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Leaders of the 160 000-member Police and Prisons Civil Rights Union (Popcru) are refusing to account for members’ investments worth R200 million that vanished after it was channelled to a mysterious company with close links to union bosses.
The money, meant for the benefit of police and prison warders, cannot be traced after it was irregularly transferred to an entity known as Popcru Group of Companies Management Services (PGCMS).
Popcru is one of Cosatu’s biggest affiliates and runs a successful investment arm, Popcru Group of Companies (PGC).
Mpho Dipela, the former financial director of PGC, was the sole director of PGCMS. PGCMS was itself owned by the Popcru Trust, of which Dipela and Zizamele Makhaza (formerly Cebekhulu), who has been Popcru’s president for 23 years, are trustees.
PGCMS has now been incorporated into Royale Energy and it no longer appears on the Companies and Intellectual Property Commission database.
Its registration number now belongs to Royale Energy, which was acquired for R170 million on behalf of Popcru’s members in 2016.
Royale Energy was acquired by PGCMS through a R170 million loan, allegedly interest-free, from the Popcru Group of Companies. A document about the history of Royale Energy shows that it was “acquired by PGC” in 2016, after which Dipela and Makhaza joined the company’s board as directors. However, Royale Energy does not appear on the list of entities owned by PGC.
Nor does the company’s financials appear on PGC’s financial statements and annual reports.
Subsidiaries affiliated to PGC include Workers Life Insurance, Workers Life Assurance, Workers Life Direct (WLD), Shishangeni Lodge, Metropolitan Health Group and Mavundla Square, a shopping centre in Greytown in KwaZulu-Natal.
‘IT COULD BE MORE THAN R300M’
The irregular channelling of money meant for Popcru members into PGCMS was picked up in March last year by Sizwe Ntsaluba Gobodo Grant Thornton, the union’s former external auditors. After bringing the matter to the attention of the PGC management, SNG Grant Thornton then reported the “irregularity” to the Independent Regulatory Board of Auditors. “Upon inspection of the bank statements of Workers Life Direct, it was identified that referral fees, amounting to approximately R100 million, were paid over to PGCMS as opposed to Popcru or PGC. We cannot make a determination as to whether the abovementioned fees were paid across from PGCMS to Popcru and PGC as PGCMS is unaudited,” the firm said in a letter.
However, a spreadsheet prepared by Popcru’s finance department, which forms part of a trove of documents obtained by City Press, shows that the amount of money transferred to PGCMS is over R200 million.
The document covers the period between March 2016 and February 2019.
A former board member of Workers Life Insurance said money transferred in this way from Workers Life Direct to PGCMS could very well be over R300 million.
“The spreadsheet covers the period from March 2016 to February 2019. It doesn’t mean that there were no transfers after February 2019,” he said.
Documents seen by City Press show that PGCMS invoiced Workers Life Direct R8.6 million on March 31 last year.
‘NOT A CENT’ SHOULD HAVE GONE THERE
Popcru has a standing agreement to refer the union’s 160 000 members to Workers Life Insurance and Workers Life Assurance for short- and long-term insurance in return for referral fees.
According to the agreement, which is undated and does not have the signatures of the six required witnesses, Workers Life Direct would collect the referral fees from Workers Life Insurance and Workers Life Assurance and pay the money over to Popcru or the PGC, and not to PGCMS.
But the spreadsheet obtained shows that all referral fees, at least between March 2016 and February last year, were paid over to PGCMS.
In March 2018 the PGC board made a decision to migrate all of PGCMS’ business and assets to another entity known as Workers Life Management Services. SNG Grant Thornton’s letter said after the decision was made, PGCMS ceased being a subsidiary of PGC.
City Press has established that following PGC’s decision to stop using PGCMS, a further R100 million was deposited into the company’s account.
DIPELA’S MYSTERY R18M LOAN
More documents show that while Dipela left PGC in 2018, he was still the de facto chief financial officer, issuing instructions to officials in PGC’s financial department.
Documents including a second letter from SNG Grant Thornton and internal correspondence between PGC’s financial department shows that on January 16 last year Dipela “borrowed” R18 million from Workers Life Direct on behalf of Royale Energy.
He repaid the money three days later.
Of the transaction, SNG Grant Thornton said: “We have noted, upon inspection of the bank statements of WLD, that there was a deposit of R18 million paid into WLD’s bank account from Royale Energy.
Upon inquiry with the client, the management team could not provide sufficient and appropriate audit evidence as to the business rationale for the deposit.
The only supporting documentation provided to the audit team was a confirmation of the deposit ... ( stating) that the depositor was Mr Mpho Dipela, on behalf of Royale Energy. This transaction occurred on January 18 2019.
There currently appears to be no apparent business or lawful purpose for this transaction. Based on the above, we have reason to believe that a reportable irregularity has occurred.”
Following the letters reporting the two irregularities, in August the firm cut ties with the Popcru Group of Companies.
“Our audit findings in Workers Life Direct has indicated two instances of reportable irregularities reported to the Independent Regulatory Board for Auditors. As a result of the pervasive nature of the impact of these findings, our audit risk has increased to a level which we cannot mitigate for us to continue being external auditors of PGC.”
PGC and all it subsidiaries did not submit audited financial statements last year. Popcru has not had audited financial statements in the past two years.
Dipela’s spokesperson, Madelain Roscher, said: “We remain resolute that we are in the right and clear in this matter, and we look forward to the judicial system proving as such.”
Popcru’s spokesperson Richard Mamabolo referred all media queries to union chair Loyiso Mdingi and his board.
Mdingi declined to respond to questions, saying the matter was sub judice.
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