Johannesburg - A society watchdog has launched an audacious legal bid to block Gill Marcus from taking over the reins of the Reserve Bank later this year.
The Society for the Protection of our Constitution filed an application in the Johannesburg High Court challenging President Jacob Zuma's appointment last month of Marcus as Reserve Bank governor.
The society wants Zuma to rethink his decision to appoint Marcus because it alleges that Absa, which Marcus served as chairperson, had breached the provisions of the Financial Intelligence Centre Act (Fica) - an offence that carries a potential penalty of R2bn.
In a 125-page document submitted to the court, the group alleges that Marcus, the outgoing chairperson of Absa, failed to disclose to Zuma that she, Absa, and its chief executive, Maria Ramos, faced criminal charges related to a R300m scheme at the bank.
The charges were filed in May by Pretoria businessman Arif Mahomed, who lost R5.4m in a scheme allegedly masterminded by Naresh Rama Mistry, an Absa agent. Mistry ran the bank's branches in the Pretoria suburbs of Laudium and Marabastad.
Mahomed is one of more than 100 investors who are believed to have been swindled by Mistry, who entangled them, with their full knowledge, in an alleged tax evasion scheme which resulted in their funds being stolen.
The court papers - which list Zuma, Marcus, Finance Minister Pravin Gordhan, the Reserve Bank's board and its chairperson as respondents - argue that although Absa initially conceded that the theft at the Laudium and Marabastad branches amounted to R17m, the value of the money missing from the investors' accounts has since ballooned to more staggering proportions.
"During proceedings in the South Gauteng High Court in May 2009, these thefts admitted by Absa increased to approximately R60m. It is now reported that these thefts by Absa through its agent (Mistry) at Absa's Laudium and Marabastad branches are approximately R300m," papers say.
It is also alleged that Absa, through Mistry's wrongdoing, breached the provisions of Section 21 of Chapter 3 of Fica, but the bank failed to report the non-compliance to the authorities.
Section 21 of Fica is aimed at preventing the facilitation of tax evasion, money laundering and terrorism.
Zuma's spokesperson, Vincent Magwenya, confirmed that the president had received correspondence from the group.
"The Presidency received correspondence from Zehir Omar acting on behalf of his client, the Society for the Protection of our Constitution, wherein he set out the allegations against Gill Marcus. The Presidency is presently considering the content thereof," Magwenya says.
Finance ministry spokesperson Thoraya Pandy declined to comment because Gordhan has "not been served with any papers".
Absa declined to comment on the allegations that it breached Fica legislation, but acknowledged that fraud had taken place at its Laudium and Marabastad branches.
The society has given the respondents in the court application 20 days to respond to the matter. This means that the allegations have not yet been tested in court.
The society, some of whose members are embroiled in the fraud, says in the court papers that Absa is liable for a fine of more than R2bn for breaching Fica and that the executives involved could face imprisonment of up to 15 years.
But a Johannesburg law expert says the society does not have a strong case.
"The claim by the society seems to be very far-fetched. I will be very surprised if they succeed in court. It is in extreme cases where directors of companies are found to be personally liable for the conduct of the company.
"The society will have to prove gross negligence or fraud on the part of Absa directors. I don't think they will be able to prove Marcus and Ramos committed fraud," he said.
Mistry is accused of setting up fictitious fixed-deposit accounts on behalf of the investors, who wanted to evade paying tax to the SA Revenue Service. Instead, Mistry, who has been missing since the allegations surfaced in May, embezzled the funds deposited into the accounts.
Absa has refused to repay Mahomed and many other investors who suffered losses, prompting the society to take the latest legal action. The society has made it clear that it will not withdraw its court challenge against Marcus even if Absa settles with the aggrieved investors.
The allegations that Mistry arranged fake accounts imply that he failed to keep accurate and proper information like ID documents, or to report suspicious transactions as required by Fica.
"Mistry believed he could steal with impunity from the investors because the monies deposited into the fictitious accounts were not declared to the SA Revenue Service.
"He thought the investors would not invoke the law to recover their funds because they were involved in tax evasion. He was wrong," says Omar.
Soon after Marcus was appointed governor of the Reserve Bank on July 19, the society wrote to Gordhan to alert him of the damning accusations against the Absa chairperson, who had resigned from her position a day after her appointment.
The letter to Gordhan drew an angry response from Absa, which threatened the society and its lawyers, Zehir Omar Attorneys, with financial doom.
The letter, written by Absa lawyer Lowndes Dlamini and dated July 23 this year, asked the society and its lawyers to retract/ apologise for the statements made in their letter to Gordhan, or face legal action.
"We hold instructions on behalf of each of our clients (Absa, Marcus, Ramos) to approach the High Court of South Africa on an urgent basis for the appropriate relief," it reads.
"This is not an idle threat. It goes without saying that an appropriate adverse cost order will be sought against you and your clients."
The society wants Marcus's appointment as the central bank's chief to be declared unlawful as she failed to disclose the allegations to Zuma and Gordhan prior to accepting the job.
Society secretary Muhammed Vawda said: "How transparent will the communication between Marcus and the minister of finance be when it is evident that she did not tell the minister that while she was at the helm of Absa bank, their non-compliance with Fica in terms of fines can be in excess of R2bn."
"These pending criminal charges against Marcus ought to have been disclosed to both Zuma and the finance minister upon her being informed that she was being considered to govern the Reserve Bank."
He said Marcus's failure to disclose this information meant she failed to satisfy all the elements of the consultation process, as compelled by the Constitution.
Marcus is expected to take over the reins of the central bank in November, when Tito Mboweni, who has been at the bank's helm for more than a decade, steps down.
- City Press