Businessman’s smear campaign gets nasty

Businessman’s smear campaign gets nasty
June 17 2012 at 12:20pm
By Bruce Cameron


Illustration: Colin Daniel

Everyone has a right to a fair trial, rich or poor, but no one has the right to simply untruthfully besmirch the reputation of others whom they perceive as their opponents.

I raise this because of the trial of Johannesburg businessman Simon Nash, the executive chairman of appliance company Cadac, who faces charges of fraud, theft and contravening the Prevention of Organised Crime Act arising from the alleged fraudulent stripping of retirement fund surpluses from the Sable and Cullinan/Powerpack retirement funds. Members and pensioners would probably have received better pensions if the surplus stripping had not taken place.

Since last year the Nash camp, which includes Nash’s wife and his public relations practitioner, Lance Rothschild, has taken the fight outside of the courts, mostly avoiding dealing with the merits of the charges against Nash. Instead, the Nash camp has focused on maligning many of those it sees as not being in its camp, making numerous untrue allegations against them.

This unacceptable smear campaign has now resulted in Nash’s wife, Elena Forno-Nash, facing at least one civil claim. This is consequent of a website registered in her maiden name, Forno, in August last year being used to take the campaign to new and very nasty heights.

Lawyers representing Nash and his wife, Forno-Nash, claim their clients were not responsible for the content of the website. They claim that “the party which uploaded the document to our client Mrs Nash’s website was not authorised to do so”.

“Our clients never have given instructions for the website to go live and the fact it did was an error on the part of the web developer and researcher.”

The registered site administrator, Rodwill Benecke of the company World Wide Design, denied in an interview that he had anything to do with the content or with the site going live. He said he was asked by “Mr Simon Nash and his wife to set up the site”.

He had been paid to register the site and for “nothing else”.

The Nash camp has ignored requests by Personal Finance for the names of the people responsible for the site and its contents.

In the smear campaign, the Nash camp has attacked various individuals and bodies, including the Financial Services Board (FSB), its chief executive, Dube Tshidi, and other executives; Tony Mostert, the curator of a number of retirement funds, and his legal team; and even me as editor of Personal Finance for reporting on the Nash saga.

A number of people who had already been smeared prior to the Forno-Nash website going live, are accused of criminal offences on the site, titled The Scam.

I am not going to repeat the defamatory claims, which have been made without a shred of evidence to back them up. The accusations are appalling.

The Nash camp seems to be relying on the propaganda tactic attributed to various leaders of Nazi Germany: “If you tell a lie that’s big enough, and you tell it often enough, people will believe you.”

The Nash camp has latched onto the fees, which they over-inflate but which are approved by the High Court and supervised by the FSB, that are paid to Mostert as curator, as some sort of warped defence against the criminal charges and multi-million-rand civil claims Nash faces.

Nash consistently avoids dealing with the merits of the case against him outside of the courtroom, only claiming that what he did was legal at the time and there is some massive conspiracy against him. His claimed legal structure for the stripping of the surpluses involved paying out about a third of the surpluses to various facilitating parties in fees and commissions.

It is a process for which a number of people have now been convicted and which the FSB has claimed in court papers was fraudulent.

In the end it is for no one but the courts to decide Nash’s guilt or otherwise.

He and/or his coterie have yet to lay a single charge against any of the parties maligned and accused of criminal acts on the Forno-Nash website and previously through various media.

In attempting to smear me, Nash has written to my colleagues, including the chief executive of Independent Newspapers, making unacceptable claims and falsely accusing me, among other things, of being a puppet of Mostert.

I have now been accused of far worse on Forno-Nash’s website. The Nash camp has yet to lay a complaint about my reporting with the Media Ombudsman or lay criminal charges relating to the obnoxious claims that I am involved in illegal activity. Clearly the aim is to intimidate me and to prevent me from keeping Personal Finance readers informed about what is happening in the various legal actions involving him. They deny that they are attempting to intimidate me or Personal Finance.

