Fidentia+sent+funds+offshore+-+FSB,+Tonny+Mafu,+Business+Report

Business Report, February 6, 2007
=Fidentia sent funds offshore - FSB=


 * By Tonny Mafu**

Johannesburg - Fidentia Asset Management (FAM) may have transferred part of the missing R689 million in client funds to overseas bank accounts, according to a report by the Financial Services Board (FSB).

The Cape high court placed Fidentia under curatorship last Thursday after the FSB exposed the misappropriation of funds at the company, which managed at least R1.6 billion on behalf of clients.

"We came across a number of transactions wherein transfers were made to offshore bank accounts from what would appear to be client funds," Dawood Seedat and Brandom Topham, the inspectors of financial institutions at the industry regulator, said in their report.

The offshore accounts were held in the name of companies related to Fidentia and Joseph Arthur Brown, the executive chairman of Fidentia Holdings, the fund manager's parent.

Based on their information, the inspectors could not probe the transfers "to ascertain whether they were made from client funds or money of FAM or its holding company".

Fidentia managed funds on behalf of clients such as the Mineworkers' Provident Fund (MPF), which invested R820 million to benefit the widows and orphans of workers killed in mining accidents.

Instead of keeping records of assets and liabilities using acceptable accounting procedures, Fidentia merely used an Excel spreadsheet prepared by Brown.

No proper records were kept to enable an audit of the information used to apportion assets to client accounts, the inspectors found. This was evident in Fidentia's October 2005 e-mail to the regulator, in which it said it managed R3.2 billion on behalf of clients on March 30 2005. But Fidentia had previously told the FSB that it managed R1.6 billion on March 30 2005, the report said.

"The question arises whether there were additional client assets not disclosed or whether the client assets list is manipulated internally so often that the management of FAM do not know how much they have under management," it said.

In an interview yesterday, Frans Mahlangu, who was suspended in November as the MPF's principal officer, said that when the fund asked for reports on its investments, Fidentia had sent "newsletters" that gave no meaningful information.

When the MPF requested audited statements, Mahlangu said, the asset manager resorted to dividing the fund's board of trustees by communicating with them individually.

At one time a Fidentia representative had told the MPF that all its funds were invested in the money market, but it was later found that more than 70 percent of its funds were in unlisted assets, he added. Pension funds are allowed to invest only 5 percent in unlisted securities.

Sapa reports that Cosatu yesterday called for the prosecution and sentencing of anyone in Fidentia who had misappropriated money. The union federation also urged curators to speed up their inquiry "to avoid long periods of uncertainty".

"Apart from being illegal, it is absolutely immoral to rob workers of money they have saved to protect their widows and orphans," it said.

"Cosatu calls upon the curators to do everything possible to ensure that the widows and orphans get everything they are entitled to."


 * From: http://www.busrep.co.za/index.php?fSectionId=563&fArticleId=3665431**

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