When lies become fraud, people involved in state capture go to jail

A number of Gupta companies and representatives and lieutenants lied through their teeth, again and again, as the family misused public money – and perhaps also money held in a trust for future generations – to steal a coal mine.

But they did not do so alone. The lies were also manufactured by Eskom and some on its board and in its management, and known to people including Duduzane Zuma, son of the president.

And some of them might be going to jail as a result.

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The State of Capture report finally released by the office of the public protector late on Wednesday tells an astonishing story of how the Gupta-controlled Tegeta got into the coal business when it bought major Eskom supplier Optimum out of business rescue.

Some of what the report reveals was suspected but unproven, such as that Eskom intentionally put Optimum out of business to make it available for the Gutpa family to purchase – and then bent over backwards at every opportunity to see that deal succeed.

Some of what the report reveals is new and damaging at an individual level such as the direct links former public protector Thuli Madonsela draws between that killing-off of Optimum and Eskom chief executive Brian Molefe – who turns out to have a close personal relationship with the Gupta family.

But some of it, Madonsela says, is criminal.

In April, Tegeta paid R2.15-billion in cash for Optimum.
The origins of that money was the source of fierce speculation but little solid information. By issuing subpoenas to banks, airlines, and individuals, and minutely analysing money flows, Madonsela found the answer: ultimately, South Africa paid.

Over the course of four months, Madonsela found, Eskom paid Tegeta a total of R1.2-billion for coal, some of it yet to be mined. Of this, at least R910-million “was diverted by Tegeta to fund 42% of the purchase price” to acquire Optimum.

Eskom scrupulously paid the money well in advance of the deadline for Tegeta to pay for Optimum, even though doing so made little commercial sense – and in at least one instance Eskom bought coal at a premium while it knew it could easily get the exact same coal cheaper, were it not to include Tegeta as a middleman in a deal.

This, Madonsela writes dryly, appears “not to make commercial sense”.

Some of the 58% of the Optimum purchase not paid for by South Africans through Eskom may have come from South Africans by way of a rehabilitation trust. Mines are required by strictly administered law to hold in trust sufficient money to restore the environments they mine before they shut up shop. The Gupta family fiercely denied that it had misappropriated that money – but Madonsela is not so sure.

Instead of being held carefully rring-fencedand separate, Madonsela found, Tegeta initiated a flurry of transactions that saw money flow into and out of the accounts where it was held. Once the dust settled one account was short R81-million – and another was missing R1.45-billion.

That money, split between different accounts and transferred between branches of the Indian state-owned Bank of Baroda, may or may not be recoverable. But the money was not treated as law requires, Madonsela found, and some of the interest it should have earned was lost.

The many transactions around the rehabilitation fund came only after Tegeta had actually coughed up the Optimum purchase price, so rehabilitation money was not directly used for the purchase. Instead the money came from some places it really should not have.

“The Gupta family has no shareholding or other interest whatsoever in Trillian Holdings,” a lawyer for the Guptas proclaimed in a statement a week ago. “It has no link to Trillian Holdings or to any of the other constituent members of the Trillian group of companies.”

Various Trillian companies contributed more than R235-million to the Guptas for the purchase of Optimum

Another R10-million of the purchase price came from a company the sole director of which is Kuben Moodley. Moodley is an advisor to mines minister Mosebensi Zwane, who acts as the ultimate guardian of the Optimum rehabilitation funds. As if to double up on the conflict of interest, Moodley also happens to married to Eskom board member Viroshini Naidoo.

The consequences of the whole dire mess could be severe.

The way in which the Eskom board dealt with parts of the Tegeta transaction “may constitute a violation” of the Public Finance Management Act, Madonsela found. Under that law each board member could be individually liable to five years in jail, if their failure wilful or grossly negligent.

Tegeta insisting in public that it had not received a prepayment from Eskom that was used to buy Optimum “could amount to fraud”, Madonsela found, and that includes shareholders who knew the truth, such as Duduzane Zuma. Judges are advised to impose sentences of at least 15 years for fraud in amounts over R500 000.

Messing with rehabilitation funds, Madonsela said, on top of a potential tax penalty running to more than R1-billion, can also see a jail term of up to 10 years.



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