SCORPIO

Eskom puts the brakes on Gupta insider Mark Pamensky’s R1-million-plus legal bill

By Jessica Bezuidenhout 7 May 2018

Eskom power lines run through an open field as the sun rises on a cold winters day in Johannesburg, South Africa, 08 June 2015. Insert: Mark Pamensky. EPA/Kim Ludbrook

A deal which sought to indemnify former Eskom board member Mark Pamensky from the payment of legal fees following the State Capture scandal has come under scrutiny as the state-owned company now seeks to recover all moneys that were paid to his lawyers “in error”. Pamensky is the businessman who was so tight with the Guptas that some of his “Hi Chair” emails to Atul Gupta have saddled him with allegations that he breached the Companies Act, the Public Finance Management Act and the Prevention of Organised Crime Act.

Mark Pamensky’s lawyers submitted over a R1-million in invoices to Eskom for legal fees arising from the former board member’s State Capture legal woes.

South Africa’s state-owned electricity utility confirmed it has to date paid just over R300,000 towards Pamensky’s legal fees and nearly R200,000 for registered A-grade security guards at his private home following the release of former Public Protector Thuli Madonsela’s State of Capture report and following his departure from the Board.

Payment of the legal fees were stopped when Eskom, according to Pamensky, did a volte face on an exit contract – one that a legal review later found to have been “contrary” to the company’s Memorandum of Incorporation, the Public Finance Management Act and the Companies Act.

Pamensky, also a former non-executive director of two key Gupta companies, was unaware of this development when contacted by Daily Maverick although he knew of the resistance to the payments, according to various correspondence between him and Eskom.

In a detailed response to questions, Pamensky said the deal was as a result of Eskom’s own actions and that it was done to avoid a protracted legal battle and in the interest of the public.

Read Pamensky’s full response here.

While Eskom directors and executives qualify for legal protection through the company’s directors’ liability cover, Pamensky demanded a separate deal – in part, because he wanted his own legal team and not the law firm handling Eskom’s response to the State Capture report and, ultimately, its response to an official commission of inquiry.

Documents perused by Daily Maverick show that he insisted on the deal for several reasons, including concerns about what the former Eskom management “had hidden” from the board.

Following the agreement, signed on November 23, 2016, Pamensky’s lawyers submitted nine invoices to Eskom between February and August 2017. Some of those seen by Daily Maverick are titled “Public Protector Report”, presumably because they relate to Pamensky’s efforts to respond to claims in the State Capture report which contained damning allegations of how some at Eskom had bent over backwards to aid the Guptas’ controversial acquisition of Optimum Coal Mine.

The invoices make for curious reading as they include items for, among other things, fees for several advocates, three of them senior, a R25,000 “standby fee”, an item relating to a “Business Day report,” a “Democratic Alliance application” and discussions with an advocate over an unspecified “declaratory application”, which may well have involved a confidential legal consideration on Pamensky’s part.

One item is marked “Denel vs National Treasury”, a matter that on the face of it has nothing to do with Pamensky or his time on the Eskom board. In that bizarre case, the state-owned arms manufacturer, Denel, took then minister of finance Pravin Gordhan and National Treasury to court in a bid to compel them to approve a controversial joint venture with the Guptas to establish Denel Asia.

Pamensky maintains that the exit contract was concluded in an effort to “assist Eskom in saving face” after the resignation announcement and said that leaked details of his legal bills may be in breach of a confidentiality clause contained in the contract.

He confirmed that his legal team required the pleadings in the Denel matter for valid purposes, adding those were confidential as divulging them may prejudice his case.

However, he said, Eskom never queried any of the bills.

“I was never given a chance to provide explanations, supporting information or documentation in support of the bills. After numerous undertakings to provide me with information that I requested and pay the outstanding amounts for months, Eskom simply did not.” And, he personally settled the outstanding invoices, including the Denel-related item.

While the invoices were submitted by Pamensky’s personal attorneys, Stein Scop Inc, they were made up of disbursements to other named lawyers, advocates and investigation experts consulted on the businessman’s case.

Documents show that of the invoices submitted, Eskom paid two, in the amounts of R170,772 and R139,165 respectively, but then the parastatal’s now suspended head of legal, Suzanne Daniels, pushed back. Bills of between R1,641 and R388,729 remain unpaid by Eskom.

