South Africa has the second highest murder rate in the world. It is a favourite hangout for organised crime syndicates from every corner of the world..CORRUPTION...Who Cares ?
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The legal team of the Johannesburg businessman Simon Nash, who is facing criminal charges arising from the stripping of surpluses of two retirement funds in the 1990s, served a slew of 16 summonses last week in his latest attempt to bring his prosecution to a halt.
And in the legal argument that ensued in the Specialised Crimes Regional Magistrate’s Court in Johannesburg, a threat was made by Nash’s legal team to have the chief executive of the Financial Services Board (FSB), Dube Tshidi, arrested because he did not arrive in court on Tuesday.
Instead, Tshidi had sent his legal representative to make suitable arrangements for his reappearance in the trial within a trial.
This is the latest turn in a case which has seen a nasty campaign by Nash aimed at discrediting the FSB and others, secret recordings of conversations, suing and counter suing by the various parties, complaints and investigations by various law societies and bar councils about legal teams and further allegations against Nash.
Nash is standing trial on charges of theft, fraud and contravening the Prevention of Organised Crime Act, arising from the stripping of the surpluses of more than R100 million in current value from the Sable Industries Pension Fund and the Power Pack Pension Fund (later the Cullinan Group Pension Fund).
The 16 people summonsed by Nash’s legal team include Glynis Breytenbach of the National Prosecuting Authority; the head of the Nash prosecution team and former Transvaal attorney general, Jan D’Oliveira, and members of his team; Hawks investigator Jan Judeel; Tony Mostert, the curator/liquidator of the various affected retirement funds and other attorneys in his legal practice; Tshidi and Jurgen Boyd, the FSB deputy executive in charge of pension funds and other FSB members.
There was semi-chaos at the court last Monday as the 16 people subpoenaed and/or their representatives were forced to stand around, with Nash’s legal team being accused by the parties that they knew that all the subpoenaed individuals could not be called to give evidence.
The FSB objected in court to the validity of the subpoenas that ultimately resulted in an agreement that Nash would file affidavits to support the relevance of the subpoenaed information and to provide grounds upon which the court should lift the secrecy provisions imposed on the information and documentation required under the subpoenas.
Initially in a media statement, Nash’s public relations representative, Lance Rothschild, who has also been involved in the campaign aimed at discrediting the FSB and various parties, falsely claimed that the subpoenas were based on a “judgment” handed down by the presiding magistrate Piet du Plessis and made various factually unsupported claims.
Nash’s legal team argued that Nash’s rights to privilege and therefore a fair trial have been compromised by information provided by June Marks, the former attorney to the Cadac Pension Fund, to both the FSB and Tony Mostert, who is the curator/liquidator of the surplus stripped funds as well as the Cadac Fund.
In court papers Nash has been accused of using Cadac Pension Fund cash to pay for his criminal trial as well as investing the Cadac Fund assets in a head office of the Cadac company.
At the end of 2010 when the FSB was investigating placing the Cadac fund under provisional curatorship, Marks provided information relating to the affairs of Cadac to both Mostert and his team and the board.
However, Marks, who now repre
sents Arthur Brown of Fidentia fame, secretly recorded her conversations at the time, including conversations when she was not in the room where the matter was being discussed.
According to court papers, Marks then handed over the tape recordings to Nash because Mostert refused to pay Marks for providing assistance to Mostert in rectifying the affairs of the fund.
Mostert told Business Report that Marks was obliged to co-operate with him in terms of the court orders appointing him as provisional curator.
The National Prosecuting Authority refused to give Marks indemnity from prosecution for using money from the Cadac fund to pay her bills as well as those of various advocates used in Nash’s legal battles.
Marks has since been successfully sued for more than R10 million by Mostert for not only being paid and paying advocates involved in Nash’s criminal trial, but also for over charging the Cadac fund for the payments.