Apart from his criminal trial, Nash is embroiled in another battle involving the Cadac Pension Fund.

In December 2010, the Cadac Pension Fund, of which Nash was chairman and his wife, Forno-Nash, a trustee, was placed under the provisional curatorship of Mostert after Tshidi alleged in court papers, on the basis of an FSB inspection, that almost R10 million from the fund had been used to pay for legal services relating to his criminal trial for the alleged surplus stripping as well as in unacceptable property deals.

In the court documents it is claimed that the alleged irregular payments were approved by Nash and Forno-Nash as fund trustees, who were given an open-ended approval of the other fund trustees.

The only formal complaint against me in this nasty saga comes from the former Cadac fund legal consultant, June Marks, who now represents Arthur Brown of Fidentia fame. Marks did lay a very garbled complaint in her personal capacity against me last year with the Media Ombudsman. She withdrew the complaint as she got herself ever-increasingly tied up in knots about the nature of the complaint, with the office of the Ombudsman even having to try to frame the complaint for her.

Marks herself now has judgments against her – which she is attempting to appeal against – for more than R10 million for the fees withdrawn from the Cadac fund. In court documents it has been shown that she siphoned off a portion of the fees she claimed were due to other advocates. She is also the subject of a Law Society investigation.

Incidentally, Brown, with Marks as his attorney, is attempting to sue me for R33 million, and others for even more absurd amounts.

Forno-Nash was warned on Tuesday last week by Mostert and his legal team and separately by Independent Newspapers’ lawyers that urgent High Court interdicts would be sought if the offending false claims were not removed from the website by Tuesday evening. The Nash alliance closed down the website because, they say, “it ought never to have gone live in the first place”.

As consequences of the website and earlier smears:

* Mostert and his team are considering laying criminal charges and making substantial damages claims against the Nash camp;

* The FSB is considering what action it should take; and

* I intend suing Forno-Nash and possibly others for R250 000. Any award will be donated to a facility for the destitute aged.

One of the photographs published on the Forno-Nash website is of Lucas van Tonder, one of the advocates on the Mostert team, who is shown in a particularly adverse state. He was attacked by armed robbers in his home and badly beaten up. He escaped being murdered by diving out of a first-floor window.

A photograph of Van Tonder in his battered, blood-covered state was placed on Forno-Nash’s website without any explanation, but obviously trying to show Van Tonder looking his worst after his horrific ordeal. That is disgusting. Shame on the person who did this.

The Nashes claim they would never have allowed this photograph to appear on the website.

Incidentally, last week Van Tonder was recommended by the Bar Council to the Judge President to be a senior counsel. He had applied for silk some time ago but it was blocked by trumped-up complaints to the Bar Council from the Nash camp.

The worst thing about all this is the consequent legal actions being taken cost money, and a lot of the costs are reducing what pensioners should receive.

This smear campaign, combined with some of the delaying and often contradictory machinations employed by the Nash camp, are not what justice is supposed to be about. It is only made worse by a National Prosecuting Authority that is not operating to the levels of efficiency required to dispense justice quickly and fairly.


Status of main players in the surplus stripping

Currently more than R700 million, recovered by Mostert and his team, is being distributed to many thousands of pensioners in terms of pension surplus apportionments approved by the Financial Services Board.

Retirement funds affected by the surplus-stripping by employers in the 1990s are Mitchell Cotts, which was stripped of a surplus of R23.6 million (now R172 million with interest); Lucas of R14.9 million (now R87 million); Picbel of R41 million (now R127 million); Sable of R36 million (now R179.4 million); Cullinan/Power Pack of R41.8 million (now R145 million); and two Datakor funds and Cortech of a total of R138 million (now R421 million).

The situation in the broader surplus-stripping affair is:

* Six people and one institution have entered into plea arrangements with the State, allowing them to escape serving time in prison for their roles in the theft of money from pensioners. They are:

- Peter Ghavalas, a former Nedcor senior executive and the architect of the scheme that saw retirement funds stripped of their surpluses in the ’90s. Ghavalas was ordered to pay back R18.6 million in compensation and was given a suspended 15-year prison sentence.

