Avid inquiry report warns of ‘conflicts of interest’

A STRONG warning about the dangers inherent in conflicts of interest that could be faced by people holding multiple posts at the same time is one of the sub-themes of the High Court’s report on its inquiry into the Social Security Commission’s botched investment deal of N$30 million with an inexperienced asset management company, Avid Investment Corporation.

The report by Acting Judge Raymond Heathcote, who presided over a Companies Act inquiry that the court conducted into the SSC-Avid investment, was issued last week. Its main conclusion is a recommendation from Acting Judge Heathcote that the record of proceedings in the inquiry should be forwarded to the Prosecutor General so that she can consider charging people in connection with testimony given at the inquiry – with the possibility that charges of perjury may be appropriate specifically hinted at by the Acting Judge.More than a page of his 18-page report was devoted to another issue, though.Making remarks about what he described as an example of a conflict of interest that became apparent during the inquiry, Acting Judge Heathcote demonstrated that these “fertile grounds for growing the seeds of corruption” could easily arise in the relatively limited pool of corporate expertise available in Namibia, and that corporate involvement was not a free pass to material benefits, but came with risks and serious responsibilities attached.By the time that the SSC agreed to invest N$30 million through Avid for four months, starting from late January this year, one of Avid’s previous directors, lawyer Otniel Podewiltz, had already resigned from the company’s board.That step, however, was not sufficient to save Podewiltz from being cited by Acting Judge Heathcote as an example of someone in the middle of a conflict of interest as far as his involvement with Avid and its relationship with the SSC were concerned.Podewiltz testified at the inquiry that he resigned from the Avid board on November 24 last year because he had been appointed to the Board of Appeal of the Namibia Financial Institutions Supervisory Authority (Namfisa), Acting Judge Heathcote recounted in his report.Podewiltz also told the court that he had joined the Ministry of Labour in May 2004, that he acted as a link between the Ministry and the SSC, and that he had helped former colleagues on the Avid board of directors with the drafting of letters forming part of the correspondence between Avid and the SSC over the N$30 million deal.Previously he had played the role of a “prosecutor” in a Presidential inquiry into the affairs of the SSC, the Acting Judge added.In that capacity, Podewiltz questioned Lazarus Kandara, who went on to start Avid Investment Corporation and served as its Chief Executive Officer, and who was implicated before the Presidential Commission of Inquiry in possible irregularities in the SSC’s affairs.At the same time – but this was not mentioned by Acting Judge Heathcote – Podewiltz was appointed, after the Presidential inquiry had concluded its work and finalised its report, to head a task force that had to implement the recommendations of the Presidential Commission of Inquiry.In the wake of the SSC-Avid saga, the Ministry of Labour has removed him from that position again, it has been reported.As it was, the Presidential Commission of Inquiry’s report and findings were not available by the time the SSC made its N$30 million investment with Avid, Acting Judge Heathcote noted.Podewiltz, though, was present in several guises, he commented: “So there was Mr Podewiltz; prosecutor of Mr Kandara and previous director of Avid (of which company his ‘adversary’ in the Presidential Inquiry was the de facto chief executive officer); while having to serve the interest of the Ministry of Labour and the Commission, he drafted letters on behalf of Avid; a multi-hatted man.””Some people appear to be incapable or unwilling to recognise a conflict of interest when an obvious one exists.Conflicts of interests are fertile grounds for growing the seeds of corruption,” Acting Judge Heathcote commented.”The professional pool from which Namibians can be drawn to serve on company boards is indeed a small one,” he continued.”If people cannot discipline themselves to decline to accept positions which put them in obvious positions of conflict, it leads to an undesirable state of affairs.”Acting Judge Heathcote aired some words of warning: “While sitting fees (to become a director on a Board of Directors) can prove to earn a handsome remuneration, an appointment on any Board of Directors carries with it a huge responsibility.Earning sitting fees is one thing, but if no effort is made to at least study the basic provisions of the Companies Act (to determine what should be done to earn the sitting fee) then the position should rather be declined.Earning sitting fees while not knowing anything about the realities of the commercial world, may inevitably lead such persons to become ‘sitting ducks’ when liquidators go after them on the basis of reckless trading, if and when a company is liquidated.”