EXPOSED: Medical aid 'looting'

04 September 2011 - 03:13 By ROB ROSE and STEPHAN HOFSTATTER
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An employee at a medical aid administration company has pleaded guilty to fraud in exchange for a 12-year suspended sentence - in a case that could lift the lid on rampant corruption in the R92-billion industry.

David Tselapedi, who was also placed under correctional supervision for three years, is now expected to blow the whistle on a racket in which trustees, meant to look after the interests of medical aid members, are taking bribes to allow people to loot medical aid funds. More arrests are expected in the case this week.

Tselapedi worked at Allcare Administrators, a Sandton-based company which pays the bills and administers four medical aids - Hosmed, Community Medical (Commed), PG Bison and Malcor - covering 160000 members. In his affidavit to court, Tselapedi admitted being behind false invoices of between R50 000 and R150000 submitted to Commed, and rigging elections to ensure Allcare was appointed as administrator.

In an interview after being sentenced Tselapedi said he took the plea as "my conscience wouldn't allow it" to continue.

"Normal South Africans, during these hardships, are faced with paying for private healthcare and instead of getting quality service, you find these guys doing these things heartlessly (to) these poor people, and I just couldn't take it."

Government regulator, the Council for Medical Schemes (CMS), now stands accused of sitting on a forensic report from February 2010 that detailed looting of medical aids run by Allcare. The 149-page report, which doesn't appear to have been acted on by the council, details how:

  • Hosmed chairman, Speed Mashilo, a mayor in Mpumalanga, had R100 000 paid into his bank account by a broker at Hosmed to keep his contract;
  • The wife of another Hosmed trustee, Joseph Sithole, got a R1-million contract to provide "wellness services" for municipalities for which there was "no evidence of service delivery";
  • Allcare MD Muzi Twala ran a company called The Printing Hub, which received R3.8-million for printing 138 000 brochures for Hosmed members - 105 000 more than the medical aid has members. Investigators said "no evidence existed of proof of delivery of printed materials";
  • Hosmed brokers, who didn't even submit invoices, were paid inflated sums by Allcare. This included 10 brokers not registered with the Council of Medical Schemes, while VAT of R3.2-million was paid to brokers who weren't registered as VAT vendors; and,
  • Fraudulent invoices under the name of Pamla Banzi were fabricated so that R685 680 was paid to a mysterious bank account that didn't belong to the company.

Allcare CEO Howard Phillips dismissed Tselapedi's claims that the company was involved in rigging elections to ensure it was reappointed as Commed's administrator.

"He must prove those allegations, I think some of them are laughable," he said.

On the forensic report, Philips said that if there was any corruption, it took place at the medical aids and not at his company.

He admitted that Allcare did bear some responsibility for what went on. "If we're told to pay an account [by the medical aid] and we carry on paying, then we get rapped over the knuckles by our auditors [who ask] why didn't we query it. Well, maybe we've learnt our lesson that you can't just accept anything," he said.

Phillips said the CMS did tackle Allcare as to whether it was a "fit and proper" administrator but did not raise any of the fraud allegations in the forensic report.

"If Allcare has got to answer to anything, we most certainly will answer to it."

CMS's registrar Dr Monwabiso Gantsho denied the council had brushed aside the issues. "These processes, as you can imagine, take time . also, information does not always come to our attention all in one go, even on matters that could have started in February 2010," he said.

Twala's R3.8-million deal to print brochures for Hosmed was a "clear conflict of interest", the report said, as he was the MD of Hosmed's administrator, Allcare.

But Twala told the Sunday Times he saw no conflict of interest.

"I work for the administrator. The scheme is a separate entity. I quoted like every other person quotes." He said the allegations were "vile, malicious and devoid of truth. I am therefore taking legal advice."

Phillips said the matter was "dealt with" internally "quite severely. (Twala) wasn't fired, but we had a serious discussion with all the directors."

The forensic report also highlighted "possible acts of corruption" in a separate case of R100 000 going into the bank account of former Hosmed chairman, Speed Mashilo.

A Durban broker said in a sworn statement that he was told "to pay an amount of R100 000 to Mr Mashilo (to) keep his broker contract with Hosmed", the report said. Copies of bank transfers were attached.

Mashilo admitted receiving the cash but claimed it was a "loan" from the scheme's former principal officer Joseph Sithole, who, in turn, had borrowed it from the broker. He claimed he was unaware his benefactor was a Hosmed broker. "Should I have known [that], I would have gone to the police."

Sithole couldn't be contacted by the Sunday Times. He was also implicated in the R1-million payment for "wellness services" to his wife, Miriam Sithole, for which there was "no evidence" of delivery.

Miriam Sithole admitted being married to him, but broke numerous commitments to meet the Sunday Times to discuss the deal.

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