Seventy percent of the money belonging to widows and orphans apparently lost by financial institution Fidentia could have been recovered, according to the lawyer who advised the Mineworkers Provident Fund (MWPF) trustees on three occasions last year to move the money out of Fidentia’s clutches.
Winston Matlala, a pension-fund specialist, said he had also warned the fund that, in his opinion, if it did not sever ties with Fidentia it could face legal claims from thousands of beneficiaries.
At the same time, a trustee who was ‘redeployed†from the MWPF board after repeatedly calling for the relationship to be terminated, told the Mail & Guardian this week that the reluctance to do so stemmed from a conflict of interest.
Collyn Manzana highlighted the overlapping loyalties between the National Union of Mineworkers’ (NUM) investment arm and the pension fund’s service provider.
William Leshilo, the provident fund’s chairperson, said the board was concerned that the Fidentia-managed Living Hands Trust could have sued over any termination, and wanted to be sure of its legal position so it spent one more year investigating. This was crucial time lost.
The MWPF board comprises 10 members, five nominated by NUM and five by the Chamber of Mines. The NUM insisted that it could not be held responsible for the MWPF’s actions.
Payments suspended
In November 2005, the MWPF suspended further payments to Living Hands, administered by Fidentia Asset Management, because of beneficiaries’ complaints about reduced and non-payments.
The Financial Services Board investigation into Fidentia Holdings could not account for R689-million of the R1,2-billion in Living Hands from July last year. The trust pays out benefits to widows and orphans of deceased members.
Fidentia Asset Management has been placed under curatorship. The M&G has learned that in late 2005 the MWPF approached pension specialist Matlala for advice on whether it could terminate its relationship with Living Hands.
Matlala wrote a legal opinion in January last year saying the provident fund could terminate its agreement and transfer money out of the trust. No action was taken. Complicating the matter was the trust’s changing ownership.
The MWPF originally had an agreement with the Mercantile Trust, which was ultimately bought out by Fidentia Asset Management. The trust was renamed the Living Hands Trust in 2004. But Matlala advised that in the absence of a new contract, the service-level agreement bound Living Hands.
He had also advised that as the board had the legal right to terminate the relationship, failure to do so would leave it exposed to civil and criminal action by the beneficiaries.
Matlala said he was later approached by the MWPF’s principal officer, Frans Mahlangu, to carry out a due diligence on Fidentia Asset Management. He reported to the board that Fidentia had refused to disclose information about the fund, adding that Fidentia boss J Arthur Brown arrived at a meeting flanked by physically intimidating ‘henchmenâ€. Matlala said Brown was arrogant and that the ‘meeting turned nastyâ€. He had again recommended that the MWPF terminate its relationship with Living Hands.
Report dismissed
Board chairperson Leshilo confirms that the board dismissed the report because it was written by a lawyer, rather than auditors. It then hired KPMG to audit the trust.
In October last year, KMPG reported to the trustees that it was barred from viewing the trust’s closing balance before Fidentia took over, and could not determine if money had disappeared at that stage.
Matlala wrote a third legal opinion on the basis of the KPMG report, suggesting the board secure a court order forcing Fidentia to provide the information.
The board had been derelict in its duties, he added. If it had cancelled the agreement in January 2006, more than 70% of the money allegedly lost could have been recovered. He based his opinion on the fact that Brown had only had the money for 13 months by then.
Leshilo confirmed that the board had received Matlala’s legal opinion on two occasions, including his report on Brown’s treatment of him. However, he said it had wanted a second opinion because the MWPF did not have a service agreement with Fidentia and the board of trustees was being cautious.
Leshilo claimed Matlala also had a conflict of interest, as he was a trustee of the Fairheads Trust, which had taken over from Living Hands in November 2005. But Fairheads confirmed that the MWPF had nominated Matlala as a trustee. Matlala added that he had submitted his opinion before being nominated. ‘[Ultimately] the question is whether the opinion is correct or not,†he said.
He rejected Leshilo’s concern that the board was potentially exposed to legal action.
Elaborating on her claim of conflicting interests, former trustee Manzana pointed out that the NUM has a 30% stake in retirement fund company Lekana through its ownership of the Mineworkers Investment Company (MIC). NUM deputy general secretary Oupa Komane is both an MWPF trustee and a director of the MIC. Manzana added that while she was trustee, Lekana received a commission from Living Hands Trust worth 0,3% of the MWPF business, valued at an estimated R24-million.
NUM leader Komane insisted that the conflict between the MIC and Lekana was ‘organic†— that is, built into his responsibilities as a union executive. He had declared his interest and would recuse himself if the need arose. However, that had never been necessary.