Issue: Mar/May 2011
Editorials

SURPLUS STRIPS

Gnashing of teeth

A trial within a trial certainly has its moments. The accused is on one hook and has been trying to catch his accuser on another.

Simon Nash, charged in the Johannesburg Regional Court with stripping a surplus from the Sable Industries pension fund, has formally called on Finance Minister Pravin Gordhan to suspend Financial Services Board executive officer Dube Tshidi until Tshidi's attempt to avoid the possible incrimination of himself has been resolved. He has also asked DA MP Dion George to urge a parliamentary inquiry into the relationship between the FSB, Tshidi and attorney Tony Mostert.

It follows the refusal by Tshidi, under cross-examination by Willem de Bruyn (counsel for Nash), to answer a question. This was after Tshidi had taken advice from his lawyer not to answer. The question was on why Mostert had been appointed curator of the Cadac pension fund after he had already been appointed curator of the Sable fund when there was a known dispute between the two funds. The Sable fund has a claim of roughly R8m against the Cadac fund.

Some excerpts from the transcript, summarised where appropriate, give the matter context:

De Bruyn: Shortly before Christmas last year, the FSB applied (to the High Court) for the Cadac pension fund to be put under curatorship. That application was ex parte and in camera. The curator appointed was one Tony Mostert.

Court: On the same contingency thing?

De Bruyn: We do not know (whether there is a 25% contingency fee for Mostert from his Cadac appointment) because there is a huge dispute between the Sable and Cadac pension funds. Mostert is now curator on both sides . . . The next event after the appointment of Mostert was a search and seizure at the offices of the Cadac pension fund and the Cadac company (of which Nash is executive chairman). Mostert was effectively the person in charge of this search and seizure.

Despite protest from his lawyers, the court was told, Nash's privileged documents and emails were taken. These included matters related to the criminal trial and to the Cadac company. Mostert had been refused access to them, but he had called in FSB inspectors who attached the computers and servers. De Bruyn contended that all Nash's privileged communications could then be accessed.

De Bruyn: I beg leave to hand up Mr Tshidi's affidavit, the complete affidavit in the curatorship application (to the High Court for curatorship of the Cadac fund).

Prosecutor (Jan D'Oliveira SC): The state objects to this being submitted.

Court: Mr D'Oliveira, before Mr de Bruyn got up I wanted to indicate to you that at the outset this morning there was reference to this particular application and the fact that this particular trial is in fact referred to in this document. It must be relevant.

Prosecutor: As the court pleases.

De Bruyn: Mr Tshidi, you have a copy of this document.

Tshidi: Yes.

De Bruyn: In paragraph 4 you said ‘The Cadac pension fund has been the apparent victim of surplus transactions pursuant to which it received assets from the Sable fund to which it was not entitled. Sable is also under curatorship as a result of the involvement of the parties identified herein.' As we stand here today, Mr Mostert is the curator of both the Sable and Cadac funds. Correct

Tshidi: Correct.

De Bruyn: How could you appoint him in view of this conflict?

Tshidi: In view of?

De Bruyn: This conflict. The Sable fund has a claim against the Cadac fund. How could you appoint the same curator on both sides? Is it going to be the plaintiff Sable fund, the curator Mostert, the attorneys Mostert & Co (against) the defendant Cadac fund, the curator Mostert and the attorneys Mostert & Co? How could you do that?

Prosecutor: This is again irrelevant.

Court: Well, it is relevant, sir, in the fact that it is in the affidavit. There are conflicts in the affidavit. You will see that the Cadac fund, the Sable fund and Mr Nash personally are placed on both sides of it.

Tshidi: Your honour, I have the following comment to make. Comment one, there is a return date on this matter (to the High Court on March 29 for the Cadac fund curatorship). Comment two, it came to my attention – and that prompted me to an application to place this (Cadac) fund under curatorship, because it came to my mind that the assets of the Cadac fund are being used to fund this litigation (by Nash in defending the criminal charges against him). That is all I want to say. The rest I will say during the return date.

De Bruyn: But how could you conceivably have appointed Mr Mostert in view of this glaring conflict of interest as the curator of the Cadac fund? Why not another independent person?

Tshidi: As I said, I prefer to answer that on the return date.

At this point, Etienne Theron (the advocate instructed by Rooth & Wessels to represent Tshidi and the FSB) intervened. He wanted to speak privately to Tshidi, which he did outside the courtroom. The court then resumed.

