Medshield gets curator over dodgy ‘research fees’

CAPE TOWN — Medshield Medical Scheme has been placed under provisional curatorship, after the Council for Medical Schemes uncovered alleged governance failings — including inappropriate and excessive payments to trustees and illegal payments to brokers disguised as “research fees”.

The council is a statutory body overseeing the medical schemes industry. Last month it put Sizwe Medical Scheme under curatorship for alleged financial irregularities and fraud.

Medshield is a medium-sized scheme with about 236,000 members. The council emphasised it is in good financial health, with a solvency ratio of 36.6%, and is capable of paying members’ claims.

“The provisional curatorship has nothing to do with the financial soundness of the scheme. There are no concerns whatsoever over the financial position of the scheme,” Monwabisi Gantsho, the registrar, said yesterday.

The council brought an urgent, ex parte application in the North Gauteng High Court on Tuesday to place Medshield under provisional curatorship, pending the outcome of a hearing on November 13.

The court appointed Themba Langa provisional curator, giving him oversight of the scheme while the board of trustees is suspended.

In his founding affidavit, Dr Gantsho alleged that two, separate inspections of Medshield’s affairs revealed a host of “material irregularities”. These include:

Medshield chairman Thabo Mabeta was a majority shareholder of Inkwazi, a company appointed by the board of trustees to deal with the scheme’s Road Accident Fund claims. The council said he benefited from this conflict of interest as his shares increased in value after the deal was concluded, and he was allegedly still a 51% shareholder in Inkwazi six months after he supposedly resigned;

Mr Mabeta was appointed acting CEO, undermining his role on the board of trustees, which is supposed to provide checks and balances for the day-to-day running of the scheme. He was allegedly paid R652,000 for six months, despite the trustees being told by a scheme employee that this was illegal. He was also allegedly paid a “retainer”

of about R150,000 a month;

Mr Mabeta was not a member of the scheme when he was elected as a trustee, contravening its rules;

Trustees allegedly paid themselves retainers, consultancy fees, and expenses totalling more than R10.4m from January 2008 to October 2011. There were 12 trustees, including Mr Mabeta. Retainers are illegal, according to the council, as trustees are prohibited from making a profit from medical schemes;

Retainers were allegedly paid to entities related to the trustees, including a family trust linked to Mr Mabeta, which Dr Gantsho claimed were used to avoid paying tax.

Dr Gantsho also alleged that Medshield paid brokers via an inter- mediary called Medshield Broker, which led to illegal payments of unaccredited brokers.

It allegedly had an agreement with Traffic Integrated Marketing to pay “research fees” to brokers to conduct research on members under the age of 42.

“This research was not used by the scheme and the payment was a ruse to pay brokers more than their statutorily limited compensation and to incentivise them to sign up younger members whose risk profile is lower (in contravention of the Medical Schemes Act),” Dr Gantsho’s affidavit read.

Medshield took the unusual step of seeking support from Parliament after it clashed with the council over the terms of reference for the first of the two inspections.

It asked Bevan Goqwana, chairman of the portfolio committee on health, to intervene. Dr Goqwana yesterday confirmed he called a meeting of the parties last year to try to settle the matter and spare the council a costly legal battle.

Medshield declined to comment, saying it would issue a press statement on Monday.