Edition: Jun - Aug 2014
Editorials

CURATORSHIP FEES

Open letter to Dube Tshidi

Much more disclosure required, promptly, on who's getting what.
Please, Mr FSB Executive Officer!

Dear Dube

Thanks for your letter of April 24 (attached). The reason that I pester you is straightforward.

It's to get a handle on the fees being paid to curators, especially Tony Mostert in respect of the so-called 'Ghavalas funds', and then to relate these fees to the amounts actually received by intended beneficiaries. Why else should the exercise have a purpose?

Unfortunately, several arguments you're selling I have difficulty in buying.

Firstly, it was on Sept 27 last year that I initially requested from you an updated table of information on curators' fees and related matters. This was followed by a series of promises on your behalf that I'd receive the information "as soon as possible" (Oct 1), "hopefully by the end of this week" (Jan 26) and a reversion to me "in the following week" (March 19).

Forgive me for believing that you needed merely to extract the information from a spreadsheet. But only after I'd indicated a deadline for receipt of this information, failing which I'd assume that it would never be forthcoming (April 22), was your letter received. It hardly takes the subject much further.

Secondly, if memory serves, our publication of the original table (TT Sept-Nov '11) was enabled by your reasonably prompt and comprehensive response to my request for this information i.e. funds under curatorhips, names of curators, fees and disbursements, monies recovered etc. I cannot understand why, this time, the verification is taking so long.

Thirdly, it's peculiar that this information is not readily on tap. Hardly worth repeating is that the Financial Institutions (Protection of Funds) Act provides at s5 for curators to act under your control as Registrar of Pension Funds. Presumably, therefore, curators' reports are regularly filed and checked on their receipt.

Since the reports of other curators are published on the FSB website, apparently in the form that they had been presented to you by these respective curators without the verification of your actuarial department, all I'd expect is the relevant information similarly contained in the reports of Mostert.

Fourthly, you've always explained that curators' reports are published on the FSB website where a court so orders. But courts make orders on your application. Also, on my understanding, there's nothing to prevent you from website publication of reports without a court order. Is there a basis for you to exercise discretion on which reports you wish to publish?

You're familiar with a 2009 judgment in the Western Cape High Court. It endorsed the need for information about the "developing situation" in a curatorship, including costs incurred, to be publicly available. Please note the phrase "developing situation".

Fifthly, since you're probably wondering why I'm particularly interested in Mostert, I can assure you that there's only one reason. It's that his curatorships are unique:

  • His reports aren't put by the FSB into the public domain;
  • He has been appointed to more curatorships than anybody else;
  • On the 'Ghavalas funds' he has operated on the basis of contingency fees (the only curator, so far as I know, to operate on this basis);
  • He typically appoints his own law firm, separately earning fees from pension funds, for the legal work that he considers necessary;
  • Curatorships of the 'Ghavalas funds' have been high profile and contentious, partly because of the criminality allegations and partly because of the astronomic amounts of money involved;
  • He has also been involved with other curatorships, sometimes made incrementally expensive by litigation that has not always been successful.

Now, it's accepted that there is good reason for Mostert being favoured on several grounds. Amongst them, he and his firm have developed formidable expertise in this specialised field of curatorship. Also, a contingency fee is justified where the curator is at risk of no remuneration for no recoveries.

This certainly looked to be the case where assets of the 'Ghavalas funds' had been entirely stripped. As you've previously stated, "but for the incentive provided to curators by the percentage fees, not a cent would have been recovered".

But hang on a moment. Mostert did receive a R1m loan from the FSB to start on the 'Ghavalas funds' curatorships. Then you changed the 2001 surplus-apportionment legislation, making its provision on "improper utilisation" retrospective to 1980. Thus it embraced the various 'Ghavalas funds' which had concluded their transactions in the 1990s.

Further, under s13B of the Pension Funds Act, you threatened Alexander Forbes and Sanlam with revocation or suspension of their licences to administer pension funds unless they settled for their putative roles in certain 'Ghavalas funds'. Without admitting liability, Forbes paid slightly over R330m and Sanlam an effective R340m.

Taking together the legislative change and these settlement amounts, mightn't you think that the risk of no curatorship fees for no recoveries was somewhat mitigated? Good thing that the 25% contingency fee was later negotiated downwards. When we published those tables back in 2011, Mostert's curatorship and legal fees from 2002 (which included a one 'non-Ghavalas fund') seemed to be approaching R300m. On which side of R400m would they be today?

Fair remuneration for a job well done, I can hear you say. In fact, on affidavit in respect of the 'Ghavalas funds', last September you did say: "More than R750m (nett) recovered by the curators has been approved for distribution to stakeholders according to the provisions of the respective surplus-apportionment schemes approved by the FSB. . . . The distribution is an ongoing process."

If you can say this on affidavit, you must by then have verified both the nett and gross numbers. So let's have them.

Sixthly, the update on all curatorships had been requested in order to contextualise them. This is necessary so that their relative costs, recoveries and distributions can be compared. The comparative numbers will enable stakeholders to draw conclusions, independently of your own, on their reasonableness.

Finally, be certain that I don't give a fig for the future of Simon Nash. If he's found guilty of having defrauded pensioners in any of the 'Ghavalas funds', he'll deserve whatever sentence is imposed. For your sake – actually, for the sakes of all those who'd succumbed to settlements – I hope that there won't be a repetition of the Fidentia embarrassment.

We'd written exhaustively about Nash's never-ending criminal trial and the related civil actions because of their fascinating revelations by courtesy of accusers and accused alike. Nash challenged you, at huge expense to himself and the state, unlike those who took plea bargains as the easier and cheaper way out.

There's been no other forum for the 'Ghavalas funds' allegations to be openly tested. In fairness, and obviously in the public interest, both the prosecution and defence versions must be reported before the court becomes the final arbiter.

Meanwhile, all I'm attempting to do is track the money; to see where it's come from and where it's going, in order to evaluate whether this inordinately complex and protracted exercise has been worthwhile specifically for members and former members of the affected 'Ghavalas funds'.

It means breaking down the fees paid for recoveries against the apportionments from those recoveries; the latter not as agglomerated amounts but to individuals who were in affected funds. On rough calculations, matching your R750m nett figure to some 15 500 members and former members, each would receive almost R50 000.

That's a comfy windfall, out of the blue after all these years, to pay for a few months in a frail-care centre. But two decades on, many of these pensioners might no longer be alive or traceable. Unknown at this stage is how much of the R750m, possibly even the bulk of it, will be indefinitely submerged in an unclaimed benefits fund.

So the next debate I'd like to start is whether, as an alternative to unclaimed benefits, there shouldn't be a cut-off date at which the balance of these monies can be paid to the beneficiaries still alive and traceable. This will require some pretty smart attention because pensioners, like you and I, aren't getting younger.

As in the past, I look forward to your continued cooperation. We have a way to go.

Sincerely,
Allan.