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Business Practices Committee Report 75

Alpha Club

2. Alpha Club Introduced To Ex-Newport Members



On 2 December 1997 the Committee received copies of two letters from the Free State Commercial Crime Unit of the South African Police Service. These letters seemed to be relevant to an understanding of the connection between Alpha Club and Newport. The first letter was dated 7 November 1997 and was addressed to "Dear Member". The letter was signed by Ms Alexandra Sullner (Sullner), Chief Executive Officer of Marketing for Success (Pty) Ltd. The second letter, dated 12 November 1997 and addressed "To all Newport Business Club (Pty) Ltd "en commandite" partners " was signed by Richard King (6).


2.1) Sullner's letter dated 7 November 1997

Alexandra Sullner introduced herself to the approximately 8 300 ex-Newport members (the ex-members) as the Chief Executive Officer of Marketing for Success (Pty) Ltd, ("MFS"). It was stated in the letter that MFS had concluded a transaction with Newport whereby it had acquired the 20 percent interest that Newport owned in the en commandite partnerships that the ex-members and Newport were party to. MFS agreed to issue at no cost to these members an Alpha Club silver membership card. The ex-members were further informed that the business conducted by MFS and Alpha Club in South Africa was completely different to that which was conducted by Newport.


Alpha Club, she said, was a holiday and travel club with a difference. It offered its members, their family and friends world-wide travel benefits that were "... unique and very cost effective". From the moment of joining Alpha Club, its members could become established in a business of their own (7) (Committee's own underlining) which would allow them to sell Alpha Club memberships to their family, friends and the public at large. Alpha Club members could choose whether to make this a full-time or part-time business to suit their own lifestyle and economic needs. She also said that Alpha Club trained its members in how to conduct their business and its members were to be provided with their "... own place at two Alpha Club meetings in the area every week where they can conduct their business with the assistance of senior Alpha Club management. The level of income to be achieved is determined by the Alpha Club members own enthusiasm and diligence".


She further stated that in the Alpha Club programme, operated in South Africa and marketed by MFS, every new member started off with a silver membership which would allow them to sell silver memberships. As their businesses grew, they could progress to a gold or platinum membership which would have allowed them in turn to sell gold and platinum memberships.


The ex-members were informed that " the next few days you will be contacted by your local Alpha Club representative (as Alpha Club has recruited many of the Newport Sales Personnel, this will probably be somebody that you already know) who will tell you a lot more about Alpha Club and provide you with all the information and material to start to enjoy Alpha Club and to earn money from your new business".


As part of the agreement between Newport and MFS, Alpha Club took over the Newport offices in Bedfordview. The physical address of the outlawed Newport and Marketing for Success were the same, namely Norwich Life House, 3 Cambridge Place, Corner of Oxford and Kirkby Roads, Bedfordview.


2.2) King's letter dated 12 November 1997


The following is a precis of the letter dated 12 November 1997 and addressed "To all Newport Business Club (Pty) Ltd 'en commandite' partners".


"Newport has been engaged in constant litigation with South African authorities, incurring legal costs of many millions of Rands. The Committee, a group of people operating unconstitutional, recommended to the Minister that our business should be deemed to be a harmful business and closed down. The Minister accepted the recommendation by the Committee. Newport has brought the unconstitutional actions of the Committee and the Minster before the Courts alleging bias, prejudice, ignorance, duplicity and bad faith being exercised by the Committee. We are still awaiting the judgement.


Newport, however, is fearful that even with a favourable judgement that would allow it to recommence its business, the Committee will again attack Newport. The Committee, the South African Government and the South African press have conspicuously ignored the benefits that Newport has brought to the economy of South Africa in the past twelve months. These benefits include creating more than 250 jobs, the payments of more than R14 million in taxes, the investment of more than R15 million (8) in a timeshare development and the opportunity to members to generate substantial incomes.

In the face of concentrated prejudice, duplicity and bad faith and faced with escalating legal fees, Newport adopted another course of action to protect its members' interests. Accordingly, Newport has sold its 20 percent interest in the en commandite partnerships to MFS, a newly created South African subsidiary of an international company(9). MFS holds the South African franchise to operate Alpha Club, a holiday and travel club. The membership of Alpha Club are sold through a system whereby members are established in their own businesses. (Committee's own underlining).


The net effect of the transaction is that each Newport member will receive an entry-level Silver Card membership to Alpha Club and the associated business ownership status attached thereto. The collective retail value of the memberships being issued is in excess of R132 million. The appropriate legal advice has been taken to ensure that the method by which MFS operates the Alpha Club franchise in South Africa is legal and regardless of any possible bias from the Committee, could never be deemed to be a harmful business practice.


For the avoidance of doubt, Newport has been advised by their legal representatives to inform you that MFS operates a business which is completely different from that which you have experienced since joining and participating in Newport. Notwithstanding this, your Alpha Club membership provides you and your family with immediate valuable benefits and the opportunity to generate income for years to come while participating in your own business with the assistance of MFS to market Alpha Club".


With the information at its disposal, the Committee on 2 December 1997 resolved to undertake a section 4(1)(c)(10) investigation in terms if the Act into the business practices of MFS, trading as Alpha Club. In this report, any reference to MFS would mean MFS, trading as Alpha Club. Similarly, any reference to Alpha would mean Alpha Club, the trading name of MFS. The words "MFS" and "Alpha" will be used alternately. At this point it is necessary to deviate from Newport, MFS and Alpha Club to briefly discuss the investigation by the Committee into money revolving schemes.


6. Richard Joseph Peter King was the sole director of Newport.


7. The "business" was selling Alpha memberships. Existing Alpha members invited prospective new members to a meeting where the "advantages" of membership was explained to them. This marketing strategy was also followed by Newport.


8. No evidence was ever produced that this amount was indeed invested.


9. Marketing for Success was not a subsidiary of an international company. The sole shareholder was Sullner. It later appeared that Hendrik Venter was also a director of MFS.


10. In terms of the Act the Committee could undertake a section 4(1)(c) or a section 8(1)(a) investigation into the business practices of a particular entity or individual. A section 4(1)(c) investigation enables the Committee to make such preliminary investigation as it may consider necessary into, or confer with any interested party in connection with, any harmful business practice which allegedly exists or may come into existence. Notice of section 4(1)(c) investigations is not published in the Government Gazette as opposed to section 8(1)(a) investigations. The purpose of section 4(1)(c) investigations is to enable the Committee to make a more informed decision as to whether a section 8(1)(a) investigation is called for. The Minister is not empowered to make any decisions on the strength of a section 4(1)(c) investigation. He may do so in terms of a section 8 investigation.