Tag: guptas

Standard Bank has denied that it has opened a bank account associated with the Gupta family.

It was reported earlier on Tuesday that the top-4 bank had agreed to open bank accounts for business rescue practitioners controlling seven Gupta companies.

However, Standard Banks spokesperson Ross Lindstrom has said the bank terminated all dealings with the Gupta family and all entities controlled by it with effect from June 2016, and that that decision still stood.

Earlier, business rescue practitioner Louis Klopper confirmed that Standard Bank had agreed to open a new account‚ with strict conditions limiting access only to Klopper and his partner practitioner‚ Kurt Knoop.

Klopper said this had been a crucial stumbling block to getting the Gupta companies‚ particularly the four mines owned by the family‚ back up and running.

However, in an e-mail to Business Day, Linstrom said on behalf of the bank: “Standard Bank of SA has not opened and will not open accounts with these companies. Any impression created to the contrary was created by an employee that was acting out of mandate.

“Communication between the employee and [Klopper] was not authorised and did not follow the internal processes of the bank. Disciplinary procedures are currently under way.”

The Gupta family has had to make do with facilities at the Bank of Baroda — a relationship that has deteriorated since the bank started to come under pressure from the Reserve Bank over the large number of suspicious transactions the Gupta family were processing.

On February 16 the directors of Gupta-owned Tegeta filed for business rescue‚ placing Optimum‚ Koornfontein and Brakfontein coal mines in Mpumalanga, as well as Shiva Uranium in the North West, under Klopper’s control.

Property investment companies Confident Concepts and Islandsite Investments 180 were also placed under business rescue.

The mines employ roughly 3 000 people‚ most of whom went on strike when salaries were not paid on February 25. The permanent staff‚ about 1 500 people‚ were paid last week.

By Kyle Cowan for Business Day

Is this loadshedding, revisted?

Eskom has been dogged by allegations of corruption and mismanagement, and this is showing in its expected financial results over the short and medium term. In addition, two of Eskom’s suppliers of coal – namely, two Gupta mines – have stopped operations due to an inability to pay staff.

As the embattled parastatal’s bills mount, questions surround whether or not there will be enough coal to keep power on this winter.

Eskom’s problems far worse than expected

The Rapport reported that Eskom expects a loss of R8.1-billion in the short term, which is set to balloon to R26,5-billion in the medium term.

These projected losses are the highest a state-owned enterprise has ever experienced in South Africa.

The National Treasury described Eskom’s financial problems as the single biggest risk to the South African economy and public finances.

This echoed the views of finance minister Malusi Gigaba, who said in January that Eskom’s financial woes could collapse the economy.

“There would be no currency, and no economy for the country if Eskom went belly-up,” said Gigaba.

To address the mismanagement at Eskom, Gigaba said in his recent budget speech that the government has strengthened Eskom’s board and management with “highly-capable, ethical, and credible leadership”.

Further allegations of mismanagement
In related news, the Sunday Times reported that former Eskom executive Matshela Koko’s wife has received millions of rand from the power utility.

“Documents in the possession of state capture investigators suggest the money flowed to companies where Koko’s wife, Mosima, is a director,” said the Sunday Times.

The report stated that the money was “channelled through Eskom service provider Impulse International, where Mosima’s 27-year-old daughter, Koketso Choma, was a non-executive director”.

In March last year, the Sunday Times reported that Koko’s stepdaughter received contracts for her company worth R1 billion from Eskom.

The report stated that Choma was appointed as a director at Impulse International in April 2016, after which it received eight contracts from the division of Eskom which Koko headed up.

Third Gupta-owned mine fails to pay workers’ salaries

An employee at Shiva Uranium mine‚ a Gupta-owned company based in Klerksdorp‚ North-West‚ says they have been left in the lurch after the company failed to pay them their salaries last week.

“We have not been paid February salaries. We were told that we would be paid on the 28th. This is very frustrating as most of us live far from work and are struggling to get money for transport‚” said the employee‚ who asked not to be named.

She said the company told them on Friday that the payments were delayed because it does not have a bank. “They also told us that they have an international bank and the funds have to be converted from dollars into rands and that the process takes long.”

Koornfontein coal mine is the second Gupta-affiliated mine not to pay salaries to its workers.

They were also told that the delay was due to Eskom not paying the company.

The country’s commercial banks have cut ties with Gupta-owned companies – citing reputational risk – while the only bank which services the companies‚ Bank of Baroda‚ is to exit South Africa at the end of March.

“We know there is trouble brewing there. They are just not telling us the truth.”

She said most workers have since Friday taken leave because they either do not have money to take public transport or put fuel in their cars.

“I do not know what I would have done had it not been for my partner‚ who has helped out with the kids’ school fees and other household expenses‚” the woman said.

She said the company has denied that it is under business rescue as the workers have heard from media reports.

“We have asked them if they are under distress and they said no. They don’t want us to take action against them and have threatened us with our jobs‚” she said.

