Fog of War

KONICA MINOLTA DIGITAL CAMERAThe Registrar of Medical Schemes is at war.

Who is the enemy?  Schemes with serious governance problems.  Last year he invaded Sizwe and Medshield and planted his flag in the middle of the boardroom tables.

At the time that there were lots of rumours flying around:

Now, the medical aid industry says yet another, but unnamed, player, could suffer similar fate before the end of the year.

Which didn’t happen.  But we may see a lot of action on this front in this new year.   Interestingly the doctrine of “divide and conquer” seems to be working well.  The schemes are not presenting a united front.

dukenukemWar is never just about action heroes taking on an overwhelming force with machine guns that never seem to run out of ammo.  Nor is it about quotable one-liners (are you listening media?).  Nope, war means strategy and tactics.

These are not the same thing.  For example in the game Civilization V you could take a strategy of technological dominance over a few centuries.  In contrast, in XCOM Enemy Unknown you would employ tactics such as flanking or winning the high ground.

The strategy, in this case, is quite simple.

  1. Identify schemes with governance issues.  This normally involves tip-offs and investigations
  2. Place these schemes under curatorship
  3. Wait until the curator fixes all the problems
  4. Lift curatorship
  5. Rainbows, unicorns and candy!

Reading an article that appeared in the 6 December 2012 issue of FinWeek, titled “Selfmed fights back” you would think that it is about some kind of personal vendetta that “Gung-ho” has for Selfmed, which may or may not be true. What I want to focus on is the matter of the tactics employed by the Registrar, which is the really interesting part, not least because all other medical schemes should be paying attention to the outcome of this case.

bad-writingNot that you would be able to tell because the article is rather poorly written (like a lot of FinWeek fare).

The plot is thickening in an ugly power struggle between Selfmed Medical Scheme and the industry regulator, the Council for Medical Schemes (CMS). Selfmed has turned
to the courts to prevent the regulator from carrying out what it feels is an unfair bid to put the scheme under curatorship.

Wait! Whaaaat?

evil-dictator-dictator-demotivational-poster-1268861119I’m no lawyer (or am I?) but even I can tell that such an approach is plainly ridiculous.  Think about it.  A court cannot give any medical scheme a piece of paper that says they will not be put under curatorship.  Especially if there has not been an application to have the scheme placed under curatorship in the first place.  Imagine if the court granted such an interdict and then it turned out that there was actually valid cause for throwing out the current management and replacing it with a court appointed dictator.

I don’t think that last statement is over the top, by the way.  While errant boards of trustees have often been accused of being laws upon themselves, a curator has essentially unlimited powers to do as he/she sees fit, as long as it is not criminal or negligent (and then the punishment will only happen long after the deed).  Historically that has worked out about as well as you would expect.

Back to the story.

demotivational-posters-dang-itNow, as part of yet another protracted round in the never-ending battle, the preemptive Bester wants to stop the regulator from its apparent bid to obtain an ex parte order. He fears the order would prevent Selfmed, much like Medshield, from defending itself against “one-sided litigation” by CMS boss Monwabisi Gantsho…

In other words Selfmed is not trying to stop an application to have it placed under curatorship but rather to prevent the Regulator from going about it in a certain way.  It all comes down to the way the C4MS went about obtaining the court orders that ousted the boards of trustees of Medshield.  Now I’m sorry about this but we will briefly have to use some Latin.

Previously, in cases where the C4MS applied to put schemes under curatorship they would make an application to the court.  A date for a hearing would be arranged and then the CMS and the scheme would present their arguments for and against.  This could drag on for quite a while.  In the case of Medshield the application was different.  For a start it was an urgent application.  It was also an ex parte application and instead of being placed under curatorship the application was to have the scheme placed under provisional curatorship.

You may be surprised to learn that ex parte has nothing to do with divorce celebrations.

In South African legal doctrine, ex parte means a legal proceeding brought by one person in the absence of and without representation or notification of other parties. It is also used more loosely to refer to improper unilateral contacts with a court, arbitrator or represented party without notice to the other party or counsel for that party.

The first Medshield knew about this was when they were served with the court order (or read the press release from the C4MS).  They did not get an opportunity to present their side of the case at this time.   This is the “one-sided litigation” that Leon Bester, Principal Officer of Selfmed, refers to in the article.

The tactic, you see, is to raid the palace under cover of darkness.

Nixon MickeyIn order to pull this off the Registrar must have convinced the court that a surprise attack was the only way to go because these trustees are bigger crooks than Richard Nixon and that allowing them any time to respond would mean that they will run shredders all through the night to destroy evidence before absconding with all the money.

Note that the courts only granted provisional curatorship.  At a later date the court would sit again and decide whether to make it permanent or not.  This follow-up hearing has been held in the case of Medshield but as far as I know the court has not delivered a judgement yet.

The problem with all this, say those who know what is going on, is that this tactic is unfair and prejudicial to the ousted trustees. The order may be provisional but the effect is the same: at this stage the trustees have little hope of having it overturned – unless they can show that the Registrar has acted in bad faith which is easier said than done.

locked-outWhereas previously the trustees as a collective would probably use scheme resources to find legal representation and oppose the application (typically on the basis that the application is unfounded) this new tactic makes that far more difficult.  The trustees will have to wait a whole month and then go to court using lawyers that they hired in their own personal capacity.  With their own personal money.  Because they are effectively locked out of the scheme.

Got it?  OK!

In the meantime the person appointed as provisional curator has free reign to collect all the evidence he needs, change the carpets and drapes, undo any decisions made by the board….

I’m sure the C4MS would argue that this is right and just and that the trustees should be using their own money if they have the balls to show up in court.

The question that Selfmed has placed before the courts is whether all of this is in the interests of justice.  Not whether Selfmed should or should not be placed under curatorship.  For all I know they really are skelms.

If Selfmed loses then medical schemes will probably develop a severe case of paranoia.  The Boogy Man could come for them at any time!

demotivational-poster-kh4vk4icyb-PARANOIAInterestingly neither the Registrar nor his office were available for comment on the FinWeek article.  Either because they don’t care, because they don’t answer to anyone or because they understand another truth of tactics: never show your hand.


3 thoughts on “Fog of War

  1. wouldn’t it be really funny if it turns out the registrar isn’t going after selfmed but another scheme? It does seem unlikely because the article shows that there really is no love lost between them but i think it would be ironic

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