The South African company, Jacques Malan Consultants and Actuaries JMCA is already attracting suspicions, even before it can finish their investigation on the entire structures of the multibillion Pula Botswana Public Pension Fund, (BPOPF).
The Registrar of Insurance and Pensions Wilfred Mandlebe appointed JMCA recently to investigate BPOPF after a tender in which they beat three fellow South African companies, Gobodo Forensic Services and Ramathe Fivaz Forensic.
Industry players say that JMCA may not be objective in their findings because they have an interest in the Fund and have on many occasions tendered without success to provide service to BPOPF.
They tried in 2001 when BPOPF started but were beaten to the race by a local company- Actuarial Solutions, which has since been bought by Deloitte and Touché Assurance and Advisory Services. JMCA allegedly tendered again this year, and were once again beaten by Deloitte, who retained the portfolio.
Industry players say that JMCA’s earlier bids to BPOPF place them on a position that borders on a conflict of interest, including a likelihood of “sabotaging” other service providers, by virtue of having access to privileged information.
A member of JMCA management team, Joanna Legutko admitted that they have tendered three times for Asset Consulting services and once for Actuarial Services with BPOPF, because they regard BPOPF “a potential client.”
However, she said they had not “obtained any privileged information as a result of the tenders we submitted,” and that they are therefore not under a conflict of interest in the present investigation.
She admitted however that “a conflict may be possible in future, should the BPOPF go out to tender again. We may need to carefully consider which services, if any, we are able to tender for, and appraise the BPOPF of any conflict of interest that may arise,” she said.
Industry players like Deloitte & Touché Assurance and Advisory Services, who are the Funds Actuaries, and Alexander Forbes Asset Consultants are seen as JMCA’s potential competitors, and fear that the investigation may be targeted at them.
Legutko admits they do compete with these companies but defends their appointment on the basis that the firm chosen to investigate the BPOPF needs to have “considerable expertise in the field.”
“We do not generally compete with Deloitte & Touché, as they are not active in the South African market where we primarily operate. However, in Botswana we do provide the same services and would view them as a competitor. We also compete with Alexander Forbes in the Asset Consultant business,” she admitted.
She added: “We realise this is the case and, would be very careful about future tenders we might be requested to submit to the BPOPF, given as we will have previously evaluated the services of these competitors and therefore a conflict of interest is possible,” she said.
She explained that the investigation is being led by Mike Codron, an independent external Actuary, whose judgment, she said, is “particularly unaffected” by any issues of competition.
But BG News Investigations shows that Codron is a former employee of Alexander Forbes RSA, and has fallen out with the company after it was involved in “bulking” or “secret profits” in which they illegally took money from their clients’ bank accounts over the period 1996 to 2004. Alexander Forbes RSA has a subsidiary in Botswana.
According to Legutko, Alexander Forbes RSA has admitted that they acted incorrectly and has since put up a reserve of R500 million to repay clients. There is a dispute over the amount because Alexander Forbes is only prepared to repay the money, net of corporate tax, which would distort the position of the fund had the illegal transactions not happened.
“ Mr. Codron, acting on behalf of one of his clients, has disputed this and requests that the fund be placed in the same position that they would have been in but for the actions of Alexander Forbes. The Financial Services Board is on record to state that they agree with the position of the fund. That is the extent of the disagreement between Mr. Codron and Alexander Forbes,” said Legutko.
But the biggest blow is that JMCA along with over 20 parties, including Alexander Forbes, Sanlam and others, is involved in an ongoing lawsuit in South Africa involving improper handling of pension funds.
Legutko defends her organisation thus: “Our organisation has provided Consulting and Actuarial Services to clients for over 11 years. One of these clients, the Picbel Pension Fund, to whom Jacques Malan served as a consultant in 1996, is currently part of an investigation, which involves inappropriate movements of surpluses between pension funds. It is our view, and also that of our senior counsel, that our involvement was limited in this matter, and we have assisted the authorities with this investigation.”
She said in any case, the Registrar had been informed about this before he appointed them to investigate. Other queries leveled at JMCA are that they are allegedly conducting the investigations outside the Terms of Reference by investigating the Fund Service Providers, which conduct is not provided for in the Pension and Provident Fund Act.
It is alleged they are able to get away with this because at this stage, there is no legislation that governs the operations of the Retirement Fund Industry, as the structures of the Non Bank Financial Institutions Regulatory Authority Bill of 2006 are not yet in place. Alexander Forbes Botswana Managing Director, Paul Masie confirmed having been interviewed, but declined to comment on whether or not the interviews were procedural.
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