This Article is in a series published by Brian Dinning at http://www.socialentrepreneurshipinafrica.com and relates to the RICO lawsuit Mr. Dinning filed against a cadre of people. This provides some information on the predicate acts to support the RICO claim.
Article 4: Cocaine, Ecstasy and Swingers: Social Ventures in Africa?
By: Brian Ray Dinning, JD, LLM and Social Venture Lawyer
July 7, 2012
As you have read in the prior Articles in this Series, for years my goal, vision and passion was, and still is very much so, to help dozens of needy communities in Africa by helping them to create jobs, hope and a better future. But, as you have also read, unpredictable and unfortunate situations, such as the fraud of Wextrust Capital, created obstacles and roadblocks, which necessitated a change in partners or strategy or the direction of the project to ultimately accomplish what I have hoped for and worked toward for many years. Each new change of direction however added a year or more onto each project as it took time to locate new partners, rebuild relationships and hold community and governmental meetings in Africa to communicate the new strategy with our social venture partners.
What do you do when people who you thought you could rely on for professionalism, honesty and integrity demonstrate the complete opposite and instead get in the way of the goal of helping others or your dreams? Think about it – do you just give up on that dream? Does it just become a thing of the past? Or, do you pick yourself up and know that you can overcome any challenge (big or small) by making some changes so you can ultimately fulfill that dream and vision? What you are about to read is one of the many challenging obstacles that created a course for change in the goal of helping the people of Africa.
Since I no longer had a job after quitting Wextrust Captial, having witnessed Joe Shereshevsky reveal himself as a man only too eager to sexually harass women, commit all manner of fraud and indulge himself with prostitutes, I needed to find a new job. Furthermore, I wasn’t the only person hurt by Wextrust Capital – many of us had lost time, effort, money and ownership in the three social venture projects. While I had to find a job, we all wanted to continue to move forward with our vision, not willing to give up on the people and projects we’d invested so much in. We all wanted to continue to move forward with our vision of helping the local people of Africa with social venture projects and we all immediately started over – not willing to give up on people in need and on social venture projects that we had all worked so diligently on.
I was hired by a company in Fairfax, Virginia in March 2005 at an annual salary of $250,000 plus bonuses. All of my spare time went toward working on social ventures in Africa. Earth Conservancy, a non-profit that I consulted with over the years, opened an office in Alexandria, Virginia and employed four full-time consultants and several web designers and grant writers. I was asked to coordinate the office in my spare time and to oversee the launch of a fundraising and social venture campaign for Earth Conservancy and Sunpoints Southern Africa to help rebuild the social venture projects. Based upon the hard work of these consultants, I was asked to draft a treatise and power point presentation for the United States Department of State on the subject of for-profit/non-profit ventures entitled “Beyond Micro Enterprise,” and was invited by the State Department to speak at the World Africa Growth Opportunity Act Conference in Dakar, Senegal and Washington, DC in 2005 and 2006.
After losing projects to Wextrust Capital, the social venture partners still had the opportunity to resurrect portions of the first three projects as Wextrust Capital’s main pursuit was diamond mining. So, once again, we were in need of other financial partners. Having two venture capital firms fail to provide the agreed upon help to the local communities and fail to live up to the promises and agreements made to Sunpoints and the social venture partners, the group discussed raising the needed funds through friends and family to avoid the problems and shortcomings of the Wall Street Investment Banking world. Unfortunately, as you will see, the friends and family option can also be full of challenges and perils.
In 2005, I was discussing my social venture work with Dr. John O, a doctor and former client (“John”). He was fascinated with the social venture work and wanted me to meet two of his friends, Richard L. and Louis D (“Rick” and “Lou”). Both MBAs, Rick was a Business MBA and Lou was a Finance MBA – both very valuable skill sets for any business or social venture project and they operated a successful business. They seemed like the perfect fit and they truly embraced the idea of helping the local communities in Africa. At that time, the social venture partners were seeking to resurrect several community projects including: Honingklip II, a mining project adjacent to the one taken from us by Wextrust Capital, Sunpoints Farm, a farm project, and Lion’s Walk Lodge a planned tourism lodge. These projects were controlled by Michael van der Merwe and his brother, Pieter van der Merwe, as the social venture partners. Other social venture projects including amazingly beautiful properties on the Wild Coast of South Africa, which were started by Bossie Bosman as the social venture partner.