Shiva Uranium is the third Gupta-owned company to not pay its employees. Optimum and Koornfontein coal mines have also failed to pay workers their salaries this month.

Workers at Optimum downed tools on Wednesday last week‚ saying they wanted to know whether the mine would be sold following reports that the mine’s owners‚ the Gupta family‚ could no longer be found.

Koornfontein supplies coal to Komati power station‚ Optimum supplies coal to Hendrina power station and Brakfontein supplies coal to Majuba power station.

https://mybroadband.co.za
By NOMAHLUBI JORDAAN for https://www.timeslive.co.za

Gupta bank exits SA

With the state-capture inquiry about to kick off, the Bank of Baroda announced on Monday it was shutting down its South African branches.

The instruction is said to have come from the bank’s headquarters in India.

The bank, which provided banking services to the Gupta family when other banks would not, said its parent company was “rationalising” branches in international markets.

There was speculation at the weekend that it would exit SA.

Baroda said it would stop taking new deposits from March and cease operations altogether at the end of March.

The South African Reserve Bank said the registrar of banks was in talks with Baroda to ensure its orderly withdrawal to protect depositors. The bank had R2.6bn in deposits at the end of December, according to regulatory filings.

Manoj Kumar Jha, the bank’s South African acting CEO, declined to comment.

The latest developments come after the bank became ensnared in state-capture allegations through its association with the Gupta family, its companies and associates.

Baroda faced the possibility of closure arising from a directive the Bank issued after it fined Baroda R10m for breaching sections of the Financial Intelligence Centre Act.

Baroda was named in former public protector Thuli Madonsela’s 2016 report on state capture, which directed President Jacob Zuma to appoint a commission of inquiry to investigate whether any official or organ of state had acted unlawfully, improperly or corruptly by giving financing facilities to companies linked to the Gupta family. This included a R659.5m prepayment that Eskom made to Tegeta Exploration & Resources to acquire the Optimum mine that supplied coal to Eskom.

Baroda is to be investigated for its role in facilitating the transaction and its handling of funds belonging to Optimum’s mine-rehabilitation fund.

After a lengthy legal battle and a ruling by the High Court in Pretoria, Zuma finally appointed Deputy Chief Justice Raymond Zondo in January to head the state-capture inquiry.

The National Prosecuting Authority’s asset-forfeiture unit froze more than R110m in deposits held at Baroda, which it said were proceeds of crime related to the controversial Vrede dairy-farm project in the Free State — meant to empower poor community members.

According to the asset-forfeiture unit, the R110m was part of R220.2m paid by the Free State agriculture department to Estina, a company associated with Atul Gupta, for the project.

Very little of this money was used for its intended purpose. Some funds found their way to Atul Gupta’s niece Vega’s blockbuster wedding at Sun City, while other funds went to vehicle dealers and other entities belonging to the Gupta family.

Attempts to reach Eugene Nel, the curator who was appointed by the court on behalf of the asset-forfeiture unit, were unsuccessful.

By Moyagabo Maake for Business Live

The Asset Forfeiture Unit (AFU) is hoping to seize at least R50bn in 17 cases it is currently investigating related to state capture, acting head of operations advocate Knorx Molelle said on Tuesday.

In an interview with eNCA, Molelle said his team had already prioritised six matters which were before the courts, awaiting preservation orders.

“The matters are before the court and hopefully in the next couple of weeks we will have court orders,” he said.

The AFU has already taken action against two Gupta-linked companies – Trillian and McKinsey – hoping to recoup R1.6bn in assets related to consultancy work done by the companies for Eskom and Transnet.

Through their engagements, Trillian had indicated a willingness to co-operate, Molelle said.

“We are quite confident that, in the next day or two, we would have recovered the funds that have been taken away.”

Assets would only be attached as a last resort, he said.

“If there is willingness with those that we are dealing with that they are prepared to make good, the actual physical removal will be a last resort.

“An engagement that we having is absolutely critical. We are sitting and resting with the comfort that should that not bare any fruits, we also identified the relevant assets from which we can recover.”

Mollelle said the matter should be finalised within the next two days.

The AFU was investigating six other matters in which they were hoping to recoup money in the current financial year, he added.

‘We are working at our utmost best’

The money would be deposited into the Criminal Asset Recovery account and reinvested into fighting crime or to the state, where needed.

Acting head of the Specialised Commercial Crimes Unit, advocate Malini Govender, could not clearly say when individuals would be prosecuted in cases related to state capture, only commenting that it was a complicated matter that needed time for thorough investigation.

“We have only been dealing with this since March, so you cannot expect that in a month or two months we are going to take something to court. We are working at our utmost best and hardest in ensuring there is sufficient traction to get this matter to court,” she said.

The NPA – together with National Treasury, the Financial Intelligence Centre, the Companies and Intellectual Property Commission and the AFU – had an 18-man team dedicated to the “eight legged” state capture investigations, she added.

