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NPA's Hermione Cronje launches a double strike on Gupta...

South Africa

AGE OF ACCOUNTABILITY

NPA’s Hermione Cronje launches a double strike on Gupta Inc’s dirty Optimum Coal deal

From top: Investigating Directorate head Hermione Cronje in a media briefing at the NPA's head office on 24 May 2019. (Photo: Gallo Images / Phill Magakoe) | Arnot Power Station, Middelburg. (Photo: Wikipedia / Gerhard Roux) | Atul Gupta at the Randburg Magistrates' Court where he appeared on charges of obstruction of justice on 29 September 2010. (Photo: Gallo Images/Sowetan/Antonio Muchave)

A major battle looms as the NPA goes to court to preserve Optimum Coal Mine and Optimum Coal Terminal, the Guptas’ most prized package of assets in South Africa. It also seeks to block a debt-to-equity takeover by Daniel McGowan, one of the family’s former business associates, who is now on the verge of snapping it up for a symbolic R1.  

The Investigating Directorate (ID) of the National Prosecuting Authority filed two High Court applications for preservation orders under the Prevention of Organised Crime Act this week.

One seeks to grab the Gupta family’s shares in Optimum Coal Mine and Optimum Coal Terminal, following their controversial acquisition – allegedly funded with the proceeds of State Capture crimes – just over five years ago.

The State contends that cash from Transnet, the Transnet Second Defined Benefit Fund and Eskom was mobilised and channelled through, among others, Albatime, Trillian Capital Partners and Centaur Mining to help the Guptas pay for the 2016 purchase. 

The second is a parallel application to preserve a R1.3-billion creditor claim held by Templar Capital, a Bermuda company through which Daniel McGowan – a former Gupta business associate – now stands to acquire the business of Optimum.

Affidavits filed by Hermione Cronje, the outgoing head of the ID, set out details of the State’s double legal bid in anticipation of forfeiture applications likely to follow in the coming months. 

Both applications are premised on the State’s contention that the deals – the original Gupta acquisition of the Optimum package and the latest being driven through business rescue proceedings – are tainted by the proceeds of crime. 

The Optimum deal was signed in December 2015 amid a national storm around the firing of former finance minister Nhlanhla Nene and subsequent reports of former mining minister Mosebenzi Zwane’s trips to Zurich, allegedly to help seal the deal for the Guptas.

The Guptas hurriedly left South Africa several years ago and law enforcement is awaiting a decision on its application for Interpol Red Notices for four members of the family. Brothers Ajay, Atul and Rajesh as well as their former kingpin, Salim Essa, are also the subject of financial sanctions imposed by the United States in 2019. 

With this case the NPA seeks to have forfeited to the State the proceeds of one of the “primary criminal schemes” identified in former public protector Thuli Madonsela’s 2016 State of Capture report, Cronje says.

Indications are that this will be one big fat clash. Three sets of business rescue practitioners (BRPs) – those of Optimum Coal Mine (OCM), Optimum Coal Terminal (OCT) and the BRPs responsible for Tegeta Exploration and Resources – have refused to grant the NPA section 133 consent for the applications filed at the High Court in Johannesburg on December 8 2021. 

(This section of the Companies Act dictates the limits within which legal proceedings may be brought against companies in business rescue).

Cronje, in court papers, said this was unfortunate but hoped that the BRPs would come round. 

She warned that some of them may be guilty of an offence under the Prevention of Organised Crime Act (POCA) should they proceed with implementation of the OCM rescue plan and thereby give effect to the debt-to-equity deal.

The NPA requires the court’s leave to proceed with the applications filed. 

While concerned about the dissipation of assets, Cronje says the immediate risk has been mitigated by an undertaking from the BRPs to give the State notice of circumstances that may lead to the imminent implementation of the business rescue plan. 

The NPA’s applications come just six months after Paul Holden of Shadow World Investigations, testifying at the Zondo Commission, urged authorities to attach Optimum.

It is also mere weeks before Deputy Chief Justice Raymond Zondo, who heard extensive evidence about this transaction, is scheduled to hand a report to President Cyril Ramaphosa.

Sibusiso Tshikovhi, a chief financial investigator attached to the ID, says there are reasonable grounds to believe the Gupta’s shares in OCM and OCT – held via Tegeta – are the proceeds of unlawful activity. 

So too, Tshikovhi says, are the creditor claims of Centaur Ventures Limited (CVL) against OCM and if not, they are the instrumentality of the offence of money laundering. CVL’s claim was ceded to Templar in June 2020. McGowan controls both companies.

Tshikovhi’s affidavit was submitted in support of both applications. 

