The Dossier of Corruption [The Star, 2003-08-26]

Publication	The Star, Opinion
Date	2003-08-26
Reporter	Estelle Ellis
Web Link	www.thestar.co.za

Schabir Shaik and 10 of the companies he represents: Nkobi Holdings (Pty) Ltd, Nkobi Investments (Pty) Ltd, Kobifin (Pty) Ltd, Kobitech (Pty) Ltd, Proconsult (Pty) Ltd, Pro Con Africa Consultants (Pty) Ltd, Clegton (Pty) Ltd, Kobi Transport Systems (Pty) Ltd, Floryn Investments (Pty) Ltd and Thomson-CSF SA (Pty) Ltd.

The state alleges that between October 1995 and September 30 2002 and at or near Durban in the district of Durban, Shaik unlawfully and corruptly gave Zuma money to influence him to use his power or reward him for using it to the benefit of Shaik and his companies.

This charge relates to R1,2-million that was written off in the Nkobi books on February 28 1999 without revealing that it was paid to Shaik and Zuma.

3. Corruption, alternatively money laundering, alternatively contravening the Prevention of Organised Crime Act. This charge relates to annual amounts of R500 000 promised to Zuma for protecting a French arms company from investigation.

Shaik is charged with avoiding paying tax on money he received. This relates to the R1,2-million that was written off.

Shaik was a director of the South African holding company of Thomson-CSF, a French company with global industrial interests. He is still a director of Thomson-CSF (Pty) Ltd.

Alain Thetard was appointed director of both the holding company and Thomson-CSF (Pty) Ltd on April 1 1998.

Nkobi Investments (Pty) Ltd is an investment company wholly owned by Shaik at first. Since August 20 1998 the sole shareholder is Nkobi Holdings (Pty Ltd).

Nkobi Investments had an initial minority shareholding in Thomson Holdings. It also had, and continues to have, a minority shareholding in Thomson (Pty).

Zuma was a member of the KwaZulu Natal legislature and minister of 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 was appointed deputy president of South Africa and a member of the National Assembly on June 17 1999.

Part of his duties was to participate in cabinet meetings relating to the arms deal and influencing the related decision-making process in a non-partisan manner.

Between October 1995 and September 2002, Zuma or other parties connected to him received R1 161 562,71 from various Nkobi entities and Shaik.

Acknowledgements of debt in Zuma’s name have been found in documentation seized from the Nkobi group amounting to some R340 000. These documents are patently incomplete and irregular, being undated, seemingly hurriedly signed in the wrong place, and indicating interest-free loans with no date of repayment.

On February 28 1999 an amount of R1,2-million was written off in the Nkobi books. This amount included one account which is wholly attributable to Zuma. The total amount written off in this way and relating to Zuma’s payments is R198 000.

Zuma could at no stage afford to repay the loan. Shaik knew this because he had intimate knowledge of Zuma’s financial affairs. Zuma was in financial difficulties.

During October 1997, Standard Bank instituted action against Michigan Investment cc (the close corporation in whose name Zuma’s home loan account had been opened) for R443 618,52. On February 19 1998, Standard Bank was provided with a number of cheques in settlement of a portion of the outstanding amounts.

On May 14 1998 he had an outstanding debt with Wesbank for the purchase of his motor vehicle of R291 145,95.

In September 1998 Zuma’s personal overdraft with Standard Bank totalled a further R105 717,61.

On October 7 1998 Zuma owed AQ Holdings (Pty) Ltd R86 500. The company threatened him with an application for sequestration. Shaik, through Nkobi, settled the debt.

The payments to Zuma by Shaik and/or the other corporate accused make no business sense, in that the Nkobi group was ostensibly not in the business of making loans to politicians. It also could not afford the payments, being at all times cash-starved, relying on bank overdrafts. It was effectively borrowing money from banks at the relevant interest rates to lend it to Zuma or Shaik interest-free.

He obtained shares at no cost but shared in the dividends accruing to the group from its shareholding, in turn, in ADS.