* A reference in a report on Acting Judge Heathcote’s report in Friday’s The Namibian could have been understood to indicate that Ralph Blaauw, former Acting Secretary General of the National Youth Council, had also been a director of Avid.In fact, Blaauw was not a director of the company.His wife, Sharon Blaauw, was a director.Both testified in the inquiry.The unintended error is regretted.Its main conclusion is a recommendation from Acting Judge Heathcote that the record of proceedings in the inquiry should be forwarded to the Prosecutor General so that she can consider charging people in connection with testimony given at the inquiry – with the possibility that charges of perjury may be appropriate specifically hinted at by the Acting Judge.More than a page of his 18-page report was devoted to another issue, though.Making remarks about what he described as an example of a conflict of interest that became apparent during the inquiry, Acting Judge Heathcote demonstrated that these “fertile grounds for growing the seeds of corruption” could easily arise in the relatively limited pool of corporate expertise available in Namibia, and that corporate involvement was not a free pass to material benefits, but came with risks and serious responsibilities attached.By the time that the SSC agreed to invest N$30 million through Avid for four months, starting from late January this year, one of Avid’s previous directors, lawyer Otniel Podewiltz, had already resigned from the company’s board.That step, however, was not sufficient to save Podewiltz from being cited by Acting Judge Heathcote as an example of someone in the middle of a conflict of interest as far as his involvement with Avid and its relationship with the SSC were concerned.Podewiltz testified at the inquiry that he resigned from the Avid board on November 24 last year because he had been appointed to the Board of Appeal of the Namibia Financial Institutions Supervisory Authority (Namfisa), Acting Judge Heathcote recounted in his report.Podewiltz also told the court that he had joined the Ministry of Labour in May 2004, that he acted as a link between the Ministry and the SSC, and that he had helped former colleagues on the Avid board of directors with the drafting of letters forming part of the correspondence between Avid and the SSC over the N$30 million deal.Previously he had played the role of a “prosecutor” in a Presidential inquiry into the affairs of the SSC, the Acting Judge added.In that capacity, Podewiltz questioned Lazarus Kandara, who went on to start Avid Investment Corporation and served as its Chief Executive Officer, and who was implicated before the Presidential Commission of Inquiry in possible irregularities in the SSC’s affairs.At the same time – but this was not mentioned by Acting Judge Heathcote – Podewiltz was appointed, after the Presidential inquiry had concluded its work and finalised its report, to head a task force that had to implement the recommendations of the Presidential Commission of Inquiry.In the wake of the SSC-
Avid saga, the Ministry of Labour has removed him from that position again, it has been reported.As it was, the Presidential Commission of Inquiry’s report and findings were not available by the time the SSC made its N$30 million investment with Avid, Acting Judge Heathcote noted.Podewiltz, though, was present in several guises, he commented: “So there was Mr Podewiltz; prosecutor of Mr Kandara and previous director of Avid (of which company his ‘adversary’ in the Presidential Inquiry was the de facto chief executive officer); while having to serve the interest of the Ministry of Labour and the Commission, he drafted letters on behalf of Avid; a multi-hatted man.””Some people appear to be incapable or unwilling to recognise a conflict of interest when an obvious one exists.Conflicts of interests are fertile grounds for growing the seeds of corruption,” Acting Judge Heathcote commented.”The professional pool from which Namibians can be drawn to serve on company boards is indeed a small one,” he continued.”If people cannot discipline themselves to decline to accept positions which put them in obvious positions of conflict, it leads to an undesirable state of affairs.”Acting Judge Heathcote aired some words of warning: “While sitting fees (to become a director on a Board of Directors) can prove to earn a handsome remuneration, an appointment on any Board of Directors carries with it a huge responsibility.Earning sitting fees is one thing, but if no effort is made to at least study the basic provisions of the Companies Act (to determine what should be done to earn the sitting fee) then the position should rather be declined.Earning sitting fees while not knowing anything about the realities of the commercial world, may inevitably lead such persons to become ‘sitting ducks’ when liquidators go after them on the basis of reckless trading, if and when a company is liquidated.”* A reference in a report on Acting Judge Heathcote’s report in Friday’s The Namibian could have been understood to indicate that Ralph Blaauw, former Acting Secretary General of the National Youth Council, had also been a director of Avid.In fact, Blaauw was not a director of the company.His wife, Sharon Blaauw, was a director.Both testified in the inquiry.The unintended error is regretted.