The Special Investigating Unit (SIU) continues to uncover significant malpractice and fraudulent activity at the Road Accident Fund (RAF), a vital institution in South Africa that compensates road accident victims for injuries and damages. On Tuesday, the SIU updated the Standing Committee on Public Accounts (SCOPA) on its investigation into maladministration and fraudulent practices at the RAF, shedding light on a series of disturbing findings that have already resulted in substantial financial recoveries and ongoing investigations.
SIU’s Mandate to Investigate Road Accident Fund Malpractice
The Special Investigating Unit, which operates with the authority to investigate corruption, fraud, and maladministration, received its mandate to look into the RAF following a 2021 proclamation. The unit’s investigations have focused on a range of illegal activities involving the disbursement of funds, specifically duplicate payments made to law firms handling claims on behalf of the RAF.
Since beginning its investigations, the SIU has made impressive strides in uncovering the extent of the fraud at the RAF. By March 2021, the unit had uncovered that over R340-million had been fraudulently paid to 102 law firms as part of a scheme involving duplicate claims.
Related: Finding the Right Lawyer for Road Accident Fund Claims: What to Look For
The Mechanism of Duplicate Payment Fraud
SIU head Andy Mothibi explained to Parliament that the fraud primarily revolved around the practice of duplicate payments. The RAF, following the finalization of claims via settlement or court order, would process payments around 180 days after the completion of a case. However, law firms and attorneys were exploiting this delay to illegally receive multiple payments for the same claim.
The fraud occurred when attorneys, after receiving the payment for a claim, would file a writ of execution against the RAF’s bank account. This writ would be served by a sheriff, resulting in another payment from the RAF. Due to poor internal controls, the same claim would be processed twice, and the law firms would collect duplicate payments. The involved attorneys, along with the sheriffs who assisted in executing these fraudulent claims, were part of the SIU’s investigation.
SIU’s Recovery of Funds and Legal Actions
Mothibi informed SCOPA that the SIU had successfully recovered R318-million of the R340-million paid out in duplicate claims. The majority of these payments were made by the law firms who had received them, but in some cases, law firms resorted to repaying the RAF from their trust accounts, a practice which is illegal.
Trust accounts are supposed to be used to hold client funds and must be kept separate from the operational accounts of a law firm. Using trust accounts to pay back money owed by a law firm is considered a criminal offense, and this aspect of the fraud has been a significant focus of the SIU’s efforts. As a result, the SIU has referred evidence against 12 law firms to the National Prosecuting Authority (NPA), and investigations are ongoing with the Directorate for Priority Crime Investigation (the Hawks).
The SIU has also worked with the Legal Practitioners Council (LPC) to address the misappropriation of trust funds, and several attorneys who have been found guilty of fraud have already been struck off the roll. In some cases, the involved attorneys have been suspended or have passed away, further complicating the recovery process.
The Role of the Road Accident Fund in the Fraud
While the primary focus of the SIU’s investigation has been on the fraudulent actions of law firms, the RAF itself has also come under scrutiny for its role in enabling these practices. The SIU has been investigating the RAF’s handling of legal contracts, specifically its decision in 2020 to allow its contract with a panel of attorneys to lapse without any proper contingency plans in place.
According to Mothibi, the RAF’s decision to allow the contract with its legal panel to end in May 2020 was made without securing a backup plan for legal representation. Although a six-month extension was initially requested due to delays in evaluating tenders, the extension was eventually cancelled, and the RAF opted to appoint state attorneys instead. However, this move was fraught with issues. There was no formal agreement between the RAF and the Solicitor General to allow state attorneys to represent the RAF in court. This lack of legal representation led to a surge in default judgments against the RAF.
The default judgments between 2018 and October 2023 amounted to a staggering R4.8-billion, and one claimant was awarded R11.2-million due to the RAF’s failure to pay on time. As a result, the RAF had to pay an additional R500,000 in interest before settling the claim. This oversight was deemed to be irrational, and Mothibi indicated that the SIU would prepare evidence for further civil litigation, disciplinary action, and other necessary legal measures against the RAF’s leadership for causing financial loss.
Project Siyenza and Its Impact on the Road Accident Fund
The SIU also provided an update on Project Siyenza, a 2013 tender meant to assist in reducing the RAF’s claims backlog. However, the project has been plagued with irregularities. The Auditor-General’s report on the RAF’s 2023/24 audit revealed that R362-million of the R440-million in irregular expenditure that year was directly linked to Project Siyenza.
Mothibi noted that the RAF had altered the criteria for outsourcing claims administration, allowing new claims to be outsourced rather than focusing solely on the backlog. This decision, along with problems in procurement and non-compliance with Public Finance Management Act regulations, led to significant issues with the service providers. One service provider processed only 96 out of 2,472 claims, and another was not compliant with the Broad-Based Black Economic Empowerment (BBBEE) regulations.
These issues have contributed to significant financial mismanagement within the RAF, and the SIU’s investigations into Project Siyenza will likely result in further legal actions.
Moving Forward: Special Investigating Unit’s Plans and Future Investigations
The SIU’s efforts to clean up the RAF are far from over. Mothibi explained that several investigations are nearing completion, and more referrals for civil litigation are expected by the end of the month. The SIU is also working closely with the RAF’s board and other authorities to hold accountable those responsible for the mismanagement of funds and the maladministration of claims.
In conclusion, the Special Investigating Unit’s investigation into the RAF’s fraudulent practices has revealed a web of corruption that stretches across law firms, sheriffs, and the RAF itself. While the SIU has made substantial recoveries and referred numerous individuals for prosecution, much work remains to be done to ensure that those responsible are held accountable and that the RAF operates transparently and efficiently in the future.
Source: More Than 100 Law Firms Defrauded The Road Accident Fund