Seven of the investigation’s “legs” came from former Public Protector Thuli Madonsela’s report into state capture, while the eighth stemmed from a separate complaint.

Both officials denied any interference by the National Director of Public Prosecutions Shaun Abrahams.

“At no stage did he give any instruction that we do not proceed. In fact, at some stage he was… anxious at what he perceived to be a slow pace,” Molelle said.

14 Gupta-linked companies and individuals to have their assets frozen

At least 14 people and entities linked to the alleged corruption by Gupta-linked company Trillian and international consultancy firm McKinsey have been identified in a preservation order obtained by the Asset Forfeiture Unit.

The AFU is going after the big shots at Trillian and McKinsey. The people named in the court order include Eric Wood, who is Trillian CEO; Trillain CFO Tebogo Leballo; Prakash Parbhoo, a partner at McKinsey; and Jean Pierre Goerges Desvaux, who is a senior partner and managing partner at McKinsey.

The court order also identifies Trillian property in the high-end business precinct Melrose Arch in Johannesburg.

Others named in the order include: Veronica Magwentshu, Thabiso Legoete, Johannes Faure, Daniel Roy, Trillian Capital Partners, Trillian Finanical Advisory, Trillian Management Consulting, Trillian Properties, Trillian Securities, McKinsey and Company Africa, and “any other person who becomes known to the applicant as having an interest in the property.

By Lizeka Tandwa and Mahlatse Mahlase for News24

E-commerce and media giant Naspers and its pay-TV arm MultiChoice could now be facing a possible class action suit in the US after a law firm there announced it was starting an investigation on behalf of investors into Naspers.

In the latest fallout in the widening scandal involving allegations of corruption, collusion and undue corporate influence from Naspers’ MultiChoice unit to allegedly influence South Africa’s long-stalled digital migration switch from analogue to digital TV, US law firm Pomerantz has launched a search for investors who want to start a class action lawsuit against Naspers.

Pomerantz said its investigation on behalf of Naspers investors concerns whether Naspers and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices.

In its public statement issued on Tuesday it said: “On December 1, 2017, Naspers reported that its wholly-owned television unit MultiChoice had initiated an investigation into whether improper payments were made to ANN7, a South African news channel owned by the politically-connected Gupta family.

“According to local media, citing leaked emails, MultiChoice substantially increased its annual payment to ANN7 from R50m to R141m over the past two years.

“On this news, Naspers’ American Depositary Receipt price fell $3.05, or 5.58%, to close at $51.60 on December 1, 2017,” Pomerantz said in the statement.

Naspers acknowledged Pomerantz’s statement and told Fin24 on Tuesday that adjustments in global tech markets took place at around the same time Pomerantz highlights.

Naspers re-iterated that it takes the recent media allegations about MultiChoice SA seriously. It however pointed out that MultiChoice SA has many minority shareholders and the responsibility for dealing with the matter lies with the independent MultiChoice SA board.

“The MultiChoice South Africa board has therefore instructed its audit and risk committees to assess whether or not there have been any corporate governance failures at MultiChoice in regard to the ANN7 matter and report back to the board,” Naspers said in an emailed response to questions.

The ecommerce and multimedia giant said it has confidence in the MultiChoice SA board to deal with the matter, following their governance procedures. It said it will verify that the MultiChoice SA board has addressed the matter adequately.

“The MultiChoice Audit & Risk committee has confirmed the action it is taking in response to the allegations in the media. As stated above, once they complete their work following their governance procedures, they will report to the MultiChoice board, and after that has happened the Naspers board will consider whether it is satisfied with the action that the MultiChoice board has taken.”

Source: Thinus Ferreira and Fin24

MTN employee helped Guptas spy on people

The Sunday Times has reported that an MTN employee, who worked as a senior fraud analyst, sold the cellphone records of high-profile politicians and journalists to a Gupta-linked company.

According to the report, she was paid R3,750 by a private investigations company for the mobile phone records of Trevor Manuel, Tiso Blackstar editor-at-large Peter Bruce, and Financial Mail editor Rob Rose.

Manuel, Bruce, and Rose are outspoken critics of the Gupta family.

Part of these records were published on Wmcleaks.com – a fake news website – on 13 August.

Bank of Baroda CEO Manoj Kumar also featured in the Wmcleaks report, and is accused of being a sellout to white monopoly capital for trying to close Oakbay’s accounts.

“Trevor via an untraceable middle-man had carried out around 30 calls to the Chief Manager of Bank Of Baroda SA, Manoj Kumar Jha,” states Wmcleaks.

“Many calls between Trevor and Rose have been verified within the time frame of the Oakbay’s accounts closure in BOB regarding the creation of this intimidation scenario.”

The Wmcleaks report added that “Rob Rose was also in constant touch with Peter Bruce within the said time frame”.

