JSE-listed Allied Electronics Corporation's (Altron's) pension fund is seeking to recoup millions it invested through its pension fund, and has joined forces with curators of a defunct portfolio management scheme in a bid to hold Absa accountable.
In a summons recently served on the big four bank, the fund and the three curators of Corporate Money Managers (CMM), on behalf of investors, aim to recoup just over R1 billion that was allegedly not properly invested. Altron's claim totals R48.4 million and interest of R8.5 million.
CMM was placed in curatorship by the Financial Services Board in 2009, because it could not meet its repayment commitments, and funds it was meant to manage were not invested in accordance with the law. Absa had been appointed to act as a trustee and had certain oversight facilities that the curators allege it did not carry out.
In 2004, the Altron Group Pension Fund, a separate legal entity that handles the JSE-listed company's staff retirement fund, entrusted CMM with 1% of its pension fund and invested R57 million through CMM and its associated entities.
Negligent
According to the claim, Absa was the fund's trustee and was meant to ensure that CMM followed legal requirements and protected investments. However, the plaintiffs argue, the bank failed to fulfil its duties.
Absa allegedly failed to make sure it detected that Altron's funds were invested the way they should have been and also did not ensure sufficient control over investments carried out by CMM, argues the summons. The bank also did not pick up that CMM was “committing irregularities”, alleges the claim.
“It failed to detect that CMM falsified its statements and disclosures to investors” and its actions were wrongful, and unlawful, argue the plaintiffs. They also argue that Absa misrepresented the true state of the situation and is liable for losses incurred.
The bank also allegedly failed to act against CMM when it was investing pension funds in contravention of the law.
As a result, the curators are claiming R849 million in losses and interest of R259.6 million for investors that lost out, as well as R48.4 million in losses for Altron, and interest of R8.5 million.
Absa, which will defend the action, says it has handed the summons over to its attorneys and will not comment further as the matter is sub judice. The issue is not likely to be heard by the North Gauteng High Court for at least 18 months.
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