Civil Service pensioners may have lost more millions than initially feared in the suspected financial impropriety involving Botswana Public Officers Pension Fund (BPOPF) and Capital Management Botswana (CMB), the High Court heard on Thursday.
The revelations were made by BPOPF senior counsel Panayiotis Stais when making his submissions before Justice Omphemetse Motumise.
Stais put up a spirited legal battle against CMB on Thursday to convince Justice Motumise to confirm the appointment of former High Court Judge Peter Collins as the statutory manager for CMB.
The urgent application was brought by Non Banking Financial Institutions Authority (NBFIRA) after it received complaints from CMB’s associates among them BPOPF, Bona Life and BFIM.
Collins was appointed by NBFIRA as the statutory manager for CMB but the latter opposes the appointment saying that it was not afforded a hearing.
In terms of the law, the court has to confirm the appointment of a statutory manager after being appointed by the regulator (NBFIRA).
Stais told the court that the major concern was how half a billion that was managed by CMB ended up being P50 million. Therefore, he said, BPOPF was joining hands with NBFIRA in urging the court to confirm Collins whose immediate task would be to investigate the alleged questionable transactions by CMB.
Motumise sought clarification from Stais as to whether BPOPF had not approached NBFIRA to help it fight a contractual dispute with CMB to which the lawyer responded in the negative.
“We are not asking the regulator or the court to resolve a contractual dispute. That is not our position. There have been a breach of rules by the First Respondent (CMB) and we want investigations to be launched. Half a billion is at risk and there should be an investigation,” he said. Stais argued that in terms of the Botswana laws, a regulator can appoint a statutory manager without affording an entity a hearing.
“The Directors have to allow the manager to take control and investigate without interference. The First Respondent does not say its deals are clean, neither does it say its clients are happy. It does not mean that business stops when the statutory manager takes control. The business continues without the involvement of the directors,” he said.
Stais argued that “The directors of CMB continue as if there is no regulator. Investigations must be launched to establish how much is left of the half billion Pula.”
He said the directors had argued that there should be no investigation by Collins. Stais said section 46 enjoins Motumise to confirm the appointment of statutory manager.
“Your Lordship (Justice Motumise) is demanded by the legislature to confirm the appointment unless the grounds for making an appointment don’t exist. Why would the Legislature emasculate your powers,” he said.
Using the famous expression to buttress his argument, Stais said should the court ignore the facts before it and dismiss the appointment, the law would be an ass. The phrase means that a particular law is wrong or not good enough, and should be changed.
Motumise interjected and stated that the second part of section 46 presupposes that these grounds exist at some time and sought to know “when is that time.”
“Now. Unless your Lordship is satisfied that the grounds no longer exist. The section says that your Lordship must have regard to the grounds at the time of the appointment,” explained Stais.
“You mean the grounds for making an appointment?” asked Motumise adding that “can we take fresh grounds into account,” to which the lawyer replied in the affirmative.
Stais said CMB’s financials were not signed when the appointment of Collins was made “and even now.” He said on various occasions information was sought from CMB by BPOPF but there was no response.
Motumise sought to know why BPOPF was supporting the argument by NBIFRA that its application to have Collins confirmed should be treated as a matter of urgency while it had known about some of the contentious issues for quite some time.
“You have been staying with a snake now you want to act on urgency,” he said to which Stais replied that “yes at the time the snake had not bitten.”
“Yes I have been playing with the snake but I didn’t know it was venomous and now I go to the regulator asking him to investigate; cut off the head of the snake, put him away and bring someone in,” he said.
He said the urgent application supported by NBIFIRA had nothing to do with the contractual dispute between BPOPF.
“They must be investigated. There is lot to be investigated. The financial system cannot have a rogue system like CMB that refuses to cooperate,” he said.
Stais added “What my client is saying is that I have lost half a billion Pula and I urge the regulator to investigate, not asking you to visit my contractual agreement . CMB is not run properly. We know it does not have financial statements. Its payments, contracts are being sought by the DCEC.”
Advocate Philip Daniels who was instructed by Armstrongs Attorneys to represent NBFIRA explained that “what is at stake is the savings of 170 000 public servants’ savings that is administered by CMB. It appears to the regulatory authority that CMB does not comply with financial laws.”
He said it was also clear “from the First Respondent (CMB) that they take this case as a criminal conduct. For instance the Applicant knows that the First Respondent is under investigation.”
Daniels further stated that CMB had submitted financial statements to NBFIRA which were not signed by an auditor and there was need to find out if that was by accident or it was done deliberately.
“You are not complying with financial services law; no audited financials. What is the First Respondent’s answer; was it by accident or done deliberately. The First Respondent submitted the audited report without an auditor’s signature,” he said.
But Motumise said since NBFIRA was aware that CMB had submitted unsigned statements in September last year why didn’t it take action and was now bringing an urgent application.
“What is the court to make of a regulator who receives unsigned reports in September and in January brings an application on urgency?” asked Motumise.
Daniels explained that NBFIRA received a complaint from BPOPF) which is CMB’s biggest client that there was need for the regulator to take action against CMB. He said the appointment of Collins was for purposes of compliance and to protect the interests of pensioners.
“Investigation maybe the first task of the Statutory Manager,” he said.
Advocate Charles Thompson who was instructed by Kajabanga Attorneys to represent CMB did not take the accusations levelled against his clients lying down as he accused NBFIRA of being used by third parties to fight contractual disputes.
He said there was need to have placed sufficient evidence before court before NBFIRA could rely on allegations brought by third parties against other entities.
He argued that NBFIRA could have given his clients a hearing by seeking clarification adding that the misunderstanding could have been avoided had the regulator take that route.
Thompson said NBFIRA should not be seen to be interfering in issues where some entities were attempting to settle score against others.
Motumise ordered that Collins should continue being the statutory manager pending judgment which will be delivered on 17th April.