- Rowland Bailey and his wife, Shirley, who benefited from the surplus in the Mitchell Cotts Pension Fund. Bailey received a total of 19 years’ imprisonment suspended for various periods for fraud, contravening the Financial Institutions (Investment of Funds) Act and money laundering. His wife was sentenced to a suspended five-year prison term.

- Cape businessman Jan Pickard Jr received a suspended two-year sentence for the theft of a R28.8-million surplus in the Picbel Group retirement fund. Pickard paid R21 million to the fund’s curators.

- Former Datakor chief executive Michael McEvoy and financial director Derrick Pettitt pleaded guilty and received suspended five-year prison terms for three counts of contravening the Financial Institutions Act. They were also ordered to pay R1 million each in compensation despite sharing in R4.9 million (now worth R18 million) from the surpluses in 1998.

- Financial services company Alexander Forbes pleaded guilty to contravening the Financial Institutions (Investment of Funds) Act. It was fined R10 000 and ordered to pay a further R5.49 million to Mostert, on top of a R342-million civil claim settlement.

* Still facing criminal charges, apart from Nash, are:

- Former Alexander Forbes senior executive, Peter Martin.

- Aubrey Wynne-Jones and his company, Wynne-Jones and Company Employee Benefits Consultants, who are due to appear in court, relating to the Sable, Cortech, Datakor and Cullinan/Power Pack funds.

- Jacques Malan and his retirement fund administration and consultation company, Jacques Malan and Partners.

- Johannes Roets, the Sankorp executive seconded as chairman of Datakor at the time of the stripping.

- William Graham Somerville, the former chief executive of hospital group Esidimeni (known as Lifecare at the time) and chairman of the Lifecare Retirement Fund, through which most surpluses were allegedly laundered.
----------------------------------------------------------------------------------

More than you bargain for
July 20 2012 at 08:25pm
By Sagie Moodley


--------------------------------------------------------------------------------

This article was first published in the second-quarter 2012 edition of Personal Finance magazine


Traffic-light shopping has to be the highlight of my day. In Gauteng, you can do your monthly shopping at the traffic lights and receive pamphlets for every service under the sun. The pamphlet that always catches my eye is “Major service … from R495”.

After I stop laughing, I take one and skim through it.

The claims are laughable, because the garage would be working for free if it carried out all the checks and replaced the parts as stipulated in the leaflet. It is a sure way of getting a cash-strapped customer into the shop and then bushwhacking him or her.

The first claim is that the garage will use genuine replacement parts. What on earth is a genuine replacement part? The part is either genuine – original equipment purchased at a dealership – or it is a replacement part bought at an after-market parts place. Genuine replacement parts … what a crock of sh*#@*t.

You know your car has been neglected for a while, and you have R495 because the wife left her bag on the dining-room table, so, with all good intentions, you take your car to this god-sent repair shop.

Ten minutes after you’ve dropped off the car, your phone rings. I will give you one guess as to who it is. Got it in one ... yes, it’s the repair centre, letting you know that practically every other part on your motor vehicle has to be replaced. The service is still R495, but all the other items that are damaged or broken will cost you R5 000. Did you have any idea that you were driving a death trap?

This is just another form of false advertising and of misleading the uninformed client into a financial disaster. The vehicle may need all the extra work, but did you budget for it? A sure-fire way of getting you to do the repairs is to tell you that the extras they are now quoting you for are safety-critical items. Not one of us unsuspecting road users out there wants to drive a death trap, so we agree to the entire repair.

And that, ladies and gentlemen, is how a sucker is born.

Let me give you an example of what it costs to service what is probably the cheapest car on the market, the Golf I, carburettor model.

Air filter: R37

Oil filter: R42

Fuel filter (plastic in-line): R15

Four spark plugs (Bosch): R60

Five litres of engine oil: R150

Labour: one hour: R456

This totals R760 (including VAT). The bill does not include the fact that there is no mark-up added to the parts. The parts are given at cost price to a service centre just to show you that a major service can never be done for R495, under any circumstances.

