amaBhungane & Scorpio #GuptaLeaks: Another German software giant implicated in ‘kickback’ payments
- amaBhungane & Scorpio
- South Africa
- 25 Jul 2017 12:53 (South Africa)
A second German multinational, Software AG, has been caught red-handed entering questionable commission agreements with a Gupta-controlled company in the hope of securing lucrative state contracts. A company that manufactures billboards and a letterbox consulting company also stood to rake in millions. By AMABHUNGANE, SCORPIO and NEWS24.
The #GuptaLeaks have already revealed how German software multinational SAP turned to the Guptas in their hour of need to clinch a R100-million contract from Transnet.
Now emails and documents show a second German company, Software AG, entered into an apparent kickback agreement with a Gupta-controlled company in an attempt to secure a R180-million contract from Transnet Freight Rail.
In a pattern that is becoming familiar, Software AG agreed to pay Global Softech Solutions (GSS) up to 35% of the value of the contracts it secured with Transnet, the department of correctional services, Mangaung municipality, Sasol and MultiChoice.
The Guptas’ Sahara Systems was in the process of buying into GSS, an IT services company, at the time.
But, as the saying goes, there is no honour amongst thieves.
The #GuptaLeaks also provides evidence that Software AG’s high-powered sales director, Riaaz Jeena, created a second sales commission agreement seemingly to ensure that he too would receive a slice of the pie.
Software AG is one of Europe’s largest software companies – last year it boasted €872-million (R13-billion) in worldwide revenue.
Like SAP, Software AG appears to have been willing to pay huge amounts of money to a Gupta-controlled company under the guise of “commissions” in the hope of unlocking huge contracts from the state.
In SAP’s case, this meant paying R100-million to CAD House, a small outpost of the Gupta empire that sells 3D printers.
With both SAP and Software AG there is little evidence that the Gupta companies contributed much beyond their political influence.
The Guptas did not respond to requests for comment. Software AG confirmed the partnership with GSS, but denied wrongdoing.
October 2014: The Mangaung deal
In 2014, Software AG was trying to replicate a fantastically lucrative deal it signed with Ekurhuleni – this time with Mangaung municipality in the Free State.
Ironically, it was Lawrence Kandaswami, the now-suspended managing director of SAP South Africa, who first introduced Software AG to GSS in October that year.
Although SAP and Software AG are competitors, Kandaswami appears to have been willing to act as go-between, passing information about the Software AG deal to GSS and the Guptas’ Sahara Systems, which was in the process of buying a 50% stake in GSS.
After receiving Kandaswami’s emails, Sahara’s Santosh Choubey passed them up the chain to Gupta lieutenant Salim Essa with the message:
“The same can be replicated exact solution in North West and Limpopo.”
Software AG was close to finalising the Mangaung deal, Kandaswami explained, but was now facing opposition from the municipality’s chief financial officer, who wanted an open tender. (The municipality insists it went no further than an initial presentation.)
The #GuptaLeaks provide no detail of what Essa did with this information, but the #GuptaLeaks reveal that in the months to follow, GSS became Software AG’s chosen partner on a number of potentially lucrative opportunities.
March 2015: Sensational signs of a retro-kickback
Although Sahara Systems would only formally take up its shareholding in GSS by September 2015, minutes of monthly meetings show that by March that year it was already firmly in control of GSS.
On 4 March, Choubey sent GSS’s new budget to Essa and Tony Gupta. It included four Software AG deals with potential revenue just for GSS of R56.9-million by December 2015 and another R54-million by December 2016.
The largest was a R180-million project for Transnet Freight Rail. The Mangaung deal that Software AG was having trouble closing was also on the list.
The commission agreement that Software AG would eventually sign with GSS allowed GSS to claim “referral fees” and “sales assist fees” for helping Software AG identify leads and helping Software AG close these deals.
But it appears someone else was also cutting themselves a slice of the commission payments.
Attached to a 9 March 2015 email sent by Choubey to another Gupta lieutenant, Ashu Chawla, is a draft agreement between GSS and Sensational Signs, a small company in the south of Johannesburg that manufactures steel frames for billboards.
A partnership between a Gupta IT company and a billboard company is odd enough, but the content of the draft agreement is even more suspect.
Dubbed a “Prospect Lead Provider Fee Agreement”, it promised to pay a “finder’s fee” of between 4 and 15% to Sensational Signs for identifying potential software deals or “leads” for GSS.
“In the event that [Sensational Signs] identifies Lead but elects to not actively pursue the sales cycle itself, but rather to refer such Leads to GSS, Sensational Signs shall be eligible to receive a Lead Provider Fee,” the agreement reads.
The obvious question is what kind of leads would Sensational Signs be able to identify for an IT company?
The answer is hidden in the metadata.
Since Sensational Signs was registered in September 2014, Mohamed Mobeen Jeena has been its sole director. He happens to share a surname with Software AG sales director Riaaz Jeena.
It is not clear what their exact relationship is, but records show that at various times the two Jeenas have listed the same unit in a complex in Winchester Hills as their residential address.
