You ANC nothing yet: Liquidators subpoena lawyer over R50m donation from Regiments Capital to party’s 2016 election campaign
The company made a generous payment towards ANC election expenses in 2016. Now liquidators want paperwork from the lawyer whose trust account the funds were channelled through.
A lawyer acting for the ANC has gone to court in an attempt to sidestep a subpoena to appear as a witness in a Regiments Capital insolvency inquiry.
At issue is R50-million that Regiments paid into his law firm’s trust account in June 2016.
Durban attorney Naheem Raheman, on the party’s instruction, used the cash to settle creditors relating to the ANC’s 2016 election campaign.
Of this, an amount of R1.3-million was paid directly to the party for “human resources” and R8-million was allocated with beneficiary details noted as “ANC TG Fund”.
The rest were round-figure payments to an advertising agency and several manufacturers that supplied “ANC regalia”.
The company’s payment to the ANC took place at a time of heightened State Capture awareness, during which South African banks terminated the accounts of companies in the Gupta stable.
Regiments – later exposed for paying alleged kickbacks to Gupta-linked front companies – was also going through a turbulent time after a split in which Eric Wood, for 11 years a partner of owners Litha Nyhonyha and Niven Pillay, left the company to start Trillian Capital Partners with Gupta kingpin Salim Essa.
Liquidators investigating the affairs of the embattled company had Raheman subpoenaed as part of efforts to examine the validity of the R50-million payment to the ANC.
If untoward, the payment could be deemed a disposition under insolvency law and liquidators may try to go after the ANC to recover the money.
Regiments, they argue, was insolvent at the time of the payment. It had R747-million in assets, according to financial statements, but the balance sheet did not include tax assessments for the period 2014 to 2016, which the South African Revenue Service (SARS) has since calculated as more than R600-million, and that excludes further “intended” VAT adjustments.
The company is in liquidation because of an unpaid debt of more than R150-million owed to Vantage Mezzanine Fund, which obtained a final winding-up order of the company in September 2020.
The company’s woes have deepened substantially since then, as SARS successfully applied to intervene in the liquidation to secure its position as a creditor and has since issued the company with assessments of more than R700-million, and additional assessments are also under way.
Last week, the taxman scored a win over Regiments’ owners when the Supreme Court of Appeal found in its favour with a ruling that keeps the company in liquidation – and for now under the control of joint liquidators Willem Venter and Kagiso Dinaka.
They had Raheman subpoenaed to appear at the liquidation inquiry in Pretoria on 15 March 2023.
He instead filed an application to set aside the subpoena two days before the scheduled date and his court bid triggered a counterapplication by Venter and Dinaka.
Raheman claims he was acting as the ANC’s lawyer tasked with defending and settling the group of creditors.
In court papers he says that he made written disclosures to the liquidators after first being approached by Venter and Dinaka in January 2023.
The ANC, he says, permitted him to release limited information about the payment but the rest would have to be obtained from the owners of Regiments directly.
Anything beyond those initial disclosures would infringe upon attorney-client privilege, Raheman contends.
Not so, say Venter and Dinaka, who want the court to compel him to appear at the inquiry called in terms of section 417 and 418 of the Companies Act. (These are usually confidential hearings and, had it not been for Raheman’s review application, the specifics of the Regiments payment might not have ended up in the public domain just yet.)
They accuse him of allegedly wilfully ignoring the subpoena, of failing to seek an interdict and filing his application to set aside the subpoena in Durban instead of Pretoria, where the parties are based and where the hearing is taking place.
They also argue that neither Raheman nor his client, the ANC, have a claim to legal privilege. “Privilege does not apply to covering up unlawful conduct on the part of Regiments, its officers or directors.”
There is no blanket right to legal professional privilege and any such issue would have to be determined with specificity in respect of either communications between attorney and client, and/or identifiable documents.
This, they say, can only be decided on by those presiding over the inquiry. Besides, privilege does not apply, as Raheman was not acting in a professional capacity as the ANC’s lawyer but rather as a pay agent for the party.
Court papers set out a chain of events based on information extracted from Regiments’ company records, now under the care of the liquidators, coupled with Raheman’s own initial written disclosures provided to the liquidators.
They include a June 2016 email from Regiments owner Nyhonyha to a staff member at Regiments to facilitate the “urgent” payment.
The next day Nyhonyha sent an email containing proof of payment to two email addresses, one of which, court papers state, was that of Dr Zweli Mkhize, who served as ANC treasurer-general between 2012 and 2017. Raheman, described in open-source material as “adviser” to Mkhize during his tenure as health minister, was appointed to the Council for Medical Schemes in December 2020.
