Durban - A former auditing clerk said his boss ordered him to write off R1.2 million in the books of businessman Schabir Shaik's Nkobi group.

Shaik has pleaded not guilty to two charges of corruption and one of fraud.

The State alleges that Shaik "kept" Deputy President Jacob Zuma "on retainer" in exchange for permission to use his name and his influence.

The State also alleges that Shaik tried to solicit a R1m bribe for Zuma from French arms company Thomson.

According to the indictment, Shaik is also charged with having some of the money paid to Zuma "written off" in the books of Nkobi in the 1999 financial year. The money disappeared from company records.

Anthony Gibb's evidence dealt with the fraud charge. Shaik has pleaded not guilty to this charge. He said he had left the bookkeeping and auditing to those best qualified and that he was told the write-off was above board.

The fraud charge relates to the write-off of R1.2m as Prodiba's development costs, the selling of the work share agreement of Kobifin to KobiIT which resulted in a profit of R3.5m, and the creation of a non-distributable reserve as well as the revaluation of assets.

The write-off zeroed the loan accounts for Shaik including payments made to Zuma, Floryn Investments, which Shaik has admitted was a vehicle to donate money to the ANC and Clegton Investments, through which payments for a flat occupied by Zuma were made.

He said that when he realised it was a mistake, he ordered that it be rectified.

In 1999, Gibb was an auditing clerk at David Strachan & Taylor. He told the court that when he did the audit he was informed that the company's financial affairs were to be reviewed by its bank. He explained to the court that they would have wanted the "most favourable position" to be depicted. He told the court Shaik's Nkobi group of companies was regarded as a "controversial client" by the clerks at David Strachan & Taylor.

He said the company would have suffered "a substantial loss" if the write-off had not happened.

Taking into account the accumulated loss of R1.4m and the recoverability of loan accounts in the names of Shaik, Clegton Investments and Floryn Investments, the company would otherwise have been "technically insolvent".

He said that after he did the audit, he was ordered by one of the two partners to make journal entries that eventually constituted the write-off.

The meeting was between himself, Paul Gering and Ahmed Paruk. He could not remember which of the two gave the instructions. "But the other did not protest," Gibb said.

"Looking back, I realise I would have been satisfied to do this, if the partners were. They were my superiors."

He said he considered the amount of R1.2m that vanished from company books because of the write-off as material.

He told the court he assumed that the "write-off" had been discussed with Shaik, but it was not done in his presence.

"Mr Shaik will say he had no knowledge of this, until he received a letter from his bookkeeper, Celia Bester, in December 1999," advocate Francois van Zyl SC said.

Bester wrote: "I do not agree with the way Paul has handled your individual income and the so-called development costs, which he has written off."

In re-examination by advocate Billy Downer SC, who is leading the prosecution, Gibb said Shaik would have benefited personally from the write-off.

Downer also pointed out that Shaik said he "found out" about the write-off in December 1999, but still signed the financial statements in February 2000.

Dawie Griesel, a strategic consultant for Armscor, is the next witness. Mr Justice Hilary Squires is presiding

With acknowledgements to Estelle Ellis, Sapa and the Cape Times.