/ 13 May 2022

NPA sees off challenge to restraint order on Gupta assets

Iqbal Sharma And Co Accused Appear In Court Over Estina Dairy Project In Bloemfontein
Former Transnet board member Iqbal Sharma appears at the Bloemfontein Magistrate's Court on June 07, 2021 in Bloemfontein, South Africa. It is reported that the suspects were arrested in connection with the failed R288 million Estina dairy project. (Photo by Gallo Images/Volksblad/Mlungusi Louw)

The National Prosecuting Authority (NPA) on Friday prevailed in a legal wrangle over the freezing of assets of the Gupta brothers and their business partner, Iqbal Sharma, worth close to R50-million when the Free State high court dismissed an application seeking to postpone the return date on a provisional restraint order.

The directors of the Guptas’ Islandsite Investments had sought a postponement pending the outcome of their application for leave to appeal a high court order that the company’s business rescue practitioners, and not they, had a right to represent the company in litigation around the restraint order.

Free State Judge President Cagney Musi had ruled that the directors had no standing to oppose the order without the authority of the business rescue practitioners. Islandsite’s application for leave to appeal was filed this week.

On Friday, the high court ruled that the interim restraint order would remain in effect until 20 and 21 October, when the hearing for the confirmation of the order as indefinite is expected to be heard. 

The provisional order was secured in June last year against Sharma, Islandsite and Nulane Investment, a company directed by Sharma and Salim Essa and accused of defrauding the Free State department of agriculture of more than R24-million.

The assets include Sharma’s R12-million Sandton home, his Porsche and other luxury cars and a second, sectional title property in Sandton worth R1.3-million, as well as the Guptas’s properties in Saxonwold and Constantia, valued respectively at R12-million and R22-million.

Sharma, a former member of the Transnet board, has been indicted on charges of fraud and money laundering last year, along with the former head of the Free State department of rural development, Peter Thabethe; the former head of the agriculture department, Limakatso Moorosi; and the former chief financial officer for agriculture, Seipati Dhlamini.

The state alleges that they colluded to channel money extracted from the provincial government to the Gupta family, who are the former directors and current sole shareholders of Islandsite. 

The NPA is seeking the extradition of Atul and Rajesh Gupta and their wives to stand trial alongside Sharma, and enlisted Interpol’s help to locate them at the time he was charged last year. They secured red notices for their arrest in February this year.

The department paid the money to Sharma’s Nulane Investment, ostensibly to conduct a feasibility study for a project that would form part of its flagship Mohoma Mobung agriculture programme, but instead it was shifted to Islandsite. 

The Nulane Investment deal was a precursor to the Vrede dairy farm scandal.

Nulane Investment had no staff yet the department secured a deviation from procurement rules to appoint it to perform the study on the basis that it has special skills. 

It then subcontracted Deloitte, at a cost of R1.5-million, to conduct the feasibility study. Nulane Investment subsequently changed the findings of the study to pinpoint Paras as the most suitable implementing partner for setting up a milk processing plant in Vrede.

It was plain, the NPA argued in court papers filed last year, that a fraudulent scheme had been concocted by persons with inside knowledge of the Mohoma Mobung project before it was announced or had been allocated a budget.

The money paid over by the department was transferred back and forth between Nulane Investment  and several companies, two of which were controlled by Atul Gupta, the NPA said in its founding affidavit ,which illustrates the centrality of Islandsite in the family’s money laundering operations.

The business rescue practitioners obtained Islandsite’s bank statements from February 2017 to January 2018, which showed money moving between different companies in the Guptas’s Oakbay operations with “bewildering rapidity”, the NPA argued.

On 1 March 2017, it received R28-million from Oakbay and immediately shifted the money to the family’s Sahara Computers company.

On 16 March 2017, Okay transferred R25-million to Islandsite, from where it was immediately transferred to Coalcor Mining. On the same day, a payment of just under R200 000 from Oakbay to Islandside was immediately repaid.

The business rescue practitioners then demanded an explanation for the rapid-fire transfers but never received one, the NPA said.

The affidavit also states that between November 2011 and July 2012 more than half a billion rand flowed through Islandsite’s Absa bank account, including the proceeds of Nulane Investment’s deal with the Free State agriculture department.

Last week, a full bench of the Johannesburg high court set aside an earlier court ruling that had discharged the provisional restraining order against the owners of Regiments Capital.

It also increased the amount under restraint to R1.6-billion.

The restraining order is a precursor to the Investigating Directorate’s plans to charge the owners of Regiments — Litha Nyhonyha and Niven Pillay and their former partner Eric Woods — with fraud, corruption and money laundering in relation to contracts with Transnet and one of its pension funds.

The Zondo state capture commission in February also recommended that charges of racketeering be brought against Regiments, Essa and businessman Kuben Moodley for syphoning funds from Transnet for advisory work, which brought the company no value, on a number of deals including the ruinous procurement of 1 064 locomotives, and saw kickbacks flow to Gupta-owned entities.

The high court ruling was an important victory and vindication for the Investigating Directorate. It appealed after the court a quo set aside the restraining order for material non-disclosure of Regiments agreement to repay Transnet R180-million and an informal undertaking by the company’s owners to cooperate with the NPA.

The court found that the Transnet agreement was not material, nor was the owners’ offer of cooperation, which “stated in the broadest terms” and promised nowhere that they would not dissipate assets.