How the Case Against Shaik Implicates Deputy President [Sunday Times, 2003-08-31]

Publication	Sunday Times
Date	2003-08-31
Web Link	www.sundaytimes.co.za

The Scorpion's charge sheet against Durban businessman Schabir Shaik has dragged the affairs of Deputy President Jacob Zuma into the public spotlight.

Shaik faces charges ranging from corruption, fraud, theft and contravening the Companies Act to money laundering and tax evasion. But the Scorpions have declined to prosecute Zuma - although claiming to have prima facie evidence of corruption against him.

Shaik has publicly claimed to be Zuma's financial adviser and has protested his innocence in the arms deal saga.

The charge sheet (45 pages excluding annexures) sets the stage for a mammoth court battle between Shaik and the Scorpions. But it also casts a dark cloud over Zuma. The charge sheet allegations describe

Shaik set up his Nkobi Group of companies in February 1995. Zuma was allegedly a "secret nominee shareholder" from the outset.

Shaik said in 1996 that Nkobi must "strategically place itself" to tender for corvettes. He knew then that Zuma would become deputy president.

Nkobi lacked expertise but Shaik had "political connections" to facilitate contracts.

Floryn Investments (Pty) Ltd is a 10% shareholder in Nkobi Investments. Shaik allegedly holds the Floryn shares as a "nominee or cedant for the African National Congress, making the latter a 10% shareholder in Nkobi Holdings", according to the charge sheet.

French group of companies, Thomson CSF (later named Thales), has global business interests in electronics serving aerospace, defence and information technology markets.

Thomson set up South African branches in May and July 1996. Shaik was a director from the outset. Thomson entered into agreements with Nkobi in mid-1996, effectively making them South African business partners.

Nkobi Holdings was chosen as an empowerment partner in a consortium awarded a R2.5-billion contract to upgrade the N3 toll road. The Department of Transport awarded a R265-million contract to Prodiba Consortium which includes Nkobi Holdings subsidiary, Kobitech, to produce the new credit card driver's licences.

Zuma was KwaZulu-Natal's MEC for Economics and Tourism from May 1994, leader of government business in Parliament from June 1997 and deputy president of the ANC from December 1997. He became deputy president of South Africa on June 17 1999.

During this time his duties included promoting the interests of business impartially (in KwaZulu-Natal) and later attending Cabinet meetings related to the arms deal.

Zuma allegedly received R1.161-million from Shaik and Nkobi between October 1 1995 and September 30 2002. The Scorpions claim the payments were "benefits which were not legally due to Zuma".

Zuma had financial troubles and could not afford to repay Shaik the alleged "loans". Zuma's over expenditure during 1999 was R37 000 a month and R29 000 a month in 2000.

Standard Bank took legal action for R443 618 over Zuma's home loan debts in October 1997.

On May 14 1998, Zuma's Nedbank overdraft was R66 500; he owed Wesbank R291 145 for a car and SA Permanent Bank R75 000. His personal overdraft with Standard Bank was R105 717 in September 1998.

South Africa put out feelers for new military hardware in September 1997, then requested offers from potential suppliers.

Thomson positioned itself early to get a slice of the deal. They wanted empowerment partners with political clout.

Thomson CSF (France) bought 50% of Altech Defence Systems (later called African Defence Systems) in 1998, then all shares in 1999.

Thomson CSF (France) and ADS were joint venture partners in the German Frigate Consortium bidding for the corvettes.

Thomson was worried about rumours that Mbeki did not approve of Nkobi as a business partner. Shaik's brother Shamin or "Chippy" (chief of arms acquisitions for the Department of Defence) met Thomson boss Alain Thetard on July 9 1998 and allegedly threatened to make things difficult if Thomson did not choose "convenient" business partners. Chippy confirmed that Zuma would be a member of the next Cabinet.

Thomson CSF (France) had invested directly in ADS (not Thomson's SA subsidiaries). This effectively excluded Nkobi from the corvette bid. Nkobi did, however, later strike a deal that would change their fortunes on the corvette deal.

Nkobi was unhappy at being "excluded". Shaik and Zuma met Thomson CSF boss, Jean-Paul Perrier *, in London on July 2 1998 to discuss the issue. Shaik threatened to get a court interdict against the French.

The ADS slice of the corvette contract was worth R1.3-billion, with R450-million going directly to ADS and the balance to sub-contractors. According to the charge sheet, "Shaik and Nkobi's eagerness to obtain entry to the arms deal through ADS is thus understandable".

