Hawks examine medical aid corruption scandal

Hawks examine medical aid corruption scandal
STEPHAN HOFSTATTER, ROB ROSE and MZILIKAZI wa AFRIKA | 18 September, 2011 01:06


Image by: Halden Krog / The Times
As details of corruption inside South Africa's R92-billion medical aid industry emerge, the Hawks have raided 12 premises in a bid to expose a racket that contributes to the steep rise in medical aid costs.
The Sunday Times has copies of search warrants that set out how "independent trustees" of two medical aids, Hosmed and Commed, allegedly connived with officials from the regulator, the Council for Medical Schemes (CMS), to swindle medical aid members.

An affidavit by police Lieutenant-Colonel Gezina Lottering detailed damning evidence of this racket, saying allegations have also now "been made against officials of CMS".

This turns the spotlight on the CMS - which is meant to ensure medical aid members don't get ripped off - and raises questions about why it didn't act on evidence it got of corruption at Hosmed and Commed last year.

One such case, investigated by the Sunday Times, is that of Commed's former chairman Raato Mogajane, who allegedly asked for a R50000 bribe to buy a chicken-hatching machine.

Mogajane was allegedly bribed to ensure Commed retained Allcare as its "medical aid administrator" - a contract worth R30-million a year - although it would have been cheaper for the scheme to switch administrators.

This bribe was revealed in affidavits by David Tselapedi, a whistle-blower fired by Allcare. He struck a deal with prosecutors this month to come clean in exchange for a 12-year suspended sentence.

Tselapedi said that earlier this year, he, Allcare's human resources boss Mzingendoda Xulu and Commed principal officer Thabisile Mfaba, drove from Joburg to Zeerust to meet Mogajane to pay the bribe.

"In return for the payment, Mogajane undertook to influence the operation and extension of (Allcare's) contract (with) Commed," he said.

Tselapedi told the Sunday Times how Mogajane met the "bribe delegation" at a former Spur site in Zeerust. "He was drinking Johnny Walker Black Label whisky (and) was handed a white sack with R100 notes."

Mogajane denied taking a bribe, or even meeting Allcare's delegation. "Nothing like that happened ... (Tselapedi) must prove that," he said.

Though Mogajane denied owning a chicken farm or trying to buy farm machinery, he did seem to know a lot about the industry. He said a "very small chicken-hatching machine", would only cost about R3000 - not R50000.

Asked why Tselapedi would fabricate that story, particularly after his conviction, Mogajane said "he has a lot to gain because Allcare dismissed him, (so) it's a case of sour grapes".

Mfaba denied taking part in bribing Mogajane, and said Tselapedi was being "vindictive" because she was instrumental in getting him fired. "It is no surprise that he has now made such spurious, without merit, opportunistic and desperate allegations," she said.

Xulu said Tselapedi's allegations were "vile, malicious and devoid of truth", and that he had consulted lawyers about taking legal action.

Mfaba and Xulu were raided by the Hawks, as was Allcare, the administrator that collects cash and pays the bills for four medical aids. Allcare administers medical aid accounts of 135000 people, and was paid R146-million in fees last year.

Hawks' Lottering said in her affidavit: "There is a culture of dishonesty in Allcare which includes theft, fraud, bribery, corruption ... and contraventions of the Medical Schemes Act."

But Allcare CEO Howard Philips told the Sunday Times that "absolutely nothing improper" happened at his company - and if there was fraud, it was at the medical aid schemes.

"We fired Tselapedi because we found him to be dishonest. If the police have got this evidence from him, they must do what they must. We have cooperated completely," Philips said.

He said while Tselapedi admitted to cooking invoices, he did this with Commed's former principal officer, Langa Mconi without Allcare's knowledge. "After an in-depth investigation into fraud ... Commed laid charges with the police last year against (Mconi) and the trustees, but nothing happened," he said.

Philips said the raids look suspiciously timed to ensure that Allcare lost the lucrative R30-million administration contract with Hosmed to rival Thebe.

But Lottering's papers detail systematic pilfering of medical aid cash. She says money was stolen from Commed "by obtaining fictitious supplier invoices, whereafter the proceeds were divided between several recipients". For this to happen, the masterminds had to ensure compliant trustees were appointed to oversee the medical aid, who would then allow fake invoices to be submitted.

Tselapedi said Allcare created an army of "foot soldiers" to solicit votes for certain people to be elected as trustees at AGMs. Next week, Hosmed will hold its AGM to elect new trustees.

CMS registrar Dr Monwabisi Gantsho said he knew nothing about his staff being implicated. "But we referred certain matters to (police) ourselves, so we're willing to cooperate with any investigation," he said.