Guptas suggest Gordhan is making more than a simple legal point
Politicking and mudslinging has obscured the legal focus of Finance Minister Pravin Gordhan’s approach to the high court in Pretoria against Gupta-connected companies.
The legal question is straightforward: Is the minister of finance empowered to intervene in the relationship between a client and a bank?
Gordhan has approached the court for an “application for declaratory relief, arising from a dispute relating to powers of intervention by government in relation to the closing of private clients’ accounts by registered banks”.
According to the volumes of papers filed by the minister, the Gupta companies, the four major banks, the Financial Intelligence Centre (FIC) and the Reserve Bank, everyone seems to have answered this question and it is unanimous that the powers of the minister do not include intervening in the contractual relationship between banks and their clients.
This is made clear in the first paragraphs of the Guptas’ answering papers. “The minister has been aware that there is no dispute between the parties regarding his powers since 24 May 2016 … The order which the minister seeks is therefore entirely unnecessary and of academic interest only … this was settled in two opinions which the minister received from his legal counsel. The conclusion of these legal opinions were accepted by the Oakbay Group on 24 May 2016.”
The Guptas do not oppose the relief Gordhan is seeking but they have asked the court nonetheless to dismiss the case, saying, if it was to entertain the case, “it would open the floodgate for other weak-kneed political officials who are too scared to take positions on sensitive political and policy matters, as they could (and would) simply retreat to the judiciary for advisory rulings on any issue they did not want to have to decide”.
They add that, if the court does not decline this relief, it will have to hear the merits of the case and this would lead to the ventilation of records, such as those of the FIC, the legal opinions of senior counsel, the letters to and from different state institutions and the involvement of political heads.
This is where the politicking and mudslinging begins.
Gordhan was strategic in including a FIC certificate, which gives brief but explosive details of transactions red-flagged to the centre. Even though this information seems tenuously related to the legal question, a court process provided an opening for information that is generally treated as highly confidential to come into the open.
The certificate, signed off by Murray Michell, a director at the FIC, is something citizens would never have seen if it wasn’t for this court process. It mentions transactions involving Gupta family members and companies ranging in value from R5 000 to more than R1.3-billion. The certificate shows 72 suspicious transactions amounting to nearly R7-billion since December 2012.
But that is all we could possibly hope to see, as Michell explains in detail in his affidavit: that only under very limited circumstances can the centre reveal further details.
“In sum, STRs [suspicious transaction reports] typically contain private, confidential and sensitive information regarding the reporter of a suspicious or unusual transaction and the reported person or entity.
“It must be stressed that the FIC has never, since its establishment, provided copies of STRs to individuals, including the minister (the executive authority of FIC) nor to any of the subjects of STRs,” says Michell.
With the revelation that the Gupta family had billions of rands moving in and out of bank accounts and the final word from the FIC that no one will have sight of anything more than the certificate, the Guptas filed their answering papers last week Friday with guns blazing.
The acting chief executive of Oakbay Investments, Ronica Ragavan, claims that the minister has no real legal purpose in asking the court to rule on his powers, never mind that his application “is riddled with factual and legal errors”.
Ragavan states that the minister’s reliance on the list of 72 purported “suspicious transaction reports” is misplaced and the application is supported by flawed analysis and a faulty factual record.
“Oakbay Group has engaged a firm of forensic accountants to exhaust all efforts to identify and explain (where it is possible to do so) each of the 72 suspicious transaction reports. The report filed by the forensic firm demonstrates that the information on the 72 transactions is inadequate.”
Ragavan goes on to speak about how Gordhan, at a meeting with captains of industry, said a certain family in the country, apparently the Guptas, who were involved in politics and business, needed their wings clipped.
From this point, businesses and banks started to disassociate themselves with the family-related companies, Ragavan said.
“The onslaught after the minister’s address was severe and has had a significant and negative impact on the Oakbay Group, which will be apparent in the 2017 year-end statements.”
She also claims that Gordhan filed the application only after he failed to report to the Hawks in August last year for a warning statement. Gordhan is quoted by Ragavan as having said the family was the “brain behind the nightmare”.
“The minister has used this fictitious ‘dispute’ between himself and the Gupta family to charge to court in a highly publicised fashion, and to place before this court a range of extraneous and defamatory statements and documents.”
She asks that, should the court entertain the application, some of the information – including the FIC certificate – be struck out.
This court process has also revealed the banks’ reasoning behind the closing of the Gupta accounts and paints a picture of how the family invoked direct political pressure in an effort to have the decisions overturned.
According to the affidavit of the group general counsel of Standard Bank, Ian Sinton, there is a legal basis in international and domestic law for shutting the accounts after having given the family two months to submit reasons for why the accounts should not be suspended.
“One of the best practices and standards for a bank to mitigate its risk is to review its relationships with customers when adverse information about them comes to its attention,” read the papers.
Sinton also said the Guptas had approached one of Standard Bank’s shareholders to intervene.
Some of the banks detailed the extent of the political pressure put on them over the closure of the accounts, with Sinton saying that Standard Bank was called to meetings with the ANC and the Cabinet interministerial committee tasked with liaising with the banks over the Gupta accounts.
At the meeting with the ANC, at Luthuli House in April, Standard Bank chief executive Sim Tshabalala was asked to respond to “the accusation that it was colluding with monopoly capital to oppress a black-owned business”.
More may yet be revealed in the replying papers still to come. But what is clear is that this dispute will continue to play itself out long after the court answers the very simple question of law it has before it.