The after-market service centres or non-dealerships that are in the know and that do really good work are well aware of the fact that ridiculous claims of servicing your

vehicle cheaply are misleading.

The old saying is absolutely perfect for this situation: “If something looks too good to be true, it is.”

The workshop’s claim of a 62-point check on the vehicle will, in itself, take an hour if done properly. Remember, the cost of labour is more than R450 an hour, so is this service centre going to work for free?

Then, before you take your car there, ask if the price applies to all cars and bakkies – four-cylinder and six-cylinder vehicles. When it comes to bakkies, you would want to know if the price is applicable to 4x4s and 2x4s.

If I were a betting man (I am), I will bet anything that the service centre will tell you to take your vehicle somewhere else once you have asked these questions. Okay, I cheated. I did call and ask, and I was told not to waste their time with frivolous questions. The choice of language is mine and not what they used.

They also claim that the price includes a wash and vacuum. Which price? The one with all the work done or the “from R495” price? A wash and vacuum at the cheapest car wash is R40.

This workshop would close in a month if it actually did what it claims on the pamphlet.

The absolute best for me is the so-called “visual check on driveshafts, steering, fuel lines and cooling system”. So these guys are so damn good they have

X-ray vision and can check the state of wear on the CV joints on the side shafts. What they mean to say is that they will have a five-second glance at the state of the steering rack boots and the CV joint boots. This is all subject to the fact that your car is a front-wheel drive and that it does have a steering rack.

The fuel lines may have a few superficial hairline cracks on them, but, if they were leaking, you would have already known it because you would have got high from the fumes.

The cooling system, on the other hand, is completely different and needs to be pressure-tested to determine if the pipes are still in good condition and to make sure that the radiator does not leak.

You have to be a psychic to be able to determine their state just by checking them visually.

The pressure test on your cooling system and a removal and check on the radiator cap may save you a very costly repair. A visual check can be done only by Superman.

The claim that the workshop will adjust the handbrake and test the brakes is a little vague. Are they going to remove the rear drums on certain cars and adjust the brake shoes or are they going to wind the adjusting screw up on the inside of the vehicle to take up the slack in the parking brake cable? The reason for this simple question is that the one exercise is 60 minutes long and the other takes three minutes and is not as effective.

Testing the brakes I can only assume is going to be done during the road test and not on a brake machine. If done on a brake machine, it means that the garage, in its infinite wisdom, spent R375 000 to buy and install the test equipment, so I can only applaud such diligence for a low price of R495.

Even better are the electrical checks. What electrical checks? If you mean checking that the lights work, that the battery is okay and that the alternator is charging, those checks are already included in a normal service and are nothing special. If you would like a proper check on all the electrical components and control units, the proper diagnostic equipment must be plugged into your car. For this check, any reputable service centre will charge up to R800.

So, let me give you a piece of advice. Don’t look for bargains when you want to service your vehicle – they don’t exist (the bargains, that is). Go to your regular mechanic and ask him to give you a written quote to repair your car. If the quote is reasonable but you have a problem with paying the entire amount, ask him which items need to be fixed urgently and which items can last until the next service. This is a sure way of ensuring that your vehicle is always safe and that you never miss a service.


* Sagie Moodley owns Sagie’s Auto Performance, a workshop in Midrand. He is also a talkshow co-presenter on 567 CapeTalk and 702 Talk Radio.


WHAT THE CPA SAYS

“The Consumer Protection Act (CPA) Prohibits misleading advertising,” Trudie Broekmann, a director of Grant Gunstons Attorneys in Cape Town, says.

“If a supplier does advertise in a way that is reasonably likely to imply a false or misleading representation about his services, he is breaching the Act.

“If you report him to the National Consumer Commission, a fine of up to R1 million or 10 percent of his turnover, whichever amount is higher, can be imposed on him.”

