"Old Mutual's day of shame," shouted newspaper headlines last week, reflecting the views of Tony Mostert, the curator of the CAF pension fund. At issue was a court case about whether Old Mutual did enough to prevent the pension fund being looted by companies owned by prominent Gauteng businessmen Laurie and Jan Korsten.
In the Supreme Court of Appeal in Bloemfontein, Mostert had successfully appealed against a decision of the Cape High Court that Old Mutual should pay out to make good the money looted from the fund to support the Korsten businesses.
In effect, the appeal court found that Old Mutual did not follow correct procedures when it handed over R32 million of CAF pension fund assets on the Korsten brothers' instructions.
Old Mutual argued it was not responsible for the raiding of the CAF fund. It had handed over the money on the instructions of the fund's trustees, and what happened thereafter was not its responsibility. The court found otherwise.
Obviously, the legal arguments were a lot more complex than this and Old Mutual still believes it did nothing wrong. There were some deep sulks at its headquarters in Pinelands this week about how the issue was reported.
I am not a lawyer and do not intend to debate the legal merits or demerits of the case. However, it is pleasing that a group of people, many of whom would otherwise be destitute, have had their money (and it is their money) restored to them.
Old Mutual could have been a bit clearer about the consequences. Two examples: The company claims the cost to it has not been as great as R80 million, as claimed by Mostert.
Old Mutual says the loss is the original "R32 million plus simple interest of 15.5 percent a year plus costs" - but it has not provided the figure of the total cost. The cost is well over R60 million, but there will be some recoveries from the Korstens' bankrupt companies.
Then Old Mutual said existing policyholders or shareholders would not incur a loss as a result of the court's decision, as contingency plans had already been made. What trite tripe. It did not clearly state that the money was removed from policyholder pockets back in 1998. It is policyholders who were harmed by the judgment - not some contingency fund.
South African corporates should be more upfront about issues of policyholder interest. Old Mutual, in particular, should have been aware of this after its recent disastrous handling of the attempt by 16 senior executives to enrich themselves with a creative share option at its Nedcor subsidiary.
This aside, the court's decision is a lesson for the wider financial services industry.
Often it is an industry, which instead of trying to comply with the law, attempts to find ways around it. A good example is the way five major life assurance companies, including Old Mutual, have side-stepped the law on maximum commissions to financial advisers, by claiming they are paying fees and not commissions.
The financial services industry often forgets that it is the "custodian" of the savings of ordinary South Africans, who have worked hard for the money which is invested with it. Too often, one gets the impression that those savings are regarded as a pig trough for paying excessive commissions, taking excessive costs and making excessive profits.
My understanding of the judgment against Old Mutual is that the court found that Old Mutual had not done enough by merely sticking rigidly to its contractual obligations. It had a greater obligation to protect the interests of ordinary people. It was the custodian of the savings of the CAF pension fund members for many years, until the Korsten brothers ordered Old Mutual to hand over the money.
I often hear comments in the financial services industry such as "only two percent of our clients were affected", "only a small proportion of living annuities are badly handled", and so on. The people who make such comments, from behind their rosewood desks in their sumptuous offices, forget that a loss of R1 000 can be enormous for the individual affected. People are not statistics.
The South African financial services industry has done many things in recent years for which it should hang its collective head in shame. Many of these misdeeds have been highlighted in Personal Finance over the past five years.
At the same time, individuals can also learn a lesson from this milestone judgment: Everyone must play a more active role in questioning what is happening to their money.
A retirement fund is the average employed South African's biggest single savings pool. You have to play a role in ensuring that your money is properly protected. In other words, you should expect and demand proper accounting on a regular basis from your retirement fund trustees.
Since the CAF theft, the law has been considerably tightened to stop people such as the Korsten brothers cynically and illegally misdirecting money. It is up to you use the law to protect yourself. This also applies to other financial dealings. You should make sure you fully understand the instruments in which you invest, including their costs and purpose.
Finally, although the charges of theft and fraud against the Korsten brothers were dismissed last year, this should not prevent Old Mutual from pursuing them in a civil case.
Old Mutual says it is considering all avenues to recover the money - let's hope the real villains of the piece, the Korsten brothers, are in the firing line.