Shortly before the Wmcleaks article, Bruce wrote a column titled The price of writing about the Guptas.

He provided details on how he was followed and photographed, accused of cheating on his wife, and attacked online.

MTN confirmed the transgression by the employee, who did not arrive for a disciplinary hearing and instead resigned from the company.

“Providing call data records of a third-party to anyone outside of MTN is a serious and major violation of MTN’s internal policies and procedures,” said MTN.

Call details

Wmcleaks published an image of the call records detailed above.

 

Source: My Broadband 

Treasury capture is something to fear

Pravin Gordhan’s axing as finance minister just more than six months ago was met with consternation, which was made worse by the man who replaced him.

Here was Malusi Gigaba – the man who had used his position as minister of public enterprises to lay the ground for the Gupta family to plunder Transnet, Eskom, Denel and other state-owned companies – being entrusted with running Treasury, the state’s most important ministry.

Many cried foul, arguing that the move was akin to entrusting a ravenous wolf with care of the sheep.

At the time, Economic Freedom Fighters (EFF) leader Julius Malema told reporters in Johannesburg that “[President Jacob] Zuma has captured Treasury, which means the Guptas have captured Treasury. He has achieved what he always wanted to achieve.”

At Gigaba’s swearing-in ceremony at the presidential guest house in Pretoria on March 31, local and foreign journalists mobbed him, demanded answers about everything from his suitability for the job to the impact his appointment would have on credit ratings.

He stunned the media with well choreographed responses. He appeared to be a man who had his job figured out.

A few days later, referring to a Save SA protest outside his office, Gigaba told his staff: “Forget all the noise outside. Do your jobs. What you see and hear will pass. Change brings with it such anxieties.”

Shortly after his appointment, rumours began swirling that Gigaba, who harbours presidential ambitions, was ready to disentangle himself from the intricate state capture network.

Many hoped he would hold off-the-record briefings with senior journalists and editors to inform them about how he would free himself from the web of Zuma’s friends, the Guptas.

One senior news executive told me this week that Gigaba’s people had arranged a meeting with him. It never took place.

Just what the doctor ordered

It is near impossible to completely capture the South African state without placing National Treasury on a leash.

This is not only because Treasury allocates each department its annual budget, but because through its public finance unit, it monitors government expenditure and reins in wayward ministers, directors-general and chief executives of state-owned entities.

Through the office of the chief procurement officer (CPO), Treasury monitors compliance with tender regulations and is able to refuse government departments permission to break the rules.

Having axed Nhlanhla Nene, Gordhan and Mcebisi Jonas for their refusal to sign off on the nuclear deal (among other reasons), Zuma needed someone whose conscience had been dulled.

What better man than Gigaba?

A trusted lieutenant, and a man whose footprints – a damning report by prominent academics found – will feature prominently in the story of how the Gupta highwaymen pulled off their great South African robbery.

A desktop review of Gigaba’s six months in the Treasury reveals a terrifying picture. Cabinet’s decision to move the budget allocation process from Treasury to the presidency has nothing to do with Gigaba.

But is it just a coincidence that something which has been coming since 2015 was implemented as soon as he arrived?

When all the make believe explanations are stripped away, only one reason remains for why Zuma’s Cabinet arrived at this decision.

The reason, as one senior government executive put it, is “for anyone who wants resources for projects that cannot be motivated for in the open to use nefarious means to achieve the directing of the budget one way or the other”.

This becomes increasingly clear when we take into account the fact that the budget allocation process is handled by an interministerial committee. All ministers have an opportunity to motivate for priority projects.

If the committee influences budget allocation, why would Cabinet want it handed to a presidency with neither the technical skill nor the research capacity to do the job?

The battle for the soul of Treasury

Two weeks ago, City Press reported that Gigaba had established a parallel administration, effectively undermining Treasury director-general Dondo Mogajane.

Gigaba’s spokesperson Mayihlome Tshwete denied the allegations.

But as fate would have it, minutes of a meeting City Press obtained revealed that acting CPO Willie Mathebula was undertaking a sweeping restructuring of his office without Mogajane’s knowledge.

The minutes revealed that, while Mogajane was in the dark about the proposed changes, Mathebula had already met Gigaba and his deputy Sfiso Buthelezi to discuss the restructuring.

The proposed changes reveal something sinister underway at Treasury: that Mathebula, Gigaba and Buthelezi were concerned that the office of the CPO “was a dictator and not an enabler” and believed the office “did not consult” their counterparts in other departments.

More alarmingly, they discussed withdrawing the office’s governance, monitoring and compliance (GMC) unit’s powers to decide if departments’ requests for tender deviations and extensions were justified.

The refrain that Treasury is a dictator, a de facto government, or a stumbling block to development is not new. It is a common refrain we hear from Zumarite ministers such as Nomvula Mokonyane.

In February, the Sunday Times reported that Zuma himself had expressed frustration about Treasury’s processes.

