/ 14 September 2023

State lambasts Nulane trial judge in petition to the supreme court of appeal

Iqbal Sharma 1
Iqbal Sharma, the head of Nulane Investments and accused number four. (Mlungusi Louw/ Volksblad/Gallo Images)

The National Prosecuting Authority (NPA) has approached the supreme court of appeal (SCA) for leave to appeal the discharge of the accused in the country’s first state capture trial, the Nulane Investments case, arguing that it was woefully mishandled by an acting judge who made a litany of errors in law.

In a strongly-worded application filed two and a half weeks after trial judge Nompumelelo Gusha denied the NPA leave to challenge her Bloemfontein high court judgment, it has submitted that she failed to meet the standards legally and ethically demanded of judges.

In April, Gusha found that the NPA had not cleared the barest threshold to prove its case against Free State officials and Gupta family associates in the R24.9 million fraud and money-laundering case, raising much concern about its capacity to convict those implicated in state capture. 

Last month, she held that the prosecution was impermissibly trying to reserve questions of fact, not law, and that even if this were entertained, it would not matter given the lack of evidence brought before court. 

While the prosecution has endured scathing criticism for its sometimes amateurish efforts in court, questions have also been asked in legal and government circles about the wisdom of assigning a watershed case to an acting judge and in its petition to the SCA, the state pulled few punches. 

It reiterated that the court had made nine material errors of law, and said the result was a grave miscarriage of justice.

Crucially, it said, a close reading of the April ruling revealed that the judge made no factual findings on material aspects of the evidence presented. 

Gusha had thus failed to substantiate her decision to grant section 174 discharges to former Transnet board member Iqbal Sharma and six co-accused after the prosecution closed its case and to acquit another, the former head of the provincial departments of agriculture and rural development, Limakatso Moorosi. 

That decision meant that none of them had to take the stand to answer the case put forth by the state, and it was not a fair one, the NPA said.

“The setting out of the evidence is disconnected from the decision to discharge. Not only is it a quantum leap, but the decision is not reasonable or rational having regard to the law.”

Her failure to set out her factual findings — first in her ruling, again later when the state requested her in writing to do so and finally in her August ruling rejecting its application for leave to challenge the judgment — meant that sections 146(a) of the Criminal Procedure Act and Article 9 of the Judicial Code of Conduct were not respected, prosecutor Jacyntha Witbooi said.  

“It is submitted that the judge’s failure to make factual findings and to provide reasons for her judgement amounts to a failure of the administration of justice and is, thus, a question of law,” Witbooi said.  

Gusha overlooked several common cause facts and the legal framework against which evidence must be measured to determine whether the accused had a case to answer, the prosecution added. 

These included that there was no justification for Free State officials to allow a deviation from procurement rules to award a contract to Nulane Investments — the fifth accused which was founded and directed by Sharma — 12 years ago to conduct a feasibility study that cost the state millions and paved the way for the Vrede dairy farm scandal.

“No lawful reason existed to depart from normal procurement processes,” the state argued, adding that the step was not fair, transparent, competitive or cost-effective. 

“It is common cause that Mr [Peter] Thabethe, Respondent 1, approved the deviation memorandum on 7 October 2011, as the head of department,” the state argued.

“It follows that the deviation is bad in law and if there is a prima facie case that is the genesis of the ultimate fraud, then he must at least give an explanation. Respondent 1 must, in classical terms, be put on his guard to explain why he approved a meritless deviation submission.”

The deviation plainly put Thabethe and other officials in breach of the Public Finance Management Act, the NPA argued. 

Gusha erred, it added, in finding that the state failed to prove that Moorosi — accused number 2 — signed the deviation.

“In her plea explanation, Respondent 2 admitted that she signed the deviation submission, therefore no authentication by the state was necessary.”

The court’s assessment that the prosecution was unable to prove that provincial officials broke the law in giving the contract to Nulane, meant that the case collapsed at the first hurdle because without proof that the money was stolen, it could not sustain the charge of money-laundering in relation to the rapid-fire transfers that followed to a raft of companies belonging to the Guptas.

Nulane outsourced the feasibility study to Deloitte — for a fee of R1.5 million — and then changed the auditing firm’s finding to insert Paras, an Indian firm linked to the Guptas, as the preferred entity to lead the dairy farm project.

