ADF Task Team takes over investigations and legal proceeding after misappropriation of funds

March 20th, 2019

By Kgomotso Ramotsho

Board members of the Attorneys Development Fund (ADF) resigned from the board on 1 March at the ADF’s Annual General Meeting (AGM) held in Johannesburg. Former Chairperson of the ADF, Nomahlubi Khwinana, said the board decided to resign voluntarily after a Task Team was appointed, at a meeting that was held on 1 February, and took over the board’s duties. Ms Khwinana added that it has not been an easy time for the ADF, but believes the fund can sustain itself and that it can continue to grow.

Former Chairperson of the Attorneys Development Fund (ADF), Nomahlubi Khwinana, giving her final report at the ADF’s Annual General Meeting, that was held in Johannesburg on 1 March.

Ms Khwinana tabled the chairperson’s report at the AGM, which included operational challenges and the financial performance of the ADF. She said that former Chief Executive Officer (CEO) of the ADF, Mackenzie Mukansi, was suspended on 31 October 2018 and criminal charges were laid against him on the same day. Mr Mukansi was being investigated for corruption and money laundering. In a statement released by the National Association of Democratic Lawyers (NADEL) in December 2018, NADEL stated that an amount of R 22 million went missing from the coffers of the ADF. At this stage, the ADF cannont confirm how much money was stolen as investigations are still underway. Ms Khwinana added that a disciplinary hearing was set for 10 December 2018 and Mr Mukansi was found guilty of all charges against him. However, prior to Mr Mukansi being notified of his dismissal he passed away on 27 December 2018.

Ms Khwinana pointed out that the ADF’s 2017 and 2018 financial statements, were in the final stages of a forensic, criminal and civil investigation. She said the stakeholders of the ADF, appointed the Task Team, which consists of representatives from all constituent bodies and stakeholders of the ADF. The Task Team was tasked with overseeing the investigation of the misappropriation of funds and the possible recovery of the lost funds, which includes the protection of the remaining ADF assets, and inquiries into the board’s fiduciary duties. She added that immediate steps were taken to secure the remaining assets of the ADF and a complete hold was placed on all accounts. Investment managers were instructed to disinvest investments. The full board has to be notified on account changes and the chairperson, vice-chairperson and the finance committee chairperson have to be copied in on all correspondence.

Ms Khwinana said legal proceedings were instituted to attach properties acquired with the stolen funds and recover ADF assets. Instructions were issued to lawyers to secure preservation orders. She added that legal proceedings are also underway to lay claims against Mr Mukansi’s deceased estate. The ADF instructed a law firm to investigate the possible liability of third parties who were entrusted with the funds, which were later misappropriated, and others who might have financially benefitted from the stolen money. She noted that SNG Grant Thornton was also appointed as forensic investigators to investigate, among others, the extent of the misappropriation and possible remedies. She added that the interim report has since been released.

Ms Khwinana added that during a meeting on 1 February it was agreed that the recovery and protection of the ADF funds must remain of utmost importance. Former Vice-Chairperson of the ADF, Mimie Memka said that the ADF appointed new auditors to prepare financial statements for the 2017/2018 financial period. She pointed out that the auditors were given information that was available at that time, taking into account that some information prior to February 2018, was saved on a laptop owned by the late Mr Mukansi, which has not been seen after Mr Mukansi decided to abscond his position.

Former Vice-Chairperson of the Attorneys Development Fund, Mimie Memka spoke at the ADF’s Annual General Meeting.

Ms Memka said that the auditors explained to the board that they could not present the ADF with audited financial statements because of incomplete financial statements, but rather gave a review of the finances, based on the information that was available to them at that time. During the questions and comments session, the Acting Executive Director of  the LSSA, Tony Pillay, recommended that the auditors be given time to work on audited financial statements, which may be given to the new board members who will then present it to the constituent members of the ADF at a later stage. Mr Pillay’s recommendation was seconded.

Chairperson of the ADF Task Team, Motlatsi Molefe, further spoke on the issue regarding the investigation of the misappropriated funds. He said an advocate was appointed to deal with the matter and a specialist financial investigator was brought in to give a written undertaking to bring an application. He said the reason the advocate and the specialist financial investigator were involved was because the Task Team did not have the capacity to investigate beyond Mr Mukansi. However, he added that the Task Team knows that the major portion of the money was laundered through a funeral parlour business, which happened to be owned by Mr Mukansi’s cousin. He pointed out that the money that went through the funeral parlour account amounted to R 13 million, but it was discovered that only R 400 000 remained in the funeral parlour account.

Mr Motlatsi said Mr Mukansi’s cousin will also be charged with money laundering and then the trail will be followed to see who the other beneficiaries were. He pointed out that this is a very difficult investigation. According to investigation and a paper trail of evidnece, Mr Mukanis withdrew money from the ADF’s account to his personal account, and then transferred the money to an offshore account, which he transferred back to South Africa for payments on a house that he purchased. He pointed out that it is important for the ADF to get the capacity to be able to deal with the matter without prejudicing the interest of the fund in recoveries that are made.

Towards the end of the AGM, there was a motion brought forward by Mfana Gwala on behalf of the constituent members of the ADF, the motion was to amend clause 18.2 titled ‘Articles of Association,’ which deals with the nominations of directors. He said that the constituent members of the ADF wanted to propose that instead of reading ‘one director’, the clause should read ‘two directors’ to constitute the new board of the ADF. Each constituent member of the ADF nominated two people each for elections of new board members.

Kgomotso Ramotsho Cert Journ (Boston) Cert Photography (Vega) is the news reporter at De Rebus.