His appointment to the council was prior to Mkhize’s Digital Vibes woes being exposed by Daily Maverick’s Pieter-Louis Myburgh, which ultimately cost the senior ANC politician his job.
Raheman says liquidators first contacted him earlier this year when they had come across the R50-million payment on Regiments’ books.
They later asked him to provide copies of his client file, notes, business and trust account ledgers and financial records relating to the inflow and outflow of the payment.
He wrote to advise them that his firm acted for the ANC in April 2016 when it was instructed to handle agitated creditors who hadn’t been paid – some of whom had threatened legal action – for work relating to the party’s election campaign.
Raheman states that the ANC’s CFO, Bongani Mahlalela, asked him to facilitate payment from a trust that was set up by the owners of Regiments, with the ANC as a beneficiary.
“I duly conducted a Fica exercise on the trust, as the parties had agreed that the funds would be used solely to support and advance the work of the ANC.”
The money was received and dispensed in line with the ANC’s instructions.
In their counterapplication, Venter and Dinaka maintain that the material provided by Raheman is woefully inadequate.
Correspondence between the ANC’s Mahlalela and Raheman also does not suggest that there was any litigation contemplated by the creditors and neither was there a request for legal advice.
It is clear, they say, that the money was intended as a donation to the ANC and, if correct, it would hold tax implications relevant to the company’s ongoing dispute with SARS that would ultimately have a bearing on the company’s liquidation.
Court papers state that Regiments did not declare a R50-million donation for the relevant tax-filing period among a handful of other donations totalling just over R5-million.
Besides, say the liquidators, Raheman’s insistence that the money was required to cover ANC election bills does not quite add up. That is because the elections, according to Government Gazette Notice 562, were only proclaimed in May 2016.
“It is thus unlikely that any of the ANC service providers could have instituted or contemplated legal proceedings against the ANC in respect of the ANC’s 2016 local government election campaign in April 2016.”
It is “curious” why the ANC would have asked a lawyer to settle with its creditors or to request payment from a third party into its lawyer’s trust account in order to pay those bills, liquidators say.
Venter and Dinaka argue that they have a duty to unravel the transaction in order to ensure it was not a disposition under the Insolvency Act and to determine whether donations tax is due on the R50-million.
For this reason, Raheman must be called before the inquiry to share his knowledge of the transaction, under oath, and produce the documents requested in terms of the witness subpoena.
Raheman did not respond to enquiries from Daily Maverick. He has filed a notice to oppose the counterapplication of the two liquidators.
Raising R50m for the ANC
The owners of Regiments Capital raised the cash for the payment to the ANC via a transaction involving a trust they set up for good causes in 2009.
Owners Litha Nyhonyha, Niven Pillay and Eric Wood were trustees of the Education Research and Policy Studies Trust at inception.
Although Wood had exited the company by the time the payment was made, the trust deed provided for the three businessmen to allocate funding to community organisations, non-government organisations and political parties that advanced democratic principles.
There appears to have been an intention for the Education Trust – of which the ANC appears to be a beneficiary – to become a member of the Kgoro Consortium.
Regiments is the majority shareholder in Kgoro, which in turn owned 100% of Cedar Park Properties. Cedar Park, now also liquidated, acquired prime Sandton land from the City of Johannesburg under controversial circumstances.
That land was previously earmarked for a multibillion-rand mixed-use development comprising a hotel, upmarket flats and office and retail space near the Gautrain station.
Liquidators contend that the cash paid into the trust account of the ANC’s attorney came from an alleged sham sale of shares in which Nyhonyha and Pillay bought the trust’s stake in Kgoro at R666,000 per share.
This, liquidators say, was more than 400% the market value if viewed against the price Regiments paid for Kgoro shares in other instances. Compiled from court papers. DM
No ordinary funder
Liquidators have urged the court to be mindful of who the ANC’s benefactor is in this case and have flagged, among other things, that it contributed towards the Gupta purchase of Optimum Coal Mine.
Read more in Daily Maverick: Part Five: How the Guptas used their loot
Read more in Daily Maverick: Exclusive: Regiments Capital puts up R500m in Capitec shares in lieu of ‘State Capture’ claims
Read more in Daily Maverick: Gupta-era bonanza aftermath: Inside the NPA’s R1.1bn State Capture salvo against Regiments Capital
This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R29.