How law firm milked pen­sion fund of R200m

Mu­nic­i­pal coun­cil­lors’ pen­sion money was spent on sev­eral prop­er­ties, of which hefty chunks were squir­relled away, in a con­vo­luted web of trans­ac­tions

CityPress - - News - SIPHO MASONDO sipho.masondo@city­press.co.za

APre­to­ria law firm is be­ing in­ves­ti­gated af­ter ac­cu­sa­tions that it plun­dered more than R200 mil­lion in pen­sion money be­long­ing to mu­nic­i­pal coun­cil­lors. De­tails of the al­leged heist are laid bare in an af­fi­davit in which the Mu­nic­i­pal Coun­cil­lors’ Pen­sion Fund com­plains to the Law So­ci­ety of the North­ern Prov­inces about the con­duct of Maluleke Ser­iti Makume Mat­lala (MSMM) In­cor­po­rated.

The af­fi­davit is a sum­mary of two in­ves­ti­ga­tions into the pen­sion fund’s af­fairs. Fi­nan­cial Ser­vices Board (FSB) in­spec­tor Shirine Fraser con­ducted the first in May 2016.

The second was in Fe­bru­ary last year, af­ter the FSB ap­pointed a care­taker board to man­age the fund’s af­fairs.

The FSB placed the fund un­der cu­ra­tor­ship in De­cem­ber.

In May 2015, the law firm signed a year­long con­tract to act for the pen­sion fund. It is now ac­cused of “tak­ing ad­van­tage of the fund, grossly over­reach­ing, [and] charg­ing un­con­scionable, ex­ces­sive and ex­tor­tion­ate fees”.

The Law So­ci­ety of the North­ern Prov­inces has launched a pre­lim­i­nary in­ves­ti­ga­tion.

The care­taker board’s in­ves­ti­ga­tion and com­plaint to the law so­ci­ety states:

● Al­most two years af­ter MSMM paid

R137 mil­lion of the fund’s money to a com­pany called Isago @N12 De­vel­op­ment for 11 va­cant stands in Klerks­dorp, North West, the land is yet to be reg­is­tered in the pen­sion fund’s name;

● In March 2016, the fund’s board was mis­led into pay­ing R70 mil­lion for an of­fice park cost­ing R60 mil­lion. The law firm paid R60 mil­lion for the prop­erty and al­legedly chan­nelled the re­main­ing R10 mil­lion to other com­pa­nies, with­out the fund’s knowl­edge;

● Of the re­main­ing R10 mil­lion, Ram­ab­u­lana Man­age­ment Ser­vices re­ceived R7.5 mil­lion for “due dili­gence” and “risk as­sess­ment”, TLSZ Busi­ness En­ter­prise was paid R157 000 for “pro­fes­sional ser­vices”, while MSMM paid it­self R2 mil­lion for “le­gal trans­ac­tion ad­vice”;

● In 2016, the fund’s board paid Isago R64.7 mil­lion for an­other va­cant stand. The law firm al­legedly bought the land for R44 mil­lion and chan­nelled the rest to other com­pa­nies with­out the fund’s con­sent;

● The law firm charged the fund “ex­ces­sive and ex­or­bi­tant fees” when it in­voiced it R34 mil­lion for due dili­gence fi­nan­cial re­views on five as­set man­agers.

In his af­fi­davit, the care­taker board’s former chair Jan Mahlangu says: “The fund is of the view that it has been charged ex­ces­sive fees by MSMM which bear no rea­son­able ref­er­ence to the ser­vices ren­dered by MSMM in re­la­tion to the due dili­gence and the prop­erty trans­ac­tions.”

In the com­plaint, Mahlangu asks the law so­ci­ety to dis­ci­pline the firm and its chief op­er­a­tions of­fi­cer (COO) Mx­olisi Zwane, in­spect the firm’s ac­count­ing records and af­fairs, re­view fees charged, and in­ves­ti­gate Zwane’s busi­ness

af­fairs and his in­ter­ac­tion with the com­pa­nies which did busi­ness with the firm.

