The chairperson of the audit committee of Durban’s eThekwini Metro council is being investigated for allegedly trying to divert R1-million from a council debt settlement into a private trust controlled by him and his family.
Mdu Msomi (33) resigned this week after inquiries by the Mail & Guardian about the allegations.
The accusation against Msomi emerged from a dispute surrounding a high court battle over a R12-million water bill allegedly owed to the council by Rainbow Chickens.
In terms of an amended plea lodged this week Rainbow argued that the council had offered a settlement for R6-million when Msomi met with Rainbow company secretary Stephen Heath in January this year.
According to sources close to the dispute, Msomi allegedly told Heath the council would accept a settlement of R6-million, but wanted R1-million of that paid to what he termed a development trust, the Singila Trust. This trust, the M&G has established, is controlled by and benefits Msomi and members of his family.
So far the council’s position has been that Msomi had no authorisation to make such an offer, if indeed it was made. The council’s legal department confirmed that the allegations against Msomi had been referred to the city’s internal investigation unit.
Following M&G inquiries, Msomi tendered his resignation as audit committee chairperson on Wednesday. He did not return calls after detailed messages were left for him on his cellphone and with his father.
However, the circumstances surrounding his meeting with Rainbow raise doubts as to whether Msomi was acting entirely alone.
In the first instance, questions have been prompted about the role of eThekwini Metro manager Mike Sutcliffe as it emerged that Msomi was perceived by Rainbow, albeit perhaps mistakenly, to have become involved at Sutcliffe’s behest.
It is understood that the legal dispute between Rainbow and the council, which has been dragging on since 2002, was raised with Sutcliffe during a routine meeting with executives from various large Durban companies in the latter part of last year.
The Metro manager indicated to Rainbow that the issues should be put in writing and he would consider the matter. Rainbow wrote to Sutcliffe and received a reply from him to the effect that he would respond in due course.
In January 2004 Msomi contacted Rainbow and was referred to Heath. At a meeting with Heath, Msomi allegedly indicated the council was interested in channelling some of the money into a Cato Manor development project.
Rainbow indicated it was prepared to settle for R6-million and that it was the council’s business what it did with the money. Msomi allegedly indicated he would have to take advice and get back to Rainbow.
At no point did he indicate he was mandated by Sutcliffe, but Rainbow assumed the approach to be a follow-up from their letter to the city manager.
Msomi allegedly later phoned Heath to confirm the deal and allegedly indicated that R1-million of the R6-million settlement was to be paid to the Singila Trust. He also provided a bank account number, which the M&G has established is held in the name of the Singila Trust.
Rainbow was somewhat concerned at this arrangement and instructed its lawyers to write to the city’s attorneys to confirm the settlement proposal in writing. It is understood that the Metro’s lawyers phoned to say they knew nothing of the settlement deal.
Heath spoke to Msomi again, who allegedly informed him not to worry about the attorneys as the matter was being sorted out at a “political level”. Rainbow declined to make payment as allegedly directed and did not hear from Msomi again.
It is possible that Msomi could have been mandated to meet Rainbow by some other official, and that neither Sutcliffe nor anyone else was aware of alleged proposals regarding Singila Trust. Sutcliffe is on holiday and could not be reached for comment, but a detailed message was left on his cellphone.
Acting city manager Krish Kumar said the council considered the whole matter sub judice. He said he personally had not authorised Msomi to conduct any settlement negotiations and as treasury director would normally have been involved in such a decision.
In their legal plea Rainbow argued the meeting with Msomi had indeed been mandated and that council had been “represented by Mdu Msomi, on the specific authority given by Sutcliffe, alternately acting on his own authority, vested in him by virtue of his appointment as head of the [council’s] audit committee”.
After the alleged settlement deal fell apart Heath was contacted by the Metro’s legal adviser, who had been alerted by council’s attorneys, together with an investigator from the Metro ombudsperson’s office.
It is understood Heath indicated he would be prepared to give evidence against Msomi once the dispute with the council over the water bill was resolved. The matter goes to court in Pietermaritzburg later this month.
Questions remain about how Msomi came to make contact with Rainbow. He is not a council employee, but serves as the external chairperson of the audit committee, as required by municipal finance legislation.
If the as yet unproven allegations are true, the key question remains how Msomi would have secured Metro ratification for a R5-million settlement of a R12-million debt. He had no power to do this himself.
An investigation of the Singila Trust by the M&G has revealed some intriguing features.
Records held at the Master of the High Court in Pietermaritzburg name the trustees as Mdu Msomi, his mother Marjorie Msomi and Zukisa Dyantyi. The beneficiaries are recorded as Mdu Msomi, Thina Dyantyi and Lusanda Ngidi.
The records show that the trust was set up on an urgent basis in late November last year, after the first contact between Rainbow and Sutcliffe.
It has also emerged that Marjorie Msomi has or had a business relationship with the new head of legal services for the Metro, Nokana Moerane. The two are co-directors in a company called Dotcom Trading 981. Nokana Moerane, the wife of advocate Marumo Moerane, told the M&G she started work at the council at the beginning of 2004. She refused to answer questions about her relationship with Marjorie Msomi or any further questions after this issue was raised with her.
The M&G provided a detailed briefing to Marjorie Msomi’s husband, FD Msomi, about the allegations involving his son, Mdu, and the role of his wife in setting up the Singila Trust. He promised to convey the urgency of the need for a response. None was forthcoming at the time of going to press.