‘Duplicate payments, irregular contracts, fraudulent claims’ – SIU’s probe into RAF paints grim picture
The SIU was tasked to investigate serious maladministration at RAF.
Various responders seen at an accident scene in Ruimsig on 12 January 2023. Picture: Michel Bega/The Citizen
Investigations into the Road Accident Fund (RAF) has painted a grim picture about the affairs of the government agency.
RAF and Special Investigating Unit (SIU) officials appeared before Parliament’s Standing Committee on Public Accounts (Scopa) on Wednesday.
The SIU, in 2021, was tasked to investigate serious maladministration at RAF in order to recover any financial losses suffered by the state.
The investigation has focused on particularly fraudulent claims, payments made to service providers, procurement and tender irregularities (especially fruitless and wasteful expenditure) as well as possible unlawful conduct of RAF employees.
Duplicate payments
Providing an update on the progress made to Scopa, SIU’s chief national investigations officer Leonard Lekgetho told MPs that the unit’s was currently investigating 102 law firms, includes sheriffs, after receiving R340 million in duplicate payments from RAF.
“The RAF has a payment system which dictates that when a claims offer is accepted whether by settlement and by way of a court order such claim will await 180 days before it is paid. As a result, an attorney will attach the RAF bank account by way of writs of execution served by a sheriff causing the RAF bank effect payment in terms of the writs upon the 180 days lapsing. The same claim will be paid again thus constituting a duplicate payment,” the SIU official explained.
Lekgetho said several legal practitioners opted to cooperate with the SIU by signing acknowledgment of debt valued at R70 million.
There are other law firms who have since refunded the RAF.
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So far, at least R317 million, including 41 million of the debt agreement total, has been recovered.
“That include money paid directly to RAF and the money paid to the SIU,” he said.
The SIU official revealed that the unit’s investigations has found evidence pointing to criminality where “trust fund accounts were misappropriated” in regards to the duplicate payments.
He pointed out that the SIU has referred 12 law firms to the National Prosecuting Authority (NPA) for prosecution, while five practicing practitioners have been reported to the LPC.
“The SIU found there were attorneys who received duplicate payments and have since been struck off the roll. Some have been suspended and other have since passed away,” Lekgetho continued.
Lekgetho told the committee the SIU was currently in the process of identifying the RAF officials who caused the duplicate payments.
“Disciplinary referrals will be made against those implicated officials who failed to ensure that proper controls are in place to mitigate duplicate payments or officials who failed to implement the controls.
“Those officials who left the employment of RAF will be referred to the NPA where there is evidence of criminality in their conduct.”
Procurement, tender irregularities
Lekgetho said there were eight contracts awarded to several service providers that the SIU looked into including tenders to procure office furniture and cleaning and security services.
The procurement irregularities of these tenders previously were flagged by the office of the Auditor-General.
With the first contract which was awarded to two service providers to deal with RAF claims backlog, the SIU found that issues of performance as one of the service provider only completed 96 files out 2 472 claims.
Lekgetho pointed out that RAF budgeted R742 million for the claims backlog contract over five years.
However, the actual money spent amounted to R312 million and R530 566 for travel and accommodation for the duration of the contract excluding medical costs.
“The contract lasted for 3 years and the SIU found that in awarding this contract RAF contravened Section 217(1) of the Constitution and section 51(1)(a)(iii) of the Public Finance Management Act [PFMA],” the SIU official said.
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He further informed MPs that there was potential monies recovery from the two service providers.
“This matter will be referred to the SIU civil litigation for assessments and possibly to the tribunal.”
There may be potential referrals to the NPA, Lekgetho said, since the SIU’s investigation was still ongoing.
“There is potential disciplinary referral, however the majority of the role players are no longer with the RAF and the response officials who left the employment of RAF will be cited in civil litigation papers.”
Another contract, valued at R1,8 million related to the procurement of SAP Licenses, which the RAF does not use.
“The preliminary findings indicate that RAF is not using the said SAP licenses, thus, this amount to fruitless and wasteful expenditure. There is a potential recovery because RAF is not using the licenses and currently we still putting evidence together so we can refer it to our civil litigation for consideration.
“The investigation is ongoing and were there are matter pointing to criminality, same will be referred to the NPA. There are possible referral of disciplinary action to be made to RAF,” Lekgetho said.
Watch the meeting below:
With regards to the office furniture contract, the SIU was yet to make some findings.
“It is alleged that an internal audit report showed that the R36 million office furniture contract escalated to R40 million irregularly.
“Also, the legal opinion from the internal legal department indicated that the amendment of the service provider agreement SPA which escalated the costs was irregular and invalid. The investigation is ongoing, thus no findings as yet and currently we are busy analysing the documents in terms of financial flow.”
It was further found that due procurement processes were not followed in the renting contract of RAF’s office building in Centurion.
“It appears that the RAF went at length to ensure that this building was procured. The investigation is ongoing. There is a potential recovery and the potential amount will be determined after the quantification process,” Lekgetho told MPs.
The acquisition of RAF’s office building in Johannesburg is also being investigated.
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“For period of 10 years, there had been cancellation of this tender and the final rental was done by way of a deviation. There were many deviations and the preliminary findings points that this contract may have been awarded irregularly. The investigation is ongoing.”
Lekgetho said the SIU was investigating why RAF cancelled the panel of attorneys, which represented the agency in court involving claim disputes.
The contract was being probed because there has been an increase in default judgements issued against RAF since the termination.
“The total amount of default judgements issued against RAF for cost and fees from 2018 until second quarter of 2023 amounts to R4,7 billion. A sharp increase on the default judgments is noted between 2021 and 2022.
“There was a matter where a claimant was awarded a default court order amounting to R11,1 million which RAF failed to honour on time which led to this amount accumulating interest worth around R500 000 which was paid out in respect of the claimant. The investigation is at an advance stage and the team is finalising the findings and giving the right of reply to persons involved before they finalised their referrals,” Lekgetho explained.
Payments made to service providers
Lekgetho also told the committee that RAF pays claims from service providers who have rendered services to the victims of the motor vehicle accidents.
“These claims include ambulance, hospital, doctors claims and other experts.”
Regarding these payments, the SIU is investigating whether service providers have been overpricing for its services.
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“The investigation is ongoing and no findings have been identified as yet.”
The unit is also looking into allegations of doctors and experts inflated invoices to RAF.
“The SIU has gathered information and data in respect of such claims and in some instance appointed experts to assist with the claims related to over-servicing by the hospitals, doctors etc. The investigation also identified possible collusion between the RAF employee and the services providers including law firms and ambulances. The investigation is ongoing.”
Fraudulent claims
Meanwhile, Lekgetho said the SIU was further investigated RAF employees who attempted to change bank accounts of service providers.
RAF previously received an internal intelligence report on the fraudulent claims.
“Upon investigation, the SIU established that the RAF employees have made bank fraudulent account changes on the RAF system and redirected monies meant for services providers into their personal bank accounts.
“The amount found to date on the personal account of those employees is R 1,9 million. The substantial amount of R1.9 million was used to purchase travelers’ cheques. The investigation is ongoing in terms of this matter.”
In conclusion, Lekgetho indicated that the SIU has observed that, among other things, RAF has a tendency of not deleting user profiles upon termination which results in those profiles used to commit fraud..
The unit further found that documents management at RAF remains a concern.
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