The bankers, lawyers and liars who enabled state capture

Report by Open Secrets and Shadow World Investigations connects the dirty dots.
This reprehensible chapter in SA’s recent history is outlined in gory detail in 'The Enablers'. Image: Brent Lewin, Bloomberg

Listening to the testimony of bankers before the Zondo Commission of Inquiry into allegations of state capture, you might believe they were unwitting victims of the Guptas and acted quickly and virtuously to throttle their corrupt ways by closing their bank accounts in 2016.

It turns out they may have been part of the capture project.

A report by Open Secrets and London-based Shadow World Investigations released on Thursday (February 6) puts bankers, lawyers, accountants and consultants squarely in the frame of the state capture project.

Entitled ‘The Enablers: The bankers, accountants and lawyers that cashed in on state capture‘, it pulls together the intricate threads of a campaign of corruption that is staggering in its reach and audacity.

Dirty tricks

The report outlines the tools of money laundering: smurfing and layering being two of the most common. 

Smurfing is where you break up large sums into smaller amounts to defeat anti-money laundering reporting requirements. The money is scattered around in a blizzard of transactions designed to hide the source and eventual destination. 

Layering conceals the source of the money through a series of transactions and bookkeeping tricks.

To help cover their tracks even further, the Gupta stoked racial tensions in SA by promoting the meme ‘white monopoly capital’ to divert attention away from their looting.

This reprehensible chapter in SA’s recent history is outlined in gory detail in The Enablers.

Here are the key figures in the report:

  • R5 trillion loss to the economy over five years through state capture;
  • Five million job opportunities lost;
  • R100 billion in lost tax revenue following the attack on Sars facilitated by consulting firm Bain & Co;
  • R288 million or 82% of the public funds spent on the Estina Free State dairy project was channelled to Gupta-controlled companies in Dubai and SA;
  • R1 billion a year spent by Eskom on the contract with consulting firm McKinsey, with Gupta-linked Trillian to receive 30% of this despite no signed contract being in place;
  • R16 billion escalation in Transnet’s 1 064 locomotive deal to facilitate kickbacks;
  • R600 million irregular prepayment by Eskom to Gupta-owned Tegeta to enable the purchase of Optimum Coal; and
  • R20 billion irregular expenditure at Eskom between 2012 and 2018.

Lais, lies and more lies

The Guptas and their enablers reportedly made use of money laundering hubs such as Dubai, Hong Kong and the British Virgin Islands. The report lists as an enabler one Stephen Lai, a Hong Kong chartered accountant who helped spirit away the gains of corrupt deals at Transnet.

Lai made little attempt to disguise his fabulous menu of services.

It included hiding one’s identity from the public, shifting funds offshore to reduce tax liabilities to zero and the possibility of never having to submit a report to regulators.

Lai would set up companies for the Guptas and make them look legitimate by, for example, creating a fake history.

Lai pops up as a key Gupta enabler even though he was the recipient of just $11 600 in fees. He set up Regiments Asia and Tequesta Group Limited, both on the same day –June 20, 2014 – and had Gupta front-runner Salim Essa listed as director. Regiments Asia and Tequesta made hundreds of payments to 181 accountants.

The role of SA banks in state capture

SA’s major commercial banks, when approached for comment on their roles as Gupta enablers, offered the kind of self-exculpatory bosh one might expect.

This new report won’t do their reputations much good.

When the four major commercial banks shut down the Gupta bank accounts in 2016, it was left to India’s Bank of Baroda to clear transactions on their behalf via Nedbank.

“Nedbank’s conduct with regard to their relationship with Baroda is curious for many reasons,” say the authors.

Nedbank closed its own Gupta-linked accounts in 2016, citing corruption and money laundering concerns, notwithstanding pressure to keep the accounts open from senior ANC officials. “Despite these overtly suspect circumstances, Nedbank only terminated this relationship in 2018, long after widespread reporting had indicated that Baroda’s SA business was dominated by Gupta companies.”

Transnet locomotive deal

HSBC was arguably the most important enabler of looting at Transnet, having handled most of the transactions for front companies CGT, JJT, Tequesta and Regiments Asia. HSBC only flagged suspicious transactions between CGT, JJT and other shell companies three years after the transactions.

Nedbank’s name pops up again in respect of Transnet’s 1 064 locomotive deal. Gupta-linked Regiments facilitated and arranged a R12 billion syndicated loan from several banks. Two days after this facility was arranged, Regiments organised an “interest rate swap” which was agreed by Nedbank.

This dramatically increased the rates payable by Transnet, generating significant profits for Regiments and Nedbank.

Nedbank defended its participation in the swaps– from which it made about R75 million – saying there was “nothing untoward” about the deal. The report raises doubts about this: a whistleblower reports Nedbank was the only bank willing to undertake the swap, while other banks found it inexplicable that an unknown external consultant, rather than Treasury, would be brought in to handle the swap.

Those familiar with the swap market regarded the fees as “unimaginable” and a “rip off”, not to mention the conflict of interest that arose with Nedbank being both lender and orchestrating the interest rate swap.