The rest of the nearly R25 million, the state alleged, was swiftly laundered through the bank accounts of Islandsite, Pragat, Wone Management, Confident Concepts, Tegeta Resources, Oakbay Investments and Arctos Trading, which all formed part of the Guptas’ operations. 

R19  million sent to a Standard Chartered Bank in the United Arab Emirates controlled by the Guptas before landing in a Absa Cash Focus account held in South Africa, of which Atul Gupta was the systems manager.

The transfers were directed by the Guptas’ close associate Ronica Ragavan, accused number 8, who submitted that she was the treasurer of the family’s financial empire and moved money from entities that were cash flush to others that were short of funding. 

This explanation simply did not stand up, lawyers familiar with the case said, because the money barely landed in one account before being redirected to several others, sometimes in the space of minutes.

However, the court found that a financial expert witness for the prosecution conceded that there might be nothing sinister about the stream of “inter-company loans” in the Guptas’ operations, calling this a “death knell” for the state.

Not so, said the NPA. Moreover, a chartered accountant testified for the prosecution that Ragavan’s explanation and the documents generated in support of it “appeared to be crafted after the fact”.  

The evidence pointed prima facie to money-laundering, but had again not been properly evaluated by the trial court.

The state relied on the doctrine of common purpose to show that all the accused — as well as Atul and Rajesh Gupta and their spouses — colluded to defraud the state of millions for the benefit of the now fugitive family. But Gusha agreed with the defence that the state had, fatally, failed to prove an explicit prior agreement to the crime.

The prosecution countered that the law does not require an agreement to act in concert to be expressed. It can also be tacit and inferred from the actions of the accused, but Gusha failed to do so.

“The learned judge, applying only half the test for common purpose, prematurely ended the enquiry it [the court] was mandated to make.”

Gusha suggested it was an understatement to call the case investigation “a comedy of errors”, with the police failing to obtain original documentation that was crucial to proving the charges. Some of it was lost when the provincial department moved offices a decade ago.

The judge refused to admit copies as evidence and here, the NPA said, she misapplied the law on evidence.

“The judge incorrectly conceived and applied the best evidence rule and the legal principles as to what constitutes a ‘diligent’ search,” it argued, adding that she further contradicted herself by admitting those originals that were submitted to court, only to change her mind later and hold that the same documents were inadmissible. 

The court made another serious error in refusing indemnity to state witness Shadrack Cezula who typed the deviation, finding that he was “hell-bent” on distancing himself from any crime when, in order be indemnified, he needed to admit that he acted with the intention to defraud the agriculture department.

The court was not supposed to rely on the witness’s assessment of whether he had committed a crime, but to reach its own conclusion in this regard after weighing the facts. Denying him indemnity pre-empted the outcome of the accused’s application for discharge, Witbooi said, and created a perception of “pre-judging and bias against the state”. 

Moreover, the judge never invited the state to address the court on this issue.

“It is respectfully submitted that the procedure was not fair to either Mr Cezula or the state with devastating effects for both, [and] was contrary to established law and vitiated the trial.” 

In granting the discharge, Gusha said the only hope that the state had of securing a conviction would be if the accused were to step into the witness box and incriminate themselves. But this is not the correct test in a case with more than one accused, the NPA said, and here there were indications that the accused were in fact ready to incriminate each other.

Moorosi’s plea explanation and the cross-examination defence lawyers conducted on behalf of Thabethe, Sharma and three other accused showed clearly that this was likely to happen had they been obliged to take the stand, the NPA said.

She had therefore misapplied the CPA on section 174 discharges, the NPA insisted. The appellate court must consider whether, had this and the other alleged mistakes in law not been made, there would have been a reasonable prospect of the case ending in the conviction of the accused.

This was indeed so, Witbooi submitted. 

“The discharge of respondents 1 and 3 to 8 and the acquittal of respondent 2 were based on the learned judge’s wrong application of the legal principles, bad in law and a grave miscarriage of justice.”

The charges in this case underpinned the state’s failed application for the extradition of Atul and Rajesh Gupta from the United Arab Emirates. However, Justice Minister Ronald Lamola has signalled that he will pursue the matter and it is reliably understood that the state is preparing a second application for the surrender of the brothers.