Daniels, in a detailed memo to the board on September 17, 2017, explained the background to Eskom’s handling of the State Capture investigation and then dealt specifically with Pamensky’s special deal.

In the memo, she told the board that back in 2016, upon receiving a letter from Pamensky for Eskom to sign an engagement letter with his personal attorneys, she referred it for further legal advice as she did not believe that Eskom could legally agree to it.

Legal advice obtained by Eskom said it would not be “prudent” for the parastatal to agree to payment of his legal fees because it has insurance with AIG to cover directors against these types of eventualities.

A response to Pamensky was drawn up but it is unclear if it was ever sent. It stated among other things:

In the circumstances, Eskom would unfortunately not be able to conclude any engagement letter with your attorneys, as the legal cost and fees in respect of the investigation should be covered by AIG.

It should be noted that all decisions and actions taken by Eskom in relation to the State of Capture report must serve the best interest of the company and not any individual director,” the document states.

However, Daniels then went on to state in the board memo that prior to having issued the response to Pamensky, there appeared to have been a few sideline meetings between Pamensky and some board members as the exit contract, one which indemnified him from legal fees, suddenly emerged for her to finalise and sign.

This agreement broadly covered his resignation, personal security arrangements for up to 12 months, access to documents relating to legal proceedings in which Pamensky may be cited insofar as it relates to his board stint and coverage of his legal fees, albeit with a caveat – that it be done in accordance with the company’s MOI and “other applicable laws”.

It was approved through a Round Robin resolution by the People and Governance Committee of the Eskom Board on 23 November, 2017 and signed on the same day.

Daniels declined to comment and referred queries to Eskom which confirmed that payments were stopped and that a legal review had indicated that the contract and payments were outside of legal provisions. In response to follow-up questions from Daily Maverick, it said it was now in the process of initiating steps to recover that money from Pamensky.

Payments were done in terms of the resignation agreement between Eskom and Mr Pamensky which agreement, after being reviewed by Eskom legal advisers, was found to be contrary to certain provisions of the Eskom MOI, PFMA and the Companies Act, amongst other things,” the parastatal said.

Eskom also said it does not know why the previous Eskom board had entered into the special contract with Pamensky.

The resignation blunder

The paperwork suggests that Pamensky may have had the parastatal somewhat over a barrel. This was because former public enterprises minister Lynne Brown had prematurely announced his resignation when Pamensky had merely sought to highlight, once again, his Gupta ties in view of a Cabinet decision to appoint Eskom as the lead procurer for the controversial nuclear deal which was still on the cards back then.

He asked to be recused from any nuclear-related deliberations, strategy sessions or documents so as to avoid any potential conflict of interest in view of his board positions with the Gupta entities, Oakbay Resources and Energy and Shiva Uranium which he said has as its major asset a uranium mine which is “directly” involved in the nuclear energy industry.

Read Pamensky’s email to former Eskom chairman Ben Ngubane here.

Pamensky offered to resign should the board or government as the shareholder deem his dual role a potential conflict of interest. But Brown jumped the gun by announcing his resignation and that seemingly triggered the exit contract.

Pamensky, now really unhappy, wrote that his name had been “dragged through the mud”, that “public opinion had snowballed in the press to the extent that I was now being vilified for speculative reasons over a resignation I had not yet tendered”.

After threatening Eskom that their actions were a “reportable” irregularity, he proposed to regularise things by laying down set terms for his exit from the board.

This included the deal for legal fees and that his lawyers be provided with access to all documents required for him to respond to the State of Capture report and other matters emanating from that.

Daniels, in the September 2017 memo, told the board that Pamensky had made several requests for Eskom records to aid his response to the anticipated commission of inquiry into State Capture which, at the time, was in any event on hold, pending the outcome of former president Jacob Zuma’s review application of the PP report.

Notwithstanding that the appointment of the Commission of Inquiry by the president is subject to judicial review and that Pamensky is not identified as a potential witness for the parliamentary inquiry, he nevertheless persists with his requests for information,” Daniels wrote.

The information requested by Pamensky includes board and board committee packs, transcripts of the board and committee meetings, minutes of the board and committee meetings, coal supply agreements between Eskom and other entities identified in the report.

The more recent requests have extended the scope to include matters that do not form part of the report including the Denton’s Report and the PwC report.”

