An investigation has been launched after a senior Discovery Health official was caught on tape hatching a scheme to fix the board at one of its client medical aids in order to protect its profits.

A general manager for mass markets, Khethang Malefane, was heard on tape discussing with LA Health’s brokers in KZN the alleged fixing of elections to appoint the scheme’s trustees.

Discovery said Malefane resigned after its forensic investigation found he had discussed influencing the elections, according to a Sunday Times report.

LA Health services about 91 000 employees in local government. Discovery, as its administrator, earns about R500m in fees each year.

Two months ago its brokers in KZN were called to a meeting at Discovery’s offices in Durban by Malefane. The discussion, which breached regulations covering the medical schemes sector and the financial sector, was how to protect a ‘really, really lucrative business’ for Discovery, Malefane told brokers.

‘I am coming to you cap in hand asking you to help us protect our collective business,’ he told the brokers in reference to the LA Health annual meeting last month.

‘We are happy to provide you with the names of the people that we want to ensure make it to the board. The stakes are high ... I’m asking us to protect what we collectively have built over the last few years, and ensure that we can look ourselves in the mirror and say we are part of an ethical business. That is in your hands, through your members,’ he told them in the 55-minute recording revealed by a whistle-blower.

Discovery confirms it was Malefane’s voice on the tape. If found guilty, the company could lose its accreditation to perform its medical aid administration work in SA, which brings in about R1bn a year.

The Council for Medical Schemes said it was investigating ‘pronouncements made by the alleged Discovery Health employee’, says the Sunday Times report.

In the recording, Malefane said it was necessary to prevent LA Health from being captured by nefarious forces in competition with Discovery. He based his suspicions on an instruction to LA Health, by the council in December, to put the administration contract out to public tender.

The council said the instruction was because LA Health had failed to test the market since 2005, when Discovery won the contract.

Malefane said there were rumours the instruction was driven by some of LA Health’s own trustees who were compromised.

‘If the rumour about some people trying to control the board is true, it follows that we have to make sure that the people who end up on the LA Health board are ethical,’ he said.  ‘The people who nominate the trustees, to a large extent, are your members.’

LA Health’s principal officer, André de Koker, said this week it viewed the council’s instruction as being in the best interests of the beneficiaries of the scheme.

Full Sunday Times report