VBS bank heist: EFF’s family ties and moneyed connections

VBS bank heist: EFF’s family ties and moneyed connections
Original Photo: Economic Freedom Fighters (EFF) leader Julius Malema addresses the crowds during the party’s 5th birthday celebrations at Sisa Dukashe Stadium, Mdantsane on July 28, 2018 in East London, South Africa. (Photo by Gallo Images / City Press / Tebogo Letsie)

EFF President Julius Malema and his “corruption-busting” political party directly benefited from the VBS Mutual bank heist, a Scorpio investigation has found. Scorpio traced the flow of illicit VBS funds, earmarked for a property in the affluent Johannesburg suburb of Sandown, through three fronts that also dished out money to the EFF. Julius Malema stayed for years at the property, which is now registered as an EFF asset. Over R1,8-million of the same illicit VBS funds were used to prop up the EFF, Scorpio has found. Stripped to its essence, a company officially owned by Floyd Shivambu's brother made questionable payments to a company owned by Malema's cousin. Both these companies operated like slush funds which dispersed money to where it was needed. This is a story of how the constituency Malema claims to fight for – the poor, the young and the vulnerable – was robbed to feed the EFF leader's private and political interests.

Scorpio’s investigation found that the EFF received over R1.8-million in illicit VBS funds flowing through two fronts. An additional R430,000 was also paid in three tranches towards a luxury Sandown property where Malema used to stay since as early as 2012 – a property which has recently ostensibly been bought by and registered under the EFF’s name.

The Economic Freedom Fighters and its President Julius Malema benefited from the VBS Mutual Bank heist through a crude scheme run in a similar manner to the On Point Engineering corruption debacle of 2012. At the time, Malema was charged with money laundering, racketeering, fraud and corruption when he allegedly used proxies and fronts in order to siphon illicit money gained through fraudulent state contracts to himself and his family. Malema has since denied any wrongdoing, but then Public Protector Thuli Madonsela found he had benefited illegally from the On Point scheme and that he misused the Ratanang trust as a vehicle to transfer illicit funds.

The funds flowing from VBS were channelled to Malema, his family and the political party he founded in 2014 in exactly the same On Point-style way.

In written answers to Scorpio, Malema has, again, denied all wrongdoing. EFF spokesperson Mbuyiseni Ndlozi, too, carefully denied knowledge of illicit VBS funds propping up the party. (Read Ndlozi’s answers in full here.)

Reacting to Scorpio’s questionover whether the EFF leadership is aware that at least R430,000 in illicit VBS funds were pumped into the Sandown property, Ndlozi said: “It is not true, at least not for EFF purposes.” It is unsure why Ndlozi felt the need to qualify his answer in this style.

Malema reacted, saying I don’t lie Sisi, I stand by what I said in the press conference”.

The fronts and proxies funnelling illicit VBS funds towards the EFF and Malema

Scorpio’s investigation highlights Brian Shivambu, the brother of EFF deputy president Floyd Shivambu, and Matsobane Phaleng, Malema’s cousin, as the two main fronts for the EFF and Malema. Brian Shivambu and Phaleng were purportedly in control of two companies used as conduits for the illicit VBS funds: Brian Shivambu is the director of Sgameka Trading Pty Ltd and Phaleng the director of Mahuna Investments Pty Ltd. Brian Shivambu did not react to questions posed and Phaleng was unreachable.

Last month Brian Shivambu was fingered as a primary receiver of R16.1-million in illicit VBS funds in an investigation sanctioned by the Reserve Bank and conducted by Adv Terry Motau and law firm Werksmans. A leaked Whatsapp discussion between VBS kingpin Tshifhiwa Matodzi and a bank manager described Sgameka as an “extremely strategic account”.

(Malema referred questions as to the nature of the “extremely strategic account” to Matodzi, who was unreachable for comment.)

Adv Motau and the Werksman’s report, named The Great Bank Heist, only highlighted first-tier receivers of the illicit VBS funds and therefore did not mention or, in some instances investigate, Phaleng, the EFF or Malema.

Scorpio’s analysis, however, shows that Brian Shivambu and Phaleng derived very little personal benefit from the illicit VBS funds flowing into their purported companies.

Sgameka and Mahuna appear to be mere slush funds which had no legitimate income, did not operate like a normal business bank account and paid no taxes and paid no staff, Scorpio’s analysis of bank statements coupled with information gained from interviews with five key sources as well as WhatsApp messages between VBS role-players, show.

In this investigation, Scorpio will only focus on illicit VBS funds flowing to the Sandown property that housed Malema as well as funds earmarked for the EFF.

Last month, Scorpio wrote that the EFF received around R1.3-million in illicit VBS funds and that Sgameka paid about R10-million into Floyd Shivambu’s account. The information was based on a PEPS report (politically exposed persons) compiled by investigators. Upon further scrutiny of the evidence, it is clear that the income streams were more complex, based on the use of various fronts in order to siphon illicit funds towards various role-players.

