Parliament - Defence department chief of acquisitions Chippy Shaik took an active part in discussions on arms purchases on which he had declared a conflict of interest, the forensic report on the multi-billion rand deal confirms.

It also says the regularity or otherwise of the decision not to select an information management system offered by the firm CCII Systems "may also have been affected by the position of Mr Shaik".

CCII was originally listed by the SA Navy as the preferred supplier of combat technology for the navy's four new corvettes.

Shaik was manager of the special defence account from which the purchases were to be funded, and controlled policy and planning related to all acquisition matters.

According to the report Shaik, who also held a string of other key positions in the defence force, played a pivotal role in the acquisition of the strategic defence packages.

However, his brother Shabir was a director of the companies Thomson-CSF and African Defence Systems.

Both had been put forward as subcontractors for the combat suite - an electronic combat control system - for the corvettes.

Shaik declared interest

The report says the minutes of a meeting of the project control board (PCB) on December 4, 1998 indicated that Chippy Shaik did declare an interest, recording that: "The chairperson informed the meeting that, due to a conflict of interest, he is to recuse himself from the combat suite element of the corvette and submarine requirement."

Retired navy chief, Vice-Admiral Robert Simpson-Anderson, had told Parliament's public accounts committee that it had been agreed that whenever the corvette and submarine combat suites were discussed he would take over as chair, and Shaik "would not take part in any discussions, consultations or decisions".

And Trade and Industry Minister Alec Erwin had testified in the forensic investigation that the recusal has been "an instruction taken with the minister of defence".

However, minutes of subsequent meetings showed that despite his declaration of a conflict of interest, and contrary to the instruction referred to by Erwin, Shaik had actively participated in discussions relating to the evaluation, selection and appointment of the main contractors and subcontractors, where ADS and Thomson had been contenders.

It also appeared that outside the PCB he was "also involved in matters that directly or indirectly concerned ADS and Thomson".

Nothing to add

The report quoted minutes of a PCB meeting on March 8, 1999, reading: "The chairperson re-iterated that, due to a possible conflict of interest, he will recuse himself from any decisions taken on the combat suite, but will not recuse himself from the meeting."

At another PCB meeting, on May 27, 1999 Shaik did not declare any conflict, nor did he recuse himself.

"He actively participated in the discussions relating directly to the issues in respect of which he had previously declared a conflict of interest," the report says.

Later that year, he participated in a PCB meeting which ratified decisions to select contenders for the combat suite.

"There was a conflict of interest with regard to the position held and role played by the chief of acquisitions of the department of defence, Mr S (Chippy) Shaik, by virtue of his brother's interests in the Thomson Group and ADS," the report says.

"Mr Shaik, in his capacity as chief of acquisitions, declared this conflict of interest in December 1998 to the PCB, but continued to take part in the process that led to the ultimate awarding of contracts to the said companies. He did not recuse himself properly."

And at another point, the report says: "It is clear that Mr Shaik's 'recusal' from PCB meetings was no recusal at all."

'A perception of impropriety'

It says Shaik's presence at certain PCB meetings, even though he declared a possible conflict of interests, created "a perception of impropriety".

"The mere fact that he remained in the room and that he made certain inputs could have created the belief that he would have influenced certain decisions in favour of ADS or Thomson-CSF, as some of the other members of the board might have regarded his presence as intimidating."

The fact that the procurement policy and procedures of the department of defence did not contain any provisions on conflict of interests was a "fundamental shortcoming".

During the course of the probe, it was also established that Shaik did not apply for, or receive, the military security clearances required by law.

The report says the department of defence and Armscor should develop specific rules and guidelines to address conflict of interest issues and ensure that personnel are properly informed on the issue.

Steps should also be taken to ensure particular individuals, regardless of their position, are not tasked with incompatible functions in "multifaceted procurements".

"This will prevent a conflict or perceived conflict of interest, which could have a detrimental effect on the overall acquisitions process."

The department should also undertake an urgent personnel audit to ensure all its staff comply with the prescribed security clearance requirements.

National Director of Public Prosecutions Bulelani Ngcuka told MPs on Thursday afternoon that a claim that Shaik received a car from a prime contractor was unfounded.

With acknowledgement to Sapa and News24.