This could turn into the biggest financial scandal in South Africa’s history.

Following my report on Monday, “Liquidator Scandal”, emails have been streaming in from people who feel they’ve been swindled by the auction houses. I even received an email from an accountant who previously worked at an auction house, and who confirmed that the newspaper reports are true and that these fraudulent practices are standard practice. I’ve also had emails from members who bought at these auctions and are now very concerned – and I think there may be good reason for serious concern!

If the allegations of fraud against Auction Alliance are true, it will have far-reaching consequences, because apparently it’s a serpent’s nest, involving many roleplayers. The papers say that banking officials were bribed to repossess properties from people who were experiencing financial difficulties, and then these properties were passed on to the auction houses to be sold. Apparently other auction houses were also implicated in Auction Alliance’s alleged fraud, and they all shared in the proceeds of the alleged crimes. Liquidators, like typical vultures, were also implicated by the reports – because just like in nature, where there are financial carcasses, there are financial vultures. Many attorneys and valuators are also involved, of course.

Although the current allegations are only allegations – and we also know how the papers can take things out of context – the court has already found that Auction Alliance is intentionally misleading people. On 3 August 2011, Acting Judge LP Halgryn handed down the judgement in the Gauteng High Court, and fined Auction Alliance millions of rands. You can read the full judgement at the following link: http://www.saflii.org/za/cases/ZAGPJHC/2011/87.html

What does this mean for us, the ordinary people?

I am not a legal expert, but let’s speculate a little. If the court finds that an auction house’s auction process was fraudulent and illegal, it means that all properties sold by them during the period when they were using the fraudulent procedure were sold illegally. This means that all these transactions are null and void, and the previous status must be restored. People who bought properties at their auctions will have to give the properties back, and will have to get their money back from the auction house… if they still have the money!

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