SIU uncovers R50m in ‘alternative’ RAF bank account

The Special Investigating Unit (SIU) has uncovered an alternative bank account of the Road Accident Fund (RAF) containing R50 million that is in the process of being recovered on behalf of the fund.

SIU chief national investigations officer Zodwa Xesibe told the parliamentary Standing Committee of Public Accounts (Scopa) inquiry into the RAF on Friday the amounts in several alternative accounts at Investec ranged from R1 million to R100 million. And that the RAF’s payment and reconciliation processes remain vulnerable to fraud.

She said there are criminal referrals the SIU has made about money that left the RAF and was placed into the bank accounts of various individuals.

“That matter is before the police and … we are talking about money to the value of R30 million.”

SIU head Advocate Andy Mothibi said the unit conducted a financial analysis, including of bank statements of attorneys appointed to the RAF corporate panel of attorneys.

He said preliminary findings suggest that a family member linked to an RAF executive was paid monies by one of the law firms on the panel, and that this same law firm is providing personal legal services to the RAF executive.

The law firm was not identified.

SIU principal investigator Msubu Maseko said the quantum of these payments is still being investigated, but referred to R74 000 having being paid to family members by a particular law firm – and that an RAF executive “that is party to that family trust is a subject of investigation”.

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Secret accounts

Mothibi said the RAF invested funds in alternative accounts, with the apparent intention of shielding these funds from legal attachments, but “these accounts are not subject to proper internal controls and the interest earned on these funds is also not adequately monitored or recorded”.

“This lack of oversight creates opportunities for financial manipulation and misstatement of the RAF’s true cash flow and liquidity position,” he added.

“Such practices may amount to financial misrepresentation and could be viewed as attempts to circumvent financial accountability and transparency. Furthermore, the absence of proper governance over these transactions undermines the integrity of the RAF’s financial management and may have broader implications for audit compliance and public trust.”

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‘Evidence of misconduct’

Mothibi said the SIU has also referred evidence of misconduct against certain legal firms to the Legal Practice Council.

He said at least 102 law firms received duplicate payments from the RAF, amounting to about R340 million, as a result of poor record management by the RAF and its failure to conduct periodic bank reconciliation.

Mothibi said that, when approached with evidence, several legal practitioners opted to cooperate with the SIU investigation in defrayal of their indebtedness by signing acknowledgments of debt (AoDs).

He said the RAF and SIU have, to date, managed signed AoDs to the value of R70.95 million, with actual cash recoveries to date amounting to R42.58 million.

“The SIU investigation revealed that the total amount of R276 092 191.76 was paid directly to the RAF by the legal practitioners,” he said.

“The SIU is investigating whether in such instances there was possible misappropriation of trust funds [by attorneys].”

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Interference

The SIU informed Scopa about interference in its investigation by people and executives at the RAF.

Mothibi said the SIU investigation team established that members of RAF were being told that their right of reply “has to go via the CEO’s office before they can be presented to the SIU”.

“We found that unacceptable and we raised it with the board and the CEO.”

Mothibi said another involved the RAF liaison person for the SIU not cooperating with the investigation.

“That person is an executive at the RAF. We even had to open a criminal case against that person,” he said.

Mothibi said that executive is still at the RAF and could recall a meeting with former RAF CEO Collins Letsoalo where the SIU was being pushed to withdraw the criminal case “which we resisted and the criminal case was left standing”.

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Former CEO Letsoalo

Xesibe said Letsoalo’s right of reply to the SIU’s preliminary findings against him has not yet been concluded, despite the SIU initiating the process in June 2024 and securing an appointment with him in November 2024 – the latter taking five months to arrange because Letsoalo’s personal assistant indicated not to have seen the SIU’s correspondence.

The SIU has not been able to start dealing with the merits of the matter under investigation, according to Xesibe, because of certain legal aspects Letsoalo is raising.

He has also asked the RAF to assist him with legal representation, and for access to his laptop to access documentation.

Mothibi said Letsoalo has his own attorneys but he is not aware if the RAF is paying for them.

He said Letsoalo objected to the session the SIU arranged with him and it had to be rescheduled because he claimed he did not have access to his laptop and could not access the information he required to prepare.

“Ultimately, that is when the RAF came back and said he is not telling the truth. They have not denied him access to the laptop.”

“I don’t know of other areas where they are assisting the investigation,” Mothibi added, noting that the SIU is looking to reconvene the hearing with Letsoalo.

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SIU’s findings

The SIU investigation identified significant governance failures at the RAF, including:

• The RAF board failing to adequately exercise its fiduciary duties of care, skill, and diligence.
• Critical decisions, including those with significant financial implications, being approved without robust interrogation of risks, compliance requirements, or long-term sustainability.
• Evidence of a tendency to rubber-stamp management proposals, with limited accountability enforced.
• Governance committees, including the audit and risk committees, being either dysfunctional or lacking the independence and capacity to provide effective oversight.
• Weak reporting lines, resulting in inadequate escalation of audit findings, risk assessments, and control failures to the board.
• These governance failures at the RAF created an enabling environment for maladministration, weak internal controls, and escalating financial risk. The systemic deficiencies compromised the fund’s ability to effectively deliver on its mandate to compensate road accident victims.

This article was republished from Moneyweb. Read the original here.