The Johannesburg High Court has accepted that in at least three of seven cases in the 1990s, employers, with the assistance of others, stripped retirement fund surpluses by fraudulently deceiving the Financial Services Board (FSB).
The FSB had applied to the High Court to set aside approvals it gave in the 1990s in terms of section 14 of the Pension Funds Act that allowed pension fund surpluses to be stripped by a number of employers. Four applications have been postponed until February 28 next year.
The postponements were granted following last-minute requests to file opposing affidavits to the four applications by Simon Nash, the chief executive of industrial company Cadac, and Aubrey Wynne-Jones, the chief executive of Wynne-Jones & Company Employee Consultants, who both face criminal charges for their role in the surplus stripping.
Opposition to the FSB applications was withdrawn by both Alexander Forbes, which it is alleged facilitated the section 14 transfers knowing they may be fraudulent, and Sanlam, which also facilitated and benefited from the surplus stripping.
Hospital company Lifecare Group Holdings, which was allegedly used to launder the stripped surpluses, has also not opposed the applications.
Alexander Forbes, Sanlam and the Lifecare hospital group have all paid hundreds of millions over to the curators of the stripped retirement funds, while Alexander Forbes recently reached a plea bargain agreement that saw one of its companies convicted on lesser criminal charges for its role in the surplus stripping.
In affidavits accompanying the applications, the chief executive of the FSB, Dube Tshidi, outlines how in a complex series of transactions involving dormant companies and the Lifecare Pension Fund, pension fund surpluses were transferred from one fund to another without the transfer of the members.
Tshidi says the true facts behind the section 14 transfers were hidden from the FSB. The transfer of the surpluses would not have been permitted if the FSB had known the facts.
Tshidi describes the section 14 transfers as a “fraud perpetrated on the Registrar (of Pension Funds) in the procurement of the impugned decision”.
In his affidavits, Tshidi criticises Alexander Forbes, as the facilitator of the section 14 transfers, for not itself having taken steps to have the “impugned” transfers set aside.
He says in terms of the Pension Funds Act assets cannot be transferred from one fund to another without the liabilities, namely the members and pensioners of a fund.
He refers to internal Alexander Forbes memoranda between executives which showed they knew that the transactions were probably a “fraudulent misrepresentation”.
The applications were also supported by affidavits from Peter Ghavalas, who has been convicted on criminal charges of fraud and theft involving all the funds.
In his affidavits, Ghavalas says the structures that were “put in place were artificial and simulated”, but to be successful a section 14 approval was essential.
In his Picbel Groepvoorsorg Fonds affidavit, Ghavalas says: “The application for the section 14 certificate was made as if the commercial transaction, signed by the parties thereto, had already been implemented, whereas this was not the case.”
He admits in his affidavits that if the true nature of the transaction was known to the FSB, the section 14 applications would not have been successful.
In his Sable Industries Pension Fund affidavit he says: “I knew that the submitted section 14 application to the Registrar (of Pension Funds) had the sole object of disguising the intended removal and dissipation of the actuarial surplus from the pension fund for the benefit of the owners of the principal employer, through undisclosed transactions.”
He says all the parties involved in the transactions “knew the registrar would be misled”.
“The section 14 certificate was a smoke screen or cover for the real transaction, (which) involved the removal of the value of the actuarial surplus from the pension fund ...
“Instead, Alexander Forbes actively managed, controlled and orchestrated the implementation of the bogus simulated sale of share agreement, which only served as a mechanism to remove certain cash assets from the fund.”
It was necessary for the success of the transaction to mislead the registrar, Ghavalas says in his affidavits.
The section 14 transfers the High Court accepted as being fraudulent and which were set aside affected the Lucas South Africa Pension Fund, the Picbel Pension Fund and the Mitchell Cotts Pension Fund.
The FSB applications that were postponed involved:
* The Datakor Group Retirement Fund, the Datakor Group Pension Fund and the Coretech Pension Fund on the intervention of Wynne-Jones.
* The Sable Industries Pension Fund on the intervention of Wynne-Jones and Nash.