Barry Streek
The heavily indebted Road Accident Fund (RAF) paid more than R68,5-million including nearly R6-million in attorney’s fees to a legal firm in which its deputy chairperson George Maluleke is a partner.
In addition, a secret R3,2-million audit report, leaked to the Mail & Guardian, has found “systematic fraud” against the fund.
According to the report, Maluleke’s firm, Maluleke Msimang, received R68 506 310 over a three-year period R17-million was for general damages of claimants, R16,4-million for future medical expenses of claimants and R5,7-million for the claimants’ attorney.
The new CEO of the RAF, Humphrey Kgomongwe, said the board had wanted to keep the audit report confidential.
“We are attending to those problems with an implementation plan. Not everything in it is accurate but overall it is a good report and we are acting on it.”
Kgomongwe said he could not comment about claims of a conflict of interest between members of the board who also acted as attorneys on behalf of the board.
Maluleke said he did not seek appointment to the board but agreed after being approached by the Black Lawyers’ Association to serve.
“I was immediately concerned that such an appointment could raise allegations of conflict of interest and fully disclosed the fact that I work in the field,” he said.
“I have four offices in Johannesburg, Pretoria, Kempton Park and Pietersburg [and] it is impossible for me to know on a day-to-day basis exactly how many personal accident claims the company is handling.
“At my instigation it was discussed at length during my interview for my appointment to the board.
“I would like to emphasise that the board is non-executive and has no involvement in or influence over settling claims.”
Maluleke said his firm received payments of R68 506 310 from the RAF between 1997 and last year. “Only a very small fraction of this accrues to my partners and I. As claimant’s attorneys we received R5736 728 of this amount as contributions towards costs, but this has been principally taken up by covering overheads and expenses.”
The former chairperson of Parliament’s transport committee, Patricia de Lille, said conflicts of interest were a major problem in the RAF, and needed urgent investigation.
“These lawyers have lots of personal self-interest and are in charge of the fund, but the new government does not seem able to act. It is the public that pays the petrol levy,” De Lille said.
According to Nkoni Sizwe Ntsaluba, a Cape Town accountancy firm, the systematic fraud at the RAF involved dishonest claims “aided and abetted by certain of [the fund’s] own staff”.
The RAF board announced in April it would run the fund in management’s place after receiving the audit report.
In May Minister of Transport Dullah Omar told Parliament the RAF board regarded the audit report as confidential “at this stage”, and would consider making it public only once it was satisfied there was no prejudice to any individual.
It was, however, available for scrutiny by the public protector and the national director of public prosecutions.
The Director General of Transport, Sipho Msikinya, said he was a member of the RAF board and in this capacity he was part of the decision to appoint the auditors.
“We have been aware of serious irregularities and we were very concerned to reduce the risk to the fund and put in place water- tight processes to make sure that the irregularities would be cut off,” Msikinya said.
The fund, which receives about R2,3-billion in fuel levies, recorded a R1,32-billion operating loss in 1999/ 2000. This grew to R10,49-billion by the end of April last year.
The audit report concludes that systematic fraud is being perpetrated against the RAF through the submission of fraudulent claims “aided and abetted by certain of its own staff who abuse their position of trust and discretion that they exercise to the prejudice of the RAF.
“[They are] either in cahoots or partners to persons, groups and syndicates defrauding the RAF; or committing fraud acts for their own benefit; or fail to report fraudulent activities to the RAF board; or are negligent in performing their duties.”
The report says the fund’s management has failed to provide leadership, leading to key RAF employees dispensing millions of rands of taxpayers’ money in an “almost uncontrolled environment subject to only their discretion”.
The auditors say the claims process and payment system was “an archaic paper-based process subject to the almost unfettered discretion of the 385 key employees of the RAF”.
There were cases where files were misplaced, lost or destroyed and were replaced by “dummy” files. These provided opportunities for claims handlers to make irregular payments.
The auditors say that in the RAF’s Cape Town office, 13 files, involving payments of R1,14-million were missing. They recommend that two senior officials in the Cape Town should face disciplinary hearings.
They also found evidence that a syndicate may be operating in the fund’s Pretoria offices.
In seven claims, involving a total of R1,3-million made to an attorney, the identification numbers of the claimants and dead people proved to be false. The same RAF employees appeared to have been involved in handling the claims.
The auditors also suggested that a syndicate was operating in the Randburg office, where 144 files involving payments of R16,6-million were missing.