Auditor General drawn into Armscor’s R8bn covert-deal battle

PRETORIA, SOUTH AFRICA – NOVEMBER 29: Auditor-General Kimi Makwetu during an interview on November 29, 2014 in Pretoria, South Africa.(Photo by Gallo Images / City Press / Leon Sadiki)

An international arms trader, in relentless pursuit of alleged unpaid commission going back to the 1980s, now wants the Auditor General of South Africa to release apartheid-era records to boost his civil claim against the state arms procurement agency in Portugal.

The Auditor General of South Africa faces a High Court application to produce records relating to Armscor’s controversial acquisition of 50 Puma helicopters from a French armaments company more than 30 years ago.

This apartheid-era transaction has haunted the state-owned entity for decades – it is highly contentious, having been billed as an unlawful, sanctions-busting deal by the current Armscor in its fight-back against an R8-billion civil claim in Portugal.

Details of the covert deal are meticulously presented in Apartheid Guns and Money: A tale of Profit, the 2017 book by Open Secrets director, Hennie van Vuuren, whose organisation subsequently exposed alleged efforts to lobby former President Jacob Zuma for political assistance in 2010.

Now, Jorge Pinhol, the Portuguese arms trader who says he facilitated the deal before allegedly being duped out of his commission, wants access to confidential South African government records via the Auditor-General having had no luck with soft approaches for assistance over a two-year period.

Pinhol’s companies, Beverley Securities Ltd and Beverley Securities Inc, two UK and Panamanian registered entities, allegedly acted as a third-party facilitator to help South Africa and the French seller, then called Aerospatiale, to secure a secret delivery channel for the Pumas.

This was done through the Portuguese military which scored an upgrade for 10 of its own Puma helicopters as a result of the covert 1987 deal.

Dubbed Project Adenia (later Gamble and Kingsley), the additional 50 Pumas were bought in spare part kits for assembly in SA where they were renamed Oryx to hide its French origin given the country’s discomfort with dealing with the apartheid government directly at a time of a United Nations arms embargo.

In papers filed at the High Court in Pretoria on Tuesday, lawyers for Pinhol’s companies argue that the records of Project Adenia are critical and relevant to his ongoing case against the state-owned company.

They are relying on the Foreign Court Evidence (FCE) Act – a local piece of legislation that permits the gathering of evidence for legal proceedings beyond SA shores – to get the AG to dig up and hand over records.

Their FCE application is not without hurdles but it is their best shot as they cannot rely on the Promotion of Access to Information Act (Paia) which does not allow for records to be requested from a public body for use in civil or criminal litigation.

The AG’s office, in response to questions from Daily Maverick, said it has not received a copy of the court papers and therefore could not comment although court papers contain details of previous unsuccessful attempts to secure the documents. The AG is likely to oppose this application.

Armscor, cited as an interested party, had also not as yet been served but it said it is aware of the bid to gain access to the records through the AG.

Armscor shredders worked ‘day and night’

An affidavit submitted by David Lawson, lead attorney for Pinhol’s companies, states that the now aged and sickly businessman never received a copy of the commission agreement due to its “top secret” classification.

But, that the helicopters were delivered to South Africa between 1989 and sometime in the early Nineties and are in fact still in use in the country today, is not in dispute.

Lawson says Pinhol at the time did not insist on a copy of the agreement, given that he had done a dry run on a smaller Armscor deal and was paid for it.

It is probable that the commission agreement and the larger procurement agreement were among the many Project Adenia documents that were shredded and destroyed in the so-called Project Massada, a 1994 operation aimed at destroying sensitive documents in the possession of Armscor.”

Lawson says a witness in their case, retired South African Brigadier Frederick Phillipus Furter, has already provided an affidavit about how Armscor shredders worked day and night to destroy documents before South Africa’s first democratically elected government came to power in 1994.

But they have brought this High Court application believing that a paper trail still exists in other government quarters and have fired the first salvo at the AG’s office in the hope of extracting unspecified records to aid their civil claim in Portugal.

Among those, Lawson says, would be records relating to transfers to and from a Special Defence Account then operated by Armscor.