Scorpio found more illicit VBS funds than initially mentioned earmarked for the EFF.

Scorpio’s analysis further shows that Floyd Shivambu did receive funds flowing from Sgameka as well as funds seemingly flowing through at least one front Scorpio has traced so far. Shivambu denied all wrongdoing, and accused Scorpio of conducting a “fishing expedition”. Read his full statement here.

Both Malema and Floyd Shivambu have repeatedly denied any wrongdoing or ever having benefited from the VBS robbery.

To understand how Malema and the EFF, despite their vehement denials, benefited from the proceeds of crime – in this instance money deposited into VBS by the poor and vulnerable – one needs to understand how the VBS robbery scheme worked.

Let’s take a step back:

Why VBS funds flowing into and out of Sgameka are proceeds of crime

It has by now been well documented that deceased mine workers’ funds with orphans and widows as beneficiaries, stokvelsand municipalities banked with VBS. Through various schemes – including the creation of fictitious and phantom accounts – the money of these vulnerable entities was stolen by politicians and the well connected, as shown by Adv Motau and Werksmans in The Great Bank Heist report.

Simply put –bona fide depositors gave VBS their hard-earned money for safekeeping while, in the background, VBS management siphoned these funds out of the bank in a variety of illegal schemes.

One primary beneficiary of the illicit VBS funds is Sgameka Trading Pty Ltd, a company purportedly owned and managed by Brian Shivambu. He did not react to Scorpio’s questions. Brian Shivambu did, however, publish a press release hours after The Great Bank Heist report was published. He claimed to have only received money from Vele. Scorpio’s investigation will show this was a crude lie.

Four factors, read together with Sgameka’s bank accounts as well as interviews with key sources, suggests that Sgameka operated as a front and a slush fund for the EFF and select EFF leaders. These are:

1.                 WhatsApps: Scorpio has a series of verified WhatsApps between the chairman of VBS Tshifhiwa Matodzi and Phopi Mukhodobwane, general manager of treasury at VBS, where a transfer of money from related party Malibongwe Petroleum Pty Ltd to Shivambu’s Sgameka is discussed.

On 8 June 2017, Matodzi requested a transfer of R5-million into the account of Sgameka. Said Matodzi of Sgameka: “This is an extremely strategic account.”

Considering that Matodzi allegedly kept himself busy with bribing influential politicians in order to bamboozle municipalities into investing in VBS, his remark over Sgameka’s influence is hair-raising;

2.               Email: Floyd Shivambu is linked directly to Sgameka by emails from his personal Gmail account relating to an additional property. (Floyd Shivambu is not the focus of this specific investigation.)

3.               Sgameka’s income: Sgameka had no legitimate income, did not operate like a normal business bank account and paid no taxes;

4.               Sgameka’s true income streams: Sgameka received R16,1-million from companies named Robvet Pty Ltd, Wegezi Power Holdings Pty Ltd, Vele Investments Ltd, Malibongwe Petroleum as well as cash deposits and what is labelled as “allocations”. Sgameka did not only receive money for “consulting services” to Vele, as Brian Shivambu claimed last month.

(Link to Brian Shivambu’s presser can be found here.

Between June 2017 and February 2018, Sgameka received 13 payments totalling R16,148,569 in illicit VBS funds. Considering Sgameka’s income stream, Adv Motau and Werksmans had this to say about the relevant companies in their report:

Malibongwe Petroleum: A fictitious deposit of R40-million was created for the company. Malibongwe Petroleum became a vehicle that was used to illegally extract money from VBS;

Vele: Through a fraudulent deal the company became a majority shareholder in VBS bank and was, directly and indirectly, a beneficiary of myriad fraudulent transactions. Matodzi headed the company. It existed for little else other than to facilitate fraudulent deals. Vele played a central and crucial part in the VBS scandal, so much so that the “…principle beneficiary of the looting was certainly Vele…”, Adv Motau and Werksmans found, and further said that “…it emerges very clearly that VBS and Vele have been operated as a single criminal enterprise with Matodzi firmly at the helm”;

Robvet: The company was used as a slush fund for “commissions” paid to influential politicians and municipal managers in order to get municipalities to invest in VBS. Illicit VBS funds flowed directly to Robvet, or in other instances flowed through companies in the Vele group (including Wegezi and Malibongwe Petroleum) into Robvet. Payments earmarked for front companies, politicians, mayors, and municipal managers were paid in cash or electronically transferred from Robvet. Adv Motau and Werksmans found that “VBS, from the Robvet account, made payment directly to front companies for the benefit of various municipal officials…” and that the VBS-management “did not regard the payments (from Robvet) as legitimate operating expenses and sought to conceal them”.

Sgameka’s income stream was alleged to be criminal bThe Great Bank Heist report. Receiving funds from Robvet – as Sgameka did – suggests that the politicians in control of Sgameka were somehow influential in getting municipalities to invest in VBS. A pattern of criminality involving Sgameka and its beneficiaries further emerges when considering Sgameka’s “income”: the money flows out of Sgameka as well as the above-mentioned WhatsApps about Sgameka’s “extreme strategic” influence.

