Bank not li­able for man­ager’s shady deal

Don't ex­pect the law to pro­tect you from fraud­sters in the fi­nan­cial ser­vices in­dus­try if you get into pri­vate deals with them in the hope of en­rich­ing your­self. This is the mes­sage from the of­fice of the om­bud for fi­nan­cial ad­vice. Angelique Ardé re­ports

Weekend Argus (Saturday Edition) - - PERSONALFINANCE -

A First Na­tional Bank (FNB) cus­tomer who en­joyed a “cosy re­la­tion­ship” with his bank man­ager – un­til he lost close to R200 000 – had his case against FNB dis­missed be­cause he was “the au­thor of his own mis­for­tune”, Nol­untu Bam, the Om­bud for Fi­nan­cial Ser­vices Providers, says.

Fi­nan­cial in­sti­tu­tions can be held vi­car­i­ously li­able for the mis­deeds of their em­ploy­ees. But when an em­ployee of a fi­nan­cial in­sti­tu­tion en­gages in im­proper con­duct and the cus­tomer is aware of it and hopes to ben­e­fit from it, the in­sti­tu­tion can’t be held li­able for the client’s loss.

Bam makes this point in her de­ter­mi­na­tion on a com­plaint against FNB brought by a cus­tomer, Craig Kesh­war, a busi­ness­man from KwaZulu-Natal.

Kesh­war com­plained to Bam that he had been lured into a fraud­u­lent in­vest­ment scheme by Regi­nald de Ghee, who, at the time of the com­plaint, was the man­ager of an FNB branch in Pine­town, in KwaZu­luNatal. Kesh­war claimed he lost R193 000.

In his com­plaint, Kesh­war said FNB had an obli­ga­tion to pre­vent the com­mis­sion of the fraud and that such im­pro­pri­ety con­sti­tuted a breach of the code of con­duct for fi­nan­cial ser­vices providers un­der the Fi­nan­cial Ad­vi­sory and In­ter­me­di­ary Ser­vices Act.

Bam says that to make a de­ter­mi­na­tion she needed to es­tab­lish whether De Ghee was act­ing in the course and scope of his man­date when he re­ceived money from Kesh­war, and whether Kesh­war was rea­son­able in his be­lief that he was trans­act­ing with FNB and not De Ghee in his per­sonal ca­pac­ity.

She says Kesh­war, by his own ad­mis­sion, en­joyed “a close and cosy re­la­tion­ship” with De Ghee, “spun over many years”. He made pay­ments into De Ghee’s per­sonal bank ac­count – even link­ing his per­sonal ac­count to De Ghee’s per­sonal ac­count. Th­ese and other “un­com­fort­able facts” re­flected ad­versely on the com­plainant, she says.


Bam says “the un­com­fort­able facts” in­clude that the com­plainant:

◆ Was ex­posed to the bank ac­counts of other FNB clients and was unperturbed by De Ghee’s un­law­ful and un­eth­i­cal con­duct. Bam says: “In­stead, he took ad­van­tage and pried into other bank clients’ con­fi­den­tial in­for­ma­tion and saw a busi­ness op­por­tu­nity that en­abled him to make an ‘ in­vest­ment’.” She says Kesh­war, as a busi­ness­man, ought to have known that such im­proper con­duct could never have been sanc­tioned by the bank.

◆ Failed to ques­tion or alert the bank to De Ghee’s im­proper con­duct – namely, the link­ing of the two men’s per­sonal ac­counts and the fact that De Ghee had given him a per­sonal cheque from his pri­vate ac­count as a “guar­an­tee”.

◆ Did not re­ceive any proof of pay­ments and did not en­quire from the bank. He will­ingly and know­ingly en­tered into what ap­pears to have been a pri­vate ar­range­ment with De Ghee.

Bam says the bank had “no way of know­ing that the com­plainant was per­son­ally mak­ing sub­stan­tial pay­ments to De Ghee.”

She says: “The com­plaint paints a pic­ture of de­ceit, lies and greed.”


Ac­cord­ing to Bam’s de­ter­mi­na­tion, some­time in 2006, im­me­di­ately be­fore Kesh­war re­tired, De Ghee in­tro­duced him­self to Kesh­war as his bank man­ager. Bam says a strong friend­ship, be­yond the or­tho­dox client- bank man­ager re­la­tion­ship was forged. Kesh­war says that from that point on­wards, De Ghee went out of his way to give him spe­cial treat­ment when vis­it­ing the bank.

When Kesh­war sought ad­vice on how best to in­vest his re­tire­ment sav­ings, De Ghee in­tro­duced him to a prod­uct which he de­scribed as a “mil­lion- a- month ac­count” – an in­vest­ment scheme he said was ap­proved by FNB.

Kesh­war al­leges that on vis­its to the bank, De Ghee showed him other FNB clients’ bank ac­counts which re­flected sub­stan­tial amounts of money, sup­pos­edly re­ceived in in­ter­est earned from the same in­vest­ment pro­posed to him by De Ghee.

As a re­sult of the De Ghee’s per­sis­tence, Kesh­war was per­suaded in Jan­uary 2008 to in­vest R100 000.

As a mea­sure of “se­cu­rity” to an ap­pre­hen­sive Kesh­war, De Ghee is­sued a cash cheque of R25 000 from his per­sonal cheque ac­count in favour of Kesh­war. Kesh­war says he was told that should the in­vest­ment fail to de­liver re­turns of over 50 per­cent over a pe­riod of four to six months, he could cash this cheque. Kesh­war says this in­di­cated to him that De Ghee was open­ing up an op­por­tu­nity that was for the priv­i­leged only.

De Ghee had a mem­ber of his staff link the two men’s per­sonal ac­counts “to speed up the process of mak­ing the in­vest­ment and pay­ment of in­ter­est”.

Kesh­war trans­ferred R50 000 to De Ghee. In early Fe­bru­ary 2008, he trans­ferred another R10 000 “to cover costs”.

At the end of that Fe­bru­ary 2008, Kesh­war re­ceived “in­ter­est” of R18 700, which in­duced him to part with another R50 000, which he paid into De Ghee’s ac­count.

In April 2008, Kesh­war made a pay­ment of R23 000. Later that month, he re­ceived pay­ments of R42 000 and R23 000 from De Ghee, de­scribed as “in­ter­est earned”.

In June 2008, De Ghee ad­vised Kesh­war to “in­vest” R30 000 in cash – to avoid bank charges – in a new scheme. Kesh­war agreed and gave De Ghee R25 000, which he drew from a teller in the bank. Kesh­war al­leges that af­ter this De Ghee pur­sued him for the re­main­ing R5 000 – to make up the full R30 000 – which he paid.

In Au­gust 2008, Kesh­war says De Ghee shifted his at­ten­tion to Kesh­war’s busi­ness ac­count and urged him to in­vest some of that money, too. In Septem­ber 2008 Kesh­war re­lented and paid R83 000 into De Ghee’s per­sonal ac­count.

At the end of Septem­ber 2008, De Ghee asked Kesh­war to in­vest another R20 000, and Kesh­war handed it over in cash to De Ghee.

Kesh­war says that by this time he had not re­ceived any proof of pay­ment from De Ghee. He held with­drawal slips as proof of sums in­vested. He claims he asked for an in­vest­ment cer­tifi­cate and that De Ghee as­sured him doc­u­ments would be de­liv­ered at a later stage.

“In spite of this, and bizarrely,” Bam says, “the com­plainant’s trust in De Ghee per­sisted. Need­less to say, the promised cer­tifi­cates never ma­te­ri­alised.”

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