The charge sheet implicating five businessmen in a R213-million pension-fund fraud details an elaborate scheme aimed at profiteering from surplus money generated by the funds.
Four businessmen were arrested last month in a criminal case relating to that being brought against Australian Peter Ghavalas, who was arrested in September last year.
The accused each face charges of conspiracy to commit fraud and/or theft and nine counts of theft, fraud and money laundering in a scheme involving the Lifecare pension fund, which purchased dormant companies that had pension funds in surplus. A surplus means those assets that exceed the actuarial liabilities at any given time. It is the property of the fund and cannot be claimed by the fund’s employer.
The pension fund holding companies transferred control of these funds via the dormant companies to Lifecare, which — under the guise of amalgamating the funds with their own — accessed the surpluses and laundered them through the business, eventually paying out 80% of the surplus back to the original holding companies.
The charge sheet alleges that Ghavalas had masterminded a “skillfully designed scheme” and executed it with the willing cooperation of his accomplices to illegally strip the funds of their assets. Ghavalas’s co-accused are actuary Peter Martin, employed by Alexander Forbes; Neil van Hees, the marketing director of an asset management company associated with Alexander Forbes; pension consultant Aubrey Wynne-Jones; and Anthony Dixon-Seager, a director of Mitchell Cotts and a trustee of the Lucas SA pension fund. Martin and van Hees are no longer employed by Alexander Forbes.
Ghavalas was born in South Africa but emigrated to Sydney, Australia, in 1998 and obtained citizenship there. He was arrested last September on his return to South Africa to visit his sick mother.
The charge sheet alleges that the scheme involved the Lifecare Fund and later the Lifecare Company, which purchased dormant companies with defined-benefit pension funds that had substantial surplus assets.
The owner of the dormant company would receive about 80% of the surplus after it had been laundered through the Lifecare Fund as a transfer of business in terms of Section 14 of the Pension Funds Act.
In all cases a substantial dividend was paid to Soundprops 178, which is owned by Ghavalas and his family, and has Wynne-Jones as a shareholder.
The charge sheet alleges that Ghavalas benefited to the tune of almost R42-million through dividend payments. The charge sheet details the following payments made to Soundprops: Jacaranda pension fund (R1,36-million); Lucas SA pension fund (R3,9-million); Sable pension fund (R9,4-million); Picbel provident fund (R9,1-million) and; Datakor retirement fund (R18,2-million).
Wynne-Jones was the administrator of the Sable, Cortech, Power Pack and two Datakor pension funds, while Dixon-Seager was the director of the Mitchell Cotts Company and a trustee of the Lucas SA pension fund. Martin and Van Hees were employees of Alexander Forbes, the administrator of the Lifecare Fund.
The irregularities were brought to the attention of the registrar’s office in 2003 when the Lifecare pension fund acquired a new board of management trustees.
The charge sheet alleges that Ghavalas, who was previously employed as an investment banker by Nedcor Investment Bank Limited, was the “mastermind” behind the scheme and was involved in all transactions. “Ghavalas ensured that the mechanics of his surplus laundering scheme were kept secret by enforcing the provisions of non-disclosure documents that he had the contracting parties sign before he would disclose how his laundering scheme operated,” alleges the charge sheet. It details the largest fraud involving the Datakor pension fund, its retirement fund and the Cortech pension fund.
The charge sheet says that under somewhat “strange (and suspect) circumstances” the three funds on May 1 1997 acquired the same participating employer, a dormant company of Datakor — Datakor Computers.
“The inspectors have expressed the opinion that the latter move was a strategy ‘solely to enable the laundering of the surplus [of the funds] through the Lifecare Fund’,” says the charge sheet.
It alleges that Wynne-Jones, a shareholder of Ghavalas’s company Soundprops and a consultant to the Datakor Funds, introduced Ghavalas to Datakor management, which was tasked with unbundling the minor assets of the group.
There were three agreements struck as part of the deal. The first relates to the confidentiality of the scheme. The second was to sell Datakor Computers to the Lifecare Company for R67,2-million, which was represented to the registrar as the basis for the amalgamation of Datakor and Cortech funds with the Lifecare Fund.
“The registrar’s approval in terms of Section 14 of the Pensions Act was sought and obtained on the pretext that the transaction amounted to an amalgamation of the Datakor and Cortech funds with the Lifecare Fund. In truth, and in fact, there was no such amalgamation. It was fictitious as the inspectors say ‘to lend a veneer of legitimacy’ to the appropriation of the surplus for the benefit of all but the members of the Datakor and Cortech funds.”
The third agreement was a subscription agreement that allotted Soundprops one “B” ordinary share at a price of one rand in Datakor that would entitle it to a dividend of R18,2-million payable on the sale of the dormant subsidiary to the Lifecare Company. This was not disclosed to the registrar.
The Lifecare Fund retained R2,8-million of the R70-million surplus paid to it and paid the balance to affiliated companies of the participating employer. Datakor Holdings then paid the R18,2-million Ghavalas dividend and an amount of R4,9-million to the Datakor management tasked with unbundling the minor assets of the group, while the balance of R44,1-million was paid by way of dividend to its holding company Sankorp.