MICHAEL MARCHANT: No accountability at Liberty Life
After hounding out the whistleblower who exposed Liberty Life’s disastrous pension fund cancellations programme, the insurer has sat on its hands
It is extraordinary to see how pension industry insiders leap to defend insurance behemoth Liberty Life for its scandalous handling of the unlawful cancellation of hundreds of pension funds.
A recent investigative report by Open Secrets, "The Bottom Line", revealed how Liberty accounted for 80% of the funds cancelled in an unlawful and error-strewn "cancellations process" run by the then Financial Services Board (FSB) up to 2013. Our report distinguished between the broader R50bn problem of unpaid pension benefits, and the worrying case of the pension funds cancellation.
The first category, unpaid benefits, is complex. It is the result of various factors, many of which are historical — for instance, apartheid’s migrant labour system and the fact that many pensioners, some with limited financial literacy, didn’t know they were contributing to a fund.
But the second category, the unlawful cancellation of hundreds of pension funds, is far more sinister. It’s a story emblematic of other industry problems — including "soft-touch regulation" and lack of accountability.
More than 6,000 pension funds were cancelled or deregistered between 2007 and 2013, even though many still owed money to pensioners. In all, 4,000 of them were administered by Liberty. This was done unlawfully or incorrectly, ignoring the interests of fund members.
Liberty admits it made at least 130 blunders during the cancellation project. It told the FSB to deregister these funds because they apparently had no assets or members — only to "discover" later that they did. Its excuse is that the records it inherited from other companies at the turn of the century were incredibly poor.
Its excuse is that the records it inherited from other companies were incredibly poor
It’s a thin excuse. The reality is that Liberty wanted to expand its fund administration business, presumably because it was profitable. When it did so, it accepted the legal duty to ensure the records were as accurate as possible. Two decades later, Liberty hasn’t addressed those shortcomings in all cases. And it has also delayed reinstating cancelled funds for this reason.
Liberty argues that it should in fact be praised for leading the way on unpaid benefits and reinstating cancelled funds.
It’s true that Liberty is the only firm to reinstate 25 funds to reverse its own errors, and it has engaged groups such as the Unpaid Benefits Campaign. But it displays little urgency in this matter, which affects indigent pensioners.
And, since Liberty is responsible for cancelling 80% of the funds in the first place, you’d expect it to be at the front of the queue to reinstate funds. Its inexplicable delay in doing so justifies harsh criticism.
Open Secrets wrote to Liberty in 2018 to ask what the delay was. Liberty told us it was engaging the Financial Sector Conduct Authority (the FSCA, successor to the FSB) directly, instead of applying to court to reinstate the funds. We explained to Liberty that applying to court is actually the only lawful approach.
Finally, in March 2019, the FSCA released a circular directing administrators to approach the courts. Yet today, one year later, Liberty still hasn’t done so.
Just as concerning is that there appears to be no genuine accountability at Liberty for those responsible for such egregious mistakes. It’s a manifest failure of corporate governance.
Liberty executives clearly didn’t exercise the duty of care required by the law. Hundreds of errors were made, putting pensioners at risk. Yet it seems CEO David Munro hasn’t subjected anyone to disciplinary action. It may even be that those individuals still work there — but Liberty isn’t saying.
One person definitely not working at Liberty anymore is Michelle Mitchley, the whistleblower who contacted the FSB about the errors she saw. Afterwards, she was moved to another department, pressured to apologise, and eventually dismissed. It’s a deep stain on Liberty’s reputation.
But while Liberty has failed to act against those responsible, the FSCA has also failed to investigate Liberty’s conduct and hold people to account.
The way in which such abysmal conduct is being defended is deserving of reflection. Were these public officials, or people linked to the Guptas, there’d be a public outcry. But those standards are hardly ever applied to those who abuse their positions in the corporate world.
We need to shift our allegiance from those profiting from misconduct to the victims of it.
• Marchant is a researcher at Open Secrets (opensecrets.org.za)