After discussing the non-profit and for-profit model of social ventures, Rick, Lou and John said that we should form a company to develop these projects and raise the necessary funding, which they calculated was approximately $10 million. In helping to conduct due diligence, enter into contracts and scope out these potential the projects in 2005, the three men donated money to Earth Conservancy as charitable donations. The donations were used to pay due diligence costs, development expenses, operating expenses for Earth Conservancy, consulting fees, business expenses, travel and entertainment expenses and personal expenses pursuant to written Consulting Agreements and Business Plans.[1] All funds that were wired to South Africa in 2005 for the scoping of these potential projects were sent to two South African social venture partners: Michael van der Merwe and Bossie Bosman.
On the for-profit side, Rick, Lou, John and I agreed to form a company called Pure Africa Management so that the four of us could all keep track of our consulting time and expenses and be reimbursed for that time and expenses as money became available from investors or from the potential project cash flow. This was all documented in the voluminous Private Placement Memorandum and other documentation of the newly-forming Pure Africa Sustainable Development Fund, managed by Pure Africa Management. I was asked to work full-time on the documentation, business plans and power point presentations. John said that he would set up meetings at his home or at the office of Rick and Lou and they would invite their friends and colleagues to explain the projects to them so that they could raise the $10 million of necessary funding. Rick would handle business administration and community relations in the Hampton Roads area and Lou would be the Chief Financial Officer and manage the funds and books of the business including the preparation of financial statements.
Before taking any outside investment, all four of us agreed that a due diligence trip to verify the existence of the projects, review the documentation, meet the South African social venture partners, meet the professional team including Sotheby’s International Realty and Smith Tabata Law Firm was necessary and prudent. In January, 2006, we traveled to South Africa to view all projects and determine which projects to focus on. In taking this trip, I was again asked to work full-time as a consultant for Pure Africa Management and the Pure Africa Sustainable Development Fund, LLC starting in February, 2006 by Rick, Lou and John. In accepting this position, a Consulting Agreement documenting my consulting compensation was agreed to and signed. Like everyone, I had bills to pay and personal obligations like child support, housing, food, car payments and more plus I would be leaving a lucrative job to focus on more risky social ventures start-up projects as a consultant.
The three men assured me that they would raise the necessary funds to pay my consulting fees of $250,000 plus all expenses for me to work full-time. My employer did not want me working on African projects and instead wanted all my time and effort devoted to their company. When I went on the due diligence trip in January, 2006 and committed to full-time work with these three men at Pure Africa Sustainable Development Fund, LLC, I would be leaving a good job. However, I was excited by the new consulting work and the help from Rick, Lou and John on the social ventures and with this newly forming endeavor, we headed out for South Africa.
The trip was truly amazing at first and we visited the tourism site at Lion’s Walk Lodge, where Sunpoints Southern Africa had secured a contract to purchase this farm in 2004 and a financial partner was needed to help build a tourism lodge there. We also visited a possible diamond mine claim at the Farm Rugalatte named Honingklip II[2] and the Sunpoints Farms, large operating farms in the Free State of South Africa.[3] We then flew to the Wild Coast of South Africa to view the project at Hole in the Wall and other sites.[4] Hole in the Wall is a National Heritage Site for South Africa and it is truly beautiful.[5] The trip was going very well and Rick, Lou and John seemed to be excellent business and financial partners to grow these social ventures for the people of Africa and provide the necessary funding.
