The testimony of Ahmed Paruk of auditing firm David Strachan and Taylor hinges on a meeting which he said took place in November 1999.

The defence says no such meeting occurred *1.

Paruk said it was at this meeting where Shaik gave them, the auditors, the instruction to write off R1,2 million rand as development costs. The money was from three loan accounts in the books of Kobifin, one of his companies.

These loan accounts were in the names of Schabir Shaik, Clegton Investments and Floryn Investments. The state says part of the money was used to bribe Deputy President Jacob Zuma. The defence said the first time Shaik learned of the write-off was in December 1999 when his accountant Celia Bester put it in her resignation letter.

Some of the items charged to Shaik's loan account included a sum of R10 000 to an upmarket men's clothing boutique. A loan of R160 000 to Y Shaik, which is possibly his brother Yunus. Paruk said that according to Shaik most of the expenses were related to travel and accommodation.

Paruk's testimony related to count 2 of fraud against Shaik. The alternative count is tax evasion.

At the November meeting, he said, Shaik announced that he did not owe the company any money, because all loan account expenses had been to the company's benefit and that he had paid company expenses from the loan account.

Kobifin's overdraft had been maximised and Shaik said he had used his own overdraft to pay for company expenses.

Paruk said there was concern about the recoverability of the loan account. A series of errors had occurred over the years.

The court also heard that Shaik did not pay personal income tax because his company had made a taxable loss. Paruk said the decision was made by his audit partner Paul Gering and accepted by both him and Shaik. Paruk said Shaik did not take a salary from the company but took loans which were debited to his loan account.

"It was pointless for Shaik to take a salary when the company had a tax loss *3," he said. Paruk said this decision was also taken at the November 1999 meeting after consultation with Shaik who was a substantial shareholder in and sole director of Kobifin.

Paruk said that after discussions about the write-off with Shaik some of the money written off as development costs were eventually reversed in the books.

He told the court that Zuma ceded his pension to Shaik. He said Shaik had told him he had cession of Zuma's policy when the deputy president's name came up in a conversation.

Paruk told the court that it was illegal to cede a pension. However, under cross-examination Paruk said he could not remember *4 any specifics about this conversation.

Defence advocate Francois van Zyl said Shaik had always looked at Zuma's pension as a means of recovering loans made to him, but that the pension had not been ceded to him *5.

The trial continues.

With acknowledgement to Wendy Jasson da Costa and Sapa.

*1  When there's no plausible explanation, there's always denial.

*2  Almost surely brother Yunis, who was in any case a shareholder, or at least acting for a shareholder, in Nkobi Holdings through a special purpose vehicle called The Workers College.

*3  Di's no good, said GAAP.

*4  When the examination gets cross, the memory tends to get going.

*5  I'm sorry, but this nonsense needs a firm ethical response. This Holier Than Thou Loaner is too religious to charge the Loanee interest (which would actually be greater than the capital amount) and when the Loanee cannot repay even the capital sum, the Loaner is prepared to take the defaulting Loanee's entire pension - on which the Loanee, at least three wives and a dozen children need to survive. Some are obviously in need of Moral Regeneration.