A forensic audit into the affairs of Fidelity Life Assurance has unearthed corporate governance deficiencies some dating as far back as pre-dollarisation and as such the Insurance and Pensions Commission has tagged the managing director Simon Chapereka and financial director German Mushoma as not being fit for office.
The commission has also called for a further audit into the Southview Park project amid concerns of weak internal controls which could have prejudiced the company and policyholders at the expense of staff and purchasers of properties. According to documents containing recommendations from IPEC following the audit, gleaned by FinX, Fidelity should establish, the quantity and recover all prejudice on the Southview project. The company should also recover multiple stands which were allocated to staff and related parties without being paid for while the same groups could also have paid lower prices for some of the stands.
The audit done by KPMG from April, at the instigation of IPEC, found that Chapereka and Mushoma could have prejudiced the company and policyholders through undeserved profit sharing, bonuses, education and security allowances and interest underpayments. IPEC called for the recovery of all personal gains made by the two.
However well-placed sources say that management is yet to respond to the findings of the report and as such no action has been taken by the board.
Chapereka is said to have allocated himself 12 residential stands at Fidelity’s Manresa and Southview projects and advanced himself an interest-free housing loan of $300 000. The loan had a tenure of 10 years, with monthly repayment installments pegged at $500; implying by the end of the repayment period, he would have repaid $60 000. This could potentially prejudice the company of $240 000. Mushoma, is said to have also abused loan facilities while he also allocated himself several stands.
The MD is also accused of failing to declare his personal interest in Fidelity Life Pharmacy where FLA holds 35% while the transaction to acquire the shares was not authorised by the board. In that respect, the group should recover its share of profits in the pharmacy business.
IPEC is also pushing for the reconstitution of the Fidelity board to ensure that it has diverse skills and maintain a balance between executive and independent directors in line with best practice and good corporate governance. “This should happen as soon as the KPMG forensic audit is responded to.”
The commission also said FLA will need to restate its financial position to make them compliant with previously violated accounting standards. “The commission will also seek the opinion of PAAB on the violation of accounting standards and determine if BDO, FLA’s external auditors acted above board. “This opinion is important considering that the relationship between the insurer and auditor may have been compromised by the fact that the FD, MD, Finance GM and the Head internal auditor came from BDO before joining FLA.”
Concerns were also raised over a ZPI transaction, pension commutation levels and non-compliance with legislation.
The audit is said to have cost almost $500 000.