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Corrected:The Optimum solution – Lessons in the complexities of money laundering

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By Tim Cohen
13 Mar 2022 0

Tim Cohen is editor of Business Maverick. He is a business and political journalist and commentator of more years than he likes to admit. His freelance work has included contributions to the Wall Street Journal and the Financial Times, but he spent most of his life working for Business Day. After a mid-life crisis that didn't include the traditional fast car, Cohen now lives in the middle of nowhere in the Karoo.

The process of money laundering is wonderfully illustrated in the current case between the National Director of Public Prosecutions (NDPP) and the business rescue practitioners for the Optimum coal mine.

One of my favourite programmes of the moment is Ozark, a Netflix series about a family that gets caught up in a Mexican drug cartel. The father and lead male character, Marty Byrde, is an accountant. And not just any accountant; he is an expert in money laundering.

Money laundering is essentially the process of putting cash through a loop. The cash starts out being the fruit of an illegal act, but once it comes out the other side of the loop, it’s legitimate, or “cleaned”.

The loops tend to be sets of corporate structures, so the money moves from one company to another, and another, and another. In the process, all kinds of accounting tricks are introduced. Often, the actual cash is not transferred, but loaned, for example, to a bank, as security for another “loan”, made to the next entity, and so on.

And it helps if all of this happens fast, because then retracing the steps becomes harder. But you do need a compliant bank, or at least a bank that looks the other way.

Essentially, the NDPP has asked for a preservation order against 16 respondents, including the business rescue practitioners and the big beneficiary of the deal, Liberty Coal, controlled by Daniel McGowan.

The deal approved by the business rescue practitioners is breathtaking. McGowan was half-owner of Centaur Ventures, based in Bermuda. The other half was owned by Akash Gargh. If you want to know where people fit in State Capture, all you have to do is look at who attended the notorious Sun City wedding. Gargh was the groom.

What the business rescue practitioners proposed was that McGowan’s companies take hold of Optimum in a debt for equity arrangement against a loan made on behalf of the company by Centaur. The NDPP is arguing against this process on the basis that the original loan, or at least most of it, arises from the proceeds of crime via a money-laundering process.

Legal counsel Matthew Chaskalson, acting for the NDPP, has described that process, including the amounts, the dates, the bank accounts and companies involved – and there are a lot.

This sentence from the NDPP’s heads of argument illustrates the process: “In this process, R258,500,000 of funds emanating from Griffin Line were advanced to CVL, then transferred to Centaur Mining, thence to Trillian, and then laundered onwards through Cutting Edge, Sahara Computers, Islandsite Investments, Oakbay Investments before landing in a range of Gupta enterprise companies including Westdawn Investments, Tegeta, TNA, Infinity Media and Shiva Uranium”.

All of this took just a few months.

The complexity illustrates one of the reasons, perhaps, why the process is taking so long; it’s massively complicated. The case also provides a clue as to why the Guptas’ bank accounts were closed because some of the transfers took place through the Absa and Standard Bank accounts of the now notorious advisory company, Trillian.

They remind us of another thing too; the role of the Eskom executives who authorised a R660-million pre-payment for coal to facilitate the transaction. The Eskom executives, led by Brian Molefe, represented the prepayment as necessary to avert an impending supply crisis to Arnot Colliery.  

“Their justification was fraudulent. There was no need to source coal from Tegeta, still less to prepay Tegeta.

“The same coal could have been sourced at less than a third of the price from Optimum which, to the knowledge of Eskom, had excess coal which it was obliged to supply to Eskom under the Eskom/Optimum Hendrina coal supply agreement but which Eskom refused to take; and even if Eskom wanted to procure coal from Tegeta, there was no need for a prepayment because Tegeta was procuring the coal that it on-sold to Eskom from Optimum on 30-day terms,” the heads of argument state.

The case is still being heard, and there will be counter-arguments, but maybe all the people calling for Molefe to return to Eskom in the light of recent loadshedding should think about that before getting too enthusiastic. DM168

  • This article originally stated that McGowan attended the notorious Sun City Gupta wedding, which McGowan says is factually incorrect, he did not attend. We apologise for the error.

This story first appeared in our weekly Daily Maverick 168 newspaper which is available for R25 at Pick n Pay, Exclusive Books and airport bookstores. For your nearest stockist, please click here.

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