South African hotels allegedly hit by pyramid scheme

The Post in South Africa reported on Monday that Durban-based hotel management company Signature Life Hospitality has collapsed amid allegations that it used a pyramid scheme to steal millions of rand from its clients.

The future management of its 16 hotels became uncertain on Friday when some creditors secured an urgent interim order in the Durban High Court putting the company into forced liquidation.

The creditors said that a liquidator needed to take control immediately to preserve documentation and interrogate directors, including Director Alan Vels, to determine “where the money has gone.”

Vels, a former regional chairman of the Federated Hospitality Association of South Africa, founded Signature Life in 2009 with two other directors, Glyn Taylor and Donald Pitt. The three reportedly had left Durban-based Three Cities Hospitality following a fallout with the company’s founder Russell Stevens.

Vels told The Mercury on Sunday that the papers served in court on Friday were factually incorrect and defamatory. “We are compelled to attend to these allegations that have been made and have instructed our attorney to act immediately, as we want the real facts to be brought before court,” Vels said. “This has been an orchestrated attack on the directors of Signature Life Hospitality and will be defended vigorously.”

But creditors say he has questions to answer. “A thorough and immediate investigation is warranted. We want to know where the misappropriated money has gone,” said James Murray, manager of the Docklands Hotel, which alleges it is owed more than 2 million rand (US$240,000) by Signature Life.

Murray has the support of four other hotels the company previously managed: Hotel on the Park, Boulevard 44 Boutique Hotel and the two Quarters hotels, all of which claim they are owed money. While not supporting the application, Hotel 64 on Gordon also says it is owed money.

HOTELS reached out to Joop Demes, CEO of the Cape Town-based consulting firm Pam Golding Hospitality, who offered these insights: “A key question to ask is whether any of the owners that have signed contracts with Signature Life have had the benefit of professional assistance with the wording, content and clauses of the management agreement.”

Demes said each hotel should indeed have its own bank account and this account should be reconciled on a monthly basis. “This should be a relatively easy reconciliation and I fail to understand the comment in the Mecury that the reconciliations became almost impossible. Owners have very strong rights in terms of a proper worded management contract and it is important to ‘manage’ an operator through monthly reviews.”