 

 

While McGowan contends that his creditor claim is in respect of coal pre-payments, Tshikovhi says most of the payments relied on should rather be seen as money laundering transactions.

Those, Tshikovhi says, were transactions by which the Guptas allegedly laundered the proceeds of crimes committed against organs of state and then used it to prop up the finances of their other entities in South Africa. 

“At the very least, R1.3-billion that underpin CVL’s (now Templar) claim against Optimum are the proceeds of crime,” Tshikovhi says. 

His affidavit contains an illuminating analysis of multiple transactions executed to help the Guptas mobilise cash to pay for Optimum in 2015/16, as well as several others, to cast doubt on the validity of Templar’s creditor claims.  

The payments in respect of Optimum included Eskom’s R659-million pre-payment for coal; an R104-million “loan” from businessman Kuben Moodley’s Albatime to Tegeta; another R152-million “loan” from Trillian Management Consulting; as well as an R842-million “loan” put up by Centaur Mining SA.

 

Without the cash put up by these various parties, the Guptas’ Optimum deal, then hinging on a payment deadline of 14 April 2016, would have collapsed, court papers state. 

Two affidavits submitted by Cronje say the State has clear evidence that the creditor claims held by Templar – currently the largest independent creditor of Optimum – are the proceeds of crime. 

“The funds underlying the CVL claims are funds that were advanced to CVL by the Gupta family’s Dubai company, Griffin Line Trading LLC, a company nominally controlled by Ajay Gupta’s son, Kamal Singhala.”

And, McGowan has himself stated under oath that money CVL received from Griffin Line was “money stolen from the South African government and laundered via Mr Singhala on behalf of his father and wider family members”, Cronje says. 

Although the NPA believes it was entitled to bring the Templar application ex parte, it has been brought with full notice to parties, as the NPA does not believe there is a risk of dissipation, at least not just yet. 

Cronje says the purpose of the preservation order in respect of Templar’s claim is to preserve the property. This is pending the outcome of an application for a forfeiture order that must be brought by the NPA within 90 days of securing the initial order being Gazetted, failing which it would lapse.

The criminal taint to Centaur/Templar’s claim has implications for Optimum Coal Mine’s business rescue plan. This is because the plan adopted in September 2020 resolved to allow Templar – a company controlled by McGowan – to use the CVL claims to acquire equity in Liberty Coal for McGowan’s benefit, Cronje says in her affidavit.  

Read this recent article by Daily Maverick for more on McGowan’s debt-to-equity deal and his bid to help liquidate the Gupta-owned Oakbay Investments.

Cronje says the BRPs would be committing a criminal offence if they were to proceed with the debit-to-equity deal involving Templar. The rescue practitioners of OCM, according to Cronje, have known since at least February 2019 that there was reason to believe that Centaur’s creditor claims were not based on authentic coal contracts but that they were devices used to launder offshore Gupta cash to prop up their local operations. 

“It is hoped that by the time this application is heard, the BRPs will have reflected on their duties not to commit money laundering crimes and will have furnished their written consent for these proceedings to continue.

“In the unfortunate event that the BRPs remain steadfast in their refusal to consent to this application, the Applicant (NPA) submits that there is an overwhelming case for these proceedings to be granted under section 133,” Cronje says. 

Due to the substantial overlap of facts across the two applications, the ID has asked the court to assign the same judge or judges to the matter. 

The applications are deemed urgent – in view of a looming March 2022 deadline by which date business rescue proceedings in respect of Optimum must be wrapped up. DM

 

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All Comments 18

  • This article is so complicated to understand. Just wonder how a judge, any judge (except Hlophe of course) will understand this. My well wishes to the prosecuting team. You’ve been hammered left, right, and centre. In my opinion largely unwarranted.
    Jessica, just how accurate is your article? To me it borders on the “trial by media”. If I learned anything in the last 7 days, is that media houses (or investigative journalism if you like) write articles in such a way that there is no doubt that the accused is 100% guilty. And many, many such articles appeared in DM and News24, with so many presented in such a way that it is…well case over. No need to go to court.

