Striking back amid its death throes, the Scorpions unit launched massive, coordinated raids on Wednesday in what appears to be a final bid to lance the festering sore of the arms deal.
The searches, carried out simultaneously at seven locations in three provinces, flowed from the Scorpions’ belated corruption probe of defence multinational BAE Systems — and the R1-billion in ‘commissionsâ€ the company paid on the deal.
Investigators believe the commissions were partly designed to conceal bribes used to influence key decision-makers, including the late defence minister Joe Modise.
A copy of the search warrant, obtained by the Mail & Guardian, shows that racketeering, corruption, money laundering and fraud are suspected.
This new front in the arms deal investigation involves sums which dwarf those at the centre of the Jacob Zuma probe.
In 1999 the South African government signed a R16-billion contract — present value more than R30-billion — with BAE and its Swedish partner, Saab, to buy BAE Hawk jet trainers and Saab Gripen fighters, representing half the value of the total arms deal.
The search warrant, issued last Friday by Pretoria High Court Judge Jerry Shongwe, fingers three sets of suspects:
- BAE and its officials and front companies, including BAE’s head office marketing services and the opaque Red Diamond Trading, registered in Panama;
- Middlemen acting as advisers or consultants in the South African deal — prominent among them Zimbabwean arms dealer John Bredenkamp and Fana Hlongwane, Modise’s former special adviser; and
- Unnamed officials or agencies of the South African government who might have influenced the awarding of the arms deal and its related offset contracts.
Lead investigator Johan du Plooy is understood to have tabled an 89-page affidavit before Judge Shongwe in chambers. Also tabled was an affidavit from lead investigator Gary Murphy of the United Kingdom Serious Fraud Office (SFO), which is conducting a parallel investigation.
The SFO also provided a schedule of ‘commissionâ€ payments made by BAE.
The warrant says ‘the investigation — includes the reasonable suspicion that BAE devised a system of payments — to its said advisers — in order to disguise the true nature of the payments, being designed as bribes in order to achieve success in the said programmes and to seek to obtain undue advantage over its competitors in the bidding processâ€.
It notes that these payments were channelled through financial entities globally, including those in South Africa, the UK, Switzerland, Jersey, Lichtenstein and the People’s Republic of China.
The search warrant seeks any information about payments which might have passed down from BAE to ‘John Bredenkamp and his associatesâ€ as well as to ‘Fana Hlongwane and his associatesâ€.
It further seeks information relating to any payments BAE or Bredenkamp or Hlongwane might have given to ‘any person connected with the arms deal or the [related offsets] who was in a position to influence the outcome of the dealâ€.
Last year the M&G revealed that the SFO had obtained evidence that BAE had paid out roughly R1-billion in commissions on the SA deal.
Now the question at the centre of the Scorpions inquiry — and the raids — is why BAE paid huge commissions to two consultancies in particular: Hlongwane Consulting and Kayswell Services.
Hlongwane Consulting was incorporated in 1999 by then outgoing defence minister Joe Modise’s adviser, Fana Hlongwane.
The SFO investigation has revealed that Hlongwane entered a consultancy agreement with BAE in 2002 on an annual retainer of Â£1-million (R15-million). In 2005 there was an agreement to pay $8-million (R80-million) as a settlement figure to Hlongwane in relation to ‘work done on the Gripen projectâ€.
Hlongwane has never explained why BAE allegedly paid him so much money from 2002 onwards, given that BAE was chosen as preferred bidder in 1998 and the final contracts were signed in December 1999.
Kayswell Services, incorporated in 1994 and contracted as a BAE consultant for the Hawk contract in the same year, was paid more than Â£37-million (R555-million).
The M&G has revealed that Kayswell is a commercial vehicle of Bredenkamp, who has just been blacklisted by the United States.
If indeed some of the ‘consultancyâ€ payments masked bribes, this could explain the questionable twists in the bid selection process.
The South African government was somehow persuaded to choose BAE despite the air force’s opinion that the Hawks were overpriced and the Gripen purchase was premature.
Modise personally intervened to change the evaluation criteria for the jet trainers by excluding cost as a factor, placing BAE in pole position to win the contract.
A Cabinet subcommittee, chaired by then deputy president Thabo Mbeki, chose BAE despite the fact that Italy’s Aermacchi trainer, favoured by the air force, was half the price of BAE’s Hawk.
A recommendation that the BAE-Saab jet fighter purchase be deferred, given that South Africa’s Mirage fighters were serviceable until 2012, was also ignored.
Where the raids went down
This week’s Scorpions raids focused on John Bredenkamp and his key lieutenants — as well as on Fana Hlongwane and BAE Systems.
Beginning at 6am on Wednesday, searches were conducted at:
Zimbabwean tycoon and arms-deal fixer John Bredenkamp faces constraints on his sprawling empire of tobacco, oil, tourism and financial businesses after the United States treasury added him this week to its list of individuals ‘designatedâ€ in terms of its sanctions against the Mugabe regime.
This means that any assets Bredenkamp has in the US are frozen and US residents are forbidden to transact with him.
A US statement described Bredenkamp as ‘a well-known Mugabe insider involved in various business activities, including tobacco trading, gray-market arms trading and trafficking, equity investments, oil distribution, tourism, sports management, and diamond extraction. [He] has financially propped up the regime and provided other support to a number of its high-ranking officials.â€
Also added to the US list was fugitive mining boss Billy Rautenbach, whom the South Africans want to question about a range of alleged crimes.
‘He has provided support to senior regime officials during Zimbabwe’s intervention in the Democratic Republic of the Congo and also provided logistical support for large-scale mining projects in Zimbabwe that benefit a small number of corrupt senior officials there,â€ the US treasury said. Both men’s companies are also designated.
Less prominent additions to the list are Nalinee Taveesin, a Thai business- woman, whom the treasury says has ‘facilitated a number of financial, real-estate and gem transactionsâ€ on behalf of Mugabe’s wife, Grace, as well as Mugabe’s Malaysian urologist, Mahmood Awang Kechik.