A two-decade-long pension fund scandal nears its end

10 July 2012 Gareth Stokes
Gareth Stokes, FAnews Online Editor

Gareth Stokes, FAnews Online Editor

Some 20-years ago, in the mid-to-late 1990s, one Peter Ghavalas (and others) used a stratagem subsequently dubbed the “Ghavalas option” to raid the surpluses of a number of pension funds. We have written extensively on the matter in both FAnews and FAnews

Senior Counsel Jan d’Oliveira recently described the scheme as follows: “The Ghavalas option was designed to appropriate the surplus of a fund under the cloak of an outwardly lawful transfer of business from one pension fund to another.” The fraud targeted defined benefit pension funds because these were the only funds to which a surplus could accrue. A fund surplus is defined as any capital remaining in the fund after the payment of all member benefits. That is why Today’s Trustee (TT), in The Multi-sided Saga of Surplus Stripping, observes that “surplus stripping [could be seen as] a victimless crime.” (Nowadays the majority of pension funds are defined contribution funds wherein fund returns accrue directly to the fund members).

Bringing the surplus “strippers” to book

Although most of the fraud took place in the 1990s it was only in 2006 that the regulator identified five individuals and two companies that would face criminal charges for their roles in the pension-stripping saga. The list included Ghavalas, Aubrey Wynne-Jones, Anthony Dixon-Seager, Peter Martin and Neil van Hees as well as Soundprops 178 and Wynne-Jones & Company EB Consultants. Criminal proceedings were instituted against Simon Nash and his company Midmacor Industries – also for alleged surplus stripping transgressions – during October 2010.

Following his arrest in August 2005 Ghavalas entered into a plea bargain with the National Prosecuting Authority in terms of which he received a 15-year suspended sentence. He also agreed to pay a R6 million fine to the FSB and return R18.6 million to the affected funds. (The plea bargain was entered into on 16 February 2009). Other settlements include the Baileys of Mitchell Cotts (R20 million), Jan Pickard Jr of Picbel (R31 million), the former Lifecare company (R60 million), and the Lifecare Pension Fund (R26.2 million). In most cases the plea agreements offered indemnity from further prosecution.

Taking steps to fix the mess

The Ghavalas option worked because the targeted pension funds applied for – and were granted – permission to complete fund transfers under Section 14 of the Pension Funds Act. During August 2009 the Registrar of Pension Funds and the FSB applied to have these contentious certificates set aside. They felt they had an “open and shut” case because one of the charges Ghavalas pleaded guilty to was committing fraud on the Registrar’s office. This action eventually fizzled out. In September 2011 the FSB again attempted to have the certificates set aside on the unopposed Court roll. But Nash and Wynne-Jones opposed the motion and the Judge ruled that it would have to be argued on the opposed roll, set down for March 2012.

In a press release issued yesterday (9 July 2012) the Registrar of Pension Funds noted that  some significant milestones had been achieved in the ongoing surplus stripping saga. They confirmed that on 20 June this year the South Gauteng High Court completed its review of the Section 14 transfer matter and agreed to set aside the certificates issued in the Datakor Group Pension Fund, Datakor Group Retirement Fund and Cortech Pension Funds cases.

Paying out the surpluses

The registrar also announced the approval (during May 2012) of the surplus apportionment schemes submitted by the following funds:

· LUCAS SA PENSION FUND (12/8/10121) (in liquidation)

· PRESTOLITE PENSION FUND (12/8/27521) (in liquidation)

· PICBEL GROEPVOORSORGFONDS (12/8/9087) (in liquidation)

· SABLE INDUSTRIES PENSION FUND (12/8/20317) (under curatorship)

· DATAKOR GROUP PENSION FUND (12/8/8849) (under curatorship)

· DATAKOR GROUP RETIREMENT FUND (12/8/19919) (under curatorship)

· CORTECH PENSION FUND (12/8/7696) (under curatorship)

The surplus apportionment scheme of the Mitchell Cotts Pension Fund was approved in February 2011 and payments in respect of this fund have already commenced. Payments to stakeholders of the above-mentioned funds are expected to begin shortly. In a November 2011 update on all the funds affected by the surplus stripping the FSB said that R748.147 million was available for distribution to the funds. This was made up of the surplus assets in the funds at their surplus apportionment dates of R231.278 million and subsequent interest and returns on these funds. The surplus apportionments were completed around eight years ago.