Court: Yes, you have taken advice.

Theron: Your worship, Mr Tshidi indicates that he is not prepared to . . . (intervenes).

Court: Well, he can tell me that, sir. Right from the word go I have indicated that I have no problem with you advising him, but Mr Tshidi is the witness so let him testify. If he says ‘I am not going to answer that question', then that is fine but he will have to give me a reason

Tshidi: Your honour, I am not keen to answer that question. That is all I can say

Court: You know, there are a lot of questions asked of witnesses that they are not keen to answer, sir, but the fact of the matter is if you say to me that you believe that it might have other implications and those implications might lead to prosecution on your part, then by all means you can say ‘I want to remain silent'.

Tshidi: I was going to move on to say, your honour, I am not keen to, but if ordered by the court to answer I will answer and the implications are that this matter is still going to be, it is before the (High) Court and I do not want to incriminate myself as the Registrar.

Court: Well, then you are perfectly entitled to say under those circumstances ‘As it might incriminate me I do not wish to answer'.

Tshidi: I will remain silent on this matter

Court: Thank you, sir. That is all we need from you. It is on record. All right.

De Bruyn: I just want to make (it) clear. You refuse to answer on the basis that you may incriminate yourself?

Tshidi: I prefer to remain silent.

De Bruyn: On the basis that you may incriminate yourself?

Tshidi: Yes.

HEAVYWEIGHT CHAMPIONSHIPS

The trial of Simon Nash, a trustee of the Sable pension when surpluses from it were allegedly stripped, might only be an early round in a more protracted contest. Through cross-examination by his counsel, Nash has taken the fight to FSB executive officer Dube Tshidi, the FSB itself, and curator Tony Mostert. Their side of the story has yet to be fully aired, as doubtless it will be, while Nash has yet to appear in the witness box and be subjected to cross-examination.

If he goes down, it won't be for not fighting. In fact, he's been fighting since he was charged five years ago. Unlike several others who had availed themselves of the "Ghavalas option", Nash did not enter a plea bargain to avoid prosecution. Whether he was offered the opportunity is moot.

During the January hearing, to be resumed, the relationship between his adversaries was exhaustively canvassed; in particular, whether documentation and related information gathered under the Inspection of Financial Institutions Act had been passed on to the police, the prosecuting authorities and others. There was contention over lawful compliance.

Under the Act, the Registrar must "take all reasonable steps" to ensure that the inspector he appoints "will be able to report objectively and impartially on the affairs of the institution". There are also secrecy provisions, to prevent leakage of draft reports, and procedures to be adopted for disclosure of final reports. On affidavit, Tshidi had stated that a section of the Act empowered him "under certain circumstances to provide any information obtained during an inspection to the curator".

At issue was whether Cor Potgieter, the FSB-appointed inspector, could have been impartial and objective. According to the evidence, he had investigated certain fund transfers that he himself had previously approved in his capacity as an FSB official. There was also cross-examination of Tshidi on whether he knew of Potgieter personally submitting draft reports to Mostert and the prosecuting authorities, and of being involved in assessing the suitability of witnesses for intended prosecutions. Tshidi said that he didn't know.

Also in the spotlight is the role of Mostert, specifically whether he could possibly have influenced prosecutions, plea bargains and settlements. He is the curator or liquidator of all the pension funds allegedly (or, in plea bargains, admittedly) stripped. These are the funds of Mitchell Cotts, Lucas SA, Picbel Groep, Datakor (two funds) and Sable. Late last year he was appointed curator of the Cadac fund as well.

Not only is he the curator but there appears to be no constraint on his law firm being appointed to act in the curatorships as well. For the curatorships he is remunerated on a contingency basis equating 25% of monies recovered. Some two years ago he agreed to accept a lesser percentage for monies recovered above a defined limit.

Given the huge settlements so far effected – including those with Sanlam and Alexander Forbes, which had received no financial benefit (TT Oct '10-Jan '11) – the fees so far accumulated by Mostert on the curatorships alone would run into many tens of millions.

Attempts by Nash to obtain via subpoena the copies of all agreements between the FSB and Mostert or his law firm, on how Mostert and the firm are being remunerated, have been resisted. Also unclear is how Nash's prosecution, for which former Transvaal attorney-general Jan D'Oliveira was brought from retirement, is being funded.

There's another bit of information so far not in the public domain. It's how much of the amounts paid in settlements have been received by fund members during the five years of the respective funds' curatorships.