Zuma and Mokonyane’s unhappiness stems from their repeated failure to get Treasury to approve the nuclear deal, estimated at R1 trillion, the R56bn Moloto rail development; and the R14bn Mzimvubu water projects.

Cabinet wants to appoint Chinese companies, without any bidding process, to finance and build the last two.

A Treasury report City Press reported on in April showed how the ministry put a stop to a government-to-government procurement agreement between Zuma’s administration and the Kremlin for a Russian company to finance and build nuclear power stations.

But without the GMC’s approval for projects to bypass legal tender processes, these megacontracts will never see the light of day.

It is for this reason that Mathebula, Gigaba and Buthelezi’s mission to hobble the GMC should set off alarms.

In the 18 months to June, the GMC halted more than 200 tenders amounting to more than R4 billion from being awarded through “deviations” – which include false emergencies and other excuses about single suppliers and continuity of service.

Treasury’s deviation reports do not attach values to numerous other requests for deviation which the GMC blocked during the same period.

They could easily amount to hundreds of millions of rands.

South Africans should not allow Gigaba and co to curtail the GMC’s powers.

One reason is that Eskom’s R1.6bn in questionable contracts with management consulting firm McKinsey and Gupta-front Trillian were awarded through deviations before the GMC was established.

Should Gigaba manage to neutralise it, it would be open season on tenders across government. This would be the final step in the capture of the state.

By Sipho Masondo for City Press. Published on News24

UK financial watchdogs are to probe HSBC and Standard Chartered for possible links to the Guptas‚ while the FBI has launched an investigation in the US‚ the Financial Times reported.

Chancellor of the Exchequer Philip Hammond said he had passed concerns raised by Peter Hain on to the Financial Conduct Authority‚ the Serious Fraud Office and the National Crime Agency.

Hain has not accused the banks of wrongdoing‚ but has asked that evidence from whistle-blowers and other sources be investigated.

In the US‚ investigators have in recent months started probing individuals‚ bank accounts‚ and companies in the US for ties to alleged graft involving the family‚ people familiar with the matter told the FT.

The US probe has focused in part on US citizens Ashish and Amol Gupta.

Source: Times Live

KPMG: too big to fail?

KPMG is struggling to survive and its recent restructuring and public pronouncements have not helped its cause either.

The hollow ring of the excuse proffered by KPMG interim chief operating officer, Andrew Cranston, that “we were only the doers” must be like a red rag to a bull for Pravin Gordhan and all those SARS employees besmirched by the KPMG SARS rogue unit report.

The destruction which this report has wrought on key management at SARS, its institutional reputation, and the long-term negative effects on our country’s economy might never be fully calculated. It would not be dramatic to suggest that in the long-term, KPMG’s complicity in this report might eventually cost South Africa hundreds of billions of rand.

The admission made by Cranston not only increases the culpability of KPMG in its overt contribution to state capture, but also brings into stark relief the fact that KPMG, both locally and internationally, seem unable to discern right from wrong and appear unable to grasp the concept of real contrition.

Since when was the trigger-man acting on behalf of a “client” not the “doer” in the committing of a hit and since when was the trigger-man not criminally liable?

But for the leaked Gupta emails, the partners of KPMG would have felt no guilt as they, like fat men at a smorgasbord, feasted on their annual partnership profits significantly increased by fees of dubious reports and questionable audits. And even now, as the extent of their malfeasance becomes more evident, they continue to resist with half-hearted excuses of “mistakes made and painful lessons learned”. Adding further insult to injury is the paltry R63-million in reparations which KPMG International has now offered our country.

To the partners of KPMG South Africa, that is simply not good enough. It isn’t good enough to offer a few sacrificial executive lambs and claim “but we didn’t know” and then speak of the importance of improving quality standards while hoping that the news cycle will move on.

As partners of KPMG, you cannot plead ignorance of the fact that your firm has conducted itself in an errant fashion and in breach of the Rules of Professional Conduct over a number of years – this was not a once-off mistake or an isolated error of judgement.

Perhaps it is too late now for KPMG’s South African operation, and if so, then what of its 3,400 employees and is KPMG too big to fail? Curiously, in the midst of the corporate crisis facing KPMG, the firm is clutching at every possible straw to justify its survival. Among these might possibly be the argument that they are too big to fail, which is as unconvincing an argument as the notorious “SARS Report”. The fact is that the statute requires that all companies are audited and it follows that volume of audit work will remain the same with or without KPMG. Importantly, not everyone at KPMG is unethical. If KPMG collapses then the great majority of competent and ethical staff of KPMG will find immediate and gainful opportunities in larger as well as mid-tier audit firms who will have to step up to fill the gap left by KPMG.

The collapse of KPMG might also provide a genuine opportunity to scale up a number of medium size audit firms, especially the “empowered firms”. The demise of KPMG will also help reduce the oligopolistic concentration of the large audit firms and will help promote more healthy competition within the profession.

