Fidelity boss in the eye of audit storm

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Fidelity Life Assurance Ltd CE Reuben Java is in the eye of a storm after it emerged this week that he was awarded an annual bonus when he was appointed to the helm in October last year at a time the company was trading at a loss. Java also rejected a top-of-the-range vehicle, a Mercedes Benz GL, and spent US$200 000 on a Mercedes S Class.

By Melody Chikono

Informed sources at Fidelity Life told businessdigest this week that Java, who has been at the Zimbabwe Stock Exchange- listed life insurer for eight months, got a US$40 000 bonus despite the company’s poor perfomance and at the expense of other employees.

According to the sources, Java got US$200 000 cash from the company’s Medical Aid Upkeep to purchase his Mercedes S Class without following proper channels. The Medical Aid Upkeep is used to take care of policy-holders who may need health facilities and care when travelling for health reasons.

Java, according to sources, rejected a brand new 2017 Mercedes Benz GL that had been ordered for his predecessor, the late Simon B Chapereka.

The vehicle is said to have arrived after Chapereka’s sacking and death.

“Java refused to take the car that had been ordered for the late CE (Chaperaka) or to sell it and use the proceeds to purchase the one he wanted. Instead, he took the US$200 000 cash. The car, a Mercedes Benz GL, is still parked at the company’s premises to date,” a source privy to the developments said.
The company reported a loss of US$1,3 million as at December 2017 year-end.

Reached for comment, Java did not deny bonus allegations, but said: “Following the loss position for the year ended December 2017 Fidelity Life did not pay a performance bonus to employees.”

On the car issue, he said he was entitled as provided for in his contract approved by the Human Resources and Remuneration committee and the board to a company a Mercedes Benz S Class.

“The contract also authorised the disposal of the existing vehicle which is a Mercedes 4×4 to purchase the benchmark vehicle at no extra cost to the company,” he said.
“The company did replace furniture in the company that was old and worn out and continues to do so from time to time. This was not done for the CEO alone.”
Sources said the board has ordered another forensic audit into the operations of the company amid allegations corruption, corporate governance shortcomings and failure to implement the recommendations of 2016 Insurance and Pensions Commission (Ipec) audit recommendations.

This comes after Ipec two years ago sent the then MD Simon Chapereka (now late) together with his finance director German Mushom, a on leave to pave way for a forensic audit ordered by Ipec.

Although Chapereka died before the conclusion of the audit, Mushoma was dismissed.

The report, among other things, unearthed corporate governance deficiencies and non-compliance with prescribed asset thresholds. It ordered the merging of the funeral and life businesses, recognition of income from the sale of stands, profit allocation between policy-holders and shareholders and systems of internal control on the administration of the Fidelity Life South View Park project.

The company was also ordered to establish the quantity and recover all prejudice on the South View Project. It was also directed to recover multiple stands allocated to staff and related parties without payment.

Information gathered by businessdigest this week shows that the company is yet to comply with various Ipec recommendations and rectify other malpractices.
Java says he has addressed all concerns raised by the Ipec in the report, adding the company was in the process of realigning structures to drive its strategy for transformational growth into the future.

“In consultation with IPEC, KPMG and Fidelity Life Assurance (FLA) Group internal audit, the board and management of FLA, have largely completed the actions to correct all the issues which were raised by the Ipec corrective order, in response to the findings of the forensic audit. We have in the process strengthened the group’s policies, systems of internal control, and various operating procedures. We have complied with the corrective order as set out by Ipec, and regular updates are furnished to our regulator at agreed intervals,” he said.

Java stands accused of hiring in excess of 30 employees from senior management to low levels from Old Mutual, his previous employer, a charged he denies.
The new employees are alleged to be paid more than their veteran colleagues they found at the company. He also denies this.

“This process inevitably demands changes in management and the deployment of new skills to augment the skills already in-house. Let me state categorically that FLA has not recruited in excess of 30 employees from Old Mutual. Fidelity Life Assurance has in place a strict remuneration policy that ensures that all employees in the same grades are paid at parity. Remuneration for newly hired employees is aligned to other employees in similar grades.”

Sources say new departments are being created at a cost to the organisation.

“He recruited new employees for a whole new department – Risk. Fidelity Life Asset management also got new employees after the remaining old workers walked away due to lack of investor funds. There was also significant recruitment at employee benefits and it is still going on; Another senior employee from Old Mutual is said to be going to Fidelity if he hasn’t already,” a source said.

Java said his company had not ordered a fresh audit.

“To verify our quantification of the appropriate write-offs on shareholder assets arising from the historical fraudulent activities and financial mismanagement dating back to the period covered by the original forensic audit, the audit did unearth some corporate governance deficiencies, which have since been dealt with and have been supplemented by additional FLA board interventions. There is no record from the audit of any employees being owed money by the company. We are not aware of any order to pay any employees any money,” he said.

For the year ended December 2017, shareholders equity diminished owing to a write-off and impairments arising from fraudulent activities and financial mismanagement during the tenor of previous executives.

“We can confirm that there was no prejudice to policy-holder funds as the write offs were fully provided for against shareholder funds. As the chairman pointed out, the company is solid, intrinsically profitable and highly motivated to perform better. The FLA team is driving a fundamental transformation in how we work in order to deliver on the expectations of our key stakeholders. Shareholders can be assured that the future of the company is very bright, and the fruits of our transformation agenda will become evident during the course of this year,” he said.

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