SA union battles to reclaim R4,5bn in pension funds

Cape Town – A union campaign to recover R4,5 billion, allegedly lost by Investec Bank subsidiary Investec Employee Benefits (IEB) due to mismanagement of union pension funds, has called on the Financial Services Board (FSB) to investigate whether funds were misappropriated.

A union delegation led by Dennis George, the general secretary of the Federation of Unions of South Africa (Fedusa), met last week with Dube Tshidi, the FSB’s chief executive and registrar, to present evidence of the alleged malpractice. The unionists refused to comment on the substance of the meeting after it adjourned.”All we will say is that we are very pleased about the outcome,” said George.Earlier, Deon van Deventer, the assistant general secretary of the SA Equity Workers’ Association (Saewa), noted: “So far nobody seems prepared to take action, so we are going to the FSB to find out what they intend to do.”Saewa organises more than 20 000 members in the electrical and metal industries.Eleven pension funds are currently trying to stop IEB transferring R13 billion of funds to Capital Alliance in what they see as a way of depleting IEB’s resources in case the claim for R4,5 billion succeeds.The matter is scheduled to be heard on October 27.”There is litigation and this is subject to court process,” said IEB chief executive Ciaran Whelan.The proposed transfer of funds to Capital Alliance, he said, was “normal and approved”.There had been delays, but Whelan denied union accusations that Investec and IEB had employed “blocking tactics”.The matter had come to a head in 2003, after the takeover by Investec of Fedlife and Fedsure, which had managed a range of union pension funds.Under an undertaking with the union pension funds, Fedlife had apparently agreed to contribute 90 per cent of certain profits to the funds.This was not done for a number of years although, according to the unions, it was their money that had been invested.Fedusa said the background to the current state of affairs ran as far back as 1999, when Fedsure began to suffer losses due to its investments in financial services companies.As a result of its losses, Fedsure did not declare bonuses to the pension funds in both 2000 and 2001 (the year it was acquired by Investec with the subsequent name change).The pension funds allege they were told by Fedsure that their funds had been invested in what is called a “guaranteed fund” of diversified assets suitable for pension fund investments.Instead, the funds claim, Fedsure placed their money together with shareholders’ money in a general fund.The general fund was then used to invest in financial services companies as part of Fedsure’s own business strategy.When talks with Investec failed, the unions instituted a claim for R1,3 billion for mismanagement and misappropriation of their capital.”Since then, with interest and accrued profits, we estimate that the pension funds are owed R4,5 billion,” said a Saewa legal adviser.Business ReportThe unionists refused to comment on the substance of the meeting after it adjourned.”All we will say is that we are very pleased about the outcome,” said George.Earlier, Deon van Deventer, the assistant general secretary of the SA Equity Workers’ Association (Saewa), noted: “So far nobody seems prepared to take action, so we are going to the FSB to find out what they intend to do.”Saewa organises more than 20 000 members in the electrical and metal industries.Eleven pension funds are currently trying to stop IEB transferring R13 billion of funds to Capital Alliance in what they see as a way of depleting IEB’s resources in case the claim for R4,5 billion succeeds.The matter is scheduled to be heard on October 27.”There is litigation and this is subject to court process,” said IEB chief executive Ciaran Whelan.The proposed transfer of funds to Capital Alliance, he said, was “normal and approved”.There had been delays, but Whelan denied union accusations that Investec and IEB had employed “blocking tactics”.The matter had come to a head in 2003, after the takeover by Investec of Fedlife and Fedsure, which had managed a range of union pension funds.Under an undertaking with the union pension funds, Fedlife had apparently agreed to contribute 90 per cent of certain profits to the funds.This was not done for a number of years although, according to the unions, it was their money that had been invested.Fedusa said the background to the current state of affairs ran as far back as 1999, when Fedsure began to suffer losses due to its investments in financial services companies.As a result of its losses, Fedsure did not declare bonuses to the pension funds in both 2000 and 2001 (the year it was acquired by Investec with the subsequent name change).The pension funds allege they were told by Fedsure that their funds had been invested in what is called a “guaranteed fund” of diversified assets suitable for pension fund investments.Instead, the funds claim, Fedsure placed their money together with shareholders’ money in a general fund.The general fund was then used to invest in financial services companies as part of Fedsure’s own business strategy.When talks with Investec failed, the unions instituted a claim for R1,3 billion for mismanagement and misappropriation of their capital.”Since then, with interest and accrued profits, we estimate that the pension funds are owed R4,5 billion,” said a Saewa legal adviser.Business Report