FSB,+BAC+fund+private+prosecution,+Wiseman+Khuzwayo,+B+Report

Business Report, Johannesburg, February 25, 2007
=FSB and BAC fund private prosecution=


 * By Wiseman Khuzwayo**

Johannesburg - The Financial Services Board (FSB) and Business Against Crime (BAC) are funding the prosecution of Alexander Forbes and at least 26 company executives for allegedly asset-stripping pension fund surpluses of about R900 million.

This is known as a private prosecution and is very rare in South Africa. Although the National Prosecution Authority is assisting the FSB and BAC, it is not contributing financially.

The trial itself is unprecedented in that the amount involved and the number of accused are the largest in the history of white-collar crime in this country.

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."

So seriously are the FSB and BAC regarding the alleged offences that they have engaged the services of retired ace prosecutor Jan d'Oliveira, the former national director of prosecutions and the former attorney-general of the Transvaal, to be the prosecutor.

The FSB investigation into the alleged scam took more than six years and goes back to the 1990s.

Alexander Forbes is the biggest pension administrator in the country. It administered the Lifecare Pension Fund, which the prosecution alleges was used to park the money siphoned off from pension fund surpluses.

According to Personal Finance, a sister newspaper to Business Report, summonses to appear in court were served on Alexander Forbes and some of its senior executives on February 9.

It is alleged that the scam was carried out using what has become known as the "Ghavalas option".

Peter Ghavalas, a former Nedcor executive and owner of pension fund administrator Soundprops 178, is the alleged mastermind of the scam. He emigrated to Australia in 1988 but was arrested when he tried to re-enter the country stealthily to visit his ailing mother. He is out on R1 million bail.

The affected funds are the Mitchell Cotts Pension Fund; Lucas SA Pension Fund; Datakor Pension Fund; Datakor Retirement Fund; Coretech Pension Fund; Prestolite Pension Fund; Powerpack Pension Fund; Sable Industries Pension Fund and Picbel-Groep Versorgingsfonds.

Apart from Ghavalas, 12 other company executives have appeared in court and have been granted bail. They face a string of charges, including money laundering, theft, fraud and conspiracy to commit theft and fraud.

The executives include Anthony Dixon-Seagger, a director of Mitchell Cotts and a trustee of the Lucas SA Pension Fund; Graham Sommerville, former chief executive of Lifecare; Gerald Nightingale, who once headed Investment Solutions at Alexander Forbes; Anton Roets, former senior executive and chairman of the Datakor Group; Michael McEvoy and Derrick Pettitt, former executives of Datakor; Adrian Bailey, a former member of the Mitchell Cotts Pension Fund; Jan Pickard, a trustee and chief executive of Picbel; Owen Wynne-Jones, chief executive of retirement fund administrators Wynne Jones; and Simon Nash, of Sable Industries.

The lid on the alleged scam was lifted by lawyer Tony Mostert, who was appointed curator of the affected pension funds. He has gone to court on a number of occasions in an attempt to win back some of the R900 million that he says is owing to the various funds.

According to Personal Finance, basing its report on various untested affidavits that Mostert has made in his high court applications, the alleged scam was carried out in the following manner.

The payment of pensions to pensioners would be outsourced. In other words, the affected pension fund would purchase pensions from a life assurance company.

The pension fund would then apply to the registrar of pension funds at the FSB for what is called a section 14 transfer under the Pension Funds Act to amalgamate with the Lifecare Pension Fund.

The ostensible reason for seeking the amalgamation was that the funds' participating employers would be merging as well.

As a result of the amalgamation, the Lifecare fund should have assumed responsibility for the affected fund, taking control of all its assets, liabilities and members.

Mostert said Lifecare fund allowed itself to be represented to the registrar in the section 14 application as the recipient, knowing that "the registrar's approval would have been fraudulently obtained, only to launder the surplus for the benefit of its participating employer, which would, through a bogus share allocation agreement, distribute the spoils to the participants in the fraud".

Unbeknown to the registrar and pensioners of the affected funds, "the fraudsters had no intention of [transferring], and did not transfer the assets, liabilities and members to the Lifecare fund". All that was transferred was the surplus in each fund.

The total surplus amounts transferred did not appear in the books of the Lifecare fund or company, but only the fund's cut from the rake-off for allowing itself to be used for the section 14 applications.

The bulk of the surplus money was laundered through the bank account of the Lifecare company, which in turn took a slice of the surpluses transferred.

The surplus money would then flow back to the original participating employer of the affected fund to be distributed between the employer and other parties in the scam.


 * From: http://www.busrep.co.za/index.php?fArticleId=3698283**

863 words