Authorities join forces on Fidentia

And the first major target is individuals involved in the Fidentia fiasco, writes E-Brief News. The SA Revenue Service, SA Police Service, the Financial Intelligence Centre, the Scorpions, prosecutors and regulators have received instructions from the highest levels of government to take action. Moneyweb reports that this emerged last week when Manuel told how he had instructed various regulatory organisations to ‘work collaboratively’ with police and prosecutors in ‘dealing with financial crime and its proceeds’. The Cape Argus quotes Leonard McCarthy, head of the Scorpions, as confirming that his investigations unit had been asked to look into the affairs of the group and its heavyweights. The Treasury’s Kuben Naidoo has confirmed that Fidentia is the ‘type of case’ that sparked the comments by Manuel. Full Moneyweb report Full Cape Argus

Manuel said the government regulators would work closely with the police to bring white collar criminals to book, notes Business Report. He held that white-collar criminals were responsible for some of the ‘fractures that give cause to crime’, citing the ‘destructive effects of the relentless pursuit of individual self-enrichment’ and the fact that ‘the culture of greed plays a role in driving crime’. Manuel said honesty and integrity needed to be core values of SA’s economic and financial institutions. ‘We continue to see instances of flagrant abuse of this principle, often involving hundreds of millions of rands. In addition, we continue to see extraordinary methods to evade tax and the legal obligations relating to anti-money-laundering legislation.’ Full report in Business Report

Manuel’s concerns have been echoed by the SA Local Authorities (Sala) Pension Fund. The fund’s Bongani Maphanga appealed for stronger measures to be implemented together with greater accountability on the part of trustees and their advisers to stop the ongoing plunder of pension funds. ‘Improved vigilance on the part of trustees, regulators and fund advisers was necessary to protect the interests of pension fund members,’ Maphanga said, according to a report on the Finance24 site. Referring to Fidentia, he said there was growing criminal activity designed to defraud workers of their retirement savings. Full report on Finance24 site

But questions are being asked about the length of time it took the Financial Services Board (FSB) to uncover Fidentia mismanagement. The Weekender notes that the issue came before the Standing Committee on Public Accounts. Committee member Pierre Gerber expressed concern that the FSB had ‘dragged its feet’ on taking action against Fidentia for six months when there were worrying signs that all was not as it should be. But Barrow was insistent that there was no way the FSB could have detected the wrongdoings at Fidentia, even though the company had only submitted audited financial statements for the year to end-February 2005. He told the committee that the FSB had immediately instituted an inspection in June last year after a visit to the company’s offices to question executives about the late financial statements. Full report in The Weekender

It has also emerged that a lawyer advised trustees of the Mineworkers Provident Fund (MWPF) on three occasions to move its money out of Fidentia’s clutches. Such a move could have saved 70% of the money belonging to widows and orphans apparently lost by financial institution Fidentia, according to Winston Matlala, a pension-fund specialist, notes the Mail & Guardian Online. He said he had also warned the fund that, in his opinion, if it did not sever ties with Fidentia it could face legal claims from thousands of beneficiaries. Similarly, a trustee who was ‘redeployed’ from the MWPF board after repeatedly calling for the relationship to be terminated, told the Mail & Guardian that the reluctance to do so stemmed from a conflict of interest. Collyn Manzana highlighted the overlapping loyalties between the National Union of Mineworkers’ investment arm and the pension fund’s service provider. But William Leshilo, the provident fund’s chairperson, said the board was concerned that the Fidentia-managed Living Hands Trust could have sued over any termination, and wanted to be sure of its legal position so it spent one more year investigating. Full Mail & Guardian Online report

And a call has gone out for stronger measures to stop the ‘ongoing plunder’ of pension funds. Bongani Maphanga, of the SA Local Authorities Pension Fund appealed for stronger measures to be implemented together with greater accountability on the part of trustees and their advisers. ‘Improved vigilance on the part of trustees, regulators and fund advisers was necessary to protect the interests of pension fund members,’ Maphanga said, according to a report on the FIN24 site. Maphanga said the extent to which ordinary South Africans were being financially compromised by practices ranging from ‘bulking’ to inflated adviser fees and outright theft had reached alarming proportions. ‘Asset managers and advisers must be called to account in terms of strict rules which, if flouted, result in the immediate termination of mandates,’ he said. Trustees also needed to ensure they\'re beyond reproach and on top of the complexities involved in running a modern retirement fund. Full report on the FIN24 site

The Fidentia saga may be overtaken by what could be an even bigger scandal. This week 16 executives appeared in the Commercial Crimes Court where they and Alexander Forbes, the country\'s biggest pension fund administrator, are accused of siphoning off pension fund surpluses amounting to a staggering R900m. They are charged with 28 counts, including money laundering, theft, fraud, contravention of the Riotous Assemblies Act and the Prevention of Organised Crime Act, notes Business Report. They are being charged either collectively, personally or as representatives of their firms. Alex Forbes MD Howard Walker appeared on behalf of the company. The pension funds that are allegedly affected are Mitchell Cotts, Jacaranda, Lucas South Africa, Sable Industrial, Picbel-Groepvoorsorgfonds, Datakor Group, Datakor Retirement Fund and Power Pack. The trial was adjourned to July 4 and bail was extended. Full report in Business Report

The trial is unprecedented in that the amount involved and the number of accused are the largest in the history of white-collar crime in SA, according to Business Report. Jurgen Boyd, the Registrar of Pension Funds at the FSB, said of the funding of the prosecution: ‘It shows how seriously we take this matter that we are putting our resources behind it.’ Retired ace prosecutor Jan d\'Oliveira, the former National Director of Prosecutions and the former Attorney-General of the Transvaal, have been engaged to head up the prosecution. The FSB investigation into the alleged scam took more than six years and goes back to the 1990s. Full report in Business Report

Those who have appeared in court are Peter Martin, a former employee of Alexander Forbes; Neil van Hess, the marketing director of an asset management company linked to Alexander Forbes; and Aubrey Wynne-Jones, the CE of pension fund administrator Wynne-Jones, says The Star. Others are Anthony Dixon-Seagger, a director of Mitchell Cotts and a trustee of the Lucas South Africa Pension Fund; William Somerville, the former CE of Lifecare; Gerald Nightingale, who at one time headed Investment Solutions at Alexander Forbes; Anton Roets, a former senior executive and chairperson of the Datakor group; Michael McEvoy and Derrick Pettitt, former executives of Datakor; Adrian Bailey, an executive of the Mitchell Cotts Fund; Jan Pickard, a trustee and CE of Picbel; and Simon Nash, the owner of Midmacor Industries. Peter Ghavalas; who is accused number one in the case, is a former executive of Nedcor and owner of Soundprops 178 and believed to be the alleged mastermind. He is accused of pocketing R42m. He emigrated to Australia in 1998 but was arrested when he re-entered the country in 2005 and is on bail of R1m. Full report in The Star