Regiments Capital is suing the Transnet Second Defined Benefit Fund to recover lost fees and to possibly get reinstated, after its three-year contract was cut short.This is despite Regiments first allegedly misappropriating at least R232m from Transnet pensioners – with Transnet chief financial officer Garry Pita’s blessing – to benefit Gupta-linked Trillian.In a court application this Friday, Regiments demands that its replacement as the fund’s manager, Old Mutual, be removed. It wants a new tender to be put out, which would put Regiments back in the running for job.The shocking details of Regiments and its offspring Trillian’s work at Transnet are being laid bare in the fund’s damage claim against both companies and their directors.Almost as an aside, Regiments boss Magandheran “Niven” Pillay adds that the company will launch a counterclaim for fees it lost by getting kicked out, 10 months after being appointed to manage the fund, on September 30 2015.This could amount to hundreds of millions of rands more, according to a formula included in court papers.Regiments’ contract gave it unusual freedom to invest in whatever it pleased and came with a steep management fee that would seemingly amount to over R300m per year.According to the fund’s court papers, Regiments and Trillian in effect used at least R179m of the fund’s money to pay themselves massive fees for services that had been rendered for Transnet – not for the fund.Even if those fees were legitimate, there was no lawful reason the fund should pay them, it said.Regiments is accused of unlawfully paying itself a R4m outperformance bonus after its first three months managing the fund – by incorrectly measuring its own performance.This “amounted to theft of trust monies”, said the fund.The big money, however, came in the guise of fees for arranging a series of interest rate swaps on the massive loans Transnet had racked up to pay for new locomotives.In November 2015, the state-owned enterprise proudly announced it had received a R12bn “club loan” from a consortium of banks to buy General Electric locomotives. Another R6.99bn loan, largely from Investec, was procured for Bombardier locomotives.Transnet paid Regiments a R166m fee for “raising” some of these loans, but then could not pay it any more money for the same work, the fund said in its papers.That’s where the swap agreements come in.At this point Eric Wood, a 32% shareholder through a trust in Regiments, had broken away to join the now-infamous advisory group Trillian, which became Transnet’s adviser on the swaps.Wood had been so central to the Guptas’ dealings that he was reportedly one of the few to know beforehand that Nhlanhla Nene would get fired as finance minister in 2015.Eskom recently demanded that Trillian repay R564m the power utility paid it.According to the Transnet pension fund’s court papers, Wood’s split from Regiments still left the companies intertwined.An agreement was drawn up for Regiments to claw back 68% of all Eskom and Transnet fees Trillian got, including the fees for the swaps. An interest rate swap is when someone agrees to pay your future interest payments while you pay them a different interest rate. It is usually done to turn a risky, variable interest rate into a predictable and safe one. The counterparty takes on the risk, for a price.In this case, Transnet’s risk was transferred on to the pension fund.Transnet’s financial statements show Regiments moved 14% of the fund out of bonds and into more risky derivatives. This has been reversed under Old Mutual.The pension fund paid R179m in fees to Regiments for the swaps.Regiments in turn paid this money to Trillian.After that, 68% of those fees would flow back to Regiments, if the fund was correct about their fees agreement.A huge portion of these fees flowed towards Albatime, a company owned by Kuben Moodley, which arranges contracts with state-owned companies for commissions, according to pension fund court papers.HOW TO RAID A PENSION FUND Pillay says Transnet gave the go-ahead for the swap and provided a letter to this effect from Transnet finance chief Pita.In the letter, Pita says the swap deals are above board and do not prejudice the pension fund. As evidence, Pita however cites a response he got from Trillian when the company was queried about it.Two days after that letter, dated July 29 2016, Regiments received a termination notice.In Friday’s court papers, Pillay says Regiments did a wonderful job and that the pension fund is making a “vague and embarrassing” claim. He says the swap agreements were above board and beneficial to the fund.He claims that Regiments received no fees in relation to the swap.The chair of the fund when all these deals were being done was Stanley Shane – also a director of Transnet at the time. He left in July this year.Shane features in the detailed account of the inner workings of Trillian by former executive-turned-whistle-blower Bianca Goodson.According to her, Shane and his partners in a company called Integrated Capital Management were involved in setting up Trillian.In other words, the same man ran the pension fund, sat on the Transnet board and was part of Transnet’s external advisory team that designed all the deals to begin with.The Transnet Second Defined Benefit Fund has been mired in controversy for years.It has 52 000, mostly very old, members. Transnet allegedly raided it in the early 2000s to fund operational needs.Since then, the fund has been paying out controversially small pensions, that shrink every year, to its beneficiaries. The annual increase in their pensions is capped at 2%, meaning a decrease after inflation. Transnet’s actuaries plan the fund’s finances on the assumption that all the beneficiaries will be dead in five years.This continues despite pensioners having launched a class action, which Transnet has stalled in the courts on technical points. The matter will soon go before the Constitutional Court.The fund has a surplus, which will go to Transnet once all the pensioners are dead. It was R3.7 billion in the latest financial year.