But, as always, circumstances change and the entire project would have to be radically altered by what I and two other trip participants refer to as “The Trip from Hell.” Once we were at the Wild Coast, we set up camp in Jeffreys Bay, a world-renowned surfing town located a few hours from the Wild Coast. The first night, we ate at a local Mexican restaurant, as it was the only restaurant that was open. When we were getting ready to leave after dinner, I noticed that John was gone. I asked Rick and Lou “What happened to John?” They replied, “he went with a guy he met at the bar to get some party supplies.” “What party supplies? – Africa is a dangerous place at night and he left with a total stranger,” I said. I was genuinely worried and concerned for John’s safety.
Later that night, I went to the room of Rick, Lou and John to check if John had returned. On the glass dining room table, I witnessed several bags of white powder and lots of pills. I asked “what is this?” John said he “bought eight grams of cocaine and 100 ecstasy pills to make the trip more fun.” Shocked by this, I said to John and the other guys: “this is so wrong – first, because you bought drugs, second, because this is Africa and you could go to prison and third, we are on a business trip to help represent our social venture partners and this is not the way to help others in need.” Laughing off my comments, John asked after he snorted a long line of white powder, “do you guys want to do some coke with us?” Disgusted and dismayed by John, three of us declined and went back to our own rooms leaving John, Rick, Lou and one of our companions in their room with their newly-acquired drug cache.
Back at my room, we all discussed what we had just seen. I worried most of the night and the rest of the trip. I did not even want to be in he same vehicle or lodging with these guys. Thoughts of Rick, Lou and John going to jail in South Africa for illegal drug possession, harming the other members on our business trip, going to the hospital for a drug overdose and other concerns about their conduct plagued me for the rest of the trip. I was awoken later that same night by sounds outside my third floor balcony so I jumped out of bed and ran to the balcony door. There was Rick and Lou trying to break into my room by climbing from balcony to balcony some twenty feet or more above the ground. I said, “what in the world are you guys doing?” In an excited and intoxicated state, they said, “we want the car keys to go get some food and drinks.” “At two o’clock in the morning?” I asked. I told them to “go back to bed because we have a schedule to keep tomorrow morning” and with that the men laughed, took the car keys and left.
The next morning we were late for our scheduled activities so three of us went to check on John and the others. John and a travel companion came out to open the door and we went into the kitchen and sat down – trying to get everyone up and moving. Scantily clad and with white powder and crusty snot outlining their noses, the travel companion told us that “we stayed up most of the night partying” as this person drank directly out of a two liter bottle of coca cola and burped loudly. John just seemed groggy and out-of-it. Needless to say, the three of them and a companion proceeded to party for a week straight, while being late to most of the scheduled meetings. They stayed up all night and slept most of the day. Their partying and behavior was so obvious and embarrassing that Bossie Bosman and our local partners asked me to never bring them to the local community projects again. The embarrassment was only heightened when one of the men, apparently too intoxicated to get up, simply went to the bathroom in his bed, which cost us $500 in damages from the lodge owner. I also received bar bills for thousands of dollars of drinks from the places we stayed from their late night drinking and partying binges that they simply did not pay.
Do these seem like the type of people you would want working with you to you help you accomplish your goals and vision?
Because the local people are working with us on a trust relationship, I was told that we cannot have Rick, Lou and John representing the social venture partners in front of the local chiefs, the tribal council, the community and the government. I was shocked and embarrassed and I did not know what to do at that point. What would you do if you were working with a poor community in Africa who is counting on you and the social venture partners to help them with their most valuable assets and you find out that some of the people on your team were using drugs and acting inappropriately?
Furthermore, unbeknownst to me, John and his wife were swingers and near the end of the trip, he said, “I think my wife would like you and your wife, so would you be interested in swapping wives when we get home?” Stunned by this question, I said to him that my wife and I loved each other and we were not interested in that lifestyle. However, I was stunned and amazed at this turn of events: I just left my job to start a new company with these three men and now I am in the middle of a complete mess. This is one aspect of social ventures that I did not expect to encounter: cocaine, ecstasy and swingers.