  • Jessica, can you please ask your boss Branco Brkic to respond to a number of articles that appeared in Independent Media Online implicating DM and Branco in person in various “crimes”. I know that Surve is a scumbag, but would still like to hear or read DM’s, or Branco’s, side of these accusations. You might brush it off, but many DM readers might not.
    In particular, I would like to know the following:
    1. Number of daily readers to DM
    2. Number of “insiders” or subscribers if you wish
    3. Circulation of your P&P newspaper, DM168
    I wish to emphasise that articles in all online media, and printed media, are nowadays compared to social media, in particular YouTube. To give any medium credibility, transparency is vital

      • Charles, you are right, or I believe so. But some 8.7 unique browsers of IOL might not. Here are some figures, the last available, of “unique browsers” to some online media:
        News 24 11.6 million; IOL 8.7 million; Times Live 6.9 million; The South African 5.3 million; EWN 4.1 million; Daily Maverick 3.8 million.
        IOL is thus second only to News24, regardless of how much fake news they publish. And unfortunately people tend to believe in what they read. SANEF has no control on what is being published by IOL. So to just brush it off is problematic.
        It is however when it comes to “Investigative Journalism” that things really become a major problem. AmaBhugane and DM are known for their quality of their investigations, by and large. But the same cannot be said about all other media. That is why I think the NDPP, Batohi, really got the bad end of the stick following recent developments with the resignation of Cronje. She has been blasted by each and sundry, including commentators on DM such as yourself, often not knowing the real facts. Her major gripe? “Trial by Media” is very real. Journalists, most without any legal background, often publish an article with a sensational headline, making most ridiculous claims. And readers believe it. Never, ever have I read an article where a journalist withdraw an article due to incompleteness or false information. In that regard, they are just like politicians.
        I think Brkic has to respond to the claims made by IOL.

        • Try emailing any of the editors of IOL. The addresses don’t exist. When they tell me about 10 babies and promote their owner’s corruption on their front page they have left the building – the building where normal journalists work. So, to even compare DM to ILO and you have lost me.

    • ‘ You might brush it off, but many DM readers might not’. On the whole I very much doubt many DM readers read any articles from IMO.
      As you say Surve is a scumbag, so why waste time on the crap he publishers? Despite all the evidence to the contrary, or lack of evidence, he will still stick to his guns regarding a woman having given birth to 10 babies. The truth and facts are not important to him. Very few have enough hours in the day waste on stuff like that.

      • No comparison, as I agree with you. Just stating the facts that they have an immense number of readers. Why? I have no idea. Don’t shoot the messenger

      • Online media are not measured in terms of circulation figures, only print media. And it is not compulsory to join the ABC, but advertisers take a dim view if you do not have an ABC certificate And yes it is easily available if u do some research. The dailies with the biggest circulation are the tabloids, like, Daily Nation (the biggest by far), Daily Sun, Isolezwe, Sowetan, Die Burger, Bukedde, Citizen, Star, Beeld, Die Son. Online media are measured in terms of “unique browsers”, and “page views”

  • I would not give him Oxygen, by replying
    He should be in court or prison for his Ayo deals and is trying to deflect or post attention elsewhere.
    I read the star religiously for more than 30 years, today I refuse to even look at the headlines as I stand in the checkout queue

  • Huh? And, McGowan has himself stated under oath that money CVL received from Griffin Line was “money stolen from the South African government and laundered via Mr Singhala on behalf of his father and wider family members”

    How can McGowan try and complete the debt:equity swap?

    If he gets the shares he will never ever set foot in the country. Too many legal problems and many hyena around. He will also find himself on the same US sanction list as the Guptas.

  • I must say that I do appreciate the transparent trail presented of the flow of money here and the quotes from parties that explain why there’s a fishy smell to the R1 deal being questioned.

    Too often after we hear of dodgy deals there’s a lot of clever lawyering that ties things up for years – which is probably why we all keep telling the NPA we’re tired of waiting – and see the implicated parties still living the life of Reilly from the ill-gotten gains.

    In an exciting aside, for me at least, the current Interpol president is from the UAE, so hopefully a bit of judicious conversation about the optics of harbouring a notorious family who refuse to have their day in court will expedite things.

  • Jacob Zuma hollowed out the NPA, the judiciary and the police to such an extent I doubt that we’ll ever see any convictions. This story has been bouncing around for years along with plenty of other Gupta scams and to to date, not one conviction. The same goes for virtually all other corruption cases because the ANC has become a legalised Mafia and protect each other to the hilt. There have been proceeds of crime attached from the Gupta’s but we need a conviction which I doubt will ever happen

    • We have not seen any prosecutions because the bar for a successful prosecution is so much higher, and it requires multi-sectoral cooperation between the SAPS/Hawks, NPA, DoJ, etc, all pulling together to find and present material evidence, whereas sitting at a desk in front of DCJ Zondo requires none of the hard work. And in addition, the way investigative reporting is often presented as cut-and-dried cases is far from the leg-work required for a successive prosecution. Oh wait, I didn’t even blame the ANC or Ramaphosa. Imagine! Let’s make it lazy and just blame Ramaphosa.

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