Business

Pension fund officials probed

2016-08-04 12:17

A bitter court battle in Pretoria has exposed how the chairperson of a R12 billion pension fund irregularly obtained a home loan, secured by the fund, to buy a Mercedes-Benz and to pay off his tax bill.

Despite being accused of contravening section 19(5) of the Pension Funds Act, Ron Field remains in his post as chair of the National Fund for Municipal Workers – a fund that holds the pensions of 43 000 municipal workers in South Africa.

The court battle has also implicated the fund’s principal executive officer, Sean Samons, who allegedly helped facilitate the irregular loan.

However, the fund has defended its decision to keep its chair on the board, saying although his behaviour was not “squeaky clean” or “lily-white”, it wasn’t criminal.

Although Field’s R252 736 home loan is small change compared with the size of the R12 billion fund he oversees, the loan has become a point of contention in a case between the fund and its former administrators.

RFS Administrators approached the North Gauteng High Court in May, asking for an urgent interdict to stop the fund from cancelling its lucrative administration contract.

The Pension Funds Act is quite clear that loans granted for housing loan purposes should not be abused –for example, for buying items such as boats or cars

In court papers, RFS claims its contract was axed after it started investigating irregularities related to Field’s home loan, and then reported the findings to the Financial Services Board (FSB) and the police.

The fund, however, defended its decision to cancel RFS’ contract, saying it was terminated because of shoddy service delivery and because the board felt RFS was overcharging the fund.

‘Some strings to be pulled’

Questions about Field’s home loan were first raised in December when Strachan & Crouse, the auditors of RFS Home Loans, flagged certain errors and worrying inconsistencies in Field’s home loan application.

Emails submitted to court suggest that Field, who works for the City of Cape Town, approached Samons in May last year, asking for help to settle a R152 285 tax bill.

On May 12, Samons told Field via email that he would “ensure that your Sars [SA Revenue Service] debt be settled with some strings to be pulled”, to which Field replied: “Thank you for help with my Sars headache.”

Although Field was not asking to withdraw cash from his municipal workers’ pension fund, he was requesting the fund to guarantee his loan, using his pension as collateral for the debt – an arrangement that is allowed in terms of section 19(5) of the Pension Funds Act, on condition that the loan is used for “housing purposes only”.

In the application form Field signed, he claimed he intended to use the loan to settle his outstanding bond on his house in Edgemead, Cape Town. Instead, court papers show he used the money to buy a 2009 Mercedes-Benz CLC350, to pay off R130 000 of his Sars debt and to make his monthly payment on his bond.

Samons, through the fund’s lawyer, said he was under the impression that the loan would be paid into Field’s bond account and used like an access bond – an arrangement that the FSB calls “irregular”.

“[Samons] didn’t know about the car,” Tony Canny, a lawyer at Hogan Lovells, which represents the fund, as well as Field and Samons, told City Press. “He was helping out a guy with a Sars debt, but he thought it was going to go into a mortgage loan account.”

Samons also denied that he had any influence over RFS Home Loans’ decision to grant the loan to Field.

FSB keeping mum

As the regulator of pension funds, the FSB has repeatedly warned trustees to be vigilant against abuse of home loans made or guaranteed in terms section 19(5) of the Pension Funds Act.

“The act is quite clear that loans granted for housing loan purposes should not be abused – for example, for buying items such as boats or cars,” said FSB spokesperson Lesego Mashigo.

The FSB would not confirm whether it was investigating RFS’ complaints against Field and Samons, citing secrecy concerns.

“We are precluded by section 22 of the Financial Services Board Act from disclosing to the public information in relation to investigations currently being conducted by us or intended to be conducted by us in the future,” Mashigo said.

However, the FSB confirmed that any contravention – whether a pension fund granted a home loan or agreed to guarantee one – would be considered serious.

“Any contravention of any provision of the act is regarded as serious, and where it comes to the attention of the board that a member utilised his or her housing loan for any purposes other than housing, such member should be required to repay the housing loan immediately.”

The fund says that when it received RFS’ allegations, it hired a top forensics team from Sandton law firm ENS to investigate the claims.

Although they have refused to disclose the report or its findings, they said the report found that neither Field nor Samons was guilty of any criminal conduct or wrongdoing, and that there was no prejudice to the fund.

“We’re not for one moment saying that their conduct is lily-white,” Canny said.

“But we have a legal opinion that it’s not criminal, and it is conduct that has been reported to the regulator ... On that basis, the board took the legal advice that we are not going to terminate their positions – we are going to tell them that this is not to happen in the future, and it’s not acceptable that it has happened.”

The fund’s compliance officer, Pierre Reineck, said: “ENS’s report found no criminal conduct, but recommended remedial action intended to prevent mistakes being made in future.

“If the regulator determines [Field] is not fit and proper, then so be it,” Reineck added. “But at the moment, it’s a private matter as far as the fund is concerned.”

In addition to this, RFS filed a second complaint with the FSB, asking it to investigate a R15 000 fishing trip paid for by the fund.

Emails attached to the complaint show that in February, Field – a keen fisherman – chartered a luxury fishing boat for a tuna fishing expedition at the fund’s expense. The trip was allegedly booked as a team-building exercise.

“The trip was cancelled and the refund was [made],” Samons said via email. “I also raised my concerns with the chairperson of the legal committee at that stage.”

Two Oceans Sport Fishing Charters confirmed to City Press that the trip had been cancelled, but said it was due to bad weather and not due to any concerns raised by the fund.

COURT BATTLE CONTINUES

In May, the court found in the fund’s favour, ruling that it was entitled to cancel the contract with RFS without giving reasons, and that RFS was not entitled to whistle-blower protection.

“In effect, the relationship had completely broken down between the parties,” Canny said.

“If you have a situation where your administrator is reporting the conduct of your principal executive officer and of your chairperson of your board to the registrar of pension funds, and to the FSB and to the police, you can hardly be continuing the relationship as administrator.”

RFS is now pursuing a civil claim against the fund and says it will seek damages if the court finds that the contract was cancelled in bad faith.

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