, that he has had no correspondence from the companies or their holding company Fingroup Holdings since inception and has made no application on behalf of the companies to register with the South African Revenue Services (SARS).

Initially investors received a monthly income which grew aggressively based on a growth rate of over 26% for the business. According to documents I received, by April 2015 BuyDirect license holders were receiving over R1 100 per month per license, at which point the business was unable to continue with their forecast rate of payment. License holders were offered the opportunity to swop their license for shares in the holding company Fingroup which proposed a dividend payment on 30 October. They were also offered licenses in a new business, MiBiz,  which follows a similar financial model.

No dividend paid

By October 2015 Fingroup was unable to pay a dividend and on 11 November shareholders received a letter informing them that the business had used the capital to acquire a 51% stake in a patented product “ILM” which is “designed to totally eradicate load-shedding”. Shareholders were also informed that funds had been used to purchase a 51% stake in “a patented heavy-duty vehicle statistics monitoring device which will prevent 80% of accidents that occur involving this type of vehicle”. The company stated that as they had used their profits to purchase these businesses, they “will therefore not be able to pay dividends at this time”.

In questions put to AllQuotes and BuyDirect director Robert Weimar, who is also the spokesperson for Fingroup, Weimar confirmed that the acquisitions never took place, although he was unable to explain what happened to the funds that had been promised as dividends.

Weimar was also surprised that the auditors had received no correspondence from the companies and could not confirm whether or not there had been any registration of the companies with SARS.

Although increasingly disgruntled, investors who have converted their license agreements to Fingroup shares have been waiting on assurances that Fingroup Holdings will be listing through a reverse take-over of distressed listed company Platfields. A SENS announcement issued on 26 October 2015 announced an intention of a Fingroup Consortium to subscribe for 800 million Platfield shares at 3c per share. However, subsequently, an application was made to put Platfields into liquidation and the deal has stalled.

While company directors have in the past been able to walk away from business failures, the new Companies Act of 2008 increased the responsibility and accountability of directors. According to a report by Deloitte, “the standard sets the bar very high for directors, with personal liability where the company suffers loss or damage as a result of the director’s conduct not meeting the prescribed standard.”

Deloitte goes on to say that the Act requires directors to be accountable to shareholders and other stakeholders for their decisions and their actions. Unhappy investors under the new act, could bring about a legal challenge requiring the directors to prove that they had not traded recklessly.

Is this a Ponzi scheme?

With between 2-3 million rand a month being paid out to license holders as a percentage of revenue generated from the sites, one has to question whether or not the business itself was capable of generating these kind of profits so early in its life-cycle. Allegations from investors and insiders are that it is a Ponzi scheme and that initial payments to existing license holders were made from money received from new license holders.

Although Weimar offered me access to information held by their auditors, the auditors claim to have no information to provide. The first set of audited results is only due in August 2016.

According to Robert Weimar, AllQuotes provides “a service to businesses to generate more trade for them by being able to quote on goods and services.” In other words a business, such as a plumber, would list on AllQuotes and provide a quote to potential customers. “We offer advertising opportunities to these businesses and we also receive income from the number of quotes requested.”

BuyDirect is a general e-commerce site selling goods and according to Weimar, income is generated from goods sold on the site as well as advertising. “All this income is used to operate the companies and fund more advertising on TV, billboards, internet etc. The license holders receive a share of this income,” says Weimar who contends that these were successful businesses but have now fallen on hard times.

E-commerce expert Arthur Goldstuck, MD of World Wide Worx says that online listing and e-commerce sites are notoriously difficult segments in which to generate income. The only successful listings companies are Trudon (previously yellow pages) and Brabys, both of which have decades of experience and large databases. In terms of e-commerce, even South Africa’s giant online retailer Takealot is still not profitable. “You have to spend large amounts of money on marketing and South Africa is still dominated by a mall culture. South Africans don’t shop online to the extent seen in other markets. There are profitable sites, but there is no one formula for success,” says Goldstuck.

Another concern is the history of several of Weimar’s associates. Theunis Schoeman, who acts as an independent consultant, was the CEO of rewards scheme FreeTalk which collapsed in 2007. Freetalk offered its licensees the prospect of earning a “passive income” by selling a rewards programme to clients. At the time investors believed they had been defrauded but FreeTalk contended that the license holders had not worked hard enough to sell the rewards programme. Rapport newspaper claimed in an article in 2007 that Schoeman had been sequestrated in 1999 by Old Mutual and Sanlam for mis-selling insurance policies and keeping the commission. According to the Companies and Intellectual Property Commission (CIPC), he is an active director of at least 47 companies. Kevin Cholwich, who acts as is an independent salesperson for the sale of licenses, was involved with FreeTalk.

Weimar claims that both BuyDirect and AllQuotes are wholly owned subsidiaries of Fingroup Holdings Ltd (FGH) an unlisted public company. The current director is Nico Oosthuizen. Several attempts were made by City Press to contact Oosthuizen but we were told to deal with Weimar. City Press spoke to Done (Gideon) Joubert, listed as a director of Fingroup Holdings, but he claims he resigned in November and has nothing to do with the business.

Weimar also stated in a letter to City Press that MiBiz is an “independent, separate, private company”. However, investigation showed that he is the director for both of the businesses. According to CIPC he is an active director of 28 companies.

Allegations are that MiBiz has been purely set up to sell more licenses to continue the flow of funds to existing investors of AllQuotes and BuyDirect. Fingroup shareholders have received a small payment which the company said was from the new businesses.