Outa gives NPA evidence of alleged massive money laundering at Transnet


The Organisation Undoing Tax Abuse (Outa) has made a submission to the National Prosecuting Authority (NPA) on how a Gupta-linked grouping allegedly obtained a payoff of R189.24 million – with R142 million of this going to the Guptas – on an unusually expensive Transnet loan. Outa also found evidence of a $17.7 million (about R288 million) payoff to an unidentified syndicate, it said.

Outa has set out the results of its investigation in a lengthy statement, which can be read in its entirety below:

Transnet took the $1.5 billion loan in 2015 from the China Development Bank (CDB), as part of the financing for its project to buy 1 064 freight locomotives. Transnet had initially walked away from the CDB loan as it was too expensive but, after intervention by then-president Jacob Zuma, negotiations resumed and the loan was signed on the same expensive terms.

OUTA's submission

Outa's submission on the Transnet-CDB financing deal is to the NPA's Investigating Directorate (ID). The referral was of suspicion of a corrupt transaction, in terms of section 27 of the NPA Act, which allows submissions directly to the NPA.

This referral is in the form of a sworn affidavit by Outa's Rudie Heyneke with annexures and provides the ID with a detailed report and evidence on the planning, negotiation phase, conclusion, the commissions that were paid in this highly controversial transaction and how they were laundered.

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Outa's submission is based on documents including some retrieved from the #GuptaLeaks, from various datasets submitted to Outa, whistleblower reports, Transnet-related documents submitted to the Commission of Inquiry into State Capture, the Companies and Intellectual Property Commission database, and media reports.

The submission explains how various individuals conspired to obtain payments by "facilitating" the CDB loan and how third parties, with no mandate or business with Transnet, received funds to which they were not entitled through a sophisticated money laundering process.

The CDB loan

In March 2014, Transnet awarded contracts totalling R50 billion in connection with the procurement of the 1 064 locomotives for the Transnet Freight Rail division.

In May 2014, Transnet started negotiating with the CDB for a loan to help fund this acquisition, particularly the locomotives being built by Chinese manufacturers. The initial negotiations between Transnet and CDB were suspended in October 2014 because of the high costs of a CDB loan.

The Transnet treasurer at the time, Mathane Makgatho, questioned the involvement of the middlemen in the proposed CDB loan, the fact that it was more expensive than the rate which Transnet could obtain in the market, had up to R3.7 billion in excessive interest and arrangement costs, and was in breach of the Public Finance Management Act.

However, in December 2014, then-president Zuma went on a state visit to the People's Republic of China, accompanied by 17 ministers and more than 300 business leaders. During this trip he made time to meet the chairman of CDB. Brian Molefe and Anoj Singh were two of the businesspeople accompanying Zuma; at the time Molefe was Transnet's CEO and Singh was its CFO. In April 2015, Singh wrote to CDB, reminding them of that meeting with Zuma and requested that negotiations reconvene promptly.

"We terminated the proposed funding proposal from CDB in October 2014 due to the high cost of funding to Transnet, however this was with the view that we would continue working together to find a solution to the cost of funding," Singh wrote to Guan Lian of the CDB South Africa Working Group.

He referred to his own meeting with the CDB in December 2014 in Beijing. "In addition the President of the Republic of South Africa and the Minister of Finance met with the Chairman of CDB to address the cost for funding from CDB. This meeting was also attended by Mr Molefe."

By the end of 2014, Makgatho had resigned. In April 2015, Phetolo Ramosebudi took over as Transnet treasurer.

In early April 2015, the CDB wrote to Singh saying the loan was competitive and noting that the CDB was glad Transnet had found a solution to fund the costs without changing the terms and conditions of the loan.

On 16 April 2015, CDB sent Transnet an official mandate letter with terms for a $2.5 billion loan, forming the basis of the agreement.

Molefe signed this mandate the same day, in what was probably his last act as Transnet CEO. The following day, 17 April, then-minister of public enterprises Lynne Brown seconded Molefe to Eskom as CEO there with immediate effect.

On 4 June 2015, the financing deal was signed on basically the same terms as when negotiations had been called off. The loan facility was for $2.5 billion, with a $1.5 billion committed facility and the remaining $1 billion a standby facility. The period was 15 years, and the interest was calculated on the JIBAR (Johannesburg Interbank Average Rate) over three months plus 257 basis points.

"Anoj Singh, Brian Molefe and Eric Wood were so desperate to continue negotiations with CDB that they had to rely on a meeting between former President Zuma and the CDB Chairman to persuade Mr Guan Lian to proceed with negotiations with Transnet. The question should be asked why they were so desperate to do business with CDB even after they were advised by Transnet's Group Treasurer [Makgatho] that three were cheaper funding options available," says Heyneke in his affidavit to the NPA. Wood was a director of Regiments Capital, which benefited from the loan fees.

The extra fees

The controversial part of the deal was the excessive extra fees which Outa's investigations uncovered. These were more than three times higher than the upfront fees of other funding for the locomotive deals.

