Bart Henderson: Masterbond to BHI - 30 years of better rules, same buried victims

Bart Henderson qualified as a Certified Fraud Examiner in 1994 and walked straight into Masterbond. About 12,600 savers, mostly elderly, lost R595m. By one count at least 16 took their own lives. Some ate tinned pet food. Thirty years later he’s working on the BHI Trust collapse. Claims there top R1.5bn, and the victims are again retirees who believed someone had checked. In between, we wrote King I to V, FICA and a new Companies Act. Then came Steinhoff. So what changed? Henderson says the incentives didn’t. Auditors, regulators and trustees still pay less for failure than pensioners do. Brutal reading. Necessary..By Bart Henderson.In early 1994 I was 32. I sold everything I owned and went to the United States to find something South Africa didn’t have: a proper method for investigating fraud.I had come from National Key Point protection, where I rose to Chief. After that I studied industrial psychology and became Group Risk Manager at one of the largest hospital groups in the southern hemisphere. In that job I kept running into the same wall. When fraud surfaced, I called in the audit firms. They sent large teams and larger invoices, and their reports mostly repeated what our own staff had told them. There was no investigative methodology. There was billing.So I went looking. From a base near family in Las Vegas I found the Association of Certified Fraud Examiners in Austin, Texas. I studied the entire syllabus, qualified as a Certified Fraud Examiner, and came home the same year to start teaching it in South Africa and across the continent.The Masterbond scandal was in the news when I landed. It became my first case study, though not by choice. It was simply the case everyone was watching unravel. I was ambitious and, if I’m honest, still impressionable. What Masterbond taught me was the sheer brutality of white-collar crime.Brutal is the right wordPeople who haven’t seen white-collar crime up close tend to think of it as clean: spreadsheets, signatures, a loss on paper. Masterbond showed me otherwise..Read more:.BHI Ponzi: Just 1% of R1.64bn recovered, even darker side to Haldane’s evil exposed.The Masterbond group raised about R595 million from ordinary savers and fed short-term money into long-term speculative property deals with almost no real security. When it collapsed in 1991, those savers were mostly elderly, mostly cautious and mostly people who had chosen Masterbond precisely because it was sold as safe.In October 1995 the Mail & Guardian profiled Don MacKenzie, founder of the Masterbond Victims’ Association. He said two investors took their own lives while on the phone with him, and at least 14 more did so after losing hope of getting their savings back. On his count that was at least 16 people, among roughly 12,600 victims. Pensioners were left to suffer quietly. Some ended up eating tinned pet food.Nobody was shot. Nobody was robbed at gunpoint. And it was still brutal.Everyone was paid to noticeThe part that has stayed with me for 30 years is not the directors. Fraudsters will always exist. It’s that the people paid to notice either didn’t, or did and did nothing.The Financial Services Board investigated Masterbond as early as 1985 and recommended charges. Little effective action followed.In 1989 the deputy registrar of banks, Hennie van Greuning, spent two days on Masterbond and reported that the funds were “recoverable”. The auditors later denied verifying that. Further complaints and legal warnings followed, and the matter was not properly pursued. Judge HC Nel, who later led the commission of inquiry, called it a “serious dereliction of duty”. Van Greuning went on to more senior roles.Then the auditors. The Nel Commission found among some of them “an astonishing degree of dishonesty, inefficiency, lack of professional integrity and lack of independence”. Forensic work by Steve Ochse & Partners showed auditors who, with few exceptions, saw their role as helping and shielding management. Several registered accountants faced disciplinary charges over debenture disclosure, misleading the Receiver of Revenue and protecting management instead of investors. Ernst & Young, the group’s final auditors, settled out of court in 1997 for R40 million. Investors had expected about R130 million.The Commission’s verdict on the whole system was blunt: investor protection, company law and supervision had failed badly.Three directors went to jail for 10 years and were out on parole after about five. The curatorship took 14 years. Some investors eventually got 50 cents in the rand. Many of them were dead by then.We fixed the rulebookSince then South Africa has done what governments do after a scandal: written better rules.We got the King codes, from King I in 1994 through to King V. We got the Financial Intelligence Centre Act. We imported the spirit of Sarbanes-Oxley. We set up an auditing regulator, replaced the FSB with the FSCA, wrote a new Companies Act and mandated audit-firm rotation.On paper, South Africa has some of the best corporate governance frameworks in the world. Our own governance professionals will tell you so.And then Steinhoff, and then BHIIn December 2017 Steinhoff collapsed and erased more than R200 billion in value. The auditors had signed off. The board was stacked with respected names. The governance codes were in place and quoted in the annual reports.In October 2023 BHI Trust imploded when its fund manager walked into the authorities and admitted misusing the trust’s money. Claims against the estate now run past R1.5 billion. Many of the victims are, again, retirees and small savers who believed someone had checked.This month is three years since I began working on BHI for investors. Thirty years after Masterbond, I find myself doing the same work for the same kind of people, against the same kind of silence.Why nothing changesHere’s the rational answer, uncomfortable as it is.Rules don’t act. People act, and people respond to incentives. The incentives of every gatekeeper in the chain are essentially what they were in 1991.The auditor is still paid by the company it audits. Losing the client costs real money now. A bad opinion costs, maybe, a settlement years later.The regulator still faces more career risk from intervening early and being wrong than from waiting and being late. Nobody gets fired for a 1985 recommendation that was never acted on.Directors, trustees and administrators still earn their fees by keeping the structure running, not by blowing the whistle on it.The investor is still told, implicitly, that all of the above have done their jobs.We’ve piled codes on top of those incentives, and the result is more compliance documentation, not earlier intervention. Every new framework gives the gatekeepers one more thing to point at when it goes wrong. “We complied with King.” “The audit was conducted in accordance with standards.” “The matter was referred.”Now more than 30 claimants have filed a combined civil claim in the BHI matter in the High Court, Gauteng Local Division, Johannesburg (case 2026-205183), and multiple summonses for damages have been served. BHI is just another poster child of institutional failure. The case was deliberately built to the criminal standard of proof, not the civil one. Disclosure: I worked on it.What Masterbond still has to teachIf I could put one lesson from Masterbond in front of every board, audit committee and regulator in the country, it would be this: a warning isn’t a box to tick. It’s a debt owed to the people who can’t see what you can see.The FSB saw in 1985. The Reserve Bank looked in 1989. Masterbond collapsed in 1991. Steinhoff’s warnings were raised years before 2017. BHI’s returns were too consistent to be plausible long before October 2023. Each time, the information existed and the will to act on it didn’t.Masterbond lit a fire under me that has burned for 30 years. I’m still angry, and I think I’m entitled to be. A lot has changed: Sarbanes-Oxley, five King codes, FICA, a new regulator. And everything has stayed the same, because the people at the bottom of the chain still pay for the failures of the people at the top.Until a gatekeeper’s failure costs the gatekeeper as much as it costs the pensioner, we’ll keep writing better rules and burying the same victims..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.

Bart Henderson: Masterbond to BHI - 30 years of better rules, same buried victims

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