Despite his protestations to the contrary, it is unlikely that Simon Nash, a prominent Johannesburg businessman, much enjoys his regular trips to the sprawling magistrate’s court in downtown Johannesburg, where he is facing charges of fraud, theft and contravening the Prevention of Organised Crime Act.
The charges against Nash arose from the allegedly fraudulent stripping of retirement fund surpluses by employers, aided and abetted by various retirement fund service providers.
Nash has told me that he finds the court experience “academically interesting” and that he is getting what he wanted – a trial.
It is a trial that could drag on for many months.
Recently, I spent a morning in court as an observer and not to report on the case.
Personal Finance will report the outcome of the Nash case, as well as the outcomes of the criminal and civil cases of the other people who are involved in this unhappy saga (see “State of play in the pension surplus prosecutions”, below).
Having escaped the indignity of having to sit in the dock, Nash sits on an armless chair upholstered in somewhat worn and dirty red material. Alongside Nash are his advocate, Willem de Bruyn, and his instructing attorney, Lennard Cowan. Their ageing table (marked as item 3 538 of state property) is in front of the dock and faces regional magistrate Paul du Plessis, who has the demeanour of an avuncular uncle but controls the proceedings with calm authority.
The drabness of the court, with its scuffed parquet flooring, is accentuated by the dirty-brown colour of the walls.
The noise of unhappy humanity in the corridors outside echoes within the court, at times making it difficult to follow the proceedings.
Nash, dressed in a tie, dark trousers and jacket, makes copious notes. The apparent confidence he displayed when I spoke to him seemed to be belied by the way his legs beat a rapid bouncing staccato under the table.
Watching proceedings from a side bench within touching distance of Nash is Aubrey Wynne-Jones, who, with his retirement fund consultancy Aubrey Wynne-Jones & Company, also faces criminal charges in a related trial that has yet to start in the High Court.
Nash’s remark about his case being “academically interesting” was made outside the court during a break in the proceedings.
Under way on the morning I was in court was the resumption, after the festive season holidays, of a trial within a trial over the admissibility as evidence of the original inspection report by the Financial Services Board (FSB) into the pension surplus stripping.
In brief, the argument presented by Nash’s legal team is that in terms of the Inspection of Financial Institutions Act, an inspection must remain secret. The reason for this, I have always understood, is that even if an inspection finds no evidence of wrongdoing at a financial institution, it could still have unfortunate consequences. The mere fact, if it became known, that an investigation is under way could affect the investigated institution adversely, even if it has a clean slate.
If an FSB investigation concludes that an institution has not behaved, the FSB normally uses the investigation’s report to support any subsequent legal action, such as placing a retirement fund under curatorship or pressing criminal charges. At that stage, the inspection report has normally become a public document. This is what happened indirectly at the end of last year, when Dube Tshidi, the chief executive of the FSB, provided a supporting affidavit in an ex parte application to the South Gauteng High Court to place the Cadac Pension Scheme under provisional curatorship. Nash was the chairman of the Cadac fund.
In his affidavit, Tshidi referred to an FSB inspection. He said he had seen prima facie evidence that the Cadac fund was incurring losses to pay for Nash’s vast legal expenses, which exceed R10 million.
Tshidi provided the court with a list of 20 invoices for legal support related to Nash’s defence. Most of the invoices were signed by either Nash or his wife, Elena Forno-Nash.
Tshidi believed that, without the provisional curatorship, Nash would continue to use the substantial resources of the Cadac fund to his direct or indirect benefit, in defending the criminal charges against himself and his co-accused, Midmacor Industries.
FSB investigations alleged that people in control of the Cadac fund had illegally and improperly used the assets of the fund over many years, dating back to 1996.
Apart from the amounts allegedly used to pay for Nash’s legal defence, Tshidi said he was concerned about a number of property transactions involving the fund. (Go to the web links at the bottom of this page to read the affidavit in full.)
Nash’s legal team seems to believe that the secrecy clause applies forever: that an inspection report cannot be used as evidence in court, and that it may not even be handed to the police to form part of their investigations. It is on this basis that Nash’s legal team is apparently contesting the admissibility of the inspection report.
On his feet when the Nash trial resumed was lean, dour-faced senior counsel Jan D’Oliveira, the former attorney-general of the former Transvaal, who has been brought out of retirement to prosecute this and other cases that involve the surplus stripping of the 1990s.
D’Oliveira made an application to the court to admit the complete FSB inspection report for the purposes of the trial within a trial.
He said Nash’s legal team was using badly photocopied documents from which some information had been “Tippex-ed out”, in its cross-examination of witnesses – in this case, Tshidi.
