A prominent Cape law firm has been accused of operating a fraudulent scheme to siphon millions of rands from insurance pay-outs destined for indigent accident victims on the Cape flats.
The scheme, which targets unsophisticated road accident victims in their hospital beds, has been exposed by the doyen of South African investigative journalism, Martin Welz. Welz, the editor of noseWEEK, asked the Cape High Court this week to seize incriminating documents from the firm H Mohamed & Associates which, he says, hatched an “exploitative and criminal scheme”.
Welz says he intends publishing details in the forthcoming edition of noseWEEK, due out next week. His court application is intended to secure evidence which might be needed by victims before he publishes the story. One of the firm’s more prominent clients is the Minister of Justice, Dullah Omar.
Welz presented the court with sworn affidavits from victims of the scam as well as his own detailed statement, which provides an extraordinary breakdown of what boils down to a lawyerly sting. He says the law firm obtains hefty insurance pay-outs for the accident victims from the state-backed road accident fund, and improperly creams off large portions of the pay-outs for itself.
In addition to taking huge cuts of the claim, the firm keeps its clients in the dark about what they are really owed. Instead the firm helps the client open an account for the pay-out and then accompanies the client to withdraw between R10 000 and R30 000 for its “fees”. And, finally, the firm fraudulently diverts to its own bank account another cheque made out to the client.
Welz says he has been told the firm pulls off about 100 of these cases a year and, from the nine cases he has explored in detail, he says it is not unusual for the firm to bag R150 000 in each case. The court papers say after wrapping up a batch of claims, Hoosain Mohamed, the senior partner, often flies to Switzerland or Saudi Arabia. He has recently acquired a flat in London, according to the papers.
Welz wants the original documents from a string of cases in which impoverished residents of the Cape Flats were allegedly ripped off by Mohamed. He says he did not want to publish the story before securing these documents, fearing they could be destroyed to hide the evidence. Together with some of the victims, Welz wants to bring a class action against the firm for recovery of the money allegedly stolen.
The revelations in the Cape High Court, which started hearing the case on Thursday, could prove embarrassing for Omar, who formally opened the firm’s new premises. noseWeek last year was the first to reveal how many of Omar’s associates have acquired top state jobs. Welz notes in his affidavit that Mohamed’s firm enjoys “high-ranking connections in social, professional and political circles”.
Welz says that according to a confidential source and extensive corroborative investigations, Mohamed employs several touts to patrol hospitals in the Cape in search of impoverished accident victims. He says the touts “specifically target victims from poor and disadvantaged communities, in hospitals generally serving such communities. They tout so aggressively that occasionally they tout other attorneys’ clients.”
Welz says victims are asked to sign documentation, including a power of attorney, which enables the law firm to act on their behalf. Mohamed then negotiates with the road accident fund, and secures an out-of-court settlement, “frequently (and indeed customarily) without discussing the quantum [amount] thereof with the client in question”.
Welz says in his affidavit: “The amount which the client will receive is determined by Mohamed. Before any amount is paid to the victim an arbitrary round figure amount, which is clearly excessive in relation to the work done in the non-litigious matters [matters which do not have to go to court], is then apportioned by the firm for ‘fees’.
“The client is informed that his/her claim has been settled, and a fictitious settlement figure is proffered to the client as being the amount of the settlement. The client is not informed of the full amount of the capital settlement, nor of the fact that the road accident fund will in future make a further payment in respect of its liability for costs incurred.”
Welz says that, unbeknown to the clients, another uncrossed cheque is then made out from the settlement. This cheque is made out to the client, but is not delivered to him. Instead “Mr Mohamed himself — apparently because he has a special arrangement with a person or persons at the Athlone branch of the Standard Bank — cashes this cheque at the branch, or occasionally deposits it into his personal bank account.”
Welz’s detailed analysis of the scam is likely to renew calls for an investigation into the way some lawyers milk the road accident fund – often at the expense of their clients. There have been many allegations of such impropriety, and scores of lawyers have been caught cheating their accident victim clients.
The outgoing Minister of Transport, Mac Maharaj, strove to reform the current system, which has saddled the road accident fund with a deficit of about R8-billion as a result of huge pay-outs to victims and their lawyers. Maharaj wanted a much cheaper system in which victims would obtain reasonable compensation for their accidents without the state having to bankroll lawyers.
He proposed new schemes which would have accorded lawyers a smaller role. For example, he proposed paying out victims regardless of who was responsible for the car accident, which would have obviated the need for lawyers. As he prepared a draft white paper for his plans, the minister met fierce lobbying from both stalwart accident lawyers and groups representing the many, newer black law firms that depend on road accident work.