/ 16 February 2009

Pension-fraud kingpin to pay back R18,6-million

A 61-year-old man who was found guilty of fraud on Monday was ordered to pay back R18,6-million in compensation, SABC radio news reported on Monday.

The Johannesburg specialised commercial crime court ordered Peter Ghavalas to pay the compensation under a plea-bargain reached with the state.

Ghavalas admitted to masterminding a pension fraud scheme that ransacked seven pension funds of R300-million.

Pension fund administrator Alexander Forbes was also implicated in the scheme.

The charge sheet implicating Ghavalas and four other businessmen in the pension-fund fraud detailed an elaborate scheme aimed at profiteering from surplus money generated by the funds.

The accused each faced 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 alleged 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 were 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.

The charge sheet alleged that Ghavalas benefited to the tune of almost R42-million through dividend payments.

Ghavalas pleaded guilty and was handed a suspended sentence.

The court found that the needs of the pensioners were paramount as they had all lost their life savings through the scheme.

Their needs, the court argued, justified the plea-bargain and the speedy settlement of the case.

Ghavalas was born in South Africa but emigrated to Sydney, Australia, in 1998 and obtained citizenship there. He was arrested in September 2005 on his return to South Africa to visit his sick mother.