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.
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.
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.