With regard to replacement parts, the consumer has to be clearly informed if they are after-market parts. Broekmann says a supplier must apply a conspicuous notice to such parts stating that they have been reconditioned, rebuilt or remade, or are grey market goods, as the case may be.

The handing out of pamphlets at an intersection amounts to direct marketing. In terms of section 16 of the CPA, a consumer has a cooling-off period during which he or she may cancel a transaction for the supply of goods or services, without giving a reason and without incurring any penalty, if the transaction results from direct marketing.

Broekmann says consumers who have a vehicle serviced in response to the pamphlet advertisement have the right to cancel the transaction within five business days of the date of the service. The transaction must be cancelled by a written notice (such as an email to the garage).

If the consumer has already paid for the service, the supplier must return the payment within 15 business days after receiving the cancellation notice. If any goods were delivered to the consumer (for example, new spark plugs fitted), the supplier has to pay back the money within 15 business days after the consumer has returned those goods.

“This is a major legal risk for a supplier, and a wonderful remedy for the consumer,” Broekmann says.

-----------------------------------------------------------------------------

Bam gives you a fair deal
July 20 2012 at 08:40pm
By Bruce Cameron


--------------------------------------------------------------------------------


Lwazi Mashiya/Magic Mirror

Noluntu Bam, the Ombud for Financial Services Providers

This article was first published in the second-quarter 2012 edition of Personal Finance magazine.


When Charles Pillai, the Pension Funds Adjudicator (PFA), died in November 2010 after contracting cancer, his passing was intensely traumatic for a number of people. Pillai was not only considered to be a great jurist who had made his mark as the country’s first Ombud for Financial Advisory and Intermediary Services (FAIS) but was also a humanist of distinction. His approach to life was based on the principle of ubuntu, namely: “I am because you are.”

Pillai had a significant impact on many people, not least of all Noluntu Bam, the current FAIS ombud, who followed Pillai into the job in March 2010 after he was appointed as the PFA.

Pillai was emphatic that he saw his task as an adjudicator as making determinations based on what is fair and not only on the letter of the law. This is a principle to which Bam has also clearly committed herself, particularly in her determinations against financial advisers who placed investors – all too often pensioners – into high-risk and often fraudulent property syndication schemes.

This commitment to fairness and outrage at injustice are discernible in Bam’s determinations.

The outrage has been evident in how Bam has responded to a challenge to her authority by Santam’s professional indemnity insurance outfit, Stalker Hutchinson Admiral (SHA), which is providing errant financial advisers with the financial muscle to challenge Bam’s right to make determinations in cases involving property syndication schemes.

SHA provided financial adviser Deeb Risk and his company with the legal backing to challenge Bam’s right to make the determinations. This was after Bam ruled against Risk and ordered him and a number of other financial advisers to make good to the investors they had encouraged to put money into the imploding property syndications.

SHA could have to pay claims of thousands of millions of rands from the financial advisers to whom it has sold professional indemnity insurance and who face determinations and compensation orders for selling property syndications. It wants to force the investors, most of whom have lost all their savings, to sue the advisers in the High Court instead of taking their complaints to Bam.

If SHA has its way, it will effectively block the complainants, because they will not be able to afford the high cost of going to court.

The very reason the government established the office of the FAIS ombud is so that consumers have cheap and easy access to justice when they receive bad financial advice.

Finance Minister Pravin Gordhan referred to the FAIS ombud’s role in this regard in his foreword to Bam’s annual report for 2010/11.

He wrote: “Access to justice is a key feature in a constitutional democracy. The establishment of the FAIS ombud eight years ago was aimed at establishing an independent and impartial forum for resolving complaints by consumers who, without the forum, might not have had the option of going to court.”

Bam has made it clear that she will not be intimidated by the bully-boy tactics of the financial services industry. The challenge to her authority is scheduled to be fought out in the High Court.

Bam makes no secret of the impact that Pillai has had on her. In her first annual report, released last year, Bam acknowledged the influence that Pillai had on her and her office, describing him as “my late friend, brother and mentor. His spirit lives in all of us who knew him.”