There were a number of possible future joint ventures between Nkobi and Thomson, including Durban airport, the ID card contract, the N3 and N4 road projects, the third cellular telephone network, other military deals, and smart-card technology.

The process to procure the various types of equipment (needed by the SANDF) was generally known as the Strategic Defence Package Acquisition Programme.

In response to the request for offers, among others for corvettes, the German Frigate Consortium submitted an offer dated May 11 1998 to supply the corvettes.

Thomson positioned itself at an early stage to obtain a slice of the arms deal. The group considered that it was necessary to obtain black empowerment partners to assist in achieving this goal. It was anxious that the partners it chose should meet the approval of the South African government or, more specifically, the ANC leadership.

The French conglomerate was urgently seeking influence in South African government circles in this period, as the change of government in 1994 had left it with few friends in high places. Pierre Moynot – the Thomson delegate in South Africa and later director of Thomson-CSF (SA) (Pty) Ltd and ADS – sought entrance to government circles and information concerning the progress of the arms deal bidders.

During November 1997, Moynot thought it was necessary to rapidly arrange for a visit by Jean-Paul Perrier, the head of Thomson CSF International, to then-deputy president Thabo Mbeki and take advantage of this to get him a meeting with Zuma. His aim was either to succeed in a bid to sell the corvettes, or at least to ensure a successful bid in respect of the combat system and the sensors.

All in all, Thomson perceived that strong political backing would be essential for clinching the combat suite subcontract.

Thomson-CSF France first positioned itself by buying at first 50% of Altech Defence Systems, which later became African Defence Systems (ADS), on February 24 1998, and then all the shareholding in ADS on February 19 1999. Thomson-CSF France and ADS were joint-venture partners within the German Frigate Consortium, which was a bidder for the corvette part of the arms deal.

During this period, Thomson were racked by uncertainties over the “suitability” of their political contacts in South Africa, as well as the “political correctness” of their partners in ADS, seemingly due to rumours they had received that Mbeki did not approve of Nkobi as a partner.

On 17 March 17 1998, Shaik conveyed to Perrier Zuma’s wish to meet with him to address this issue.

Thomson-CSF France chose to invest initially directly in ADS, as described above, and not through Thomson Holdings and Thomson (Pty) Ltd. This direct investment in ADS excluded Nkobi – being a shareholder of Thomson (Pty) – from the corvette bid, seemingly in contravention of the Thomson/Nkobi shareholders’ agreement.

Thomson continued to regard Zuma as a rising force, while regarding it as necessary that what was regarded as “the Zuma problem” must be resolved.

Shaik informed other directors that Nkobi should strategically place itself to tender for the corvettes. He did not consider its lack of applicable expertise a problem, as its political connections would ensure a partnership with a big international company with the necessary expertise or skills.

It was understood that Shaik would use his political connections to facilitate the contracts and tenders. It was understood from Shaik as early as 1996 that Zuma would become deputy president in the post-Mandela government.

Nkobi regarded its initial exclusion from the arms deal negatively and sought to rectify the situation.

On November 18 1998 the South African cabinet selected the German Frigate Consortium as preferred suppliers of the corvettes.

On the same day, a meeting was held at the Nkobi offices between Nkobi and Thomson-CSF France. The subject matter of the meeting was the sale of 10% of Thomson’s share in ADS to Nkobi. The minutes reflect that the meeting was attended by Shaik, Moynot, Thetard, Perrier, Anand Moodley (an attorney) and “Minister JZ”

Zuma was there as a mediator to resolve the dispute between Thomson and Nkobi and to help Nkobi (also in the promotion of empowerment) to get effective shareholding in ADS.

The result of this would in effect be the resumption of the partnership between Thomson and Nkobi – and thus Nkobi’s entry into the corvette bid.

The result of this meeting was that Nkobi Investments (accused number 3) became a joint-venture partner with Thomson in the German Frigate Consortium and so joined the successful bidder in the corvette bid.

The ADS portion of the corvette contract was worth R1,3-billion, with R450-million coming directly to ADS and the balance going to subcontractors.

What was the reaction of Nkobi and Thomson to an investigation into the arms deal?