Upon our return to the United States, I had to begin making plans to slowly distance myself from my new partners and yet at the same time, we were already setting up a new fund, The Pure Africa Sustainable Development Fund that would be operated by Pure Africa Management with project ownership to be held by Pure Africa Holdings. John had already invited friends and colleagues to meet for presentations on the Fund on several occasions in late 2005 and early 2006. One of the first investors into the Fund was a long time friend of John and also a friend of Rick and Lou. His name was Dr. Allan Stiner of Norfolk, Virginia. After one of these informal gatherings organized by John, Dr. Stiner told the Fund that he wanted to invest in the social ventures because he had just inherited millions of dollars from his father and had money to invest. At Dr. Stiner’s request, a Private Placement Memorandum documenting the potential projects and the risks inherent in investing in projects in Africa, a Subscription Agreement and other legal documents were provided to Dr. Stiner for he and his legal counsel to review.
Pure Africa Management agreed to allow Dr. Stiner to invest his $250,000 into the Fund in February, 2006. In February, 2006, in a meeting with Dr. Stiner at his home, he reviewed the legal documents one final time and signed the Subscription Agreement. However, in making his investment, he had one other request: he would only invest his money if Rick, Lou and John had no access to it as he was aware of the bad behavior of the group in South Africa the month before. Dr. Stiner read the substantial Private Placement Memorandum of the Fund and he signed his Subscription Agreement (both legal documents which detail the risks of the project along with background information). Dr. Stiner then gave me a check written out to me personally as the Fund had not yet set up its bank accounts. The $250,000 was deposited into the Sunpoints Southern Africa bank account as the Fund had acquired all of the Sunpoints Southern Africa projects in South Africa including its bank account. With these funds, my outstanding invoices were paid for the time and effort I had put into the social venture projects and necessary project and business expenses were paid.
Based upon the strange events of The Trip from Hell in January, 2006 and my recent departure from my paying job, I was paid as a consultant pursuant to a written Consulting Agreement with the Fund through its bank account in Sunpoints Southern Africa for a large portion of my 2006 pay because I was feeling very uncertain about my future with Rick, Lou and John. Furthermore, since I was the only person working full-time, the Fund managers knew that I was relying on my consulting pay to relocate from Washington, DC to the Virginia Beach area. With my consulting pay and funds loaned to me by my family, I was able to purchase a home in Suffolk, Virginia. With my two children and the hopes of having additional children and/or adopting children, my wife and I bought a five-bedroom home in a nice neighborhood where my children had many friends and an area that was very safe and close to my children’s school. [6]
By mid-2006, the Fund had five investors who invested a total of $545,000, one of whom was John and the others were his friends and colleagues, whom he invited and recruited into the Fund. Lou prepared financial statements and balance sheets and Rick prepared status reports for the Fund investors. I provided needed help from the business plan writing and coordinating with South Africa and US legal counsel. However, the Fund was dysfunctional because of the prior serious actions by John and others and the inherent mistrust caused by their potentially criminal actions. Furthermore, the drug use, partying and lack of professionalism had ruined their reputation with the social venture partners. I was forced to adapt and change the projects already underway and restructure midway or have all of us lose everything to financial partners once again. At my request, we all agreed that the Fund would stop raising money for the foreseeable future, in my mind, to protect other financial partners against any further potential loss or negative actions.
Once again, I had just left a high-paying job to work full-time on social venture projects as a consultant for Pure Africa Management and the Fund and now, I was faced with an uncertain future: a new home and social venture projects that did not have a reliable funding source or a reliable management team.
While the events of this story seem outlandish or unbelievable, there were seven witnesses to the cocaine, ecstasy and swinger Trip from Hell (including John, Rick and Lou). One witness stated, “it was the worst trip I have ever taken in my life.” Another witness said that, “I was initially excited to see three professional men like Rick, Lou and John getting involved to help the needy in Africa but I was deeply saddened and disturbed when I saw this unethical behavior by three professional men who were husbands and who had families acting in such a reckless manner by taking drugs and partying in an out-of-control way. While on the trip, I was scared to be anywhere near them because they were carrying such a large amount of drugs and acting so childishly and unprofessional. Later, I was hurt that these men not only let down the poor people in Africa and potentially ruined the vision of the company because they misrepresented the company, the projects and they gave the people of Africa a negative impression of Americans. In meeting with government officials, Sotheby’s, the local chiefs and the community, it was embarrassing to have them in meetings because they looked hung over and unprofessional.”