Nedbank didn’t ride this gravy train alone. All SA banks, including several international ones, were on board.

In another Transnet deal, the Guptas used shelf company Bex to facilitate the China North Rail deal with Transnet to supply locomotives. Transnet reported in December last year that it would approach the courts to recover money for locomotives paid for but not delivered. Of 232 locomotives ordered, only 22 had been delivered. Standard Bank set up the Bex bank accounts, and held accounts for other Gupta front companies, including Homix, which has been implicated in laundering kickbacks related to several corrupt contracts.

In his evidence before the Zondo commission in June 2019, South African Reserve Bank official Shiwa Mazibuko said the Homix transactions raised almost every single red flag for money laundering, and that it was inexplicable that Standard Bank did not pick up on these, or, if it did, failed to act on them.

The red flags included a bank account lying dormant for a long period, then seeing a massive spike in deposits which were immediately transferred to other accounts.

The Estina dairy project – the Guptas’ cash cow

In 2013, Ace Magashule, then Free State premier, announced the launch of the Vrede dairy farm as a state-of-the-art facility producing 100 kilolitres of milk a day. Estina was the company contracted to build the farm.

Analysis of banking records and other documents by Shadow World Investigations shows the vast majority of the R280.2 million paid to Estina by the Free State government was transferred into accounts controlled by the Guptas.

There were red flags aplenty from the get-go: Estina had no prior experience in agriculture; was headed by a former IT salesman, Kamal Vasram, who continued working at Toshiba while supposedly setting up a giant dairy farm; there was no competitive bidding process for the project; and 51% of the shares in the project was earmarked for local beneficiaries.

National Treasury investigated the project in 2014 and concluded that no further payments should be made to the project until various risk factors had been identified, such as lack of clarity about the actual deliverables. The Public Protector concurred, but none of their recommendations were acted on.

A decision was then made to transfer the project to the Free State Development Corporation, which should have ended Estina’s role.

Estina relied on an agreement that required further payment of R136 million for services supposedly delivered. The claim was ludicrous.

Estina had spent almost none of its own money on the project, nor had it delivered substantial services of any kind. By May 2016, Estina’s claim for R136 million was settled in full.

The report shows that 64% of all the money paid by the Free State government to Estina was transferred to the Guptas’ Dubai vehicle, 18% to their local vehicle and 11% to Sars for Vat costs. A paltry 7% was spent on other expenses.

Gupta auditors KPMG found nothing wrong with so many glaringly suspicious transactions.

Jail time for offenders

At the launch of the report last week, Andrew Feinstein of Shadow Watch Investigations, said the arms deal was the first example of state capture.

Hennie van Vuuren of Open Secrets says the Zondo commission must secure the evidence in its possession. “We want to see criminal liability for CEOs involved in state capture, and we want a reparations fund to be established to recover stolen money to assist social movements and civil society.”

Reforms needed

A key deficiency in SA law relates to public disclosure of beneficial ownership. Shell companies were set up for the Guptas and others both in SA and abroad. The institutions implicated in state capture are conflicted in performing their duties and torn between their obligations under law and the need to protect their clients.

The Companies Act needs to be amended to provide a publicly accessible registry of beneficial ownership, states the report.

“The failure of SA’s financial institutions and professional bodies to prevent grand corruption has meant that investigative journalists and activists have been solely responsible for pursuing transparency and accountability.”

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The scale of the looting is beyond comprehension, yet not one arrest or conviction has been made. Not one. By the end of the month we as taxpayers will know how much we will have to pay extra to replenish the looting.

Fully agree, not a single high-profile arrest. Difficult to take on your buddies when you have a couple of skeletons in the cupboard yourself, hey Squirrel?

Let’s not get away from 1 absolute truth – the ANC in all its glory are complicit, whether it is National, Privincial or Local Government.
” You want to joint the ANC ?,do you know how to steal ? “

” Taxpayers to replenish looting” If ever there was justification for an income tax boycott it is the contents of this article. But I guess we just don’t have guts. We will moan and complain but do nothing. Why should things change?

Go after everybody that still has money – China Rail, HSBC, Bain, McKinsey, Nedbank, Standard, Zuma, Gupta, Essa, etc

I am not sure more rules will ever help stop the crooks as they will either use fraudulent documents or find a lawyer to act as nominee, for example on beneficial ownership. That is how most of the Panama Papers deals work.

BBBEE, affirmative action and transformation paved the way for state capture.

Oaktree you are spot on my man…SPOT ON!

As did the Human Resources “professionals” who facilitated the appointment of these clowns and criminals, withouit saying a word…

“First they came for the Communists
And I did not speak out
Because I was not a Communist

Then they came for the Socialists
And I did not speak out
Because I was not a Socialist

Then they came for the trade unionists
And I did not speak out
Because I was not a trade unionist

Then they came for the Jews
And I did not speak out
Because I was not a Jew

Then they came for me
And there was no one left
To speak out for me”

(Post-war confession first made in German in 1946 by the German Lutheran pastor Martin Niemöller (1892–1984))

Read the book “Billion Dollar Whale” – many similarities…

Please don’t infer that “White Monopoly Capital” is fictional – how is Julius going to write a future speech? Party Pooper!

