The other Life Esidimeni scandal

The pattern of behaviour surrounding the deaths of psychiatric patients in the Life Esidimeni scandal — unexplained financial decisions, a strange urgency, a callous disregard for the wellbeing of vulnerable people, a lack of accountability — is not limited to the Gauteng department of health, suggests a written judgment by the high court in Johannesburg released this week. 

The province’s social development department acted in a similar fashion in an effort to do business with the same Life Esidimeni facility from which psychiatric patients were removed, according to the judgment. And, although the health department is coming under close scrutiny in the arbitration hearings currently underway, many questions about the social development department’s motives remain unanswered.

But things have changed since the court last had evidence submitted before it, the Gauteng government insisted this week, and it is busy cleaning house.

The written judgment, delivered on Friday, stems from a complex set of urgent civil claims and counterclaims between the Gauteng government and a small charity organisation, A Re Ageng, since late 2016.

According to a letter admitted as evidence, Gauteng’s social development department “saw an opportunity to go in and fund” Life Esidimeni, after the health department withdrew funding for the psychiatric patients who had long been cared for at the facility.

But a nonprofit organisation administered by Life Esidimeni, Life Recovery, was not registered on its financial systems and so could not be paid directly, officials said. Instead money was paid via “conduits” — registered organisations such as A Re Ageng — which were then to pay the money on.

“On social development’s own version in the present case a total of more than R37-million was paid or was to be paid into Life Esidimeni’s account as the administrators of Life Recovery within the space of six months,” Judge Brian Spilg said in his detailed judgment on the combined claims and counterclaims.

The “conduit” mechanism meant auditors would never know where the money went, he said. Neither Life Recovery nor Life Esidimeni would show up in payment records. In the A Re Ageng case, even Absa could not figure out where money paid into its account had come from, and mistook it for a foreign-exchange transaction.

The use of “conduits” raised a reasonable suspicion of money laundering and, on the face of it, was also a breach of both public finance law and a contract Gauteng entered into with the Life group, Spilg said.

Why officials, who risked serious personal penalties, used that mechanism remained unexplained. 

“Looming large are the acts of certain officials within social development who are in breach of legislation concerned with financial regularity. So too the curious situation where one department of the provincial department finds a service provider too expensive, which itself is strange as any remuneration would be pursuant to a costing evaluation process, yet another department will effectively conclude in haste an agreement with the very same service provider without any apparent tender or cost analysis.”

The sequence of events shown in court also meant it “cannot be ruled out” that officials backdated an agreement with Life Recovery — an agreement that was deemed confidential, which is not a standard practice.

“One would expect inquiries to be made as to who decided that the Life Recovery agreement should be treated differently, to whom its existence was restricted, from whom its existence was being withheld, and why,” Spilg said.

It similarly “cries out for investigation” how R5-million of the R37-million for the project was transferred to petrol company Kish Gas, which claims it was used to pay for diesel, which was then apparently spirited across the border in a fleet of tankers.

The explanation Kish provided “is riddled with commercial improbabilities” but should be easy to investigate, the judge said. Yet the court had no knowledge of such an investigation almost a year after evidence of it had first emerged.

A Re Ageng said the transfer of R5-million of government money from its account to that of Kish had not been of its doing, providing an account Spilg largely accepted, saying “the possibility of an outside[r] hacking cannot be ruled out”.

At the time of the alleged hacking, Gauteng government officials, who had created the situation by breaching finance rules, were aware that the money was in limbo, Spilg said.

Besides financial breaches that were considered a routine practice and a remarkable lack of urgency in recovering stolen money, the A Re Ageng cases also showed that “certain officials within the department [of social development] appear to have made it their personal fiefdom”, he said. When A Re Ageng was unexpectedly sent R10.2-million meant for Life Recovery, as part of a conduit scheme, it refused to send the money on without proper paperwork. One official tried to convince the charity’s bank to transfer the money and others threatened A Re Ageng with withholding its subsidy — and then made good on that threat.

Officials “have the power to switch funding on and off with scant regard for the wellbeing of the individuals in need of care (who in this case are generally indigent women and children who are victims of abuse),” said Spilg.

A Re Ageng this week told the Mail & Guardian it still was not receiving its regular scheduled payments from the Gauteng government.

“The only time when we get payment is when we do contempt of court against DSD [the department of social development],” its director, Mpule Thejane-Lenyehelo, said. “We are still not sure as to whether they will renew our payment going forward for the 2018-2019 financial year.”

Gauteng finance MEC Barbara Creecy’s office referred questions to Gauteng Premier David Makhura.

Makhura’s spokesperson, Thabo Masebe, said the premier had instructed that civil and criminal action be taken to recover the missing R5-million. There had also been clear instructions to all departments to halt “conduit” payments, he said.

Acting Gauteng social development head Makhukhu Mampuru said he had been brought in “in part to try and help the department get a better grip of the difficulties encountered with regards to A Re Ageng”.

On the back of an internal forensic report, which he declined to share, five “quite senior” staff were now undergoing disciplinary processes, he said, but he would not name them, say whether they were suspended or discuss details of the cases.

“There may be a general finding of wrongdoing [by the court] but we have to drill down to individual wrongdoing,” he said.

Mampuru also said his department was “vigorously pursuing” criminal action and the search for the missing R5-million, and welcomed the arrest in December of an A Re Ageng director after criminal charges were filed against that organisation.

The department had not filed charges against Kish, Mampuru said. “That is a matter for the police to unravel. The case we have laid should be able to get Kish Gas appearing in court and accounting.”

Mampuru said the department had evaluated the performance of A Re Ageng and was not satisfied with its work, so might not continue to fund it. There was also an internal forensic report, which suggests A Re Ageng may have been in the wrong.

“We were disinclined to have a relationship with A Re Ageng after this experience,” Mampuru said. “Their explanation for the disappearance of the money out of their account suggested their account had been compromised. That may or may not be true.”

Phillip De Wet
Guest Author

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