For the past six months, an extraordinary campaign of vilification and disinformation has been orchestrated by Johannesburg businessman Simon Nash, who is currently standing trial on charges of theft, fraud and contravening the Prevention of Organised Crime Act, stemming from the stripping of surpluses (about R100 million in current values) from the Sable Industries Pension Fund and the Power Pack Pension Fund (later the Cullinan Group Pension Fund).
And aligned with him is Arthur J Brown, who is facing criminal charges relating to his days as chief executive of Fidentia, who claims he, like Nash, has been framed.
Brown has laid a complaint with the public protector and criminal charges against Dube Tshidi, the chief executive of the Financial Services Board (FSB), and four of his staff.
Nash has employed a public relations practitioner to spread allegations against Tshidi and Tony Mostert, the curator of the Sable and Power Pack funds and also the provisional curator of the Cadac Pension Fund – a fund sponsored by Nash’s engineering company, Cadac (Pty) Ltd – which was placed under provisional curatorship at the beginning of this year. Nash was chairman of the fund at the time.
He has also lashed out at the National Prosecuting Authority and the FSB in general.
Nash repeated his wild accusations against Tshidi and Mostert during financial journalist Bruce Whitfield’s evening business programme on Radio 702 and CapeTalk 567 last week.
When challenged by Whitfield to produce evidence to support his claims, he could not do so.
And when Whitfield challenged Nash as to why he had not taken legal action against Tshidi and Mostert, Nash replied: “Because we need to find the link between Mostert and Mr Tshidi and we need to find the link between Mr Mostert and any other individuals who might be involved in this.”
In other words, Nash simply makes wild accusations without any basis.
Apart from the criminal charges Nash faces, he is also trying to orchestrate a campaign to have Mostert removed as the provisional curator of the Cadac fund.
Mostert was appointed provisional curator in January following an application by the FSB. Nash initially opposed the curatorship but now only opposes having Mostert as the curator.
In an affidavit supporting the Cadac application, Tshidi said he had prima facie evidence that Nash had used about R10 million of the Cadac fund assets to pay for his criminal trials and that there were other transactions involving loans and property purchases that needed to be investigated.
In the radio programme, Nash’s campaign of vilification also backfired on him when two former Cadac directors and Cadac fund trustees called in to make serious accusations of wrongdoing against Nash.
While vilifying others, Nash is also attempting to make out that he is facing criminal charges simply because of a change in the law in 2001.
One of the more interesting claims being made by Nash is that the removal of surpluses from retirement funds by employers was perfectly legal when it happened in the 1990s.
It is for the court to decide whether what Nash did was legal or illegal and I do not intend to proclaim on his guilt or otherwise.
But I do think it is worth recording that Nash is being a bit disingenuous.
A little bit of background first.
The 2001 amendment to the Pension Funds Act allowed for the distribution of surpluses that had built up in retirement funds mainly as a result of inequitable and unfair withdrawal benefits being given to people who withdrew from the funds before retirement and because there had been sound investment returns.
Prior to the legislation, the only legal ways for a retirement fund surplus to be accessed was to reduce or halt contributions (take a “contribution holiday”) or to liquidate the fund and transfer the members to new funds (mainly from defined benefit to defined contribution funds), while outsourcing pensions by buying pensions from a life assurance company.
When funds were liquidated, the split of any surplus was normally agreed on by the members and pensioners, normally through elected trustees.
Many employers, who wanted to keep their retirement funds going, took contribution holidays.
The amended legislation, however, stated that, where a contribution holiday had been taken, the money had to be paid back into the surplus for a negotiated division. These contribution holidays were categorised as “improper use” in the Pension Funds Second Amendment Act of 2001, and the amounts had to be added back into any fund surplus for division among employers, members, former members and pensioners.
Importantly, these contribution holidays were not criminalised in any way, and the charges against Nash do not relate to any contribution holiday.
What the criminal charges relate to was an elaborate scheme designed by a former senior executive at Finansbank (a subsidiary of Nedbank, which is owned by Old Mutual), Peter Ghavalas, which resulted in surpluses being removed by employers from retirement funds.
There was no allocation of any portion of the surpluses to members or pensioners; the money was simply ploughed back into their own businesses.