Thetard met Perrier in Paris on November 10 1999. The discussion concerned Zuma.

On March 11 2000 a meeting was held in Durban at 10.30am between Thetard, Zuma and Shaik.

The proceedings of this meeting are reflected in a letter handwritten by Thetard in French. It was typed and then faxed in encrypted form to Yann de Jomaron and copied to Perrier when Thetard returned to his Pretoria office from Durban. The fax, in translated form, reads as follows:

“AT (according to Alain Thetard’s practice this was meant to appear as from Alain Thetard)

J de J (This was to Jan or Yann de Jomaron)
CR (copy to) J-P Perrier
Encrypted Fax

Following our interview held on 30/9/1999 with S Shaik in Durban and my conversation held on 10/11/1999 with Mr J-P Perrier in Paris, I have been able (at last) to meet JZ in Durban on 11th of this month, during a private interview, in the presence of SS.

I had asked SS to at least obtain from JZ a clear confirmation, or failing which, an encoded declaration (the code had been defined by me), in order to validate the request by SS at the end of September 1999. Which was done by JZ (in an encoded form)

May I remind you that the two main objectives of the effort requested of THOMSON CSF are Protection of Thomson-CSF during the current investigations (SITRON) Permanent support of JZ for the future projects

Nkobi complained in a letter to Thetard dated March 20 2000 that all Nkobi was good for to Thomsons was “for a black empowerment partner to land the deal through its connectivity” and “thereafter we are required to step aside and be at the mercy of Thomson, poor management of the deal”.

The request by Zuma, assisted by Shaik, that Thomson pay Zuma a bribe in exchange for Zuma’s protection and support of Thomson was agreed to by Thomson through Thetard and Perrier.

In a letter dated January 19 2001, written in his capacity as “leader of government business” in parliament, Zuma wrote to Gavin Woods, then chairperson of the parliamentary standing committee on public accounts:

“Furthermore, we are convinced that (…) there is no need for the Heath Unit to be involved in any investigation of the defence acquisition.

“We hope this strange manner of proceeding was not driven by a determination to find the Executive guilty at all costs, based on the assumption we have already mentioned, that the Executive is prone to corruption and dishonesty.”

In terms of the agreement between Zuma, Shaik and Thetard on March 11 2000, Zuma would receive R500 000 a year until the first ADS dividends were paid. ADS dividends were paid in September 2001, almost exactly two years since the bribe was requested on September 30 1999.

Nkobi entered into a so-called service provider agreement with Thales in Mauritius.

The application form attached to the service provider agreement is dated November 1 2000. The agreement that is signed by Shaik is undated. The agreement indicates that it was to be signed in January 2000.

Article 7 of the Service Provider Agreement deals with remuneration. Nkobi’s annual fee charged to Thales was R500 000. The printed form provides for two payments of R250 000 (before the end of December 2000 and on February 28 2001).

Article 3 provides for the extension of the contract for successive one-year periods.

Nkobi experienced difficulty in receiving payment of this fee at the end of 2000, and had to reflect the fees as still to be received in its frequent cash flow financial statements for the period. The initial fee expected and eventually paid on February 16 2001 was R250 000.

Shaik subsequently experienced problems with obtaining the money from the French.

Arrangements were made for Zuma to meet Perrier and senior Thomson personnel in November and December 2000 in Paris.

Jean-Daniel Chabas, another member of Thomson senior management, visited South Africa from February 19-21 2001.

He met with Shaik in Durban on February 21 2001. The subject of the loan repayments through the dividends was discussed.

Shaik inquired when the dividends could be paid, over and above the loan repayments. He was concerned about being able to help those who had helped him.

A reference is made to Zuma’s “bond saga” in Shaik’s diary on March 22 2001.

Another entry in Shaik’s 2001 diary indicates that he had Thomson and ADS board meetings in Gauteng on March 28 2001. After that he flew to Cape Town for supper with Perrier and Zuma.

At the time of the joint task team’s hearing into the arms deal, Zuma’s expenses indicated that he expected R1-million.