Although the draft agreement was between GSS and Sensational Signs, the document properties show that it was Riaaz Jeena who drew up the document on his Software AG computer.
And although Software AG was not mentioned by name anywhere in the agreement, the wording of the Sensational Signs agreement appears to have been lifted directly from Software AG’s own contracts.
Also, the potential deals listed in the four-page annexure are the same four leads listed in the GSS budget that Software AG was already pursuing: Transnet, Mangaung municipality, Sasol and MultiChoice.
It appears that what Riaaz Jeena was effectively putting in place was a retro-kickback agreement – a scheme designed to make sure that the person paying a kickback gets some of it back for himself or a nominee.
On the Transnet Freight Rail deal, for instance, GSS was potentially agreeing to pay R27-million to Sensational Signs as a “finder’s fee” for supposedly identifying the lead and passing it on to GSS.
On the Mangaung deal, the Sensational Signs agreement anticipated that GSS would take a 35 percent (R13.65-million) cut from Software AG while Sensational Signs, though not even in existence when the German multinational made its initial pitch to Mangaung, would be entitled to 10 percent (R3.9-million) supposedly for “finding” the deal.
Detailed questions were emailed to both Riaaz and Mohamed Jeena. Riaaz Jeena was “out of the office” all week and did not answer calls on his cellphone, while Mohamed Jeena terminated the call when told it was from amaBhungane.
May-July 2015: Software AG rolls out the red carpet
By May 2015, as the opportunities rolled in, Software AG and GSS were still formalising their new partnership.
Unlike CAD House, the Gupta-company implicated in the SAP scandal, GSS at least had a track record in the software industry.
“As part of extending the company skill set I attended the training courses … in Software AG learning academy,” GSS’s founder and one-time chief executive Leela Yemineni explained via email. “I started the partnership application with Software AG in November 2013 and company attained partnership in February 2014.”
The Power Up agreement did not detail the percentage that GSS would earn from Software AG, but the Sensational Signs document estimated that GSS’s share would be between 22.5% and 35%.
Software AG sales director Riaaz Jeena now also had an additional connection to GSS – in April, his wife, Fehmeda Alibhai, had started working for Sahara Systems. Minutes show Alibhai was now present in all the GSS monthly meetings where the Software AG deals were discussed.
Although the Power Up agreement between Software AG and GSS was in most respects a standard sales commission agreement, the question is what GSS brought to the party to justify the more than R100-million in commissions it expected to make according to its budget.
The agreement was clear that “Software AG will not accept leads that have already been … identified by Software AG itself.”
In the case of the Mangaung, it is clear that Software AG had identified the deal long before GSS came into the picture.
This was confirmed by Mangaung communications manager Qondile Khedama, who said in an email: “Software AG South Africa … made a presentation to the city’s management team in July 2014.”
The Sensational Signs document also makes it clear that the deals on the list were not new – some were scheduled to be finalised in less than 30 days.
However, in terms of the Power Up agreement GSS could still earn a sales assist fee if it “actively drives [the] majority of the sales cycle with Customer”.
However, most of the customers we approached claimed never to have heard of GSS.
The Sasol deal
Sasol’s group head of media relations, Alex Anderson, said Sasol first approached Software AG in February 2015 and later invited Software AG and three other bidders to submit proposals.
“Sasol was not aware of GSS as an organisation nor of GSS’ involvement and association with Software AG. Sasol did not engage at all with GSS… All engagements … were through Software AG directly,” Anderson said in an email.
Despite both GSS and Sensational Signs being missing in action according to Sasol, the Sensational Signs document shows that GSS, the company controlled by the Guptas, expected to earn R10.5-million from the Sasol contract, R4.2-million of which would flow to Sensational Signs, the billboard company.
Sasol said no contract was awarded in the end.
The MultiChoice deal
Like Sasol, MultiChoice says it had also never heard of GSS or Sensational Signs.
“MultiChoice concluded a contract with Software AG in 2015 for the provision … of a number of IT related services,” general manager of corporate affairs Jackie Rakitla said.
“All payments in terms of the contract are made to Software AG and to no other entity. Global Softech Solutions (GSS) is not mentioned in the above contract. MultiChoice has no relationship with GSS...
MultiChoice is also unaware of any alleged agreement between Software AG and GSS. As far as we can ascertain, none of our employees or authorised representatives have met with GSS or Sensational Signs.”
Yet, according to the Sensational Signs document, GSS expected to earn R4.5-million from Software AG for the contract, of which Sensational Signs would get R1.5-million for “finding” the lead.
Unlike Sasol, the MultiChoice deal did actually go ahead and a GSS spreadsheet details how the money appears to have flowed.
On 2 July 2015, Software AG paid R3.805,597 to GSS with the reference “MultiChoice deal”. The following day, GSS made two payments: One of R1.71-million (R1.5-million plus VAT) to Sensational Signs and another of R1.48-million to a company called Forsure Consultants. Both listed as a reference “MultiChoice deal”.
