Overview of Investigating Directorate Establishment and Functions
In March 2019, the President established the Investigating Directorate (ID) within the National Prosecuting Authority (NPA) to address corruption allegations. The ID has powers to subpoena witnesses, execute search warrants, compel testimony under oath, and prosecute cases. Through partnerships, the ID can access additional powers to combat corruption. Its mission is to hold those responsible for serious corruption accountable through criminal proceedings.
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INVESTIGATING DIRECTORATE In March 2019, the President issued a proclamation creating an Investigating Directorate (ID) within the Office of the NDPP in terms of s7 of the NPA Act largely in response to allegations of widespread corruption at the State Capture Commission (SCC) The Head of the ID was appointed in May 2019 and capacitation of the ID began in July 2019 primarily through reassignment of prosecutors from within the NPA; secondment of investigators from the SAPS, IPID, SARS and SIU; and placement on duty arrangements of DPCI investigators recruitment of investigators and prosecutors on contract for 3 years additional to the NPA establishment. Its first cohort of 21 financial investigators came on board in January 2021 Co-location of ID s multi-disciplinary teams scheduled to take place in April 2021 1
Investigating Directorate Operational Support Cyber and Commercial Forensics Investigations Support Legal Support Administration Stakeholder/Partner Coordination Public & Private Sector SOE Security Sector 2
INVESTIGATING DIRECTORATE The powers and functions of the Directorate are set out in chapter 5 of the NPA Act, they include the power to: subpoena witnesses to furnish documents or to answer questions; apply for and execute search and seizure warrants; compel witnesses to answer questions under oath, including self- incriminating questions, subject to a use immunity prosecute cases after consultation with the relevant DPP and bring asset forfeiture applications Through secondment arrangements entered into with partners organisations, the ID can access additional powers such as police powers, subject to the direction of the National Commissioner of police and through MoUs with SARS, the FIC and the SIU the ID can use additional capabilities to investigate corruption 3
INVESTIGATING DIRECTORATE The ID s mission is to hold those most responsible for serious, complex and high level corruption accountable in a criminal court. Any personmay report a matter to the head of the ID by means of an affidavit (s27) and the Director, in the absence of a report, may authorise an investigation into the matter if the following requirements are met: There are reasonable grounds to suspect that an offence has been committed (s 28(2)); and the offence is a specified offence, which is defined in the NPA Act as, any matter which in the opinion of the head of an Investigating Directorate falls within the range of matters set out in the proclamation. If the NDPP refers a matter in relation to the commission of a specified offence to the Director, the ID is obliged to conduct an investigation into the matter. (s 28(1)(b)) 4
INVESTIGATING DIRECTORATE Investigations into TRANSNET and ESKOM authorised on 31 July 2019 The Report of the Public Protector on the "State of Capture" dated 14 October 2016; Testimony before the SCC alleging serious and high-level corruption within State Owned Enterprises, particularly testimony relating to ESKOM and TRANSNET; and Ongoing criminal investigations into unlawful activities committed at ESKOM and TRANSNET relating to serious and high-level fraud and corruption; Ongoing civil litigation relating to alleged irregularly awarded contracts and payments made by ESKOM and TRANSNET and related entities; and A report submitted in terms of section 27 of the NPA Act on fraud and corruption 5
Transnet: Investigation Focus Key Focus Areas Detail level 1 Detail level 2 Contract Value/payments Alleged Bribes/Gratification LOCOMOTIVES CONTRACTS CG Trading/JJ Trading Regiments Asia/HK & Tequesta 95 locomotives R2.6 billion R537 million (20%) 100 locomotives R4.4 billion R924million (21%) 1064 locomotives 4OEMs Regiments Asia/HK & Tequesta Regiments Asia/HK & Tequesta Regiments Asia/HK & Tequesta 359 CSR R18billion R3.7billion (21%) 322 CNR R9billion R2billion (21%) R6.1billion R1 billion Maintenance CNR, Bombardier, Bex & Tequesta RELOCATION OF 2 OEMs CNR & Bombardier R1.2billion R635 million CONSULTING AND ADVISORY CONTRACTS Regiments/Trillian/McKinse y Advisory 1064 - Increase in ETC Funding (Clubloan & Swaps) Transet Defined benefit R 1.9 Billion R274m Other contracts
