He played a critical role in the state's process of acquiring arms worth R43bn

A HIGH-level internal investigation has found a senior trade and industry department official to have contravened government's code of conduct by failing to declare a Mercedes-Benz purchase linked to the controversial "cars for arms" scandal involving European Aeronautic Defence and Space Company (EADS).

The official, Vanan Pillay, who played a critical role in the process of acquiring arms worth R43bn, now faces formal sanction. If, as expected, he is sanctioned, Pillay would be the first government official to have action taken against him since the controversy began.

Other senior government officials named in the cars discount saga include the head of the SA National Defence Force, Gen Siphiwe Nyanda. The defence department has been tight-lipped on what action, if any, could be taken against Nyanda.

EADS, a beneficiary in the defence procurement process, suspended its SA MD, Michael Woerfel, last week. Until then the company had downplayed the unfolding discounts controversy.

The preliminary probe found that Pillay did not disclose as he had contended the massive R55000 discount.

Pillay had told the department's director-general Alistair Ruiters he had reported the discount to the department's human resources division. The department said he had also informed it that the details concerning the purchase of the Mercedes, valued at R196000 and for which he paid R141000 in July 1999, were on file. However, this was found not to be the case.

The department's senior management is known to be deeply embarrassed and concerned that Pillay had not informed Trade and Industry Minister Alec Erwin before the minister's appearance before the standing committee on public accounts. He had also remained silent when Erwin went before the public protector and expressed confidence that no single person could have influenced the process.

Department spokeswoman Manana Makhanya said the massive discount and the manner of the disclosure was a matter of great concern. She said Ruiters was concerned enough by the nondisclosure to seek legal advice outside the department, "to look at whether there is a need to take disciplinary action".

It was unclear at the weekend whether the decision to seek external legal advice was prompted by the absence of its legal unit head who is overseas or the need to consult a neutral party.

The department is particularly incensed by the fact that Pillay addressed the issue only after the media picked up on it as well as after Ruiters made inquiries.

"In terms of our code of conduct there is an expectation for one to disclose gifts and discounts. He did not do that," Makhanya said.

The department would try to "wrap the whole thing up as fast as possible so that people don't lose faith in the process".

Makhanya said the department had undertaken "that if any of our officials are accused of wrong-doing, we will take that seriously and investigate".

She said the feeling was that Pillay should have foreseen the potential embarrassment to the minister and to the department. "The (short-sightedness) caused the director-general enough concern to seek legal advice."   

With acknowledgement to Bonile Nigqiyaza and Business Day.