Iqbal Sharma, the head of Nulane Investments and accused number four. (Mlungusi Louw/ Volksblad/Gallo Images)
In a bitter blow for the National Prosecuting Authority, the Bloemfontein high court on Thursday denied it leave to challenge the discharge and acquittal of the suspects in the state’s first state capture trial, the Nulane Investments fraud and money-laundering case.
Trial judge Nompumelelo Gusha said the prosecution was impermissibly trying to reserve questions in fact, not in law. And even if these were entertained, it would not alter the outcome given the evidence led by the state.
In April, she found that the prosecution had failed to pass the barest threshold to prove the charges against former Free State provincial government officials, Nulane Investments and its directors Iqbal Sharma and Dinesh Patel, Gupta associate Ronica Ragavan and their company Islandsite Investment.
She granted section 174 discharges to two of the former officials, Nulane, Islandsite, Ragavan, Sharma and Patel for lack of evidence, meaning they did not have to raise a defence.
The eighth accused, former head of the Free State provincial departments of agriculture and rural development, Limakatso Moorosi, did not file a section 174 application and was acquitted.
Gusha said R24.9 million had clearly flowed from the state’s coffers but the prosecution had woefully failed to show what happened to the money.
“It is an inescapable fact that almost R25 million rand of taxpayers’ money left the fiscus. The question that remains is why and who facilitated this.”
The state had relied on the doctrine of common purpose to prove that all the accused colluded to commit fraud and ensure the money went to the Gupta family, landing in a United Arab Emirates Standard Chartered Bank in 2012 before flowing back to their business operations in South Africa.
It alleged that Atul and Rajesh Gupta were party to the conspiracy, as were their spouses, and the charges formed the basis for the request for the brother’s extradition from the UAE, which was denied in April.
But Gusha agreed with the defence that the state had, fatally, failed to prove an explicit prior agreement to the crime.
The NPA filed for leave to appeal the ruling on 8 May, saying this reading of the doctrine of common purpose was among a litany of errors in law and in fact she had made. It subsequently withdrew the first application, supplanting it with a 30-page application for the reservation of nine questions of law in terms of section 319 of the Criminal Procedure Act.
Explaining this step in heads of argument filed on 25 July, the prosecution said a close reading of the ruling revealed that the judge made no factual findings on material aspects of the evidence presented.
Though an appeal can only speak to errors in law, not in fact, the NPA said these findings were necessary to establish if the law had been applied properly. Gusha did not respond to a letter asking for the findings, it added.
“Consideration of questions of law requires a consideration of the facts to ensure the certainty of the facts to which questions of law relate. Therefore, reference to the facts in a case are necessary, as was in this case.
“To date, the honourable court has not responded.”
Gusha, in Thursday’s ruling, said she was simply unaware of the letter and found it “disquieting” that the state suggested she had wilfully ignored it. Responding to the contention that factual findings were absent, she said what the prosecution had asked was to be found in her judgment.
“The fact that same is not tabulated or found under a particular heading does not suggest that factual findings were not made.”
All the prosecution’s application really did was to “to rehash” the evidence in chief, she said.
“In my view the facts upon which the legal questions should pivot, are those facts found to be proven by the trial court, no more or less”.
The prosecution’s handling of the case has been criticised. It notably – and needlessly close observers said – abandoned a bid to have the Gupta leaks admitted as evidence. But if the ruling prompted much hand-wringing about the state’s ability to prosecute state capture, questions were also asked as to why it was assigned to an acting judge.
“This is an important matter that carries far-reaching consequences for how the State deals with state capture issues in future,” the NPA submitted.
“The questions of law raised in this matter are not minor but material.”
These included, whether the court followed legal precedent on the standard for section 174 decisions in cases with multiple accused, and whether it correctly applied the law on documentary evidence and on common purpose.
In her April ruling, Gusha held that it would take “a quantum leap” to find the accused had acted in concert given the state’s failure to show prior agreement to defraud the Free State government.
The NPA said this is simply not how it works. There need not be an explicit agreement because the actions of the accused spoke to their intent, and from this conspiracy could be inferred.
It alleged that the accused associated themselves with the contents of an unsolicited letter sent to the Free State department of agriculture in 2011 by an Indian scrap metal trader Worlds Window Impex, that initiated the fraud that would follow.
The company expressed interest in becoming “a strategic partner in the Project Mohoma Mobung” provided due diligence was done by a service provider of its preference.
Finance management rules were circumvented and a few weeks later the contract for a feasibility study for a dairy farm was awarded to Nulane Investments.
It outsourced the study to Deloitte, for a fee of R1.5 million, and later changed the findings of the study to pinpoint Paras as the suitable partner for a milk-processing plant in Vrede in the Free State, effectively setting up the Estina scandal.
The rest of the money was swiftly laundered, the state argued, through the bank accounts of Islandsite, Pragat, Wone Management, Confident Concepts, Tegeta Resources, Oakbay Investments and Arctos Trading, before it was transferred to the UAE, then back to South Africa.
“The money did not fly out the window as found by the trial court,” the NPA said.
Gusha did not admit the letter from Worlds Window as evidence because the investigating officer could not authenticate it. Defence counsel then argued that without the letter, fraud could not be proven, and without fraud, money-laundering could not be proven.
The NPA said failure to admit the letter was a misdirection in law.
“The document is not a stand-alone piece of evidence – it forms the basis of the reasoning or motivation by senior officials in the department (to falsely create a motivation) for a deviation. This misconstruction on the part of the learned judge is fundamental in understanding the fraud itself.
“Without this understanding, with respect, the court got it completely wrong.”
Another court, it said, may well view the letter as the tool the accused used for purposes of perpetrating the fraud, which would allow the money-laundering charge to revive.
Gusha again erred in finding that a financial expert witness for the state had conceded that the money flows between various companies in the Gupta stable did not indicate money-laundering.
The only concession from said witness was that Islandsite Investment kept its books in order, the NPA said, and this was not decisive.
That the transfers took place was not disputed by Islandsite, or by Ragavan, who testified that she served as the treasurer for these entities and would direct money to companies that were short on funding. She did not explain how the transfers could shore up companies in distress when it barely landed in their accounts before they were diverted elsewhere.
Evidence was led that the financial flows did not make commercial sense, and hence the court should have applied greater scrutiny to Ragavan’s version, the NPA said.
But Gusha said that each of the points raised, from the existence of common purpose to the admissibility of evidence, in reality referred to a fact-based inquiry by the court.
“In conclusion, even if it were to be successfully argued that the questions of law sought to be reserved, were indeed such, the question becomes what would the practical effect of that judgment be in the face of the evidence as led?”
It can as a last resort directly approach the Supreme Court of Appeal for leave to challenge the ruling.