Johannesburg - A client insurance fund has had to repay more than R100 million in funds stolen from attorney trust accounts between January and October this year.
And chief executive of the Attorneys Fidelity Fund, Motlatsi Molefe, anticipates the fund could pay out as much as R150m by the end of the year to clients who’ve been cheated – which would be almost R60m more than last year.
This as a second attorney appeared in the court this week for his alleged involvement in fraud concerning the Land Bank.
Limpopo lawyer Dinga Rammy Nkhwashu appeared in the Pretoria Magistrate’s Court over his alleged involvement in a R6m Land Bank fraud.
He appeared alongside former Land Bank chief executive Phil Mohlahlane and former ANC MP and ANC Youth League deputy president Rubben Mohlaloga, who is now a chief director at the Department of Communications.
Nkhwashu’s trust account was allegedly used to funnel money from the bank’s AgriBEE fund, which eventually bought two BMWs, a farm and time share.
Police have noticed a disturbing trend. “Fraudsters are using the normal infrastructure available to business to commit crime. More vigilance by the legal fraternity and stricter internal controls (are) needed to avoid the use or misuse of the profession and aid the combating (of crime),” says Hawks spokesman Captain Paul Ramaloko.
While the Law Society of the Northern Provinces says the practice of using trust accounts to conceal fraud is not rife, Molefe says the fund is concerned about the increasing number of claims for money stolen from clients by attorneys who hold their money in trust.
According to the 2011 report, the fund was set up as a client protection mechanism.
The fund paid around R93.4m in claims last year, compared with R70.8m in 2010. It paid out R92.26m in 2009.
“For 10 months of 2012, we have already paid R104m, and it’s going up… Looking at the current trend it is probably going to reach R150m,” Molefe said.
And this while relatively few people are aware of its existence.
Molefe said bridging conveyancing funds related to property transactions were most often stolen, followed by Road Accident Fund claims and, to a lesser extent, deceased estates.
More proactive regulation was required and as a result the fund had now set up a forensic unit, he said. “The forensic team is going to begin to do compliance inspections.
“Some attorneys have already volunteered and where there are problems, we provide support,” Molefe said.
The programme was currently only being used by the law society of KwaZulu-Natal.
The Free State and Cape law societies were next in line.
Most theft and fraud relating to trust accounts took place in the northern provinces, including Gauteng and Limpopo, he said.
But Fourie said in many instances, attorneys’ accounts were being used for fraud without their knowledge.
Some clients would initially inform their lawyers that money was for a legitimate property transaction, for example, only to later ask for the money to be sent elsewhere.
“In some instances the attorneys only realise it when the people who lost the money start complaining,” Fourie said.
However, he said if an attorney stole money from a client or was knowingly involved with fraud, they could be stripped of their licence.
“It is very difficult for the law society to investigate this, because we only have the power to investigate the attorney’s trust accounts.
“If money is paid out, you don’t know where it is channelled from there.
“This will only come out in a criminal trial,” he said.
Fourie said the society was investigating Nkhwashu’s involvement in the alleged fraud, but because of its privacy policy would not divulge whether there were further complaints against him.
The society was investigating the involvement of Matuba Maponya, another Limpopo-based attorney, in R26.5m in fraud at the Land Bank.
Maponya has turned State’s witness against Mohlahlane, who is the main accused in the case, and former Gauteng Housing MEC Dan Mofokeng.
Nkhwashu would not comment when approached at the court.
Sunday Independent