/ 15 September 2005

‘Heavy hand’ behind hotel deal

The fraud trial of three former senior executives at the Eastern Cape Development Corporation (ECDC) has renewed widely held perceptions in the province that Premier Nosimo Balindlela’s government is attempting to purge individuals loyal to former premier Makhenkesi Stofile and provincial African National Congress deputy chairperson Enoch Godongwana.

Former CEO Mcebisi Jonas, property-development director Don McClean and finance director John Cerff have been on trial in the East London High Court since last Monday.

The three have pleaded not guilty to misrepresenting details in the sale of the three-star Mpekweni Resort near Port Alfred, after it was sold to a consortium called Silver Charm Investments for R9-million in April last year when other bidders were allegedly set to pay more.

The state evidence, contained in a 120-page report by forensic auditor Peet Pieterse, fell apart as state witness after state witness conceded, under cross-examination, that most of the key findings were based on “selective information”.

Some witnesses blatantly lied to the court. Defence advocate Terry Price said in his closing argument on Wednesday that the subjectivity of the state evidence “shows malice”, suggesting there was a heavy political hand behind the case.

“There is, unfortunately, a political background to this charge,” the defence team argued.

State advocate Glen Turner told the Mail & Guardian Online: “To be honest with you, I don’t know if there is a political motive. We prosecuted on the available evidence.”

State evidence slammed

Price, who branded Pieterse “evasive and dishonest as a witness”, slammed the state evidence. Price frequently found discrepancies in the report, which was almost wholly based on inaccurate minutes taken at ECDC board and executive management meetings.

These inaccuracies included an amount of “R13 000” being recorded instead of “R13-million”, the word “Finbank” instead of “Bankfin”, “0,9%” being recorded instead of “90%” and India being confused with China.

When former ECDC minute-taker Ntombi Kakaze took the stand, she conceded that her minutes were not always accurate. Under cross-examination, Pieterse admitted that the kernel of the charges against the men — that they undersold Mpekweni — was inaccurate because the Silver Charm bid was the highest at R9-million.

The other nine bidders never matched this amount, nor did they fulfil the conditions of the deal — that all 90 staff members be kept on, that the hotel be sold as a going concern and that it should be a “clean deal with value”.

An example of the other offers was one from a company called Kat Leisure, which offered R5-million, less the cost of retrenching the resort staff. Another consortium, called Impunyela, offered an upfront sum of R1-million and proposed that former president Nelson Mandela approach United States golfer Tiger Woods to buy into a golf resort at Mpekweni. Another group listed its shareholders as “Mr X” and “Mr Y”.

In other words, with the exception of the Silver Charm bid, all the others were disqualified. In addition, two sworn valuators had valued the property after the sale at R9-million.

No motive

A visibly irritated Judge Dylan Chetty said that the “ECDC estimate was spot-on” when Pieterse tried to argue that he was still waiting for a government-appointed valuator. Pieterse also admitted there was no motive for the three accused to undersell Mpekweni.

“It is extremely puzzling to me, and for that matter to my co-accused, why we, as salaried employees of the ECDC, as persons who would not gain one cent no matter what the price of Mpekweni was and persons against whom there was no allegation that we took a kickback from Silver Charm, [would] deliberately exclude persons who could pay substantially more for the resort,” Cerff said in his plea to the charges.

During the cross-examination it also emerged that Pat Zondi — who was acting CEO after Jonas’s dismissal — was, in fact, responsible for the disappearance of minutes recording a crucial board meeting when the details of the sale of Mpekweni to Silver Charm were announced. The state had alleged that Jonas’s personal assistant, Colleen Coetzee, had been responsible. The minutes were crucial to the defence’s case.

The provincial government’s efforts to remove Jonas, Cerff and McClean from the ECDC began in September last year when provincial minister for economic affairs, environment and tourism André de Wet, a Balindlela appointee, suspended the three men without furnishing them with reasons. The men took the matter to the Grahamstown High Court, which ruled against De Wet, saying that he had violated labour law.

The three men were reinstated. De Wet then repeated the process at a board meeting on November 17 where the men were sacked permanently, again without reasons, they said. The actions against the three men are widely perceived as an attempt by the Balindlela camp to purge the ECDC, other parastatal bodies and the provincial government of individuals loyal to leftists Stofile and De Wet’s predecessor, Godongwana, who was also sacked without substantive reasons in August last year.

The ANC provincial executive committee has openly criticised Balindlela for this. Chetty will hand his judgement down on Tuesday.