SURPRISE SEEMA: The VBS-type heist the courts averted

In late 2018 South Africans were left aghast when Terry Motau released his “Great Bank Heist” report into the orgy of fraud, corruption and looting at VBS Mutual Bank.

This was nothing short of a financial sector transformation horror story. Here was an institution founded in the darkest years of apartheid’s dispossession and disempowerment of black South Africans, carried over decades on the shoulders of gritty and financially resilient ordinary black investors, stokvels and burial societies, that was smashed to smithereens in months by looters who made no pretence of caring an iota about SA’s transformation imperative.

It is against this backdrop that those of us with antennae attuned to issues of transformation in sectors previously seemingly impenetrable to historically disadvantaged groups watch like hawks for developments that might threaten that goal again. I take this long and scenic route to make the point that about a week ago, another “heist” was averted, and an egregious wrong to our transformation imperative thwarted by the full bench of the high court sitting in Johannesburg.

To be clear, the scheme I’m talking about had not yet developed into anything on the VBS scale. But its corrosion of the public interest in the proper administration of the pension funds sector would have been devastating had it gone ahead unchecked. Fortunately, despite our country’s myriad problems the centre still holds, at least in the administration of justice and due process.

In the hurly-burly of SA news developments the judgment of a full bench in the matter of Moropa & Others v Chemical Industries National Provident Fund (CINPF) & others went underreported, perhaps because its import wasn’t fully appreciated. It’s that anomaly I hope to redress here.

A summary of what the case was about and the court’s judgment is appropriate. It stemmed from a November 2019 decision by the board of trustees of the CINPF, worth about R6bn, to terminate the services of its long-standing administrator, NBC Holdings. The trustees then moved swiftly, bulldozing through any due process, including a competitive tender process, to appoint as NBC’s replacement three service providers — Akani Retirement Fund Administrators, Novare Actuaries & Consultants and Moruba Consultants & Actuaries.

In short, it turns out the provident fund’s top three officials (the board of trustees’ principal officer, chair and deputy chair), who had championed, cajoled and bamboozled the rest of the board into making this decision, had been paid handsomely by a front entity called Neighbour Funeral Scheme, whose sole director was also the CEO of Akani, one of the “successful bidders” for the fund administration contract.

Actually, “paid handsomely” is inaccurate, because as it turns out this trio were willing to pervert their fiduciary and statutory duties for the proverbial 30 pieces of silver. The now late principal officer received the miserable sum of R40,000, while the chair and deputy chair of the board each received a measly R25,000.

Sadly, the cloak and dagger plot couldn’t be consummated without sucking into its maelstrom 23 employees of NBC, among whom were the two top officials entrusted with maintaining the business relationship with the provident fund. Alas, they found the allure of Akani’s dirty money too tempting.

Needless to say, they’re all former employees today. But the damage already done is immeasurable. In the wake of the saga NBC suffered millions of rand in business losses and was forced to retrench some of its employees, victims of this attempted heist.

The high court rightly rejected the explanations proffered by the three fund officials for why an entity such as Neighbour Funeral Scheme was a mere week after its award making payments to each of them.

They all fell back on the flimsy cover story that the funds were in lieu of funeral insurance payouts for some relative or other who had apparently died in each of their family circles in that week in late November/early December 2019. The said relatives, whose relationships with the three fund officials were never explained to the court’s satisfaction, also just happened to have been covered by the same funeral insurance company (NFS), on policies also coincidentally taken out by the CINPF officials separately in precisely the same month (August 2019).

Them taking funeral policies with a company whose sister-entity they were to award a lucrative contract a mere three months later was also said to have been coincidental. Of this tale they tried to weave, the court said “it is so far-fetched that it can and should be rejected ...”

A perplexing feature of this scheme is how small the bribe amounts were, given how lucrative the contract the three entities were to gain in exchange was, and the extent to which the strategy would tear the fabric of trust in the employee benefits system while undermining member control of funds like the CINPF in one fell swoop.

But as we have come to appreciate over the past few years, it’s not always the quantum of the bribe that matters. It’s also the betrayal of the legal duty of care and diligence, the erosion of our country’s values of transparency and accountability and — importantly, as the court found in this case — the undermining of human rights, in this case the right to administrative justice.

The corrosion of our democratic society’s values, rights and principles described above is precisely why the court felt the public interest was affected in this ostensibly private dispute. So much so that the court resorted to applying the Promotion of Administrative Justice Act, a tool mainly reserved for judging conduct by organs of state and rarely used by the courts to gauge private entities’ behaviour.

This is also why I believe more ought to have been said about this underreported judicial outcome. Had the scheme succeeded, who knows what would have been targeted next by such conspirators, who would have been emboldened by their initial “success” in unlawfully elbowing out NBC and entrenching Akani, Novare and Moruba in the fund administration contract.

CINPF’s founding in 1987 and history hitherto has always been about promoting control and participation in key decision-making by its mainly blue-collar members in sectors such as petroleum, paper, chemicals, wood and glass. I would argue that it is not far-fetched that further plots were going to be hatched that could have ended with CINPF members in the same predicament as VBS investors and depositors.

South Africans are understandably fed up with corruption. This judgment has great significance in its emphasis on what criminology’s “broken window theory” has always held: untoward behaviour left unchecked leads to further decay and the undermining of laws and values.

Fortunately for SA, in this instance the broken window was swiftly attended to by a robust system of judicial recourse. We are all the better for it.

• Seema, a former journalist, is now involved in the financial services sector.