- The Special Investigating Unit (SIU) on Tuesday updated Parliament’s Standing Committee on Public Accounts on its investigations into maladministration at the Road Accident Fund.
- The SIU has recovered R318-million from law firms so far.
- While most of the duplicate payments have already been recovered, the SIU discovered that some law firms had plundered their trust accounts to pay money back to the RAF.
- Using a trust account to pay money owed by the law firm is a criminal offence.
- As a result, the SIU has referred 12 of the 102 law firms to the National Prosecuting Authority for using their trust accounts.
The Special Investigating Unit (SIU) is probing 102 law firms who fraudulently received duplicate payments from the Road Accident Fund (RAF), amounting to more than R340-million as of 1 March 2021.
These law firms, as well as sheriffs who allegedly enabled the duplicate payments, form part of the SIU’s investigations. The unit has been looking into the Road Accident Fund since receiving a mandate to dig into serious maladministration there following a proclamation issued in 2021.
Updating Parliament’s Standing Committee on Public Accounts (SCOPA) on findings thus far, SIU head Andy Mothibi on Tuesday explained how the duplicate payment fraud worked.
Mothibi said the RAF made payments 180 days (approximately six months) after a successful claim was finalised by way of settlement or court order. Attorneys would then file a writ of execution against the RAF bank account, which would be served by the sheriff. This would cause the RAF’s bank to effect payment at the end of the 180-day period. Because the same claim would have already been loaded on the RAF system, it would be paid again after the 180-day period.
The sheriffs, said Mothibi, would also benefit from funds received when executing the writs on behalf of the instructing attorney.
He said “several legal practitioners” had cooperated with the SIU and signed acknowledgments of debt amounting to R71-million so far.
The SIU civil litigation unit is considering legal action against law firms that have failed to pay their acknowledgements of debt, said Mothibi.
Pillaging trust accounts
Mothibi told MPs that almost R318-million of the R340-million in duplicate payments had been recovered from law firms so far. However, some law firms had repaid the RAF out of their trust accounts.
Trust accounts are supposed to be used to safeguard clients’ funds and kept separate from the law firm’s operating funds.
Using a trust account to pay money owed by the law firm is a criminal offence. As a result, Mothibi said that the SIU has referred evidence against 12 law firms to the National Prosecuting Authority (NPA). Referrals are currently with the Directorate for Priority Crime Investigation (the Hawks) for further investigation.
He said some attorneys who received duplicate payments had been struck off the roll, while others had since been suspended or died. The SIU is also working with the Legal Practitioners Council (LPC) to recover monies from these attorneys.
The SIU has also referred evidence of misappropriation of trust funds by law firms or practitioners to the LPC to “take appropriate action”.
Failure to appoint attorneys
The SIU was also investigating the RAF’s 2020 decision to allow its contract with a panel of attorneys who represented the RAF in court on claim disputes to lapse without any backup plan.
Mothibi said the contract had ended in May 2020, and a six-month extension was requested. The reason given was that the RAF was busy evaluating the tender, and it was taking longer than expected to finalise. However, the tender was subsequently cancelled. The RAF then decided to use state attorneys.
The first batch of 62 state attorneys were appointed. But there was no signed agreement between the RAF and the Solicitor General who controls and supervises the Office of the State Attorney. It took a further six months before the state attorneys had the right to represent the RAF in court.
The lack of legal representation for a year resulted in an increase in default judgments against the RAF.
The amount racked up by default judgments for the period April 2020 to May 2021 (the period when the RAF had no panel of attorneys) is not specified, but the default judgments between 2018 and October 2023 amounted to R4.8-billion.
One claimant was awarded R11.2-million from a default court order, which the RAF failed to pay on time, resulting in interest to the amount of R500,000 before it was paid in January 2023.
By doing away with the panel of attorneys without any plan in place, the CEO and the board appeared “to have acted irrationally”, stated Mothibi.
He said the SIU is “preparing the necessary evidence packs for referrals relating to disciplinary/administrative action/civil litigation against all members responsible for causing loss, damages and/or contraventions of the relevant law”.
Further investigations
Mothibi listed a number of completed investigations which will be referred for civil litigation at the end of the month. One of them is Project Siyenza which originated as a 2013 tender for help with administering claims to reduce the RAF’s backlog.
In adverse findings in its 2023/24 audit of the RAF, the Auditor-General found that R362-million of the R440-million in irregular expenditure that year, mainly related to Project Siyenza.
In his presentation, Mothibi stated that the RAF had changed the criteria used to determine which files would be outsourced, including new claims rather than backlogged claims only.
He said that among the problems with the procurement, the Bid Evaluation Committee members had no standard evaluation criteria set out, and it was unclear how competitors would be scored, contributing to the award not complying with the Public Finance Management Act and preferential procurement regulations.
He said two service providers had been appointed, one of which only successfully processed 96 of the 2,472 files it had been given. Additionally, one of the service providers was not BBBEE compliant.
Following the SIU’s presentation, RAF CEO Collins Letsoalo, Transport Department deputy minister Mkhuleko Hlengwa, and board chairperson Lorraine Francois also answered questions by MPs on the Auditor-General’s report presented to the committee last week.
Some of the questions asked by MPs touched on the SIU investigations, but SCOPA chair Songezo Zibi said the committee would coordinate with the SIU, RAF, and the ministry to return to SCOPA to deal with the SIU’s presentation.
“There are some matters from their (SIU) processes which need to go through one more step then they’re able to give us the full story,” said Zibi.