Corruption starts with the corrupt, self-enriching, rent-seeking government employee… Not one of them are forced to take a bribe or to be corrupt.

Why do we talk about “Nedbank”? Let’s ask the CEO Mike Brown what he did or didn’t do, and if he’s innocent let’s ask the next guy in the chain.

If you are not moving every cent and asset you have from this kleptocracy, as well as your families, then you only have yourself to blame. One small point, the organisation (ANC) that facilitated this pillage still rules the country. Looking at Africa’s post-colonial history from 1950, will rule for at least another 20 years. By then, there will be NOTHING left

Because nothing has been done to those that robbed SA blind, they can’t use our pension money’s ! Go get it from the crooks.

If SA can’t do the job, then ask the FBI/INTERPOL etc to assist but you not using my pension money to bail yourselves out when nothing is being done about the real crooks!

It would seem that the best way to delay prosecution is to play sick, or just drag things out until they go away.

Remember Tigon? Allowed to drag on for almost 2 decades. Gary Porritt, Sue Bennett and Mr Progressive Jack Milne did my late father out of R65000, a sum that seriously affected his retirement (he was 70 at the time). I also lost a packet. Hopefully Judge Sparg will now finally bring them to book. (Milne has suffered somewhat for his involvement.)

And what about the Brett Kebble saga? Barry Sergeant’s books on that lot had as much incriminating evidence as the Gupta Files. What happened to the prosecution of that case? (R23bn at that time.) And here’s the thing; relative to the latest saga involving the banks and Gupta (as per this article), at that time Investec and Allan Gray were allegedly involved in part of the shenanigans (vociferously denied at the time)according to Barry’s investigation. PSG were using them (Investec) for my Living Annuity at the time that the scandal broke. We parted company; to me if it looked like a fish, and smelled like one then it probably was a fish – a vrot one at that.
And so the South African public are ruined time and time again. Those responsible live in the lap of luxury, earning amoral income packages. And as the old English idiom goes, we end up “sucking hind tit”.

Zuma and the rest of the ANC leadership (sic) are in good company it would seem.

The ANC has modeled South Africa to be like the Milky Way – at the center is a super massive black hole without which there would be no force to hold the arms of the spiral galaxy of subordinate satellite systems in place. The hole is known as Luthuli House. However, the job done on the SOE arms, especially the Eskom one, may corrupt their ability to stay attached and the spin off could easily destabilize the center causing a sudden collapse that will radiate a wave of lethal reaction across their entire Universe at the speed of light.

these sharks loot 100s of millions so that they have the resources required for bribing the enforcers and to pay for endless legal delays. ultimaely the ANC voters are to blame as the ANC puts party before state, and hence the prospect of actual justice is small. if the DA governed SA the last 10-years our GDP would have been double and unemployment at 15%.

I propose every taxpayer holds back their tax payments until there are convictions. Actions speak loader than words…….

Apologies for spelling mistake ….should be “louder!”

The simplicity of the manipulation by the Guta family lies here: “Nedbank defended its participation in the swaps– from which it made about R75 million – saying there was “nothing untoward” about the deal.”

When there is easy money to be made from shifting funds around, bankers have as little ethics as your local drug merchant.

…. and occasionally I watch the Zondo proceedings which drone on like bees buzzing around a restful summer picnic next to a calm lake on which boaters drift along – with all the time in the world.

Let’s not forget Firstrand and the Bosasa/Watson that happened on their watch

Just top of he Iceberg – Time the Zondo Commission starts after having listened to the stories on what happened – starts now to listen to how it was possible to organize this organised white collar crime – Referring to my story that was published last month on RMB the banks don’t assist nor organize these pay-out schemes for free.

When one considers all the red tape, hoops and hurdles the honest SA investor has to overcome to place a mere R100 000 investment with any reputable financial institution, it is incomprehensible that so many billions and trillions can flow without the raising of an eyebrow somewhere by these same financial institutions. So once again, laws and regulations only make the honest person’s life more difficult whilst the crooks simply ignore them. Same with no alcohol driving, disarming of citizens, and all the other ridiculous pieces of (proposed) legislation. If you slip up marginally and in many cases unintentionally on any of these, you become a criminal, yet the real criminals laugh all the way to their Swiss bank accounts, Lamborghinis, Luxury apartments, overpriced jewelry (whilst wearing red overalls on rally days) and raising their respective middle fingers at us doyen.

Lawyers – Shark Sh$t!
Banks – Shark Sh$t with a god complex!
Insurance Companies – Shark Shi$t who would rob their own mothers!
FSCA – nowhere….
SA public – screwed!!

Lawyers – Afrikaans word for side
Banks – Afrikaans word for side
Insurance Companies – Afrikaans word for side
FSCA – nowhere….
SA public – screwed!!

Lawyers – Afrikaans word for side
Banks – Afrikaans word for side
Insurance Companies – Afrikaans word for side
FSCA – nowhere….
SA public – bent over the table and told to keep quite!

End of comments.

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