Their paths first crossed when Pillai was one of her lecturers at the School for Legal Practice, which was attached to the University of Natal (now the University of KwaZulu-Natal).

The school’s administrator asked Bam to give Pillai a call. This led to her meeting him and her deciding to do her articles under Pillai’s tutelage.

In an interview, Bam said: “It is hard to describe in words how profoundly my meeting Charles was to change my life. The relationship went from a teacher/student, to an employer/employee and, finally, to a brother-and-sister relationship characterised by respect, love, support, mentoring and constant nurturing. At times, we used to laugh about how we met in the first place.

“One thing, though: no matter how close I was to Charles, the underlying glue binding us was our passion for our work of resolving complaints. Work had to be done properly. He wasted no time in indicating where he was not pleased with whatever I did.”

Bam grew up in Ngangelizwe Township in Mthatha in the Eastern Cape, where her father owned a general dealer’s store.

“My mother’s time was shared between assisting my father with running the shop, her dress-designing home business and looking after us.”

Bam matriculated from Umtata Technical and Commercial College. In grade eight, while she was at another school, Bam was selected to study commercial subjects at the college, and she studied economics, accounting and mercantile law.

It was while at Umtata Technical and Commercial College that Bam’s interest in law was sparked. Bam’s father had wanted her to be a doctor. Her other career choices were to be an accountant or an economist.

After matriculating, Bam worked as a Post Office clerk before deciding that law was her destiny and registering for a BProc at the University of Transkei. After graduating, she moved to Durban to pursue her LLB, “to diversify institutions and to open my eyes”.

Bam says it is not only Pillai who has had a significant impact on her life: “Undoubtedly, my parents, a number of high school and university teachers, as well as a few friends, have helped me make meaning of life. To all these people I remain eternally grateful.”

When Pillai was appointed as the FAIS ombud in 2003, he asked Bam to serve as the assistant ombud.

She says: “[At the time] I felt it was something up my street. Now it is a question of loving what I do. I go to bed every night knowing that, through my team, I have made a difference in someone’s life, who, without our office, would have probably had their life turned upside down.”

Prior to taking up the post she worked on the other side of the fence, so to speak, as a legal adviser for Old Mutual Personal Financial Advice and Liberty Life. This experience had an immense impact on her work as the FAIS ombud, specifically in understanding the financial planning environment, Bam says.

Bam accords a high priority to education. She is completing an MBA thesis on the regulation of the financial services industry.

Bam has also been instrumental in driving her staff to improve their level of education.

She says in her 2010/11 annual report: “In our quest to offer a service that is relevant to the needs of those who use it, we figured that, without ongoing development, offering the right kind of service would be a challenge.

“We view ourselves as a learning organisation. Accordingly, we have made training and development a mandatory element in each employee’s performance pact, regardless of which department the employee serves.”

For example, a decision has been made that the minimum educational standard for employment in the office’s technical team must be an NQF 5 in financial planning.

Her office has also initiated an undergraduate bursary scheme for law students.

Bam says the education drive is part of an initiative to grow and develop intellectual capital within her office, “to ensure that we are capable of meeting the demands of a complex and ever-evolving financial services environment.

“An important part of this challenge is to ensure that the service we offer remains relevant to all South Africans. This is not easy.”

Bam is not satisfied simply to make rulings against erring financial advisers: she also names and shames the people behind the scams, as well as those who should have done more to prevent them. Bam does this despite the fact that, in most cases, she cannot issue determinations against these individuals: she is limited to dealing with those who provided the inappropriate advice and sold the products.

Bam has warned that she will not allow individuals who devise crooked investment schemes to hide behind a corporate veil.

In numerous determinations, she has drawn conclusions about company directors who “knew that what they were doing was deceitful. What they were doing was stealing money from unsuspecting investors by making use of brokers (advisers).”

Bam has done this particularly when issuing determinations in cases involving fraudulent property syndications, such as BlueZone and Blue Pointer.