Little is known about Forsure Consultants except that it shares an address in Mayfair and a former director with Homix, the Gupta-linked letterbox company that amaBhungane previously revealed received kickbacks from Neotel and other companies on Transnet contracts.
The #GuptaLeaks spreadsheet also recorded that GSS transferred another R798,000 to Sahara Systems with the reference “MultiChoice deal”.
The Transnet deal
The only instance where GSS seems to have played an active role was at Transnet Freight Rail.
“Transnet received an unsolicited proposal from Software AG and Global [Softech] Solutions for the provision of a demurrage system…,” Transnet spokesperson Viwe Tlaleane confirmed.
Transnet bills clients for demurrage fees when a scheduled rail trip cannot go ahead because of delays on the client’s side. The proposed system would help Transnet to increase the amounts it collects.
“At the time, [Transnet] did not have a structured way of determining demurrage fees, and saw the value in having a system that would enable it to ensure effective and optimal use of its rolling stock,” Tlaleane said.
This resulted in Transnet entering a pilot project with Software AG and GSS in 2015.
“The contract is commission based and fees will be determined by revenue generated by Transnet on a percentage that is less than 50%.”
The draft agreement between GSS and Transnet found in the #GuptaLeaks indicates that GSS would receive between 49.5% and 50% of the revenue generated for Transnet: a potential R263-million in total. Software AG would receive a royalty for providing the software.
Although GSS was supposed to be the main partner on the deal, email exchanges show that it was Software AG and Jeena, its sales director, that drew up GSS’s proposal for Transnet.
Although Transnet said the pilot project was ongoing, Software AG’s Cassoojee denied any knowledge of it: “Software AG has not generated revenue from any of the references made in your request … apart from one Private Sector transaction which we cannot disclose... All other Proposals have subsequently expired and we have not entered into any additional agreements with GSS since December 2015.”
The prisoner deal
In addition to the four opportunities already identified in GSS’s budget and the Sensational Signs agreement, emails show Software AG was also pushing for Sahara Systems to submit a bid for a prisoner tracking system.
Software AG appears to have been hoping to sell Software AG’s products and GSS’s services to the department of correctional services (DCS) by using its new partner’s political connections.
“I want you guys to get all the services business more than anything else on this deal… I don’t have an idea on the size of the [software] license deal implications as yet, but the services would be huge on a deal like this!” Software AG partner manager Joanne Foster told Sahara’s Choubey in an email, before adding: “Do you have contacts and leverage @ DCS?”
Foster ignored requests to comment. AmaBhungane previously reported the contract was awarded to another politically-connected company.
It is not clear how much flowed from Software AG to GSS as several of the opportunities identified did not materialise. But there is very little evidence that GSS earned its fees by identifying leads or doing the sales legwork.
As with SAP, the Software AG commission agreement comes across as stage-managed to disguise payments to politically-connected people and their companies, in essence an apparent kickback for helping Software AG to secure business.
Software AG South Africa’s Cassoojee responded in writing:
“Software AG prospective Partners undergo a stringent verification process that ensures Partners are able to add value to the customer… Software AG is committed to conducting its business fairly, impartially, in an ethical and proper manner, and in compliance with all laws and regulations.”
Cassoojee did not, however, offer any insight into how GSS added value to its customers when three out of four potential customers claimed not to have heard of the company.
We also asked if Software AG sanctioned Jeena’s side deal between GSS and Sensational Signs. Cassoojee did not respond and none of the questions sent to Software AG’s head of corporate communications globally, Byung-Hun Park, went answered since our first email on 26 June.
We also put this allegation to Yemineni. He said via email: “Sincerely I was not involved in sales and finance from mid of 2014. Apologies.” He also said he had formally left the company in 2016.
In May 2016, Sahara Systems sold its 50% stake in GSS to Futureteq, which at the time was owned on paper by Imtiaz Emmamally and Fehmeda Alibhai. Circumstantial and source evidence suggests, however, that Futureteq is effectively controlled by the Guptas.
Either way, this potentially places Alibhai -- Jeena’s wife -- in prime position to benefit if the Transnet contract goes ahead.
Transnet’s Tlaleane told us:
“The trial period is set to expire late this year and [Transnet] will make a decision on whether or not to roll out the project in full.”
For now, however, GSS seems to be keeping a low profile. Its phones went unanswered all week; emails sent to official GSS email addresses bounced back; and a visit to GSS in Rivonia turned up an empty office.
Detailed questions were put to Emmamally, Alibhai and Gupta spokesperson Gary Naidoo, but none responded.
Meanwhile, SAP has confirmed that the international law firm it hired to investigate allegations that it paid kickbacks to the Guptas will also look at a December 2015 bid amaBhungane previously reported on, where SAP planned to subcontracted 60% of an R800-million Transnet software contract to GSS as its “supplier development partner”.
SAP’s Ansohpie Strydom said: “The investigations cover SAP’s entire South African operation, and include a review of all contracts… SAP has committed to sharing the results of the investigations once they have been completed.” DM
Original photo by Gallo Images.
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