Marks is appealing the High Court judgments against her and has also issued summonses against some of the former Cadac trustees (excluding Nash and his wife, Elena) for an equivalent amount.
Nash and his wife allegedly authorised the payments on behalf of the fund, according to court documents.
Nash now claims that the information provided by Marks in consultation with the FSB and Mostert, was privileged and compromises his right to a fair trial in his current surplus stripping trial, even though the recordings mainly deal with the Cadac fund and not the surplus stripping funds and despite the secrecy provisions applying to the secretly recorded conversations.
Marks, who was the only witness called to appear before Du Plessis on Tuesday, rejected the arguments of Nash’s legal team that the information she provided to Mostert and the FSB was privileged and contended that the privilege was not that of Nash.
Nash’s legal team has also been trying to halt the admission in evidence in his criminal trial of the FSB inspection report that led to the placing of the Sable and Power Pack Funds under curatorship on the basis that the law did not allow the FSB to make an inspection report public, which includes that they claim using it in the trial.
A trial within a trial on this point still has to be finalised and the Nash camp’s intention is to extend the trial within a trial on the privilege issue, hoping that the entire case against Nash will be dismissed without the merits of the case being argued before the court.
Mostert told Business Report that the only person Nash’s team needed to subpoena to obtain the information was Marks.
“The rest of us were subpoenaed simply to waste our time.”
He said that attached to the summonses were extracts from claimed transcripts of the Marks tape recordings, which was a contravention of secrecy clauses of Inspection of Financial Institutions Act and the Financial Services Board Act and secrecy provisions contained in various court orders appointing him (Mostert) as provisional curator, under which the recorded conversations took place. The secrecy can only be lifted by court order.
Marks had allegedly previously contravened the secrecy clauses by handing the recordings to Nash as part of an alleged “set-up” to expose Mostert and Nash in turn attached transcripts thereof to the court papers seeking the removal of Mostert as the provisional curator of the Cadac fund.
Mostert said that he had evidence that during April 2011 Marks phoned Nash and offered the recordings to him as a product in result of the staged set-up, which Marks claimed, occurred with the co-operation and support of counsel representing her at the time, Henk Louw. Rothschild denies that there was a set-up.
The criminal trial was adjourned to May 14 for argument relating to the validity and enforcement of the subpoenas. Du Plessis ordered, at the demand of Nash’s representatives, that some of the witnesses re-appear on May 21.
The subpoenaed witnesses reserved their right to contest the validity of the subpoenas.
Apart from the initial media statement announcing the subpoenas, Nash and his legal team declined to comment.
Marks said in an e-mailed response to the article: “In so far as your comments relate to me they bear no resemblance to the truth and you publish them at your own peril.”
Issue: Mar/May 2011
Gnashing of teeth
A trial within a trial certainly has its moments. The accused is on one hook and has been trying to catch his accuser on another.
Simon Nash, charged in the Johannesburg Regional Court with stripping a surplus from the Sable Industries pension fund, has formally called on Finance Minister Pravin Gordhan to suspend Financial Services Board executive officer Dube Tshidi until Tshidi's attempt to avoid the possible incrimination of himself has been resolved. He has also asked DA MP Dion George to urge a parliamentary inquiry into the relationship between the FSB, Tshidi and attorney Tony Mostert.
It follows the refusal by Tshidi, under cross-examination by Willem de Bruyn (counsel for Nash), to answer a question. This was after Tshidi had taken advice from his lawyer not to answer. The question was on why Mostert had been appointed curator of the Cadac pension fund after he had already been appointed curator of the Sable fund when there was a known dispute between the two funds. The Sable fund has a claim of roughly R8m against the Cadac fund.
Some excerpts from the transcript, summarised where appropriate, give the matter context:
De Bruyn: Shortly before Christmas last year, the FSB applied (to the High Court) for the Cadac pension fund to be put under curatorship. That application was ex parte and in camera. The curator appointed was one Tony Mostert.
Court: On the same contingency thing?
