East London -- Senior management from the liquidated Magwa Tea Corporation went on a rollicking R10 million spending spree over a three-month period last year despite an order which vested all the parastatal's assets and funds in the appointed liquidators, Gobodo Inc, Nkonki Sizwe & Ntsaluba and Ernst & Young.

Details of major alleged financial irregularities and questions over control measures are expected to emerge when the Heath Tribunal meets on January 28, the return date for three interim interdicts which the Heath Special Investigating Unit (SIU) have obtained since December 29 last year.

These details form part of the auditor's report which had been handed in as part of the papers in the first application before the Heath Tribunal.

The action by the SIU followed after a confidential audit commissioned by the provincial Department of Agriculture and Land Affairs. The forensic auditors Price Waterhouse apparently delivered their report to the department last year.

The department has, however, decided against releasing the report until the SIU has finished its investigation. An earlier request for comment by the department was turned down.

Yesterday Mr Steve Barkhuizen, investigation manager for the SIU, said that the Magwa Tea matter was still under investigation.

"I cannot comment further than that," he said.

In the most recent interim interdict obtained by the SIU, various assets of some of the Magwa management, including vehicles and property have been attached while bank accounts have been frozen.

The attachment orders were made to effect the recovery in due course of Magwa assets and funds. At the same time the interim interdict also allowed the SIU and the liquidators to recover losses by claiming from ex gratia severance packages which were due to be paid out to some staff members.

Magwa financial statements show that various bank accounts, which should have been frozen after the liquidation order, had still been operated by management.

Between July 10 and August 10, 1997 while under financial control and management of liquidators Coopers and Lybrand, more than 300 cheques for leave pay -- totalling R1,5 million -- were made out to Magwa employees without the authority or knowledge of the liquidators

On July 11, the day after the parastatal had been placed under liquidation, about 30 Magwa cheques -- totalling almost R1m -- were cleared by the Bank of Transkei for leave payments to Magwa management and staff.

These payments were allegedly not due and payable.

Magwa management also settled the balances outstanding on private-car financial schemes of more than R2m on the same day.

The parastatal also settled the accounts for legal fees which had been incurred by some Magwa management members, who have consulted privately with attorneys. This amounted to almost R200 000.

These cheques have also been cleared by the Bank of Transkei after the liquidation date.

Departmental sources say that more than R70 000 in Magwa funds have also been spent on the payment of school and hostel fees for the children of Magwa employees. Some of these payments were made after the date of liquidation.

It has also emerged that in some cases Magwa cheques for the payment of electricity and water bills for Magwa management members had been cleared with the bank after the liquidation date while some staff members continued to use petrol and business credit cards for Magwa's account up to two months after liquidation.

On October 28 Magwa's corporate cellphone account totalled more than R46 000 which included an account for R4 000. Management also bought two cellphones for over R7 000 from Umtata Business Systems after the date of liquidation. This cheque was also cleared by the Bank of Transkei.

In many cases of payments to employees no records could be found that tax had been paid to the Receiver of revenue when applicable.

These included payments for leave, vehicle loans, cellphones, and staff loans (of which more than R140 000 was outstanding at the end of July 1997).

The parastatal also owed the Receiver of Revenue more than R14m for arrears in Vat payments -- which have never been paid.

With acknowledgements to Eddie Botha and the Daily Dispatch.