Cabinet chose the German Frigate Consortium as preferred corvette supplier on November 18 1998.

That same day Nkobi (represented by Shaik) and Thomson CSF (France) met at Nkobi's Durban headquarters. Zuma attended the meeting as a "mediator to resolve the dispute" and "also in the promotion of empowerment". He allegedly helped Nkobi get shares in ADS.

"The result of the above mentioned meeting was that Nkobi Investments became a joint venture partner with Thomson in the German Frigate Consortium and so joined the successful bidder in the corvette bid," said the charge sheet.

Former PAC chief whip Patricia de Lille raised arms deal corruption claims in September 1999. The Auditor-General and Heath Special Investigation Unit then announced their willingness to investigate matters.

On March 11 2000, Zuma and Shaik met Thetard in Durban. An encrypted fax recorded that during the meeting "JZ" used a pre-arranged code word to solicit a R500 000-a-year (until the first ADS dividends were paid) bribe to "protect Thomson CSF during the current investigations" and to secure the "permanent support of JZ for future projects".

Zuma wrote a letter, in his capacity as "Leader of Government Business" on January 19 2001 to the chairman of Parliament's Standing Committee on Public Accounts, Gavin Woods. The letter said "There is no need for the Heath Unit to be involved in any investigation of the defence acquisition."

ADS dividends were paid in September 2001 - two years after the alleged bribe request - making the total bribe due R1-million. Nkobi then entered into a "service provider agreement" with Thales in Mauritius. Nkobi's annual fees were R500 000. The total fees due amounted to R1-million.

Shaik had difficulties getting the French to pay the alleged bribe. He wrote to Thetard in October 2000 "My party is now saying that we are reneging on an agreed understanding . . . he feels let down . . . I therefore urge you to respond timeously . . ."

Construction on Zuma's home at Nkandla, in northern KwaZulu-Natal, started in July 2000. It was completed in April 2001. It cost just over R1-million.

Zuma did not meet construction payments. An unidentified "third party" paid off R130 000 in August and October 2000.

Durban businessman and casino boss Vivian Reddy stepped in and paid R100 000 in November 2000. Reddy then signed suretyship (of R400 000) to help Zuma get a R900 000 bond from First National Bank. Reddy has been paying the monthly bond instalment of R12 000 since January 2003, according to the charge sheet.

The charge sheet cites numerous alleged examples of Shaik using Zuma to further Nkobi's other business interests.

Zuma allegedly intervened directly in an attempt to persuade Malaysian conglomerate Renong to adopt Nkobi as their local empowerment partner during discussions on Durban's multimillion-rand Point Development Project.

Shaik made himself known in the business world as "special economic adviser" to Zuma. He allegedly offered to fly to Thomson in Paris, with Zuma, to discuss "big investment plans" in which the South African government ministers of transport, tourism, justice and finance wished to find partners. One project was a proposed new airport at Durban.

Shaik discussed his and Zuma's strategy to establish a "Nkobi bank" to manage government budgets and tried to persuade former Safety and Security Minister Steve Tshwete to discuss a deal involving a fleet service for the SAPS. Tshwete ignored the request.

Jean-Paul Perrier
Executive Vice-President, Chief Marketing Officer, Chairman and CEO Thales International

Born July 5, 1945, he is a graduate from the French Ecole des Mines of Paris and from the Institut Auguste Comte . He also holds a Doctor's degree in Corporate Management.

He joined Thomson-CSF's Avionics Division where he held successively the positions of Production Engineer, Financial Controller, Head of Data Processing and Production Director.

In 1984, he was appointed Director of the Logistic Support and Customer Assistance Department of the Electronics Systems Division of Thomson-CSF. In 1986, he became General Manager of the Electronics Systems Division of Thomson-CSF.

From 1991 to 1994, he was Executive Vice-President of the Missile Systems Group. In 1994, he was appointed Executive Vice-President International Business of Thomson-CSF, and then named Chairman and CEO of Thomson-CSF International, now called Thales International. He was promoted Executive Vice-President, Chief Marketing Officer, responsible for Thales International, in July 2002.

** The French claim to have state-of-the art, battle-proven, cost-effective equipment.

Why they need to have partners like Schabir Shaikh or the ANC or Workers College, or enter into R500 000 per year "service provider" agreements to fund the monthly expense shortfalls of deputy presidents of emerging African nations, makes this all the more difficult to understand.