International law firm Dentons was commissioned by the Eskom board in 2015 to investigate a range of major issues at the parastatal that included load shedding, its financial challenges, the cost of primary energy and delays with construction of new power stations at Medupi and Khusile, while the one by PwC highlighted procurement flaws in a coal supply contract involving the Guptas’ Tegeta Exploration and Resources.

Clearly, given his declared conflict of interest at the time, he is not entitled to all of this information and Eskom is entitled to decline his request for such information where it is in the interest of the company to do so,” said Daniels.

Across the various correspondence seen by Daily Maverick it seems that Pamensky also had a beef over how Eskom had responded to the public protector’s report. He claims that affected individuals had not been given an opportunity to consider the claims against them and that Eskom had unilaterally presented a consolidated response.

Late in 2017, in what was another bid to get Eskom to pay up for his legal fees, Pamensky wrote to various people at Eskom, including then interim chairman, Zethembe Khoza. In the message, titled “Eskom lies”, he mentioned a board resolution to cover the legal fees of the affected directors and stated that there was no mention that it would be covered by insurance.

I was clear that I don’t want to be represented by CDH (Cliffe Dekker Hofmeyr, Eskom’s attorneys) as there may be a conflict of interest with management in that the board and myself has no idea what management had done and what they hid from the board.”

Directors’ liability cover

Most public companies, including state-owned enterprises, provide management liability cover for directors or office-bearers who may face legal action as a result of their work. An obvious presumption here is that such cover is designed to protect them from legal consequences for decisions or actions resulting from the execution of their duties – not for delinquent conduct.

Eskom’s directors’ insurance is provided for in terms of the PFMA and the company’s MOI which mimics the provisions of the Companies Act.

As at March 2017, Eskom, through its insurer, AIG, had R250-million in directors’ liability cover that includes up to R10-million per non-executive director.

Under the nearly R7-million-a-year policy, directors are also insured for up to R500,000 for actions stemming from the United States Foreign Corrupt Practices Act.

It is unclear why Pamensky was so hell-bent against using Eskom insurance, something that may have allowed for an independent assessment and possibly full cover of his claims from the onset.

But Daniels, in her missive to the board, raised legal restrictions that may have posed a headache for some of the Gupta-aligned former directors.

The policy states that AIG shall not be liable for any cover arising out of, based upon or attributable to the “gaining of profit or advantage to which the insured was not legally entitled, or committing of any deliberately dishonest or deliberately fraudulent act” – in the event such is established by final adjudication of a judicial inquiry or tribunal or by any formal written admission by those involved.

In service of Eskom and the Guptas

Pamensky, like several of the former Eskom board members drawn into the State Capture scandal due to their Gupta ties, have not yet been formally charged for any wrongdoing.

However, civic organisation Outa opened a case against him and several others in 2017 as a result of information contained in the #GuptaLeaks, the cache of leaked emails that have since come to cripple the Gupta empire as it revealed the extent of their influence over government officials and government business.

The leaks showed how Pamensky allegedly sent emails to Gupta brother, Atul, regarding among other things the family’s acquisition of Optimum Coal Mine from commodity trader, Glencore. In that controversial transaction Eskom approved a R600-million upfront payment for coal for the Gupta-owned Tegeta which helped them cover a shortfall on the Optimum purchase price, coincidentally of the exact amount.

Appointed to the Eskom board by Brown in December 2014, Pamensky was always upfront with his Gupta ties; his Eskom declarations show that he alerted them of his role in the Gupta companies and also of an arms-length association with the Gupta-linked Trillian Capital Partners, the company embroiled in a R1.6-billion scandal following a dodgy deal that also involved US consulting firm, McKinsey & Co.

Read Pamensky’s Trillian declaration here.

It is perhaps not surprising that Eskom is digging in its heels over Pamensky’s legal bills – one of the fee items in the invoices submitted involves “Mr Pamensky’s PEP status”.

A “PEP” is an internationally used term for politically exposed persons; rather puzzling that Eskom would have been billed for such an enquiry in 2017, well after he had left the parastatal. This may have been more useful if done and managed during his tenure on the board since he not only “served” taxpayers but also the Gupta-owned companies during that time. DM

Send tip-offs to Jessica@dailymaverick.co.za

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