It is true that the KPMG saga has shocked the SA business sector. But this is an interesting case of ethical destruction. After all, this is how a market economy should deal with its faulty and unethical firms. The case has also created a golden opportunity for SA corporations, and the business sector more broadly, to undertake a genuine and constructive recalibration of their ethical framework across all spheres. There is little doubt that all businesses could raise their ethical standards.

In particular, the collapse of KPMG should be a warning siren for the other audit firms to reassess their internal processes and their corporate governance mechanisms. This is vital for socio-economic development because in modern societies, underpinned by complex financial and economic structures, the audit firms play a unique and pivotal role in assuring that resources are used with probity and propriety. To this end, a number of measures need immediate consideration. For example, corporate SA should adopt the principle of “auditor rotation”, as importantly the audit companies themselves need to appoint non-executive directors with appropriate governance competencies; and external audit firms need to focus on audit work and avoid technical advisory work. Corporate finance advisory operations have no place within audit companies. The notion of “Chinese walls” within the audit firms simply does not work, as KPMG clearly demonstrates.

As often said, we should not waste a good crisis. The KPMG crisis should definitely not be wasted on the SA business and the country at large. The crisis is a stark reminder that our nation needs to re-examine the ethics of doing business, whether in the private or in the public sector. We have no time to prevaricate. Company directors, chairpersons of the boards, and members of the audit committees in particular need to act with vigilance and urgency. As Martin Luther King, Jr reminded us: “It is always the right time to do the right thing.”

By Iraj Abedian and Simon Mantell for The Daily Maverick

With €22-billion (about R330-billion) in revenue last year, German software multi-national SAP should have all the expertise it needs to close major deals.

Instead, the #GuptaLeaks and related information show, the world’s third largest software company is not above calling in help from the politically connected, risking contravention of international anti-bribery laws.

AmaBhungane and Scorpio can reveal that in August 2015, SAP signed a “sales commission agreement” with a small Gupta-controlled company that specialises in selling 3D printers.

The terms suggest a thinly-disguised kickback arrangement: If the Gupta company were the “effective cause” of SAP landing a Transnet contract worth R100 million or more, it would get 10 percent.

In the year to follow, SAP paid the company, CAD House, a whopping R99.9 million, suggesting SAP used the Gupta influence network to drive sales of a billion rand to Transnet and other state-owned companies.

SAP denies it paid kickbacks or was party to laundering the payments, arguing that CAD House had “the necessary skills in terms of positioning our solution” and was paid a sales commission for acting as “an extension of the sales force”.

But there are factors suggesting that SAP’s denial does not hold water: there is no evidence that CAD House had any experience marketing or selling SAP software. And CAD House appears to have been used as a front, both to distance the transaction from the Guptas and to launder the proceeds to them.

Neither CAD House nor the Gupta family responded to detailed questions.

Strategic customer

In 2014, Transnet was considered so key to SAP’s business that it was defined as a “strategic customer” – a designation given to just 300 out of 197 000 SAP customers worldwide, according to a SAP presentation found in the #GuptaLeaks.

Despite its special relationship, SAP was seemingly having trouble closing deals with Transnet and turned to the Guptas for help, the trove shows.

CAD House, which specialises in selling 3D printers, is not widely known to be part of the Gupta empire. At the time it was, on paper, half owned by Santosh Choubey, a key Gupta lieutenant employed by their Sahara Systems.

Minutes and other #Guptaleaks records show, however, that CAD House was managed as a subsidiary of the Sahara group – indicating that beneficial ownership rested with the Guptas themselves.

In an interview, SAP South Africa chief financial officer Deena Pillay claimed that CAD House was no different to other sales agents SAP uses. “They’re small guys who would go out there, identify business and come to SAP with that opportunity.

“It’s a lever available to SAP to sell its software… We’ve got a sales force that we employ, so these are the agents on the ground… They are an extension of the sales force.”

In SAP’s world, commission agreements are not unusual. Except in this case Transnet was already a client of SAP and the commission agreement with CAD House made it clear SAP was not so much hiring a sales agent to market a product to Transnet as a fixer to clinch the deal.

The commission agreement was signed on 20 August 2015 by Pillay and another senior SAP executive. It promised CAD House 10 percent if CAD House was the “effective cause” of Transnet signing a R100 million-plus deal with SAP.

CAD House’s “main purpose”, it specified, “is to assist [SAP] in obtaining Customer consent to the Customer Contract and Customer’s requisite signatures to such agreement”.

Due diligence

SAP’s Pillay told us that an “external reputable company” did a “rigorous due diligence” on CAD House before the agreement was signed. Pillay’s colleague Candice Govender, who is SAP South Africa head of legal, confirmed that SAP was aware CAD House was connected to Sahara, but found “no red flags”.

Yet, by the time SAP signed the commission agreement in August 2015, the red flags were in plain sight.

