Judge sends Alexan­der Forbes pack­ing in sur­plus strip­ping saga

Mem­bers of pen­sion funds that were stripped of their sur­pluses in the 1990s can take some com­fort from a re­cent judg­ment against Alexan­der Forbes, writes Bruce Cameron.

Weekend Argus (Saturday Edition) - - GOODWINES -

Alexan­der Forbes, the big­gest re­tire­ment fund ad­min­is­tra­tor in the coun­try, has had its lat­est at­tempt to avoid re­spon­si­bil­ity for its part in the strip­ping of pen­sion fund sur­pluses of more than R1 bil­lion in the 1990s thrown out of court.

In three court applications in the Gaut­eng High Court, Alexan­der Forbes had sought more in­for­ma­tion about the R1.1-bil­lion claim be­ing brought against it by the cu­ra­tor of the seven af­fected funds, Tony Mostert, and to “join” all the par­ties that ben­e­fited from the sur­plus strip­ping in the same court case.

Act­ing Judge JF Roos re­jected all of Alexan­der Forbes’s applications, de­scrib­ing one as “ir­reg­u­lar” and an­other as “so mis­con­ceived that it amounts to a vex­a­tious pro­ceed­ing …”. All three applications were dis­missed with costs.

The judg­ments are a fur­ther blow to the al­ready tat­tered rep­u­ta­tion of Alexan­der Forbes, which has been forced to pay back about R500 mil­lion that it plun­dered from re­tire­ment funds by way of se­cret prof­its from such things as the bulk­ing of bank ac­counts.

The judge said that if the at­tempt by Alexan­der Forbes to force Mostert to sue all the par­ties si­mul­ta­ne­ously had been suc­cess­ful, Mostert would not be able to pro­ceed as sched­uled with the claim against Alexan­der Forbes, which is set down for court in April next year, thereby in­creas­ing costs.

Mostert’s claims are broadly based on the fact that em­ploy­ees of Alexan­der Forbes fa­cil­i­tated the trans­ac­tions that led to the funds be­ing plun­dered, to the detri­ment of the funds and their mem­bers.

In nu­mer­ous court doc­u­ments, it is al­leged that Alexan­der Forbes sub­mit­ted false in­for­ma­tion to the Reg­is­trar of Pen­sion Funds to al­low the sur­plus-strip­ping trans­ac­tions to suc­ceed.

Alexan­der Forbes’s al­leged role en­tailed ap­ply­ing to the Reg­is­trar of Pen­sion Funds for per­mis­sion in terms of sec­tion 14 of the Pen­sion Funds Act to trans­fer the sur­pluses from the funds to the re­tire­ment fund of hospi­tal group Life­care (now Life Esidi­meni Group).

How­ever, Alexan­der Forbes failed to point out in the applications that the money would, in fact, be go­ing back, via the Life­care Pen­sion Fund, to the em­ploy­ers spon­sor­ing the re­tire­ment funds.

NON-EX­IS­TENT FUNDS

In sim­ple terms, Alexan­der Forbes is re­ject­ing the R1.1 bil­lion claim by ar­gu­ing that:

Mostert, as cu­ra­tor and liq­uida­tor of the funds is, in fact, not the cu­ra­tor of the funds, so he has no power to sue Alexan­der Forbes on be­half of the funds.

He is not the cu­ra­tor be­cause the pen­sion funds don’t ex­ist.

The funds do not ex­ist be­cause the Fi­nan­cial Ser­vice Board (FSB) dereg­is­tered them.

The FSB dereg­is­tered the re­tire­ment funds be­cause the funds’ as­sets were sup­pos­edly trans­ferred via var­i­ous chan­nels to the Life­care Pen­sion Fund ( ad­min­is­tered by Alexan­der Forbes and its big­gest client at the time) in terms of sec­tion 14 of the Pen­sion Funds Act.

The sec­tion 14 trans­fers, ar­ranged by Alexan­der Forbes, were ap­proved by the FSB and “re­main valid and bind­ing”.

And in a new twist to the story this week, Alexan­der Forbes chief ex­ec­u­tive Bruce Camp­bell claimed that if his com­pany is cor­rect in its con­tention that Mostert has no stand­ing, it would mean that any money paid to the cu­ra­tor al­ready would prob­a­bly need to be re­paid. (This con­tention is made by Camp­bell de­spite the fact that Alexan­der Forbes al­legedly pro­vided the FSB with false in­for­ma­tion; and var­i­ous par­ties have pleaded guilty to fraud and have re­paid the money in terms of plea bar­gain ar­range­ments.)

The judge said that there is a dif­fer­ence be­tween “joint wrong­do­ers” and “con­cur­rent wrong­do­ers”.

Joint wrong­do­ers act in con­cert to vi­o­late the law for a com­mon de­sign, whereas con­cur­rent wrong- do­ers are per­sons whose in­de­pen­dent un­law­ful acts com­bine to pro­duce the same dam­age. Con­cur­rent wrong­do­ers are li­able for losses suf­fered as a re­sult of un­law­ful action.

He ruled that the em­ploy­ers and oth­ers who ben­e­fited from the sur­plus strip­ping did not jointly break the law in ap­ply­ing for or ob­tain­ing the sec­tion 14 cer­tifi­cates caus­ing the losses to the var­i­ous re­tire­ment funds. Alexan­der Forbes ap­plied for the cer­tifi­cates in each of the sur­plus-strip­ping trans­ac­tions.

The judge also dis­missed Alexan­der Forbes’s ar­gu­ment that it had not ben­e­fited from the sur­pluses. He found that it was “ir­rel­e­vant” to what hap­pened to the money af­ter the cer­tifi­cates were is­sued.

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