Books changed after sting

Durban businessman Schabir Shaik only ordered that written-off loans be reinstated in his company's books after the missing money was discovered by the Scorpions.

This was the evidence by auditor Ahmed Paruk, who yesterday continued his testimony in Shaik's fraud and corruption trial in the Durban High Court.

Shaik has admitted that the transactions were reversed after it was discovered by the Scorpions, but he says it was because he had been ill-advised about these before then *1.

Paruk, a chartered accountant and partner at the auditing firm David Strachan & Tayler (sic Taylor), gave evidence relating to a fraud charge against Shaik.

Shaik has pleaded not guilty to this charge and two charges of corruption.

It is alleged that Shaik asked for loans of R1.2 million to be written off in his company's annual financial statements for 1999. These loans allegedly included money paid to Deputy President Jacob Zuma.

Paruk, who was the partner overseeing the auditing of Nkobi's books for the 1999 financial year, told Judge Hilary Squires that Shaik said to him that there was "no way" he owed all that money (reflected in his loan account) to the company.

"He said it must have been an accounting mistake," Paruk said. He added that Shaik had said the money ostensibly owed by Floryn and Clegton, other companies of Shaik's, were "clear errors" as well.

He said he knew Shaik was Zuma's financial adviser. Subsequent to the 1999 audit, he found out that Shaik had made certain payments to Zuma.

Paruk said he recalled a conversation with Shaik, who told him that he had obtained cession of Zuma's pension.

"You are not allowed to cede a pension," Paruk said.

During cross-examination by advocate Francois van Zyl SC, for Shaik, Paruk said he had accepted Shaik's explanation that the amounts were allocated in error.

"Mr Shaik was a substantial shareholder in the company. I had no reason to believe that he would tell me something that was not correct," Paruk said. "In hindsight it is clear that we should have checked."

He said corrective measures were taken after questioning by the Scorpions.

Paruk said Shaik had told him that he had Zuma's pension ceded, as repayments of Zuma's debt to Shaik.

Van Zyl replied: "Mr Shaik will say that he did not have a cession of Zuma's pension *2. He did, however, always look at Zuma's lump-sum pension payout for repayment of his debt *2."

The trial continues.

With acknowledgements to Estelle Ellis and the Daily News.

*1 But apart from forgotten technikon-level skills in High Voltage Engineering, this skilled entrepreneur also claimed earlier in court proceeding that he had Accounting Skills.

Even the average semi-wit knows that creating journal entries to facilitate the transfer of virtual profits from one corporate entity to another corporate entity in order to create a non-distributable reserve which is later written off as non-existent development costs violates GAAP and that this is unlawful (in more than one respect).

*2 Sounds like an equivocal splitting of proverbial hairs to me.