INVESTIGATING DIRECTORATE Action to Date Wright J had granted the NDPP a restraint order on 18 November 2019 against Regiments Capital and associated persons and companies on the basis that: the defendants were involved in a corruption and money laundering scheme relating to Transnet and the Pension Fund The defendants entered into agreements with persons associated with the Gupta family, particularly one Salim Essa to the effect that Essa and his associates would facilitate the appointment of Regiments companies by Transnet and / or the Fund (among other state owned entities), where they would provide financial services for inflated fees. In terms of this order approximately R1.6 billion was restrained. R600 m was released to the Transnet Second Defined Benefit Fund On 26 October 2020 Mahalelo J discharged the provisional restraint order on the basis of material non-disclosure of: An order by Vally J in September 2019 in litigation between Mr Pillay, Mr Nyhonyha and Dr Wood, and the respective entities under their control and An (as yet unrecovered) settlement between Regiments Capital and Transnet in October 2019 7
INVESTIGATING DIRECTORATE Action to Date The NDPP has been granted leave to appeal the decision on the basis that: The documents not disclosed were not material to the restraint order non-disclosure did not warranted the discharge of the provisional restraint, but ought at best to have impacted on the quantum of the restraint. The Court s finding that it was not for the NPA s deponent to pick and choose what to include in a restraint application is unrealistic. In complex matters, there inevitably has to be a selection process. If this is not done, any judge will be utterly overwhelmed by the volume of evidence .SARS has intervened in the winding up proceedings of Regiments and its subsidiaries on the basis that it has a claim of at least R48 million, but likely much more. The commitment by McKinsey to repay Transnet in excess of R600m at the State Capture Commission in relation to its involvement in the Transaction Advisory Contracts with Regiments will further augment recovery of assets in this matter. 8
INVESTIGATING DIRECTORATE Action to Date The ID obtained a search and seizure order in November 2019 in respect of the Regiments server and other digital devices. The finalisation of the charge sheet has been delayed by protracted disagreement with Regiments regarding the execution of the search warrant as the company claims legal privilege in respect of a wide range of documents on the server. The review of relevant material from the search is currently underway (the volume of documents are huge). A forensic report by a private forensic firm appointed by National Treasury and the DPCI prior to the establishment of the ID has been deemed inadequate for a criminal trial by the prosecution team and has to be redone The finalisation of the charge sheet is expected to take a further 3 months 9
INVESTIGATING DIRECTORATE Action to date On 9 March 2021, Transnet and the Special Investigating Unit (SIU) brought an application to review and set aside contracts awarded to original equipment manufacturers General Electric, Bombardier Transportation, China South Rail (CSR) and China North Rail (CNR) valued at R54 billion in 2014 on the basis that: The procurement was based on a flawed market demand strategy and that the laws, government instructions and Transnet policy were deliberately ignored . And the OEMs were not entitled to benefit from locomotive supply agreements that were awarded to them in an irregular and illegal manner, and particularly not when the (manufacturers) conducted themselves in the manner that CSR and CNR did . General Electric and Bombardier could not claim that they did not or could not reasonably have known that the procurement process and subsequent contracts were irregular and unlawful . 10
INVESTIGATING DIRECTORATE Action to date (cont.) The application is a comprehensive account of the wrongdoing at Transnet (the founding affidavit alone is over 800 pages and the annexures are contained in several lever arch files. The application is based on the extraction and analysis of over 29m documents. The Transnet/SIU application together with the SARS s application in December 2020, in which the court froze R2.8bn in local CRRC accounts, following an earlier temporary SA Reserve Bank freeze has catapulted progress in this investigation by many months. This indictment will be finalised when the ID is in possession of admissible bank records sought in terms of Mutual Legal Assistance Requests that prove the flow of bribes paid to Regiments Asia and Tequesta in Hong Kong 11
