Public Protector takes on FSB boss

2018-02-04 06:00
Dube Tshidi

Dube Tshidi

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The Office of the Public Protector is investigating allegations of corruption, extortion, fraud, bullying, intimidation and mismanagement by the head of the country’s financial services regulator.

Public Protector Busisiwe Mkhwebane’s spokesperson, Cleopatra Mosana, confirmed this week that the office is investigating a complaint against Financial Services Board (FSB) boss Dube Tshidi, laid by Economic Freedom Fighters (EFF) president Julius Malema.

Malema laid the complaint in April last year and accused Tshidi of “gross misconduct, abuse of power and perjury”.

“We have seen substantial documented evidence indicating that for years he has been responsible for gross misconduct, material abuse of the powers of the FSB, perjury, withholding information and ongoing efforts to cover up wrongdoing, intimidation of members and corporate institutions, and breaches of his fiduciary duties,” Malema said in his complaint.

The FSB is responsible for licensing and regulating the entire financial services sector, excluding the banks.

Malema accused some senior FSB staff, including deputy chief executive officer (CEO) Jurgens Boyd and chairperson Abel Sithole, of being “unfit” for office.

FSB spokesperson Tembisa Marele said Tshidi offered Mkhwebane a comprehensive response to the EFF’s allegations.

He said the Public Protector gave the chair of the FSB board the task of answering questions, which he did in writing, and appeared for examination by the Public Protector and Tshidi.

The complaint

The basis of the EFF complaint stems from the alleged relationship between lawyer Anthony Mostert and Tshidi regarding 10 pension funds, which the FSB placed under curatorship between 2005 and 2011. The High Court in Pretoria appointed Mostert as curator of all 10 funds at the recommendation of Tshidi.

The FSB’s placement of the funds under curatorship followed a 2001 decision to introduce new pension fund surplus legislation, which it backdated to 1980. The effect of the legislation was that certain transactions concluded by pension funds and their administrators became irregular. As a result, the FSB placed the 10 funds under curatorship and appointed Mostert to look after them.

After his appointment Mostert appointed his law firm AL Mostert to advise him on matters relating to his curatorship.

“It is a clear conflict of interest when a curator of a company briefs his own law firm to act in any manner and this has been confirmed by a high court judgment,” said Malema in his complaint. In 2013 Judge Caroline Heaton-Nicholls harshly criticised Mostert for using his own law firm to brief him in matters relating to the 10 pension funds.

Malema stated in his complaint that, between his appointment and 2011, Mostert was paid R188m in curator fees and a further R48m in legal fees.

Mostert sent a four-page threatening lawyer’s letter saying the EFF’s complaint was a “perpetuation of a defamatory and vexatious smear campaign”. While acknowledging that Mostert had given answers to the Public Protector, the lawyers claimed that the matter was still sub judice as no findings have been issued.

“We point out that any publication ... not founded on factual matter and in proper context may be aiding and abetting unlawful conduct, and our client’s rights in this regard are and remain reserved,” the letter reads.

Marele said Mostert was “also summoned by the Public Protector to respond to similar types of accusations and appeared in Cape Town in a separate hearing”.

Court papers obtained by City Press show that when Tshidi appointed Mostert in around 2005, it was agreed he would be paid standard hourly rates for lawyers. But two years later Tshidi and Mostert signed another agreement, backdated by two years, authorising Mostert to charge the pension funds his apparently inflated curatorship contingency fees.

In April last year the High Court in Pretoria declared the contingency fee agreement and the money Mostert earned as illegal and invalid and set them aside. Mostert and the FSB are appealing the judgment.

In his submission Malema said he didn’t understand why the FSB was defending Mostert when the regulator’s duty was to protect pension funds.

Eight years in court

The court action to set aside the contingency fee agreement was launched in 2013 by Simon Nash, Cadac International’s executive chairperson. Cadac is one of the 10 funds the FSB placed under administration.

Mostert and Nash have been fighting each other in court for eight years. In 2010 Mostert laid a complaint of fraud, theft and money laundering against Nash, regarding pension fund surplus transactions which he concluded between the Sable Industries and Powerpack pension funds in the 1990s. These two funds are among the 10 the FSB placed under Mostert’s curatorship. Nash is a former trustee of the Sable Industries and the Powerpack pension funds.

The settlements

Alongside Nash and about 30 others, Mostert also laid complaints of fraud, theft and money laundering against Sanlam, Alexander Forbes and Old Mutual, which administered some of the 10 pension funds. Allegedly under pressure from Mostert and the FSB, and without admitting any guilt, the three companies paid a collective R670m settlement in 2008.

Of these settlements, Malema said: “Tshidi, to the benefit of Mostert, has used his office to threaten and intimidate large institutions with the possible withdrawal of their licences unless these institutions withdraw from litigating against Mostert and the FSB and paid settlement payments to Mostert.

“Legal representatives of both Sanlam and Alexander Forbes complained to Tshidi that the letter he had sent to their client was a threat to use the FSB’s statutory powers against the companies should they act contrary to that as required by the FSB.”

Malema said he interpreted Tshidi’s actions as state extortion to the benefit of Mostert.

‘Misleading Parliament’

Malema also accused Tshidi of “purposefully misleading” Parliament.

In 2009 Tshidi told Parliament he had provided authorisation for Mostert to be paid through contingency fees on one fund.

“The answers provided by Mr Tshidi were untrue and purposefully designed to mislead Parliament and the public,” Malema stated.

Malema further alleged that Tshidi allowed a “fraudulent inspection report” to be drafted, which Nash stated in court papers was done to place the Cadac Pension Fund under curatorship.

“It is our contention that Mr Mostert has captured the FSB through its CEO and thus he is empowered to act with impunity,” stated Malema, adding that an “unholy alliance” existed between Tshidi, the FSB board and Mostert.

“This alliance pointed to the statutory mandate of the FSB being ignored and places the financial services sector at risk.”

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Read more on:    fsb  |  eff  |  busisiwe mkhwebane  |  julius malema

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