Fidentia : Curators’ briefing

Matters Relating to Ex-Mineworkers

09 March 2008
Chairperson: Mr M Sonto (ANC)
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Meeting Summary

The Curator of Fidentia briefed the Committee on the history of Fidentia, its investment portfolio, financial mismanagement, the investment by the Ex-Mineworkers Union into Fidentia, the current developments on the curatorship and prosecution of those responsible, and the way forward. He noted that Fidentia was built on an insecure foundation with no professional structures to drive its investment initiative. This, coupled with improper behaviour of its directors, led to the disappearance of depositors’ funds under mysterious circumstances. The  Ex-Mineworkers Union had invested about R789 million by the time Fidentia was placed under curatorship. Substantial progress had been made in bringing the main culprits to book and many others would follow. There were substantial litigation costs, and some difficulty in unravelling who had deposited amounts, as funds had been co-mingled. Fidentia had made some interim payouts to surviving spouses and children, and a full report could be given to the Committee once the beneficiaries had been identified. The relevant accounting documents were available and were being compared with other records.

Questions from the committee focused on the progress made so far by the curators, distribution criteria to beneficiaries, the number of beneficiaries, the amount invested by the depositors, the progress of sales of attached property and the distribution of those proceeds, the number of convictions, and the kind of assets attached by the curators.

Meeting report

Fidentia current situation: Curator’s Briefing
Mr Dines Gihwala, Curator, Fidentia, chronicled the genesis of Fidentia from a garage with no official structures to a high profile investment company that was entrusted with funds from the Ex-Mineworkers Union, after these had been moved from Old Mutual.

He noted that Fidentia was built on an insecure foundation with no professional structures to drive its investment initiative and this, coupled with improper behaviour of its directors, led to the disappearance of depositors’ funds under mysterious circumstances. He noted that the Ex-Mineworkers Union had invested about R789 million with it by the time Fidentia was placed under curatorship.

Several individuals and organisations had invested in Fidentia prior to its placement under curatorship. He pointed out that he was not clear on the actual beneficiaries within the ex-mineworkers, but the union had invested huge sums of pension funds into Fidentia.  Various legal means had been pursued to bring all culprits to book. He cited the arrest of Mr Graham Maddock, a former accountant with Fidentia, as a step in the right direction. Mr Maddock had turned state witness and entered a plea bargain.

R6.3 million was likely to be realised after the sale of Mr Murdock’s attached assets, which included a house in Constantia. He added that the convicted had been sentenced to 47 years in prison and a substantial fine, although he would not serve the full term. Other directors of Fidentia had been forthcoming in providing the curators in helpful information. The major problem lay in attempting to unravel large sums of money that were co-mingled to buy expensive properties such as coastal properties, football and rugby clubs and game farms. The process of reconstructing the books at Fidentia had revealed that several transactions were conducted in a climate of fraud and unlawful business conduct. He said that as at November 2007, the curators had paid out R90.844 million as stipend to widows and orphans who had invested with Fidentia. Several summons had been issued to culpable institutions that were found to be conniving with Fidentia in its improper business conduct. 

Substantial progress had been made in charging the major players, and many others would follow. However, heavy litigation costs financed by the fund were a cause for concern, although the process was proving to be fruitful

Discussion
Mr P Nefolovhodwe (AZAPO) wanted to know whether the curators had been able to ascertain the actual amount invested by the Ex-Mineworkers Union, and how much was likely to be recovered. He also questioned whether the widows and orphans of the Ex-Mineworkers Union’s members would also receive something in the near future.

Mr Gihwala responded that the Union had invested R789 million by the time Fidentia was placed under curatorship. He added that by co-mingling he meant that investment funds were used to acquire various assets, making it difficult to identify the exact source of funds. He promised to pay out all outstanding beneficiaries once the money had been recovered. However, he was not forthcoming on the timeline. He pointed out that the curators were struggling to sell some major assets at competitive prices to enable them to pay out beneficiaries.

The Chairperson sought clarity on how the curator would identify the legitimate claimants, given that some mineworkers were deceased by now. He also asked if there were records or other proof that supported the fact that the Ex-Mineworkers Union invested money with Fidentia.

Mr Gihwala revealed that the Ex-Mineworkers Union had invested their money with Fidentia through agencies. He added that the curators were in the process of reconstructing the books of accounts. In order to identify the legitimate claimants, he said they were comparing information at Fidentia with the records of the Union. He emphasised that the books were in safe custody for reference purposes. He added that they would only be able to pay out stipends to beneficiaries after the Financial Services Board Registrar had approved the distribution process.

The Chairperson maintained that the answer given by Mr Gihwala on identifying the legitimate claimants was not satisfactory.

Mr Gihwala explained further that the money was pooled into the Ex-Mineworkers Provident Fund covering a number of beneficiaries. However, the curator had not yet unravelled the individual contributions to the fund. He promised that would be done once the money to pay out the stipends had been recovered. He added that the stipend to every beneficiary varied according to the contribution made. He pointed out that the curators would consult with the Union to identify the beneficiaries.

Mr Nefolovhodwe asked whether their books had information on individual contributors and traceable banking records to help identify the depositors.

Mr Gihwala commented that the curators had all the relevant information at their disposal, although the validity and reliability of the information was still to be verified. He promised to make available more information to the Committee when it was received.

The Chairperson asked for the names of those stakeholders the curators had consulted in unravelling the financial mess at Fidentia.

Mr Gihwala responded that everyone who had dealings with Fidentia was questioned, including Alexander Forbes and the Ex-Mineworkers Union.

The Chairperson noted that the process of curatorship showed that there was “rummaging in the house”, but queried whether the process was worthwhile in helping defrauded depositors, including the Ex-Mineworkers Union members.

Mr Gihwala was optimistic that the process would bear fruit, given that all the information the curators needed was physically there. He added that all culprits would be brought to book.

Mr Nefolovhodwe asked whether land was included on the list of attached property from the directors of Fidentia and whether it was possible to sell it to the State for resettlement purposes.

Mr Gihwala confirmed that indeed land in the form of a game farm had been attached, and the curators were busy trying to sell it. He cited the property as New Bay Horizon.

The Chairperson asked whether Fidentia was likely to be resuscitated in the near future.

Mr Gihwala revealed that Fidentia was not viable, and would eventually fold once benefits to depositors had been paid out. He urged the Committee to investigate the manner in which funds were invested into an entity operating from a garage. He noted that over 60 000 people were suffering as a result of such improper economic behaviour.

Mr Nefolovhodwe sought clarity on whether Fidentia, according to the curators, was a dubious entity.

Mr Gihwala said the lack of professional structures and proper banking details showed that the firm was founded on an unstable and unprofessional ground. He warned the Committee to be on the look out as these kinds of entities had the audacity of sprouting back and swindling the same victims using new names.

A Member asked whether beneficiaries who had since died would benefit in the process of distribution.

Mr Gihwala pointed out that in that case the stipend would be paid out to the next of kin who was entitled to the benefits.

The Chairperson sought clarity on the definition of beneficiary.

Mr Gihwala said each Pension Fund Scheme had tailor-made definitions of beneficiaries, ranging from the contributor to the immediate spouse and descendents, followed by brothers and sisters and surviving parents. He further promised to make available copies of the Curators’ report to the Committee once the compilation had been done.

The meeting was adjourned.

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