ESKOM B.1.5. B.1.1. B.1.2. B.1.3. B.1.4 B.1.6. B.1.7 RehabilitationTrust Fund Tegeta Impulse Impulse ABB Trillian-Mckinsey Eskom Board Flow of Funds Prepayment Tegeta Pressure by Eskom - Glencor Impulse Contracts Labour Deposit of Impulse Employees Master of the High Court GUPTA s SAXON World Meetings Purchase of Glencor Shares Invoices to Eskom Coal Supply Agreement Arnot Power Station Guarantees issued Tegeta ABB Procurement Process for Impulse Services Provided to ESKOM Registrar of the High Court Trillian Benefits to ESKOM Executives BEE Credentials Fiduciary Duties Trustees of the Rehabilitation Trust Funds DMR Pressure Glencor Emergency Appointments Prepayment by ABB to Impulse GUPTA Networks of Influence Travel by ESKOM Executives BEE Credentials BEE Credentials MSA Contract McKinsey Value for Money Asset Recovery State Bank of India to UAE Auditors on Rehab Trust Funds Cell Data Board and ESKOM Executives Sale of Shares Onboarding Madupi ABB Capture Team Purchase & Selling of Richards Bay Colliery ABB Appointment Kusile DMR Access to Trust Funds Albatime Sub-Contracts IMPULSE & LEAGO at ABB Bank of Baroda - Access To Funds & Security to Loans
Case number On about 14 December 2007, ESKOM concluded a Turbine Generation Works Contract (Works Contract) with ALSTOM S&E Africa (Pty) Ltd (ALSTOM), under agreement 4650008908, for approximately R 13.1bn in respect of the design, supply, manufacture, fabrication, delivery, erection and commissioning of six (6) turbine-generator unity with auxiliary equipment for KUSILE. The scope included 6 air Cooled Condenser sections (ACC). The Works Contract came into effect on 1 January 2008 being the date from which the parties bore the rights and obligations stipulated in the agreement. Eskom received information about possible manipulation of the contractual arrangements and corrupt practices and reported the matter to the authorities in the RSA. An investigation revealed that agreement between Alston and Eskom had been manipulated in a number of ways. Central allegation is that Tubular entities and Mr. Lomas offered bribes that were accepted to employees of Eskom to de- scope the contract from Alstom and DBT and instead, to contract directly with Tubular for execution of the works in relation to Units 4 to 6 at Kusile power station. SOE: ESKOM KUSILE/TUBULAR 2017 Corruption PRECCA contraventions Fraud Theft PFMA contraventions POCA contraventions Bedfordview 354/08/17, and Phola 125/03/19 Date Reported Offence Loss involved Entity involved/Person/s involved Over R1.5 Billion France Mangope Hlakudi Hlakudi Translation & Interpretation CC Bon Service Telekom CC Antonio Jose Da Costa Trindade Tubular Construction Projects Current Status The matter is on court roll at Palm Ridge court and is reminded to 1 June 2021 for the state to reply to further particulars received from the defense. Extradition proceedings in respect of one of the accused is underway. 13
SOE: ESKOM KUSILE/TUBULAR Bedfordview 354/08/17, and Phola 125/03/19 2017 Corruption PRECCA contraventions Fraud Theft PFMA contraventions POCA contraventions Over R1.5 Billion Entity involved/Person/s involved Hlakudi Hlakudi Translation & Interpretation CC Bon Service Telekom CC Antonio Jose Da Costa Trindade Tubular Construction Projects Case number On about 14 December 2007, ESKOM concluded a Turbine Generation Works Contract (Works Contract) with ALSTOM S&E Africa (Pty) Ltd (ALSTOM), under agreement 4650008908, for approximately R 13.1bn in respect of the design, supply, manufacture, fabrication, delivery, erection and commissioning of six (6) turbine-generator unity with auxiliary equipment for KUSILE. The scope included 6 air Cooled Condenser sections (ACC). The Works Contract came into effect on 1 January 2008 being the date from which the parties bore the rights and obligations stipulated in the agreement. Eskom received information about possible manipulation of the contractual arrangements and corrupt practices and reported the matter to the authorities in the RSA. An investigation revealed that agreement between Alston and Eskom had been manipulated in a number of ways. Central allegation is that Tubular entities and Mr. Lomas offered bribes that were accepted to employees of Eskom to de-scope the contract from Alstom and DBT and instead, to contract directly with Tubular for execution of the works in relation to Units 4 to 6 at Kusile power station. Date Reported Offence Loss involved France Mangope Current Status The matter is on court roll at Palm Ridge court and is reminded to 1 June 2021 for the state to reply to further particulars received from the defense. 14
SOEs: ESKOM INVESTIGATION Investigation conducted into various allegations of fraud/theft, corruption and money laundering and contraventions of the PFMA and Companies Act: Eskom Board of Directors and officials, procurement contracts relating to Tegeta Exploration and Resources (Pty) Ltd, and purchase of shares held in Optimum Coal Holdings by Tegeta SYNOPSIS OF CASE Optimum Coal Mine [OCM ]a division of Optimum Coal Holdings [OCH] a subsidiary of Glencore, provided coal to Eskom for power generation. Allegations emerged that the coal was substandard and during negotiations of penalties levied against OCM, it became clear that ESKOM was initially willing to negotiate the penalty was no longer interested. OCM went into Business rescue. ESKOM was not interested in negotiating with any entity interested in buying OCM except Tegeta. Tegeta subsequently enjoyed