Fund ordered to pay benefit to employee convicted if R1.8M fraud

07 October 2020 Office of the Pension Funds Adjudicator (OPFA)
Advocate Matome Thulare, Deputy Pension Funds Adjudicator

Advocate Matome Thulare, Deputy Pension Funds Adjudicator

A Johannesburg employee who was convicted of fraud against her employer and was sentenced to seven years imprisonment in 2014, must be paid her pension, Deputy Pension Funds Adjudicator, Advocate Matome Thulare, has ruled.

The tribunal found there was no compensation order made by
the criminal court entitling the employer to a deduction from the employee’s pension benefit.

The complainant was a member of the GTC Umbrella Pension Fund (first respondent), administered by GTC Employee Benefits Administration (Pty) Ltd. She was employed by Sterklewies (Pty) Ltd (third respondent) for 12 years until she was found guilty of fraud in June 2014. She was sent to prison for seven years.

Upon exiting the first respondent, a withdrawal benefit became due and payable to the complainant. The complainant’s fund credit as at 27 July 2020 was in the amount of R367 431.19 The first respondent withheld the complainant’s withdrawal benefit at the instance of the third respondent pursuant to section 37D(1)(b)(ii) of the Act.

The complainant submitted she did not receive payment of her withdrawal benefit after she resigned from employment. She stated that she never signed an acknowledgement of debt in order for the third respondent to withhold the payment of her withdrawal benefit.

The first respondent submitted that the third respondent requested that the complainant’s fund credit be paid to it in terms of section 37D(1)(b)(ii) of the Act. The first respondent submitted that the complainant was convicted of defrauding the third respondent in the amount of R1.8 million and sentenced to imprisonment. The first respondent submitted that the third respondent suffered a loss due to the complainant’s theft.

The first respondent stated that Section 10 of the Pre-Sentence Report provides that the complainant had admitted to defrauding the third respondent in the amount of approximately R1.8 million. Approximately R700 000 had been recovered from the sale of the complainant’s house and vehicles and obtaining the value of her pension fund. This left a net amount of damages of R1.1 million, which is what the magistrate took into account when considering sentencing. It was the magistrate’s understanding that the complainant had agreed to her pension fund money being diverted to the employer.

The first respondent further submitted that in the Confidential Psychological Report, the complainant accepted that her pension money had been diverted to the third respondent. In an e-mail to the Human Resources Division of the third respondent, the complainant confirmed her liability to the employer and further stated that perhaps her pension value would be sufficient to cover the loss, which conveyed a willingness for the complainant’s pension value to be offset against the loss by the third respondent.

In his determination, Thulare said that as a general principle of law, pension benefits are not reducible, transferable or executable save for certain exceptions as outlined in sections 37A and 37D of the Act.

The relevant section of the Act in this complaint is section 37D(1)(b), which states a
fund may “deduct any amount due by a member to his employer on the date of his retirement or on which he ceases to be a member of the fund, in respect of compensation in respect of any damage caused to the employer by reason of any theft, dishonesty, fraud or misconduct by the member”.

In this regard, the member must have admitted liability in writing to the employer; or judgment had been obtained against the member in any court, including a magistrate’s court, from any benefit being paid in respect of the member or a beneficiary, and for such amount to be paid to the employer concerned.

Thulare found that Section 37D(1)(b)(ii) is unambiguous. It provides that in order for a deduction to be lawful, the member must have admitted liability to the employer in writing or that judgment must have been obtained against the member in respect of damage caused to the employer by reason of any theft, dishonesty, fraud or misconduct by the member.

The Deputy Adjudicator found that there was neither an admission in writing by the employee nor was there a judgment in respect of the damages caused to the employer. The employer had not instituted civil proceedings, and even if it did so now, such proceedings would be unlikely to survive a defence of prescription.

Neither the pre-sentence report nor the confidential psychological report was authored or signed by the complainant. Accordingly, they could not be regarded as an admission of liability in writing by the member and, therefore, these documents do not assist the respondents.

Thulare said that the circumstances, there was no lawful reason for the continued withholding of the complainant’s withdrawal benefit and for any deduction to be made from same. Accordingly, the complaint must be upheld and the first respondent was ordered to pay the complainant’s withdrawal.

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