He says his team has unearthed information from a former auditor who had worked at the Auditor General. The former auditor, who is named in Lawson’s affidavit, allegedly told them that he was responsible for auditing transfers of covert funds, including those made at the request or instruction of Armscor for foreign procurement programmes such as Adenia (through which the Pumas were bought).

Due to confidentiality obligations, this individual is not able to provide evidence in the Lisbon civil suit but Lawson says he gave them enough information to extend their hunt for records to the AG’s office.

The Special Defence Account rested under the control of both the minister of finance and of Defence at the time.

Lawson said the former auditor told them that a specific task of the AG’s office was to ensure that the necessary signature from the two representative ministers was obtained prior to the release of any funds from this account.

In short, documents relating to each transfer of State funds to Armscor – including all covert transfers – made during that period relevant to the Portuguese civil litigation would have been separately held in each of the two Ministries, as well as the office of the AG.”

He said while Project Massada resulted in a substantial wipeout of records at Armscor, there is no indication that a similar mission took place at the office of the AG.

Unfazed, Armscor has challenged Pinhol’s claims every step of the way. Part of its argument is that the deal was unlawful, sanctions-busting in nature, that Pinhol’s companies played no role and therefore it does not owe him a dime.

It did, however, lose two preliminary rounds in Portugal, including an unsuccessful legal challenge that Portuguese courts did not have jurisdiction to hear the case.

SA government has duty to oppose Pinhol claim’

After taking its jurisdictional challenge all the way to the Portuguese Supreme Court of Appeal, Armscor was slapped with a 1-million euro cost order in 2013 – payable regardless of the outcome of Pinhol’s Lisbon claim.

Lawson also takes issue with Van Vuuren’s portrayal of the deal as a sanctions-busting one and that some of those involved in the claim were acting like “bounty hunters,” driven by greed. This, Lawson states, is inaccurate and “defamatory”.

Pinhol’s case is being financed by among others, a Canadian billionaire, John Risley, who stands to benefit handsomely from a successful claim.

Bizarrely, Lawson says, the claim against Armscor is not one aimed at the South African taxpayer.

There can be no doubt that Armscor, as a commercial entity, is more than capable of paying any (civil) judgment that may be granted against it….”

He also contends, in his statement, that the helicopters were bought by Armscor for “sea and rescue” purposes that would not have been covered by the United Nations Arms embargo at the time.

To this, Van Vuuren, who is an expert on this transaction and several others through the work of Open Secrets, an organisation whose mission is the investigation of private sector economic crimes that result in human rights violations, said:

The intended use of the weapons was to prop-up apartheid. This was a violation of the United Nations sanctions and Mr Pinhol, by his own admission sought to profit from this secretive criminal conspiracy.”

Van Vuuren added that a civil claim by a “shady arms broker” for an “illicit” transaction is something that the democratic government has a responsibility to counter.

While there is no question that access to apartheid-era records would serve to benefit the public by shedding greater light on economic crimes of that time, such efforts by those who actually benefited from the system and who may continue to seek benefit out of it, is not likely to go down well with the taxpayer.

Activists, in the interest of transparency, have been at this for years. “We don’t need a Pinhol to open this door for us,” Van Vuuren said.

They want us to see it as a purely commercial transaction. Nothing about it was.”

Said Van Vuuren: “Armscor does not exist as an entity in a vacuum.” It is a government agency and if forced to pay up, it will be the South African taxpayer that is saddled with that burden.

This is not Pinhol’s first legal attempt in SA. His case first reached local courts in 1993 but was withdrawn without prejudice in 1994 as a result of an evidence gap. Since then, they have secured an Armscor whistle-blower who is among a group of voluntary witnesses lined up for proceedings in Portugal.

In 1996 they went to French courts to try and recover 50% of the commission allegedly payable by Aerospatiale but lost there three years later.

The current lawsuit was filed in Lisbon in 2008, just in time to escape that country’s 20-year statute of limitations or prescription period for such claims. In South Africa, civil claims lapse unless filed within three years. DM


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