Issue: December 2011 / February 2012
Editorials

SURPLUS STRIPS

Whos on trial?

The accused and the accusers are locked in a deadly embrace. Between the dock and the witness box, the criminal and the civil courts, the applications and counter-applications, its become Nash versus Mostert and the FSB veering from one minefield to the next.



Nash...marathon man
There are two completely separate issues in the ongoing tribulations of Simon Nash. The one is whether he’s guilty as charged for illegally having stripped the surpluses of pension funds. The other is whether funds’ curator Tony Mostert and the Financial Services Board are complicit in improprieties that Nash alleges against them.

Now the issues have come to be related in both a criminal court, where Nash is on trial, and a civil court, where Mostert’s appointment as curator of the Cadac pension fund is challenged. Since last December, Mostert has been the fund’s provisional curator. Nash is a trustee of the fund and controls the Cadac company, its principal employer.

An overlapping feature of the criminal and civil matters is several hours of discussion, immediately prior to the FSB’s application for provisional curatorship of the Cadac fund, in the offices of Mostert. Present at the tape-recorded meetings were Mostert and members of his legal team, FSB executive officer Dube Tshidi and other FSB officials, and attorney June Marks who had previously acted for the Cadac fund (TT Sept-Nov).

At these December meetings, Nash alleges, confidential Cadac information and documents were given by Marks to his accusers. Attorney-client privilege was further breached by a raid on his offices from which the Cadac computer servers were removed, enabling his accusers to view and download their entire contents.

The implications are serious for both the criminal and civil matters. It’s unlikely that either will be resolved anytime soon.

On the criminal side, Nash can walk free if the breaches of his legal privilege are shown to have caused an unfair trial. Conceivably, on the same grounds, it could call for a review of whether others similarly charged, in relation to other funds, will yet have their day in court; in other words, that not a single criminal trial is actually concluded.

After all the flames that have burned bright over the perniciousness of surplus stripping, the prospect of no successful prosecutions then douses them to the acute embarrassment of Mostert and the FSB. Unsurprisingly, they’re fighting tooth and nail. For it also opens the prospect of damages claims by Nash, not least for recoupment of massive legal expenses.

On the civil side, the longer return date for the provisional curatorship is extended the more the fund’s assets are depleted by the fees incurred in voluminous High Court litigation. While acting as the fund’s provisional curator, appointed on the recommendation of the FSB, Mostert also acts as its attorney.

If members of the Cadac fund are entitled to elect trustees, which they are, then it would seem logical that these trustees be entitled to select curators on whom they can rely to protect the fund. They want the court to make a joint appointment of two curators independent of Mostert. He in turn counters that the trustees are puppets of arch-villain Nash, raider of the fund.

For Tshidi, the opportunity to remove a cloud of suspicion over him is also delayed. Under cross-examination in the criminal trial, where he wouldn’t answer a conflict-of-interest question on grounds that the reply might incriminate him, he promised to respond in the civil court on the return date of the curatorship application (TT March-May).

This date has been repeatedly postponed. Hearing is now set down for three days in April, some 14 months after the provisional curatorship took effect.

Meanwhile, Mostert has demanded R2m from the Cadac trustees as security for costs to shield the fund from “those who participate...in the process of protecting (Nash’s) personal interests”. It’s a demand that Werksmans, acting for the trustees, considers to be an intimidatory and delaying tactic.

On the tape recordings, Mostert wants certainty as to their admissibility: “If they are indeed permissible, it would be necessary to deal extensively with the circumstances under which they were made, the accuracy of the transcription thereof as well as the contents thereof.”

He contends that there are “undisputed features” about the recordings. Amongst them, that they were made:

  • For a criminal purpose to “set up” the FSB inspectorate and its representatives in exchange for payment, reward or some other benefit from Nash;
  • In relation to discussions conducted on a without-prejudice basis;
  • In respect of discussions expressly or impliedly confidential, and which were privileged.