De Bruyn: We do not know (whether there is a 25% contingency fee for Mostert from his Cadac appointment) because there is a huge dispute between the Sable and Cadac pension funds. Mostert is now curator on both sides . . . The next event after the appointment of Mostert was a search and seizure at the offices of the Cadac pension fund and the Cadac company (of which Nash is executive chairman). Mostert was effectively the person in charge of this search and seizure.
Despite protest from his lawyers, the court was told, Nash's privileged documents and emails were taken. These included matters related to the criminal trial and to the Cadac company. Mostert had been refused access to them, but he had called in FSB inspectors who attached the computers and servers. De Bruyn contended that all Nash's privileged communications could then be accessed.
De Bruyn: I beg leave to hand up Mr Tshidi's affidavit, the complete affidavit in the curatorship application (to the High Court for curatorship of the Cadac fund).
Prosecutor (Jan D'Oliveira SC): The state objects to this being submitted.
Court: Mr D'Oliveira, before Mr de Bruyn got up I wanted to indicate to you that at the outset this morning there was reference to this particular application and the fact that this particular trial is in fact referred to in this document. It must be relevant.
Prosecutor: As the court pleases.
De Bruyn: Mr Tshidi, you have a copy of this document.
De Bruyn: In paragraph 4 you said ‘The Cadac pension fund has been the apparent victim of surplus transactions pursuant to which it received assets from the Sable fund to which it was not entitled. Sable is also under curatorship as a result of the involvement of the parties identified herein.' As we stand here today, Mr Mostert is the curator of both the Sable and Cadac funds. Correct
De Bruyn: How could you appoint him in view of this conflict?
Tshidi: In view of?
De Bruyn: This conflict. The Sable fund has a claim against the Cadac fund. How could you appoint the same curator on both sides? Is it going to be the plaintiff Sable fund, the curator Mostert, the attorneys Mostert & Co (against) the defendant Cadac fund, the curator Mostert and the attorneys Mostert & Co? How could you do that?
Prosecutor: This is again irrelevant.
Court: Well, it is relevant, sir, in the fact that it is in the affidavit. There are conflicts in the affidavit. You will see that the Cadac fund, the Sable fund and Mr Nash personally are placed on both sides of it.
Tshidi: Your honour, I have the following comment to make. Comment one, there is a return date on this matter (to the High Court on March 29 for the Cadac fund curatorship). Comment two, it came to my attention – and that prompted me to an application to place this (Cadac) fund under curatorship, because it came to my mind that the assets of the Cadac fund are being used to fund this litigation (by Nash in defending the criminal charges against him). That is all I want to say. The rest I will say during the return date.
De Bruyn: But how could you conceivably have appointed Mr Mostert in view of this glaring conflict of interest as the curator of the Cadac fund? Why not another independent person?
Tshidi: As I said, I prefer to answer that on the return date.
At this point, Etienne Theron (the advocate instructed by Rooth & Wessels to represent Tshidi and the FSB) intervened. He wanted to speak privately to Tshidi, which he did outside the courtroom. The court then resumed.
Court: Yes, you have taken advice.
Theron: Your worship, Mr Tshidi indicates that he is not prepared to . . . (intervenes).
Court: Well, he can tell me that, sir. Right from the word go I have indicated that I have no problem with you advising him, but Mr Tshidi is the witness so let him testify. If he says ‘I am not going to answer that question', then that is fine but he will have to give me a reason
Tshidi: Your honour, I am not keen to answer that question. That is all I can say
Court: You know, there are a lot of questions asked of witnesses that they are not keen to answer, sir, but the fact of the matter is if you say to me that you believe that it might have other implications and those implications might lead to prosecution on your part, then by all means you can say ‘I want to remain silent'.
Tshidi: I was going to move on to say, your honour, I am not keen to, but if ordered by the court to answer I will answer and the implications are that this matter is still going to be, it is before the (High) Court and I do not want to incriminate myself as the Registrar.