Nash told Whitfield that Ghavalas “developed a system or a mechanism where the pension fund surplus was accessible on a quick basis rather than a slow basis…”
Ghavalas has since pleaded guilty for his role. In a plea bargain to avoid going to prison, he was sentenced to 15 years in prison, suspended for five years, and a R6-million fine, suspended for six years on a conviction of fraud. He also had to repay R18.6 million he had received in commissions.
HOW THE SURPLUS-STRIPPING WORKED
The story of the surplus stripping is told in many thousands of pages of court papers. Here it is in brief, with some variations:
* Members of the targeted funds with surpluses were transferred to an associated retirement fund to isolate them from the surplus.
* The payment of pensions to pensioners was outsourced. The affected pension fund would purchase pensions from a life assurance company. This effectively excluded the pensioners from any surplus entitlement.
* The affected pension fund then applied to the Financial Services Board (FSB) for what is called a section 14 transfer (in terms of the Pension Funds Act) to amalgamate with the Lifecare Pension Fund, the retirement fund of the Lifecare Hospital group. The ostensible reason given to the FSB for seeking the amalgamation was that the sponsoring employers of the funds would be merging through the purchase of shares. This, in fact, was allegedly never intended or happened.
The section 14 applications, which the National Prosecuting Authority, the FSB and funds curator Tony Mostert have claimed were fraudulent, were made by Alexander Forbes, which administered the Lifecare fund.
Alexander Forbes pleaded guilty earlier this year to six counts of contravening the Financial Institutions (Investment of Funds) Act arising from the transactions. The firm, which never benefited from the transactions, was fined R10 000 and ordered to pay R5.49 million to the affected funds for distribution to pensioners.
Alexander Forbes reached a R342-million civil claim settlement with Mostert last year.
Alexander Forbes has also not opposed a High Court application by the FSB to have the section 14 applications set aside on the basis that they were obtained fraudulently. Nash and another criminally accused in the case, Aubrey Wynn-Jones, have opposed the application.
* As a result of the amalgamations, the Lifecare fund should have assumed responsibility for the affected funds, taking control of their assets, liabilities and members.
* It is alleged that, unbeknown to the FSB, there was no intention to transfer the assets, liabilities and members to the Lifecare fund, and the transfer did not take place. All that was transferred was the surplus to the various employers, totalling R174.5 million (the total losses are now valued at about R1.2 billion).
* The surplus amounts transferred did not appear in the books of the Lifecare fund. All that appeared was the fund’s cut for allowing itself to be used for the section 14 applications.
* The surplus money, less commissions and fees of about 30 percent paid to various parties, flowed back to the original employer of the affected fund, to be distributed between the employers and other parties in the scheme.
IF TRANSACTIONS WERE LEGAL, WHY THE COMPLICATIONS?
What Simon Nash needs to explain, if everything was as legal as he claims in this “quick” solution to access fund surpluses, is:
* Why no members of the Sable fund were transferred to the Lifecare Pension Fund as required byf the Pension Funds Act.
* Why the FSB was allegedly deceived and not informed that no members were to be transferred from the existing funds to new funds with the surplus assets.
* Why the Sable fund and its sponsoring employer paid the following amounts from the fund’s R36-million surplus: R1.4 million to the Lifecare fund for merely being a conduit of money, R100 000 commission to Peter Ghavalas, and a further R9.3 million to a company called Soundprops, controlled by Ghavalas.
* Why only R25.1 million of the Sable surplus was transferred to Midmacor Industries – another company controlled by Nash. In other words, this “quick” and “legal” solution cost 30 percent of the surplus.
* Why R 12.9 million was paid in various commissions, mainly to Ghavalas, from the R43.5-million surplus in the Power Pack fund.
* Why Cullinan, a listed company also controlled by Nash at the time but which has since been sold, was left with only R30.6 million of the R43.5 million.
It seems rather odd for Mr Nash to pay away 30 percent of a total of R79.5 million in “commissions” for “quick” and “legal” access to the surpluses.
If it was legal at the time, as Nash claims, why did funds not simply write out cheques to the two sponsoring employers? How much quicker that would have been than the elaborate plan that was devised by Ghavalas.
Instead of making hollow threats against Personal Finance in an attempt to stop us publishing reports on this very sad saga, maybe, Mr Nash, you would care to explain this strange behaviour to the readers of Personal Finance and the fast-dying pensioners of the two funds, who were excluded from your “legal” scheme?