In a recent series of determinations, she ordered two company directors, Deolene Susan Catsicadellis and Reginald William Lynton Rabie, both of the Western Cape, to repay about R150 000 to two investors. Bam found that Catsicadellis and Rabie had assumed the role, albeit illegally, as key individuals in terms of the FAIS Act, and as such could be ordered to pay the compensation.

She has questioned the way the directors of failed and/or fraudulent schemes make false claims about the use of attorney trust accounts, auditing firms, property valuers and banks. She has also named the lawyers, property valuers and auditors who were used in property syndication schemes and who failed to do their jobs properly.

When Bam finds evidence of wrongdoing on the part of those who fall outside her office’s jurisdiction, such as lawyers, she reports their activities to the bodies that are empowered to take action against them, such as the law societies and the Financial Services Board, as the industry regulator.

In her determinations against errant financial advisers, Bam has highlighted the fact that the architects of high-risk investment schemes pay above-normal commissions, which become the motivation for sales and advice, rather than the interests of consumers. In the process, the advisers do little or nothing to check the veracity of the claims made by the promoters of the schemes.

Bam says one of the problems in the consumer protection environment is that consumers are not sure where to take their complaints. This results in respondents attempting either to circumvent the jurisdiction of the ombud’s office or to delay the processing of complaints.

“Quite commonly, respondents challenge the jurisdiction of the FAIS ombud’s office in the hope that they can divert the matter to an alternative forum where it may be economically unfeasible for many complainants to continue.

“Coupled therewith are the potential delays, which may disillusion a complainant.”

Bam agrees with the government’s resuscitating the idea of a single complaints resolution/adjudication structure for the entire financial services industry, to replace the numerous voluntary and statutory schemes, while incorporating the existing skills and experience into the new entity.

She says a single structure “would assist in bringing about an end to the jurisdictional confusion that currently exists”.

Bam says she would like the limit on the compensation that her office can award to be increased from R800 000, because this amount has not been revised since the ombud’s office was established on September 30, 2004. “Time and inflation stand still for no man, and hence the present value of this amount is significantly smaller than it was at the inception of the office.”

Bam is proud that her office has “an unblemished record both in terms of the fairness of its decisions, as well as its unqualified audit reports. The statutes governing the office, such as the FAIS Act and the Public Finance Management Act, mean that the office is subject to very close scrutiny, which includes various audits. It is my responsibility to ensure that we continue to pass these inspections with flying colours.”

Bam says the financial services industry in South Africa is an innovative one, with links to the rest of the continent and beyond.

“This brings with it an exchange of ideas and processes which are intellectually stimulating and exciting. In simple terms, I get to interact with great minds both within and outside my office.”

Regarding the behaviour of the financial services industry, she says that, once you break it down, the industry is “all about money, which in itself can attract unscrupulous individuals who operate without any moral integrity.

“While the majority of established institutions are underpinned by good corporate governance, there are those who design and promote products that have little or no chance of providing any return for the client. When down the line the scheme collapses, the perpetrators have moved on or have hidden their assets, leaving consumers destitute. It is important that such individuals are speedily brought to book so as to serve as an example.

“In addition to effective enforcement, there may be a need for greater scrutiny of financial products, in particular the way in which they are marketed, the structures thereof, and the ease with which the average individual can understand the promotional and contractual material. We also need to be aggressive and more focused with consumer education.”

Bam says that all the determinations issued by her office have equal importance, although they may speak to different financial products and highlight various tendencies.

However, for Bam the determination that stands out is the one in the case of Helena Dennis versus Nedbank Group Insurance Brokers, “perhaps because it was our start in writing determinations and it helped to bring the FAIS ombud to the attention of ordinary people”.

In 2005, Pillai ruled against Nedbank after Dennis complained that the bank had refused to accept, as a condition for a home loan, an existing life assurance policy she had with another company. It wanted Dennis to purchase one of its products. Pillai ruled that this was a denial of freedom of choice and was contrary to the intention of the legislature.