Editor’s thoughts: When we sat with the Financial Services Board (FSB) on 13 June this year they acknowledged that lengthy court processes make it difficult for both the regulator and the court-appointed curators to finalise surplus stripping and other financial frauds. Do you believe that South Africa’s legal system is successful in dispensing justice in complex financial fraud cases? Add your comment below, or send it to


Added by Mncedisi Norman Petersen, 31 Jul 2022
My mother worked for Lifecare from 1983 up until 2007 and she was only paid 1rd of her provident fund from Life Care National Provident Fund and when I request her benefit statement...they send me an excel type documents...I have been struggling with this matter since 2019. HOW CAN I GET HELP
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Added by Cheryl Ann Dean, 02 Sep 2017
How do I go about ascertaining and claiming any surplus that is due to me from Picbel Pension fund
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Added by B.Kroese, 07 Oct 2015
Where can we get more info regarding The Picbel Group Provident Fund
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Added by Liz Samuels, 07 Sep 2015
For those of you who has enquiries about unpaid surplus, retirements funds etc, should contact the Financial Services Board. Email -info@fsb, or 0800 202087. You will be most definitely be assisted,
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Added by Roy Davis, 24 Mar 2015
Could anyone tell me how to go about lodging a claim for share of the surplus in the Cortech Pension Fund?
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Added by Son-in Law, 02 Apr 2014
I was the executor of the estate of my late father in law, who passed away some 6 years ago. We received a letter, dated 16 October 2012, from Old Mutual stating that a surplus amount under the Picbel Group Provident Fund is still due to my father in law. After numerous calls to the Old Mutual Call Centre during 2013, and again twice this year nobody seems to know when this surplus will be paid out. The same reply every time is that some Trustee Resolution needs to be obtained before further payments can be made. When will this ever be finalized?
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Added by Brian Challis, 11 Aug 2013
My husband work in S.A. From 1980 until 1986 paid into a pension fund
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Added by Edward, 23 May 2013
Good day, I'm unable to trace my pension between the period 1985 to 1990. I started with Pick n Pay, then moved onto Metro trade centre (Free State region) and finally with Shoprite. I’m not sure if during this period my pension bridged across to the next fund as I moved between the Companies, or if there are 3 separate pensions which are lying in dormant state! I know for a fact that I was never paid out against these! I have over the past 3 years or so made a few phone calls to the Organizations but no-one can assist me or indicate which Pension fund was active at the time etc. Secondly I don’t have any payslips etc .from that period to show my employee number etc. Is there an Organization which I can contact to help me in this regard? Your response would be greatly appreciated, Regards Edward
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Added by Mirna, 15 Apr 2013
Good day, I urgently need some advice as where I can find out what happened to my father's pension money that was at Picbel??? Can you please assist met in giving me a contact person that will be able to answer some questions?
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Added by Retrenched, 21 Jul 2012
My husband was retrenched at this time with 1 hours warning after 35 years of service, along with other long term Lucas employees, without any compensation. We later found that this was so that people like Dixon-Seager could loot their extensive contributions to the pension fund. We never recovered from this event and i wonder how we can get compensation for not just the pension lost but the criminal act perpetrated on my husband and the three other senior executives?
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Added by Cynical Simon., 10 Jul 2012
The question arises as to what would have happened to these surplusses had these criminals not stripped them.It is known that these surplusses were allocated to pass soft loans and pension holidays to certain individuals in the good old days.Even in the life industry there appears to be funds that if they were stolen such crime could also be called victemless,Policies which are lapsed because policy loans exceed the surrender value where such policy loans were mere book entries debited against the accrued bonusses to pay premiums in cases where assureds stopped paying premiums would be a point in question.It seems to me that whenever actuaries are involved[Sorry!]in the calculation of risk the opportunity for victimless crime is ample and the chance of being caught and convicted a calculated risk so small that it could be ignored.
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