If you do not believe me, then perhaps legal counsel will ask them on the witness stand under penalty of perjury to tell the truth. If they do not do so, then there are four witnesses who can testify to their actions. Once again, the social venture projects needed a funding partner and a management team and, unfortunately, the next partners were equally as challenging in their behavior and more devastating to the projects than anyone else.
Again I will ask, what would you do in a situation like this? Give up your dream? Give up the opportunity to help thousands of people have a better life? Or, do you pick yourself up and know that you can overcome any challenge (big or small) by restructuring and making some changes so you can ultimately fulfill that dream and vision and protect others from the negative actions of a few.
The next article in the series is: Murder-for-Hire, Aggressive Bad Press Campaign and Other Distasteful Actions: Social Ventures in Africa?
[1] See Letter from William Brown, Ph.D to Asst. United States Attorney, Stephen Haynie acknowledging my consulting agreement at Earth Conservancy and payment of consulting fees, and personal and business expenses.
[2] See Video at http://www.youtube.com/watch?v=KDRhTrs7PyM&feature=channel&list=UL Social venture partners, Michael van der Merwe and his brother Pieter van der Merwe, take us on a tour of the Honingklip I Diamond Mine and show us the adjacent site of The Farm Rugalatte named Honingklip II. Funds were sent to Michael van der Merwe in 2005 to secure the mining claim and necessary bonding so that due diligence could be done on the potential mining project.
[3] See Video at http://www.youtube.com/watch?v=jxE7zjXsgTo&feature=channel&list=UL Social venture partners Pieter van der Merwe along with the farm manager take us on a tour of the Sunpoints Farms in the Free State Province of South Africa. As working farms, the goal of these social venture projects were to educate the local people in modern farming methods and to operate profitable farms. Funds were sent to Michael van der Merwe in 2005 and 2006 to sign contracts to become a social venture partner in this existing farming operation.
[4] See Video at http://www.youtube.com/watch?v=OysOjCVKXB0&feature=channel&list=UL After the local leaders and our Xhosa community social venture partners greeted us with traditional dancing, Rick, Lou, John and I were escorted around The Cliffs at Coffee Bay golf course by social venture partner, Bossie Bosman. The golf course is owned by the local community and they leased it to Earth Conservancy and Pure Africa so that the golf course could be renovated. World renowned golf architects and other golf experts were flown in to prepare a plan to renovate the golf course in 2006 and 2007. Ault Clark and other golf experts commented that The Cliffs at Coffee Bay was similar to Pebble Beach with cliffs and sweeping ocean views.
[5] See Video at http://www.youtube.com/watch?v=M-9E-8qtpW0&feature=channel&list=UL Social venture partner, Bossie Bosman takes us on a tour of the Hole in the Wall project. Hole in the Wall is a National Heritage Site for South Africa and it holds significant cultural value for the Xhosa community. As one of the premier natural tourist sites in South Africa, Hole in the Wall is regarded by Sotheby’s and other professionals as a major tourism lodging site. Funds were sent to Bossie Bosman in 2005 and continuing to allow for Earth Conservancy and Pure Africa to become social venture partners at the Hole in the Wall project. With 50 oceanfront lodge sites and a hotel site, the plans at Hole in the Wall would allow for up to $6M of lodge lease income and continuing revenues from the hotel site. The project is structured with 45% ownership by the local Xhosa community.
[6] When Rick, Lou and John first set up investor presentations in 2005 and early 2006, I was working full-time for Trident Systems, Inc. for $250,000 plus bonuses and I was also working as a consultant for several social venture companies. In February, 2006, I was hired as a consultant by the Pure Africa Sustainable Development Fund and I was also a consultant for Earth Conservancy and other projects. My combined consulting contracts were designed to provide me with $350,000 or more of income as and when funding was available.
RICO LAW 