Court: Well, then you are perfectly entitled to say under those circumstances ‘As it might incriminate me I do not wish to answer'.
Tshidi: I will remain silent on this matter
Court: Thank you, sir. That is all we need from you. It is on record. All right.
De Bruyn: I just want to make (it) clear. You refuse to answer on the basis that you may incriminate yourself?
Tshidi: I prefer to remain silent.
De Bruyn: On the basis that you may incriminate yourself?
The trial of Simon Nash, a trustee of the Sable pension when surpluses from it were allegedly stripped, might only be an early round in a more protracted contest. Through cross-examination by his counsel, Nash has taken the fight to FSB executive officer Dube Tshidi, the FSB itself, and curator Tony Mostert. Their side of the story has yet to be fully aired, as doubtless it will be, while Nash has yet to appear in the witness box and be subjected to cross-examination.
If he goes down, it won't be for not fighting. In fact, he's been fighting since he was charged five years ago. Unlike several others who had availed themselves of the "Ghavalas option", Nash did not enter a plea bargain to avoid prosecution. Whether he was offered the opportunity is moot.
During the January hearing, to be resumed, the relationship between his adversaries was exhaustively canvassed; in particular, whether documentation and related information gathered under the Inspection of Financial Institutions Act had been passed on to the police, the prosecuting authorities and others. There was contention over lawful compliance.
Under the Act, the Registrar must "take all reasonable steps" to ensure that the inspector he appoints "will be able to report objectively and impartially on the affairs of the institution". There are also secrecy provisions, to prevent leakage of draft reports, and procedures to be adopted for disclosure of final reports. On affidavit, Tshidi had stated that a section of the Act empowered him "under certain circumstances to provide any information obtained during an inspection to the curator".
At issue was whether Cor Potgieter, the FSB-appointed inspector, could have been impartial and objective. According to the evidence, he had investigated certain fund transfers that he himself had previously approved in his capacity as an FSB official. There was also cross-examination of Tshidi on whether he knew of Potgieter personally submitting draft reports to Mostert and the prosecuting authorities, and of being involved in assessing the suitability of witnesses for intended prosecutions. Tshidi said that he didn't know.
Also in the spotlight is the role of Mostert, specifically whether he could possibly have influenced prosecutions, plea bargains and settlements. He is the curator or liquidator of all the pension funds allegedly (or, in plea bargains, admittedly) stripped. These are the funds of Mitchell Cotts, Lucas SA, Picbel Groep, Datakor (two funds) and Sable. Late last year he was appointed curator of the Cadac fund as well.
Not only is he the curator but there appears to be no constraint on his law firm being appointed to act in the curatorships as well. For the curatorships he is remunerated on a contingency basis equating 25% of monies recovered. Some two years ago he agreed to accept a lesser percentage for monies recovered above a defined limit.
Given the huge settlements so far effected – including those with Sanlam and Alexander Forbes, which had received no financial benefit (TT Oct '10-Jan '11) – the fees so far accumulated by Mostert on the curatorships alone would run into many tens of millions.
Attempts by Nash to obtain via subpoena the copies of all agreements between the FSB and Mostert or his law firm, on how Mostert and the firm are being remunerated, have been resisted. Also unclear is how Nash's prosecution, for which former Transvaal attorney-general Jan D'Oliveira was brought from retirement, is being funded.
There's another bit of information so far not in the public domain. It's how much of the amounts paid in settlements have been received by fund members during the five years of the respective funds' curatorships.
FSB chief Dube Tshidi: When the law enforcer becomes the accused
He loves the job and has just been reappointed for a second term, but being South Africa's chief financial services regulator is acutely frustrating, says Dube Tshidi, executive officer of the Financial Services Board.
FRUSTRATED: Dube Tshidi
It is easy to see why he feels this way. Almost five years ago the Financial Services Board (FSB) fingered Fidentia CEO J Arthur Brown for allegedly misappropriating millions of rands belonging to a mineworkers' pension fund.