The illicit money flows out of Sgameka

Bank statements further show that as quickly as Sgameka received these proceeds of crime, the money was moved mainly to the accounts of the EFF, Grand Azania Pty Ltdand Phaleng’s Mahuna Investments. Sgameka was used as a conduit for illicit VBS funds. Scorpio’s analysis suggests that Brian Shivambu, the ostensible owner of the company, utilised very little of the funds flowing through Sgameka for his own personal use – a clear indication that he was not the owner of the money as he purported to be, nor the intended receiver.

The last deposit into Sgameka was on 23 February 2018 – just days before VBS was put under curatorship, with effect from 11 March 2018. Since February money has only flowed out of Sgameka. The company did not receive funds from any other income stream other than from various fraudulent VBS schemes. The entire money flow into Sgameka is therefore compromised and illegal. In line with the focus of the current investigation, these payments are important:

1) Between July 2017 and December 2017, four payments totalling just over R1.2-million were made into two EFF bank accounts;

2) Between June 2017 and February 2018 Sgameka paid just over R4.8-million in nine tranches into Mahuna’s account.

The illicit VBS funds to Mahuna, through Sgameka

The director of Mahuna, and the purported owner is Malema’s cousin Matsobane Phaleng. According to Malema he and Phaleng are “not close”, Mail and Guardian recorded. An analysis of the Mahuna account, however, shows it is, like Sgameka, merely a slush fund with no proper income, expenses or any tax paid. Our analysis, coupled with information from sources, suggests Phaleng was merely a front and conduit for Malema and the EFF.

Phaleng derived little personal benefit from the illicit VBS funds flowing into his company. Between July 2017 and February 2018, eight payments totalling R110,000 and labelled as “director’s fees” flowed out of Mahuna. Phaleng is the sole director of Mahuna. Sources confirmed that the amount was paid to Phaleng.

This suggests that Phaleng was not the real owner of the account and not the intended receiver of the illicit VBS funds paid into Mahuna by Sgameka.

How the EFF benefited from illicit funds flowing through Mahuna and Sgameka

Between July and August 2017, another R600,000 earmarked for the EFF flowed from Mahuna into different bank accounts. Descriptions on the bank statements include “July 26” and “EFF GP”. July 26 is a significant date for the EFF – it is the EFF’s “birth date” as well as a referral to the 26July Movement in Cuba under the leadership of Fidel Castro. The illicit VBS funds labelled as “July 26” seems to have been allocated as payments for the EFF’s 2017 birthday celebration. The funds were paid into different bank accounts.

(There are more funds flowing from Mahuna earmarked for the EFF, sources said. These do not form part of the current investigation.)

In total, Scorpio has traced over R1.8-million in illicit VBS funds flowing from Sgameka and Mahuna in order to prop up the EFF.

Illicit VBS funds allocated to the Sandown property at address 49a Edward Rubenstein, through Mahuna:

As early as 2012, Malema has rented a property at 49a Edward Rubenstein, Sandown, Johannesburg

According to the neighbours of 49a Edward Rubenstein, Malema has lived on the property until fairly recently. According to Malema, he lives in Goodwood, Cape Town, at the moment.

Deed documents Scorpio has seen shows that in around June 2017, the property was transferred to the name of the “Economic Freedom Fighters”. The purchase price was R5,250,000. According to sources, the EFF’s national chair Dali Mpofu was the pointsman involved in discussions around the deal. Mpofu did not react to Scorpio’s questions. The origin of funds paid towards the house so far, and the total of such payments, are unknown at this stage.

When questioned about the origin of the funds for the Sandown property he utilised for personal benefit, Malema deflected, saying “The EFF will answer that one”.

The EFF did not.

When Scorpio prodded Mbuyiseni over the matter, he replied through Whatsapp that “we took a loan from one of the financial institutions”.

Asked whether the house is allocated to Malema to live in, Mbuyiseni said “no”.

Between July 2017 and February 2018 three payments totalling just over R430,000 designated for this property flowed from Mahuna. The payments were affected into different bank accounts and are linked to a pool and the 49a Edward Rubenstein property, sources confirmed.

(According to sources there are more illicit VBS funds flowing from Mahuna to this property. These do not form part of the current investigation.

Scorpio’s analysis further suggests that additional illicit VBS funds were utilised to fund Malema’s lifestyle and flowed towards his family and children. This has been confirmed by key sources. Our investigation into these payments continue.)

Did the EFF leadership know?

There is no evidence to suggest that Mpofu was aware of the origin of the funds flowing to the Sandown property. There is no further evidence to suggest that the EFF leadership – with the exception of Malema and Floyd Shivambu who from the investigation were clearly aware of proxies used to funnel money – knew the party and themselves were beneficiaries of illicit VBS funds. DM



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