A seven-year crusade to prove that Armscor had "fraudulent" dealings with arms deal beneficiary African Defence Systems (ADS) has finally handed parliament a hot potato.

Parliament's standing committee on public accounts will have to decide soon whether to allow Armscor itself to launch a second inquiry into the alleged irregularities or ask an outside body to carry out the probe.

In the first inquiry, in 2000, the armaments procurement parastatal exonerated itself from a range of allegations of wrongdoing, but could not refute most of the charges.

The new evidence followed a preliminary investigation by the auditor-general, which indicated that the facts do not always support conclusions in a first "in-house" investigation.

The attorney-general's report was tabled in parliament last week after a two-year forensic investigation into eight of the 72 allegations of fraud and irregular payments to ADS.

Meanwhile the South African Human Rights Commission has started legal proceedings aimed at forcing Armscor to release attachments to its first internal inquiry in 2000 it has steadfastly refused to provide to a former ADS employee who first blew the whistle on the alleged irregularities back in 1998.

That whistleblower, Fritz Louw, had kept up his campaign for an outside probe into the alleged irregularities because he said only 40 percent of the main charges were refuted by the Armscor Review Board, while taxpayers had allegedly been defrauded of more than R5 million.

Attorney-general Shauket Fakie's highly technical report found that the Armscor internal control system "was not adequate to eliminate the issues identified in the allegations" and that the facts obtained by the office's investigation team "do not always support the [Project Review Board] findings".

Armscor spokesperson Bertus Celliers said the attorney-general's report had been received only on Wednesday and that the company was not ready to respond to the new evidence.

Armscor's 2000 internal investigation pointed to ADS deficiencies but the report said no evidence of instances of fraud or collusion between ADS and Armscor had been found.

With acknowledgements to Christelle Terreblanche and the Sunday Independent.