ISAGO: THE FIRST TRANS­AC­TION

Mahlangu al­leges in his com­plaint to the law so­ci­ety that the 11 va­cant stands the fund bought from Isago in 2015 had “not been trans­ferred to the name of the fund”. The fund’s prin­ci­pal of­fi­cer, Elias Msiza, told City Press this week that this still has not hap­pened.

In its com­plaint, the fund states that of the R137 mil­lion paid for the 11 stands, about

R25 mil­lion was paid to Isago and R106 mil­lion to an­other law firm, Strauss Daly. Strauss Daly’s Steyn Botha said they acted on be­half of the bond­holder, One Vi­sion In­vest­ments 351, which “pro­vided fi­nance to the de­vel­op­ment com­pany, Isago”.

“The loan was re­paid and the bond can­celled,” he said. This sug­gests that the prop­er­ties are now owned by an­other en­tity en­tirely.

THE OF­FICE PARK

Mahlangu says in his af­fi­davit that in De­cem­ber 2015, the pen­sion fund’s board agreed to buy an of­fice block for R60 mil­lion. Ear­lier that month, the fund re­leased a R7 mil­lion de­posit for the prop­erty to the law firm, “which is 10% of

R70 mil­lion, which was not the agreed pur­chase price”.

He says the firm was well aware that the pur­chase price was R60 mil­lion. Ten days later, the fund paid R70 mil­lion to the lawyers, who paid R60 mil­lion to the seller’s at­tor­neys.

The af­fi­davit quotes Fraser’s FSB re­port stat­ing that the former board was led to be­lieve “that the fund bought the of­fice park for R70 mil­lion and the bal­ance was dis­trib­uted to the law firm, Zwane and his busi­ness as­so­ci­ates”.

ISAGO: THE SECOND TRANS­AC­TION

In Jan­uary 2016, the fund agreed to buy

an­other piece of land from Isago. It trans­ferred R64.7 mil­lion to the law firm, which paid

R44 mil­lion to Isago.

Of the re­main­der, R14.6 mil­lion was paid to Ntumba Char­tered Ac­coun­tants, R2 mil­lion to THL In­vest­ments and a fur­ther R2.1 mil­lion to Sa­manzi Fi­nan­cial Ser­vices, the af­fi­davit states.

The com­plaint adds that be­tween Fe­bru­ary and June 2016, THL in­vest­ments made five trans­fers to­talling R1.25 mil­lion with the de­scrip­tion “Zwane” or “Sa­maz”.

One of the pay­ment ref­er­ences reads “Mercedes-Benz C-Class M Zwane”.

Zwane, the law firm’s COO, was at the time also a di­rec­tor of Sa­manzi Fi­nan­cial Ser­vices.

Ntumba Char­tered Ac­coun­tants’ owner Thu­la­sizwe Ntumba was a co-di­rec­tor at THL In­vest­ments and TLSZ Busi­ness En­ter­prise when THL made the “Zwane” pay­ments.

THE DUE DILI­GENCE

In May 2016, the fund asked the law firm to con­duct a due dili­gence of lo­cal fund man­agers Sam­pada Pri­vate Eq­uity, Mvunon­ala As­set Man­agers, Benguela Global Fund Man­agers, and off­shore as­set man­agers No­vare Global Bal­anced In­sti­tu­tional Fund and May­ibentsha In­vest­ments. Ac­cord­ing to the fund’s af­fi­davit, the law firm is­sued three re­ports about the lo­cal fund man­agers.

Mahlangu says it is un­clear why a due dili­gence was con­ducted on Sam­pada be­cause an­other com­pany had al­ready done it.

The com­plaint states the law firm’s “so-called” due dili­gence of Mvunon­ala and Benguela con­sisted of no more than two to three pages of “mod­er­ately valu­able” in­for­ma­tion, for which they charged R9.9 mil­lion.

The fund paid its lawyers a fur­ther

R24.8 mil­lion for due dili­gence on No­vare and May­ibentsha. No­vare sought a le­gal opin­ion on it, which stated it was “ma­te­ri­ally flawed” and should be “with­drawn in its en­tirety”.

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