preferential treatment and was the preferred service provider even though the cost of coal was higher than its competitors and thus to the prejudice of Eskom. On or about 9 December 2015, Eskom allegedly agreed to advance a R1.68 billion prepayment to Tegeta against future coal deliveries from Optimum. Subsequently a performance guarantee issued by Eskom in favour of Tegeta on 11 December 2015 in the amount of R1,68 billion. This guarantee was used to obtain a letter of comfort to obtain finance to purchase OCH. On or about 10 December 2015, Tegeta signed a deal to purchase Optimum from Glencore for R2.15 billion. In January 2016, Eskom awarded lucrative emergency coal contract/s to Tegeta to supply coal to Arnot power station for nine months the same coal previously deemed sub-standard Between 29 January 2016 and 26 April 2016, Eskom made 11 prepayments to Tegeta to the total value of R 1 209 378 167.57. Tegeta did not utilise the prepayments to purchase additional equipment to ensure reliable delivery of coal to Eskom but rather to fund its acquisition of Optimum. OUTSTANDING INVESTIGATION Interviewing of identified witnesses Witness statements and additional statements Forensic report Finalisation of affidavits Travel records Financial records and analysis Department of Home affairs record Cell phone records and analysis Documents requested from Eskom E-mail communication from server and hardware Eskom board members appointment letters and declaration of interests. 15
SOEs: ESKOM ABB/Impulse International (Pty)Ltd SYNOPSIS OF CASE During the period 2013 2017 Eskom/Rotek awarded contracts to ABB and Impulse International (Pty)Ltd. ABB was awarded the Early Works Order and ultimately the Control & Instrumentation (C&I) contract at Kusile Power Station in 2015 to replace Alstom. ABB appointed a sub-contractor to conduct work in terms of the C&I contract at Kusile. ABB was later awarded Variation Orders at Kusile Power Station and appointed a sub-contractor, Impulse International (Pty)Ltd to complete the work. Allegations are: 1. ABB was awarded the contract after it was included in the submission to the tender committee after the report was finalized; 2. ABB received an unfair advantage over its competitors in that it received information which was not available to other bidders; 3. In return, ABB a subcontractor who would then ensure that money would be paid to senior Eskom officials. After a fall out between the first contractor and Eskom officials a second contractor was brought on board; 4. Further contracts were awarded to Impulse International ABB has accepted responsibility for its wrongdoing and has been cooperating with the investigation. ABB has paid Eskom R1.6 billion for losses incurred as a result of the corruption. The investigation into the ABB officials involved in the corruption is being pursued in conjunction with prosecuting agencies in Switzerland, Germany and the United States It is anticipated that the matter will be enrolled in April 2021 16
INVESTIGATING DIRECTORATE Criminal conduct characterized by a high degree of sophistication concerning the methods of committing and camouflaging the crimes; This complexity contrasts with the broad lack of training of investigators and prosecutors in specific relevant matters such as forensic accounting, public procurement processes of state owned entities, or Roles players include senior political figures, senior executives and multi- national companies supported by enablers accountants, lawyers and management consulting firms Data intensive dockets run into terrabytes of information that require careful management in light of onerous discovery requirements in criminal cases 17
INVESTIGATING DIRECTORATE Institutional Impediments Skilled and capable investigators and prosecutors who are equal to the scale and scope of the investigations and prosecutions the ID is seized with ID dependent for personnel on secondments from law enforcement partners, NPA Act and temporary contractors the NPA Act does not make provision for appointment of investigators in the NPA on a permanent basis. Dire skill shortages in the public sector with constraints on employing skills outside of the NPA - recruitment of financial investigators and critical litigation skills at sustainable remuneration rates remains a challenge ID has obtained a deviation to recruit skills and capacity from the Commissions, but plans to transition State Capture Commission resources and capability to the ID delayed by Commission extension with significant impact on ID work. Slow procurement processes within the State a further delaying factor Digital and Commercial investigation capability critical in cases where terrabytes of data has to be analysed and processed 18
Thank You Victoria & Griffiths Mxenge Building 123 Westlake Avenue, Weavind Park Silverton, Pretoria 0001 Private Bag X752, Pretoria 0001 Head Office: 012 845 6000 E-mail: communication@npa.gov.za www.npa.gov.za