Against this, says Nash, the FSB and Mostert teams had received legally privileged information from Marks “with full knowledge” that neither he nor the Cadac fund had waived legal privilege. This information – which formed the basis of the FSB’s application for the fund’s curatorship – was moreover “received by the FSB in the presence of Mostert and his legal team in breach of the secrecy provisions of the Inspections Act”.

In essence, the High Court will have to rule on whether Mostert can be confirmed as the Cadac fund’s curator. The FSB wants him because of his extensive experience in unravelling numerous funds stripped in terms of the “Ghavalas option”. Through the efforts of Mostert, hundreds of millions of rand have been recovered in various settlements.

Against this, the Cadac trustees contend on affidavit that Mostert is unsuitable because the FSB and particularly Tshidi had actively “colluded” with Mostert and his legal team to bring the Cadac fund’s curatorship application: “The current vehemence with which the FSB defends Mostert as a suitable candidate for the curatorship casts serious doubt on their impartiality and objectivity.”

Back to the criminal trial which, in November, was suspended until magistrate Paul du Plessis rules on whether there should be a stay of prosecution. This will be on January 14.

The crisp issue is whether Nash can have a fair trial in view of the alleged privilege breaches. Again, these relate to the tape-recorded discussions of last December and to the removal of Cadac’s computer servers. Whichever way the court rules, noted Du Plessis, the party which loses – the prosecution or the defence – can take his decision on review to the High Court. This in itself might take months, and more in legal expenses.

But a decision there must be. The prosecution contends that, by law, the criminal trial has to run its course and argument on fairness heard only at its end. Were this to happen the defence, also citing legal authority, contends that even potential prejudice and hence unfairness to Nash is inevitable. The dispute between the prosecution and the defence is procedural, on the timing to rule on unfairness, less on the substance of unfairness itself.


Should argument on unfairness only be heard at the end, Willem de Bruyn SC (for Nash) said, the trial could last for another four to five years. The docket runs to over a million pages. The state alone has 51 witnesses still to call.

The FSB, according to De Bruyn, was attempting to force Nash into years of trial. This was after the FSB had “made itself guilty” of accepting information from Marks knowing that she had been his instructing attorney. Had De Bryun been aware of the consultations between Tshidi and Marks, which took place a month before Tshidi entered the witness box, “I would have taken a completely different approach to him”.

The court: “I will sum it up for you (the prosecution) in a nutshell. They (the defence) want the trial stayed.”

What are the possible scenarios? So far as can be made out:

Assuming that the trial is permanently stayed, either after the magistrate’s decision or after his decision been taken on review to the High Court, it finishes with a whimper. There’s no judgment on the merits of the charges themselves. Effectively, the trial concludes without a conviction or an acquittal.

On the other hand, assume that the trial continues to run. Then, after years have passed, at its end the issue of unfairness is argued. If the court finds for the defence, there’s the same whimpering result. If it finds for the state, the court is enabled to hand down a judgment on the merits of the charges. Nash is sentenced or goes free. Appeals to the High Court, and beyond, can follow.

Into this heady mix of a continued trial, throw a curved ball. It’s in what might emerge through the evidence and cross-examination of witnesses, likely to include FSB officials and members of the Mostert legal team.

With the accused having turned accuser, and the accuser having dug in its heels, all bets are off. So too are the gloves. There can be more than one loser. A whimper has its attractions.


MERELY FOR THE RECORD

  • Jan de Oliviera SC, attorney-general of the former Transvaal, is no longer representing the state’s prosecution of Nash;
  • Peter Ghavalas, who put together the surplus-stripping schemes in numerous funds, had agreed in terms of his plea-bargain arrangement to give evidence. However, this key state witness has returned to Australia;
  • In the civil trial, provisional curator Tony Mostert has applied for various allegations in “new affidavits” to be struck out. He says that they “contain endless defamatory allegations relating to the provisional curator and his legal representatives and individuals in the employ of the FSB”, several referring to implications drawn from the Mostert/Tshidi/Marks discussions of last December.