Three weeks earlier, amaBhungane and the Mail & Guardian had revealed how telecoms firm Neotel agreed to pay letterbox company Homix R104 million in what were also termed “commissions” – clearly kickbacks – to land Transnet contracts.

Our exposé at the time showed that a Gupta man was behind Homix. Immediately after the exposé, Neotel’s chief executive and chief financial officers went on “special leave”, ultimately to lose their jobs.

Two possibilities present themselves: Either SAP ignored the obvious red flags about the Guptas’ alleged involvement as fixers at Transnet, or it signed up for exactly the same service.

In a settlement with the US Securities and Exchange Commission last year, SAP agreed to pay a $3.9 million fine after a senior SAP official paid bribes for state business in Panama via a local partner.

The SEC had jurisdiction because of SAP’s secondary listing on the New York Stock Exchange.

The road to closure

Even for questionable commission agreements, 10 percent appears to be high. One industry insider put the usual “fixer” fee at closer to two or three percent. With the Neotel deals, Homix was to receive roughly five percent of the roughly R2 billion Transnet contract value.

But SAP not only wanted a Transnet deal worth a minimum of R100-million, it wanted it signed within just one month.

In an attached timeline of deliverables, referred to in the commission agreement as the “Road to Closure”, CAD House and Choubey were expected to secure a meeting with Transnet chief financial officer Garry Pita within just three days to “position the financial benefit” of SAP’s proposal.

After that it was not a sales effort, but one simply of getting Pita and Transnet to give the necessary approvals. The timeline provided that Pita would have the required R100 million-plus “budget reallocated for capital approval” only a week later.

By 21 September 2015, a month after SAP signed the commission agreement, CAD House was expected to “fast track and attempt to obtain contract signature” from Pita and Transnet’s chief information officer – although it had leeway until the end of December still to qualify for the commission.

While there is scant information in the agreement about how CAD House would work such a miracle, the agreement – in common with many commission contracts – contained extensive anti-bribery clauses, making CAD House promise that it would not pay any money in turn to government, state owned company or party officials.

But the circumstances suggest this was little more than a fig leaf.

Fronting for the Guptas

The evidence suggests that CAD House was interposed as a front to avoid exactly the kind of red flags that the Guptas as politically connected persons would have raised during a due diligence.

For a company with a turnover of less than R20 million and struggling to make any profit at all, the prospect of millions in commission should have been a major development.

Yet, #GuptaLeaks minutes of monthly CAD House meetings straddling the date of the commission agreement make no mention of the expected windfall. The meetings, at Gupta holding company Oakbay Investment’s Sandton offices, were attended by both Sahara and CAD House officials and discussed revenue-generating proposals for the latter.

A CAD House budget signed off in February 2016 – six months after the commission agreement was signed and shortly before SAP’s payments were to start rolling in – made no mention of the income either.

As we shall see, this was with good reason: SAP’s payments were not to stay with CAD House, but flow straight out to other Gupta companies.

Although SAP vehemently defended the decision to hire CAD House, Pillay and Govender seemed unable to explain why a company that sells 3D printers was an ideal partner for a complex software deal.

“We were doing a proof of concept and CAD House was an existing vendor at Transnet and we were looking at doing 3D models for these guys to show them the value and the benefit of using our solution,” Pillay told us.

When pushed for further detail of what SAP product required it to be modeled in 3D, Pillay said: “[The deal] was about Transnet in terms of the rail infrastructure, the way the operations work, the yards, the trains – all of that these guys were able to do the necessary 3D modelling as well as being able to position the SAP solution.”

Vetted

When we pointed out that CAD House’s speciality is selling printers that make physical 3D models, Govender deflected: “At the end of the day they [CAD House] were vetted internally and externally; SAP was happy that they added value; [Transnet] was happy that they added value… Look you have the CFO and SAP head of legal in front of you… If you need more technical detail you don’t have the right people in front of you.”

There are compelling reasons to be skeptical of SAP’s explanation:

One, Pillay signed the commission agreement on behalf of SAP and would surely have been privy to why SAP was giving away 10 percent of a minimum R100 million deal.

Two, If SAP honestly did want plastic models of its software solution it could have bought them at a fraction of the cost.

And three, despite Pillay maintaining that SAP engaged CAD House because of its “existing relationship [and] understanding the processes within Transnet”, Transnet denied it had any relationship with CAD House whatsoever.

Pita, the Transnet chief financial officer and “Road to Closure” target of SAP and CAD House’s lobbying efforts, wrote in reply to our questions: “According to our records, Transnet has not conducted business with CAD House. I have never heard of CAD House or dealt with them, nor have I had any discussions with a Mr Choubey about them.

“I have never been approached by CAD House or Mr Choubey to discuss Transnet’s contract with SAP or SAP’s services and products. I have not met with any third party to discuss contracts between Transnet and SAP.”