FSB IS SURE OF ITS CASE
Criminally charged Johannesburg businessman Simon Nash’s campaign of vilification aimed mainly at Financial Services Board (FSB) executives and Tony Mostert, the curator of pension funds stripped of their surpluses by employers in the 1990s, backfired this week.
Last week, Nash was on Radio 702/Cape Talk. In an interview with financial journalist Bruce Whitfield, he accused Mostert of “sitting on R750 million, and the FSB is co-operating with him to hide where that R750 million is … So far he has filed no accounts, he produces no evidence of where he has got that R750 million.”
And later in the interview, Nash said: “I am accusing certain people within the Financial Services Board, yes, of the possibility of committing fraudulent activity.”
This week, Jurgen Boyd, the deputy chief executive of the FSB, released a seven-page report on the financial management of the funds and the money so far recovered by Mostert.
Boyd’s statement makes it quite clear that every cent is accounted for and details how money will be distributed to pensioners.
Nash faces criminal charges arising from the stripping of two of the funds, the Sable Industries Pension Fund and the Power Pack Pension Fund.
Boyd released the statement following the accusations made by Nash in the radio show as well as accusations in a few media reports based on information provided by Nash.
Boyd says that valuation reports, compiled by named, well-known actuaries, have been submitted as required by Mostert to the FSB over the past three years and are available at his office.
The money recovered by Mostert is now held as surpluses in the various funds. Surplus apportionment schemes in terms of the Pension Funds Act have been proposed by Mostert for all the funds except the Power Pack fund, which is delayed because of an investigation into two other retirement funds that are linked to Nash.
The surplus apportionment proposals are currently being assessed by the chief actuary of the FSB, Marius du Toit.
Du Toit is required to sign off every surplus apportionment scheme, even where there is a nil surplus. He has already approved the proposals for the distribution of millions of rands in the Mitchell Cotts Pension Fund. The money is currently being distributed to pensioners by Old Mutual.
Boyd provides details in his statement of the assets, liabilities, reserves and surpluses and the status of each of the seven funds.
He says that with investment returns the value of recoveries made by Mostert and awaiting distribution has grown from R750 million to R902 million.
Of the R902 million, about R2.4 million is held in bank accounts, R2 million in lawyer trust accounts, R486.7 million in Investec Asset Management, R27 million in Prescient Asset Management, R6.3 million in Sanlam and R377.7 million in Old Mutual.
Boyd says it is difficult to indicate when all the surplus apportionment schemes will be approved by the FSB, but he estimates it will be within the first three months of next year.
Last month, the National Treasury issued a statement reprimanding Nash for his wild and unsubstantiated allegations against Mostert and the FSB.
It is absolutely unacceptable for anyone to throw mud as Nash did in the radio programme without a shred of evidence to support his claims.
Nash’s sole purpose seems to be to distract people from the fact that he is the person under the legal microscope.
In the meantime, it causes consternation among the many pensioners who have now been waiting for more than 10 years to have their pensions topped up, and which they would never have received if the FSB and Mostert had not stuck doggedly to their task.
NASH’S LAWYERS THREATEN US, BUT DON’T BACK UP CLAIMS
Personal Finance, in response to sending this column to Simon Nash, received a threatening letter from his attorney Lennard Cowan, of the firm Cowan-Harper, objecting to the publication of the column this week.
In his letter, Cowan says he has been instructed by Nash to place on record that the “proposed article contains numerous inaccuracies and false allegations”. He says he has been instructed by Nash to place on record that “false allegations in the proposed article are false to your knowledge”.
However, Cowan does not list a single reported fact in the article in his general claims of inaccuracies.
Cowan gave an undertaking that Nash would respond by 5pm on Thursday next week and wanted the publication delayed until next week.
Cowan incorrectly claims that “you have already been placed in possession of information, transcripts and other documents from which the falsity of those allegations appear unequivocally”.
Personal Finance had asked Nash to point out any inaccuracies and, if he was to make any accusations against any party, he should provide supporting evidence. He was also asked to answer the questions addressed to him in the column.
Note: Personal Finance has never knowingly and never will knowingly publish false information. Personal Finance goes to extraordinary lengths to verify its articles.