Ajay and Atul Gupta. (Muntu Vilakazi/Gallo/City Press)
The first state capture trial in which Atul and Rajesh Gupta and their spouses have been formally charged got underway in the Bloemfontein high court on Monday, while the state’s efforts to secure their extradition from the United Arab Emirates continue.
Former Transnet board member Iqbal Sharma, a close associate of the family, his brother-in-law Dinesh Patel and six co-accused face charges of defrauding the Free State government of R24.9 million with the intention of benefitting the Gupta brothers and their business operations.
The state alleges that Nulane Investments, of which Sharma was the sole director, eventually transferred R19 million into a Standard Chartered Bank of Gateway Limited account in the United Arab Emirates after it was laundered through a host of companies in the Guptas’ business, including Islandsite Investments, Tegeta Resources and Oakbay Investments.
The Gateway account in the UAE was controlled by Sanjay Grover, who is described in the indictment read out in court on Monday as “a close, trusted, loyal friend, employee and business partner” of the Guptas.
Sharma on Monday entered a plea of not guilty, both with respect to himself and to Nulane Investments. Patel also pleaded not guilty, as did Ronica Ragavan, the financial director of Islandsite Investments. Patel’s counsel, advocate Kenny Oldwage SC, told the court he was never employed by Sharma, as alleged in the charge sheet.
The accused include Peter Thabethe and Limakatso Moorosi, who headed the Free State departments of rural development and agriculture, which were later merged, and the chief financial officer of the department Silvia Dhlamini.
The state alleges that in October 2011, the department received an unsolicited letter from an entity named Worlds Window Impex India that set in motion the fraud that informs the charges.
It signalled intent to become a strategic partner in Project Mohoma Mobung, the Free State’s flagship private-public initiative to stimulate agricultural production and alleviate poverty, but stipulated that, as a pre-condition, due diligence be done by a service provider of its preference.
“This letter initiated the process of fraudulently extracting money from the Free State department of agriculture and rural development, laundering the money through the bank accounts of Accused 5, 7, Pragat, Wone Management, Confident Concepts (Pty) Ltd, Tegeta Resources (Pty) Ltd, Oakbay Investments (Pty) Ltd, Gateway Limited and Arctos Trading (Pty) Ltd, and eventually being transferred out of the country, for the benefit of the Gupta enterprise and their associates,” the state alleges.
Treasury rules stipulate that unsolicited proposals may only be accepted following a thorough feasibility appraisal establishing a clear business case.
But about three weeks after the letter was sent to the department, two contracts worth R24.9 million were signed in Sandton.
These saw the province breach procurement rules to appoint Nulane Investments to conduct the requested feasibility study for a dairy farm project. The department motivated for a deviation from procurement rules to allow the contract to go to the company, stating that conditions set by Worlds Window Impex made it “impossible” to do otherwise, given Nulane’s track record.
The study in turn paved the way for the Estina scam in which a further R280 million flowed to the Guptas. At the time the study was initiated, the state notes, the province was in financial dire straits and there was no plan and no funding for such.
The indictment stresses that, contrary to what departmental officials claimed, Nulane Investments was not uniquely qualified to perform the work. In fact, it had no staff and sub-contracted Deloitte to perform the study for a contact fee of R1.5 million and pocketed the rest.
Nulane Investment subsequently changed the findings of the study to pinpoint Paras Dairy, a major Indian concern, as the most suitable implementing partner for setting up a milk processing plant in the Free State town of Vrede.
Moorosi’s lawyer, advocate Ismael Semenya SC, on Monday said his client would argue that the feasibility study was a legitimate government project and that she had the support of experienced officials, including Thabethe, when she approved the deviation that enabled the appointment of Nulane. Both Moorosi and Thabethe face charges of breaching the Public Finance Management Act.
Counsel for several of the accused challenged the authenticity of documents submitted by the state in support of its charges on violation of procurement laws. Lead prosecutor Peter Serunye asked the court to provisionally admit the documents and hear arguments as to their authenticity at a later stage.
Judge Nompumelelo Gusha said she would allow this.
The state called a forensic auditing expert from the national treasury, Siphiwe Mahlangu, as its first witness. Advocate Daniel Mantsha, for Thabethe, questioned his credentials. In the course of his testimony, Mahlangu confirmed that Patel was one of the signatories of the contract for the feasibility study.
Serunye said the official who wrote a memorandum asking for a deviation, Shamrock Cezula, would later be called as a state witness.
The matter was adjourned until Tuesday.
The state filed a formal extradition request for the two Gupta brothers in July, after their arrest in Dubai. It last sent a note verbale on December 7, asking Emirati authorities whether any obstacles remained to processing the request. No response has been forthcoming, according to trusted sources, and no court date has been set for an extradition hearing.
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