All in all, a more plausible explanation for the payments to CAD House may be that SAP willingly entered into a kickback agreement where both parties knew the Guptas, not CAD House, were to receive SAP’s millions and use their politically-derived influence to secure business for SAP. This is supported by what happened in the run-up to the deal.

The start of a beautiful friendship

The #GuptaLeaks show that Lawrence Kandaswami, SAP South Africa’s managing director, was the software multinational’s key contact with the Guptas.

As far back as 2014, when he was still SAP’s account director responsible for Transnet, Kandaswami exchanged emails with Choubey, who used his Sahara Systems email address.

At the time, SAP was trying to close a separate deal with Transnet to buy SAP Hana, a database management product.

A day after meeting with Transnet, Kandaswami forwarded Choubey the SAP presentation marked “strictly confidential”, detailing the proposed deal.

Kandaswami’s message read: “This is to prompt movement on the opportunity.” Choubey immediately forwarded the email to Salim Essa, with a note saying: “Sir – FYI – Supporting for Hana from SAP.”

Essa, a key Gupta lieutenant, has often been the family’s most direct point of contact at Transnet and Eskom.

The #GuptaLeaks do not show what Essa did after receiving Kandaswami’s email but Transnet confirmed that it agreed to go ahead with the proposed SAP Hana deal in late 2014.

By February 2015, Kandaswami had been promoted to SAP South Africa’s head of public sector, according to his LinkedIn profile. Both Transnet and Eskom’s accounts were now under his purview.

There are indications that a similar role was played at Eskom too.

On 17 February 2016, the #GuptaLeaks show, Choubey scheduled a meeting between Sahara and SAP. Two weeks later, on 2 March, Kandaswami emailed Eskom chief financial officer Anoj Singh, head of procurement Edwin Mabelane and head of generation Matshela Koko about an urgent deal for Eskom to acquire SAP Hana.

The offer would expire, he warned, at the end of March unless Eskom seized the opportunity.

In a pattern that has now become familiar, Kandaswami almost immediately forwarded this email to Choubey, who forwarded it to one of the Gupta brothers’ adult children.

Eskom spokesperson Khulu Phasiwe confirmed that Eskom signed two contracts with SAP during 2015 and 2016, but declined to provide any further detail citing a confidentiality agreement signed with SAP.

Shortly after these exchanges took place, Kandaswami was promoted to managing director for SAP South Africa.

R99.9m payday

Following the signing of the Transnet commission agreement, the money started flowing to CAD House – and straight out again.

The first SAP payment we know about landed in CAD House’s bank account in April 2016. The R17 million did not stay there long; on the same day R2 million was transferred out to Sahara Computers and R2.3 million to an obscure Eastern Cape company whose owner we have been unable to trace.

Within five days another R10 million was transferred out: R9 million to Sahara Computers and a million to Baroda, the Guptas’ bank of choice.

A similar pattern was repeated that July when R9.2 million came in from SAP. Within two days, R7.7 million bounced to Sahara Systems and R1.1 million to the Eastern Cape company.

In December that year, a massive R73.7 million rolled in from SAP. Within a fortnight, R71.1 million had gone out to three companies in the Sahara orbit: Cutting Edge, Futureteq and Sahara Systems.

All in all, we identified R99.9 million in SAP payments of which only R5.7 million did not flow straight out.

The amount appears not to relate only to the R100 million minimum Transnet contract that was the subject of the commission agreement we know about. Pillay and Govender confirmed that SAP paid CAD House in respect of “other customers” too, but refused to give details, citing client confidentiality.

This pattern, of money being cycled through Gupta-controlled accounts at a rate that defies all commercial reason, has become familiar through the #GuptaLeaks.

When we put it to SAP that it may have become party to a money laundering scheme by contracting with CAD House, Govender objected strongly, saying: “We are not aware of any payments being made to Sahara or anybody else. Our contract is with CAD House.”

Pillay added: “What the partner does with their money I have no control over. If you say these guys pass the money up the line, I have no control over that, I have no visibility over that.”

SAP may end up having to explain that to the Securities and Exchange Commission too, which will have SAP on a watch list after last year’s settlement over bribery in Panama. In that matter, the SEC found that SAP “failed to devise and maintain an adequate system of internal accounting controls” to prevent bribery.

Transnet did not respond to questions other than to mirror Pita’s comments, saying it had “never conducted any business with CAD House. The company is not aware of CAD House’s involvement with SAP or Mr Choubey”.

Detailed questions were sent to SAP’s Kandaswami and Sahara’s Choubey, but neither responded.

In a written statement, Govender said: “SAP is dedicated to conducting every aspect of our business responsibly and in accordance with the highest legal standards… With regard to CAD House and SAP SA Business Development Partners in general, please note that any selected SMMEs and/or partners are verified, both in terms of SAP’s rigorous internal forensic procedure as well as by an independent forensic law firm.”

By AmaBhungane and Scorpio for News24

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