Investigations led to criminal charges being laid and the curators being sent in to recover what money they could for the beneficiaries.
The case still has not come to court. Instead Brown has taken the curators to court, accused the FSB of bullying him, threatened to lay charges against it for criminal defamation and approached the court to have the charges against him thrown out because media speculation has impaired his right to a fair trial.
The courts have rejected his attempts but now, with stupefying chutzpah as far as Tshidi is concerned, Brown is hitting the talk circuit (tickets at R175) and plugging a "tell-all" book he is about to publish which will prove it is the FSB which is the real culprit and he the real victim in all this.
Tshidi, 57, says the ease with which alleged white collar criminals are apparently able to turn the tables on their accusers and endlessly delay court proceedings against them is damaging public confidence in the regulator.
"You have the responsibility to protect the integrity of regulators, and you will only achieve that by taking effective action against wrongdoers."
What is his response to Brown's allegations of criminal defamation against the FSB?
"If you look at everything printed in the media or heard on radio talk shows you will not pick up a word of this coming from the FSB."
The FSB has confined itself to investigating the case and handing its report to the enforcement agencies of government, he says.
"We never went to the media and said Arthur Brown has stolen from the widows and orphans. What we have said is that assets belonging to widows and orphans of a particular pension fund were misappropriated."
When does he think the case will be heard in court?
"I can't tell you. There are so many sideshows around all these big cases. Just when you think you're going to court to deal with the merits of a specific case something else crops up, another sideshow. We don't know at this stage when the proper case is going to be heard."
He finds it "terribly frustrating", he says, and would like to see a new system that makes it easier for regulators to bring alleged offenders to book.
"I would prefer a judicial system or an enforcement system which says if there are allegations against an entity or individual in the financial services sector there should be a special court that can deal with that matter there and then. No sideshows. Let's get to the real case and deal with it.
"It depends on government and the judiciary whether they would entertain such a request [for a special court], but the request has been made."
There is already a specialised commercial crime court which was established more than 10 years ago precisely to speed up the investigation and prosecution of financial services fraud, but Tshidi does not think it is doing the job.
The ongoing Arthur Brown saga has highlighted the weakness of the current system.
"After all these years we haven't even started dealing with the case. We need to have a fresh look at this commercial crime court and ask, 'is it serving the original purpose it was created for?' We have to revisit it."
So must the legal rights of the accused be put on hold so that the nitty gritty of the case against them can proceed?
"Their legal rights and constitutional rights must be respected, but within the main case, not around the main case. All the rights of the individuals we're pointing fingers at must be respected, but the case must start"
What everybody would like to know is where Brown is getting the substantial amounts of money needed to pay for the court actions he has initiated to delay the only case that, as far as Tshidi is concerned, really matters.
The same question can be asked of others who seemingly have all the money in the world to pay top legal teams to delay their day in court. It's an issue that Tshidi finds particularly galling.
"You go and fight for your rights and justice using contentious profits. How correct is that?"
Is this not where the Asset Forfeiture Unit comes in?
"Yes, but have the assets been forfeited? They're still there and they're being used to defend the actions taken," he says.
Because of delays in the justice system, the regulator becomes the accused, he says.
"The law enforcers are now the accused. We have people who have committed crimes, pointing fingers at the law enforcers and saying to them, 'You're the ones who are out of order'."
In spite of his obvious frustrations, there have been deeply satisfying successes.
None more so than ensuring the distribution to members of surplus pension fund money.
Last year, Tshidi said companies were sitting on more than R60-billion of surplus pension fund money. There was a time when nobody would have been any the wiser and members of the funds would have had little hope of seeing any of it.
The dice were loaded against them, but that is changing.
"Only last week we approved a surplus fund distribution of R20-billion to former and current fund members."
And there will be more, promises Tshidi.