D’Oliveira pointed out that his team had discovered that the documents were an extract of the very inspection report that the defence was asking the court not to allow as evidence in the trial within a trial.
De Bruyn argued that the source of the documents was clearly marked with references on them. He also argued that D’Oliveira’s application was out of order.
Du Plessis agreed with De Bruyn that it was not the appropriate time for D’Oliveira to have the FSB inspection report provided to the court. This should be done on the re-examination of Tshidi, he said.
However, Du Plessis seemed to be puzzled by the way that De Bruyn was “standing with one foot on each side of the river” in using the very documents in his cross-examination of Tshidi that the defence was seeking to have rejected as evidence.
Du Plessis, in making his ruling, told D’Oliveira that the proper time to submit the complete report would be when he re-examined Tshidi.
However, the magistrate challenged De Bruyn’s claim that the “badly photostated” extract from the FSB inspection report was clearly referenced.
The copy that had been submitted to the court and to which D’Oliveira referred was not the same as the one that De Bruyn held up to show the court. De Bruyn’s copy was clearly marked with references at the top of the first page.
Du Plessis checked his papers and found that the court copy was not properly marked with the same references, contrary to what De Bruyn had claimed.
Both D’Oliveira and De Bruyn say that the trial could take months to complete. There are 52 potential witnesses listed.
One would like to see Nash’s defence on the merits of the case and not on technical points such as the admissibility of documents. The Inspection of Financial Institutions Act is there to protect consumers and retirement fund members.
The very point of the Act is to enable the FSB to ascertain whether anything unacceptable has been happening that will deprive users of financial services products and members of retirement funds.
The full force of the law should be used to protect retirement funds in particular.
Recent research by Alexander Forbes found that more than 50 percent of retirement fund members will reach retirement with a pension that will be equal to less than 30 percent of their final basic pay cheque, excluding allowances.
And, as Personal Finance has reported over the past 15 years, employers and the retirement fund industry all too often see retirement savings as easy pickings. This attitude has resulted in fund members being deprived of a financially secure retirement.
Those who fight this scourge – such as Tshidi and the FSB, Tony Mostert, the curator/liquidator of the surplus-stripped funds, the police and the National Prosecuting Authority – must be allowed every reasonable weapon.
STATE OF PLAY IN THE PENSION SURPLUS PROSECUTIONS
Six people have received sentences in terms of plea bargains for their part in stripping surpluses from retirement funds in the 1990s. They are:
* Peter Ghavalas, a former senior executive of Nedcor and the architect of a scheme that resulted in various retirement funds being stripped of their surpluses in the 1990s, to the detriment of thousands of pensioners. In September 2009, Ghavalas was ordered to pay R18.6 million in compensation to the affected funds and he received a 15-year prison sentence, suspended for five years.
* Rowland Bailey and his wife, Shirley, who benefited from the surplus in the Mitchell Cotts Pension Fund. In September 2007, Bailey received a total of 19 years’ imprisonment (suspended for various periods) for fraud, contravening the Financial Institutions (Investment of Funds) Act and money laundering. His wife was sentenced to a five-year prison term, suspended for five years.
* In August 2008, Cape businessman Jan Pickard Junior received a two-year prison sentence, suspended for five years, for his role in the theft of a R28.8 million surplus in the Picbel Group retirement fund. Pickard had to repay R31 million to the curators of the fund and was fined of R200 000.
* Last year, Datakor’s former chief executive, Michael McEvoy, and its former financial director, Derrick Pettitt, were found guilty of three counts of contravening the Financial Institutions (Investment of Funds) Act and sentenced to five years’ imprisonment, suspended for five years. They were each ordered to pay R1 million in compensation.
Simon Nash and his company, Midmacor Industries, are currently on trial on charges that relate to the surpluses stripped from the Sable and the Cullinan/Power Pack funds.
The National Prosecuting Authority confirmed this week that the following have been charged but have yet to go on trial:
* Alexander Forbes and one of its former senior executives, Peter Martin, for allegedly facilitating the stripping of most of the affected retirement funds.
* Aubrey Wynne-Jones and Wynne-Jones & Company Employee Benefits Consultants are scheduled to appear in court in April. The charges relate to the Sable, Cortech, Datakor and Cullinan/Power Pack retirement funds.
* Jacques Malan and his retirement fund administration and consulting company, Jacques Malan and Partners. New charges relating to some of the funds were laid against them last year after the initial charges were withdrawn.
* Johannes Roets, the Sankorp executive who was seconded as the chairman of Datakor at the time of the surplus stripping.
* William Graham Somerville, the chief executive of hospital group Esidimeni (known as Lifecare at the time) and the chairman of the Lifecare retirement fund, through which most of the surpluses were allegedly laundered.