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SLM - Sanlam Limited - Sanlam: Settlement of disputes on pension fund surpluses

Release Date: 09/09/2010 08:01
Code(s): SLM
Wrap Text

SLM - Sanlam Limited - Sanlam: Settlement of disputes on pension fund surpluses Sanlam Limited (Incorporated in the Republic of South Africa) (Registration number 1959/001562/06) JSE share code: SLM NSX share code: SLA ISIN number: ZAE000070660 ("Sanlam") Sanlam: Settlement of disputes on pension fund surpluses Sanlam has reached an agreement with the curators of four pension and retirement funds ("the Funds") on a settlement of disputes that originated from the removal of surpluses from these funds in the 1990s. The Chief Executive Officer of the Financial Services Board ("FSB"), although not a party to the settlement agreement, played an integral part in the negotiations leading up to the settlement. The funds concerned are the Datakor Group Pension Fund and Retirement Fund, the Cortech Pension Fund (all three under curatorship) and the Picbel Groepvoorsorgfonds (in liquidation). Sanlam has made several offers since 2006 to settle the matters as part of an earlier undertaking given to the FSB and to the National Prosecuting Authority ("NPA"). Sanlam provided an undertaking to participate fully in all investigations into allegations in respect of the removal of surpluses from the Funds in the 1990s and to make every effort to see to it that the members of the Funds are compensated for any losses suffered. Sanlam continues to believe that it did not participate in any unlawful action involving the surpluses, but that the settlement is in the interests of the members of the Funds who have incurred losses. The settlement agreement provides for Sanlam, without admission of liability, to pay the Funds the sum of R175 million on specific terms and conditions accepted by the curators and liquidators. The liquidators and curators have agreed to continue to take all reasonable steps to recover the losses suffered by the Funds from all other parties and persons against whom the Funds may have claims for such losses. The net amount of all such recoveries up to a maximum of R25 million will be paid back to Sanlam. As reported since its Interim Results and its Annual Report of 2009, Sanlam has made provision for the payment of a possible settlement amount as a contingency. Background During or about 1992 when it was legally possible for an employer to share in the surplus of a pension fund established for its employees, an illegal scheme, which became known as the Ghavalas option, was developed by a number of individuals not related to Sanlam. The purpose of the Ghavalas option was to remove the surpluses from pension funds in terms of an arrangement that had not been fully disclosed to the Registrar of Pension Funds ("the Registrar") at the time. Sanlam as administrator of the Funds acted upon section 14 certificates provided by the Registrar in respect of the Funds in good faith as these certificates were accepted as valid. Sanlam accordingly transferred the assets of the Funds to the Lifecare Fund and made other payments in accordance with instructions from the Funds. Several years later the Ghavalas option was investigated by the Registrar and curators were appointed to deal with all nine pension funds subjected to the Ghavalas option scheme, including the Funds. In the case of Picbel Groepvoorsorgfonds, the curatorship was subsequently terminated and the same individuals were appointed as liquidators thereof. During the course of the investigations by the FSB and the NPA, Sanlam however realised that one of the Ghavalas option schemes involved a subsidiary company sold by Sanlam. It turned out that a dividend of R44.1 million had been received within the Sanlam Group as a result of the implementation of the Ghavalas option in respect of the pension and retirement fund of this subsidiary company. Although it was not legally liable to do so Sanlam, without admission of liability, unconditionally paid the sum of R106 million to the curators of the two Datakor and the Cortech funds on 14 December 2006 in respect of the R44.1 million. This amount represents the capital amount of the dividend plus interest thereon from 24 November 1997 to date of payment. Settlement Sanlam`s offer of settlement was accepted by the curators and liquidators of the Funds on 18 August 2010 and Sanlam transferred the settlement amount of R175 million to the Funds on 31 August 2010. The settlement effectively settles, fully and finally, all disputes and claims of any nature of the Funds against Sanlam. The Funds, their curators and liquidators thus have no further claim against Sanlam of any nature whatsoever. Bellville 9 September 2010 Sponsor Deutsche Securities (SA) (Proprietary) Limited Date: 09/09/2010 08:01:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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