The Arrangement Fee: Details of an "arrangement fee" of 1.18% – a total of $17.7 million on the $1.5 billion committed loan – for "syndicate partners" was provided to Outa by a whistleblower. This is detailed in negotiation notes.

It could not be established who these "syndicate members" were, and Outa asks the NPA to establish who the recipients were of the arrangement fees. That $17.7 million would have been worth about R219 million at the time the deal was signed.

Success contingency fee: Regiments Capital was paid R189.240 million (R166m plus VAT). Regiments was part of the Transnet advisory team when it was included by McKinsey consultants (appointed as Transnet's transaction advisor in 2012) as its social development partner without going through any procurement processes. Ramosebudi, who had just taken over as Transnet treasurer, recommended to the Transnet board's acquisitions and disposals committee (ADC) that Regiments' mandate should be extended to enable it to take part in the Transnet financing negotiations and that its fee should be at least R166 million. The ADC, chaired by Stanley Shane, approved Ramosebudi's recommendation. Regiments submitted an invoice to Transnet on 3 June 2015, a day before the deal with CDB was signed, and received payment, approved by Singh, eight days after the submission of the invoice.

Who got the payoff

Outa tracked the R189.24 million success contingency fee.

An amount of R2 million was transferred to the personal accounts of each of the directors of Regiments Capital – Eric Wood, Litha Nyhonyha and Magandheran (Niven) Pillay. Regiments then paid R141.930 million – which was 75% of the money received from Transnet – to the Bank of Baroda account for Kuben Moodley's company Albatime, which in turn distributed the money to Sahara Computers, Salim Essa and the newly registered companies Hastauf (Pty) Ltd and Forsure Consultants (Pty) Ltd.

Sahara Computers and Essa have both been linked to the Gupta empire. Hastauf and Forsure were previously identified by Outa as first-layer recipients in a money-laundering scheme, driven by Essa, Wood and Ashok Narayan (a known Gupta administrator and employee). A further 3% of the funds received from Transnet was paid to Moodley into a separate bank account of Albatime.

From Hastauf and Forsure the funds were distributed to a further seven entities; Outa was able to identify three of these companies and their directors. Fairchild Phiri was the director of two companies, Mod Urban Connexion (Pty) Ltd and a non-profit company Hip Hop Dance Championship NPO. These two businesses received almost R3m of the money that could directly be traced back to the Transnet-Regiments payments. The other company, IPocket Global (Pty) Ltd, was put into voluntary liquidation in August 2016 by its directors. IPocket received R15.5m of the Transnet funds. Werner Fuls, one of the IPocket directors, is also a director of the First Swiss Services Family Office based in Switzerland, which provides financial services for super-wealthy clients. Outa is of the opinion that this company could have been used to move Gupta/Essa money out of the country. Outa's referral to the ID also requests a further investigation into this company and its directors.

Those who should be investigated

Outa's referral suggests suspicious criminal activities that should be investigated against several role players in these highly irregular transactions, including:

•    Brian Molefe, CEO of Transnet from March 2011 until April 2015./\r\n/
•    Anoj Singh, CFO of Transnet from March 2009 (initially acting CFO then permanent CFO from 2012) until September 2015./\r\n/
•    Siyabonga Gama, CEO of Transnet Freight Rail who took over as CEO of Transnet as Molefe's successor in April 2015./\r\n/
•    Phetelo Ramosebudi, Transnet treasurer from 1 March 2015 until he was fired in October 2018./\r\n/
•    Stanley Shane, Transnet board member from December 2014 until June 2017, and chair of the board's acquisitions and disposals committee./\r\n/
•    Garry Pita, Transnet's GM for supply chain management and Singh's successor as CFO./\r\n/
•    Richard Seleke, director-general of the Department of Public Enterprises (the department responsible for Transnet), a Transnet director and member of the board's acquisitions and disposals committee./\r\n/
•    Eric Wood, director of Regiments Capital and Trillian Capital Partners which were consultants to Transnet./\r\n/
•    Salim Essa, director of Trillian Holdings, a key member of the Gupta business empire and now in Dubai./\r\n/
•    Kuben Moodley, director of Albatime./\r\n/
•    Fairchild Phiri, director of Mod Urban Connexion and Hip Hop Dance Championship NPO./\r\n/
•    Werner Fuls, director of IPocket Global and the First Swiss Services Family Office./\r\n/
•    Atul Gupta, one of the three Gupta brothers who ran their business empire, director of various companies including Sahara Computers, now in Dubai./\r\n/
•    Chetali Gupta, part of the Gupta empire, director of Sahara Computers, now in Dubai./\r\n/
•    Magandheran (Niven) Pillay, director of Regiments Capital and Regiments Securities./\r\n/
•    Litha Nyhonyha, director of Regiments Capital and Regiments Securities./\r\n/
•    Bernie van Zijl, director of IPocket Global.

Outa believes that we have submitted enough evidence to the NPA to swiftly and without any delays conclude an investigation on this matter and to start prosecuting this matter, the statement concluded.

(Compiled by Carina Koen)

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