AFU senior financial investigator Samson John Schalkwyk's affidavit claims there was a “deliberate and fraudulent circumvention” of Eskom’s supply chain processes.
An explosive affidavit by the acting head of the Assets Forfeiture Unit (AFU) has implicated Eskom, Mckinsey and Trillian Capital Partners in corruption, fraud and money laundering to to the tune of R1.59-billion in assets plus interest. But although the Pretoria high court granted an order to seize these assets a month ago, it has not yet been enforced.
Madoda Nxumalo, who will curate the R1.59-billion in assets to be seized, confirmed to the Mail & Guardian on Tuesday night that the assets had not yet fallen under his curatorship. Nxumalo said that part of the reason why the court order has not yet been enforced is because he only received his official letter of curatorship on Friday.
The preservation order, which was granted on December 14, says that property and proceeds from unlawful activity (referred to as “the property” in the order) should be surrendered to Nxumalo, who has the power to assume control over the assets and a duty to preserve them.
The court order states that people with knowledge or access to the assets can not have any dealings with them and gives Nxumalo authority to investigate the assets.
Due to the nature of a case which is still ongoing, Nxumalo said he could not reveal any more information about why there had been delays in the process at this stage.
Much of the damning details around the Eskom’s payment of R1.59-billion to Trillian and McKinsey are contained in two affidavits: one by Knorx Molelle, acting head of the AFU, which forms part of the National Prosecuting Authority (NPA), and the second by AFU senior financial investigator Samson John Schalkwyk.
Molelle submitted the founding affidavit in the AFU’s application for a preservation order under the Prevention of Organised Crime Act on behalf of the National Director of Public Prosecutions Shaun Abrahams. His application is ex parte, meaning that it sought a court order even though other parties had not been notified of the application. Much of Molelle’s application relies on Schalkwyk’s affidavit, which is attached to his court documents.
Schalkwyk investigated payments Eskom made in August 2016 to McKinsey of R1-billion and from April 2016 – February 2017 the power utility paid Trillian R595 228 913.29.
McKinsey and Trillian received the money, Schalkwyk said, from unlawful activity that amounts to criminal behaviour.
Fraudulent invoices and the contracts that never existed
Schalkwyk states that there was a “deliberate and fraudulent circumvention” of Eskom’s supply chain processes that preceded the payments, and included acts of corruption and money laundering.
The series of irregularities and unlawful activities he found are:
- There was no competitive bidding process. McKinsey and Trillian were simply appointed.
- Eskom did not get approval from National Treasury to deviate from standard procurement processes in its dealings with McKinsey and Trillian.
- Payments were rendered for unspecified services or services that never happened. There were “several fraudulent invoices” submitted to Eskom for no work done.
- Eskom had no valid contract or service level agreement with Trillian and McKinsey, but still made payments to them.
The AFU investigator concluded that the relationship between the three entities was not based on a contractual agreement but a corrupt relationship where “no legally binding and enforceable contract was concluded between any of the parties”.
“I submit from the totality of the evidence gathered that the payments made by Eskom to McKinsey and Trillian were not based on valid contractual agreements but rather on the collusive and patently corrupt relationship that existed between one or more of the officials from the respective entities,” Schalkwyk said.
He said that there was also no valid contract between McKinsey and Trillian, who purported to be McKinsey’s BBBEE partner in the deal. However, according to Schalkwyk’s evidence, McKinsey and Trillian had not even negotiated a provision for Trillian to be a BBBEE partner.
Through these actions, Schalkwyk said that Eskom, Trillian and McKinsey had violated the Public Finance Management Act (PFMA). They had also violated sections of the Constitution and the Prevention of Corrupt Activities Act.
He provided details of three invoices Trillian made to Eskom which failed to specify what work was done. The first invoice, dated April 14 2016 to known Gupta associate and Eskom’s now suspended chief financial officer Anoj Singh, described services as a “professional fees, pro-rate share of Eskom corporate plan Deliverable” for R30.6-million. Despite the vagueness of the invoice, Eskom paid the amount on the same day.
In August 2016, two other invoices from Trillian were sent to Eskom for R107.2-million and R99.3-million respectively on the same day. Three days later, Eskom combined the amounts into one payment it made of R235.5-million.
“It took Eskom a mere three days to process the said invoices and effecting payment to Trillian. I submit that it is highly improbable that proper care and diligence was exercised in the processing of these invoices and its subsequent payment, taking into account the magnitude of the amounts claimed,” Schalkwyk said.
Schalkwyk interviewed a number of Eskom officials, who are named in his court papers. Two of them confirmed that Eskom had said that Trillian was McKinsey’s BBBEE partner, but that no contract or service level agreement was ever presented or signed by any of the parties.
Some of the evidence he obtained was drawn from testimony during the Parliamentary inquiry into Eskom last year and other reports that are already in the public sphere. He used a submission to Parliament on October 31 from Mosilo Mothepu, the executive director at Trillian Financial Advisory, who said that Trillian’s work for Eskom was not worth R600-million.
David Fine, a partner at McKinsey, also made a submission to the parliamentary inquiry in which he said that no contract existed between McKinsey and Eskom and that Trillian had hidden its relationship with a Gupta family associate.
But McKinsey, by the AFU’s account, was not spared of wrongdoing. Schalkwyk referred to advocate Geoff Budlender’s report into Trillian, released in 2017, which uncovered a letter McKinsey had sent to Eskom on February 9 2016, instructing the power utility to make direct payments to Trillian. A month later it sent Trillian a letter enquiring about its business associates for due diligence reasons.
In an annexure attached to the court order, the AFU said that it was pursuing the R1.59-billion plus interest of 15.5% that would be calculated from the date Eskom made the first payment to the date when the assets are “paid back”.
Saftu and Vavi behind the scenes
In October, South African Federation of Trade Unions (Saftu) general secretary Zwelinzima Vavi laid a criminal complaint against Trillian to pressure the NPA to prosecute those involved in state capture. Vavi penned a letter to Abrahams that same month, threatening to compel the NPA to take action through a court order.
Abrahams responded in October that he would oppose Vavi’s application because NPA investigators were busy attending to allegations of state capture revealed in the public protector’s State of Capture report.
Vavi, in an interview with Radio 702 on Tuesday, said that Abrahams’s bid to now act was influenced by the outcome of the ANC’s elective conference in December.
“He was clearly hoping that the NDZ campaign will succeed and had it succeeded we wouldn’t have had any of this, but the pressure we mounted worked,” Vavi said.
Despite Vavi’s application from last year, and the swathes of information in the public sphere around Eskom, Trillian and McKinsey, the court order is yet to be enforced.
Nxumalo told the M&G that the order to seize assets from McKinsey and Trillian would likely be enforced during this week.