Outside of her job, Bam enjoys keeping fit and reading. When Personal Finance interviewed her, she was vacillating between The Leader Who had No Title by Robin Sharma and John Grisham’s The Confession.

“I never tire of reading Chicken Soup for the Soul,” she says.

Bam makes relaxing with her family a priority when she goes on holiday. “Durban remains a favourite destination, as I left good friends behind when I moved to Pretoria. I also visit my siblings at the family home in Mthatha from time to time.”

The tenet on which Bam models her life is one that those who mis-sell financial products would do well to emulate instead: “Do unto others as you would like them do unto you.”
---------------------------------------------------------
Failed syndication: pensioner paid back R60 000
July 8 2012 at 12:00pm
By Laura du Preez


--------------------------------------------------------------------------------

A financial adviser who recommended that a Bellville pensioner invest in a now-failed property syndication has been ordered by the financial advice ombud to repay the pensioner the R60 000 he invested.

Lukas Maree, director of Polokwane-based Maree and Rogers Beleggings, recommended in March 2005 that 73-year-old Jan van der Merwe invest the money in Blue Pointer, the marketing company for the Propdotcom property syndication scheme, according to a ruling released this week by the Ombud for Financial Services Providers.

Noluntu Bam, the ombud, says Van der Merwe received income as agreed, which “was characterised as a dividend payable at a rate of R1 000 a month on the investment”, until early 2006, when Blue Pointer defaulted. Since then, all Van der Merwe’s attempts to get his capital back have failed, Bam says.

Van der Merwe told Bam he wanted to invest the R60 000 to supplement his retirement income and that he could not tolerate high risk.

The Financial Services Board (FSB) investigated Blue Pointer and Propdotcom in 2006.

Propdotcom was supposed to purchase various commercial properties and issue shares that Blue Pointer would sell. But, according to the FSB’s findings, which were reported in an earlier determination by Bam, Propdotcom’s and Blue Pointer’s funds were mingled and used to fund Blue Pointer’s operations, and proper accounting records were lacking.

According to Bam’s earlier determination, Blue Pointer never obtained a licence to sell shares, in contravention of the Financial Advisory and Intermediary Services (FAIS) Act. Blue Pointer eventually shut its doors in 2007 after taking the funds from the sale of the only property in Propdotcom.

According to the ruling against Maree, he told the ombud he had offered Van der Merwe three investment options: a money market fund, an investment in Blue Pointer or an investment in Propdotcom.

He says Van der Merwe chose the Blue Pointer investment because it offered a higher income.

Maree told Bam Blue Pointer’s property portfolios were stable with a low risk profile and comparable to investments in Nedcor Commercial Property and Old Mutual Property.

He admitted that, at the time, he had no information on whether the portfolio was managed properly.

However, in her ruling, Bam says the shares issued by Blue Pointer were unlisted and illiquid, and the company had no track record.

It was “misleading” to compare the investment to one in Old Mutual Property and Nedcor Commercial Property, because Blue Pointer did not have to publish financial statements, she says.

It is “impossible to understand how [Maree] was able to come to the conclusion that the shares offered by Blue Pointer were appropriately priced”, the ombud says.

Investors could not know what they owned and what governance structures were in place to look after their interests, she says.

The shares would generally be regarded as high risk, she says, and an investor’s capital could be redeemed only if a willing buyer for the shares could be found.

Maree failed to disclose this to Van der Merwe, and this failure was a contravention of the code of conduct under the FAIS Act, Bam says.

In addition, Bam found that Maree and Rogers Beleggings was operating under the FAIS licence of Maree’s son, Coenraad Maree, who was not licensed to sell unlisted shares. In terms of the FAIS Act, Maree should have told Van der Merwe that he was not licensed to sell Blue Pointer shares, Bam says.

The ombud says she is convinced that Van der Merwe would not have made the investment if he had known that he might lose his capital and that Maree was not licensed to sell the Blue Pointer shares.

Van der Merwe’s loss was a consequence of Maree’s conduct, the ombud says, and therefore she ordered him to repay the R60 000 to Van der Merwe.