Publication: Mail and Guardian
Reporter: Evelyn Groenink
: Who Got R1bn in Pay-offs?
Mail and Guardian
new allegations of dirty money and influence-buying at the heart of South
Africa's multibillion-rand arms deal have emerged from a British investigation
of BAE Systems, the defence conglomerate that secured a R30-billion South
African order for Hawk jet trainers and Gripen fighters.
are contained in a formal application by the United Kingdom's Serious Fraud
Office (SFO) for legal assistance from South African authorities.
SFO document, which has been seen by the Mail & Guardian, requests
cooperation in pursuing the investigation of more than
R1-billion in "commissions" paid by BAE on the South African deal.
The money went to no fewer than eight
entities in terms of "consultancy agreements" dating, in one case, as far
back as 1992.
The request for mutual legal assistance is dated June 26
last year, but the South African response seems to have been marked by bureaucratic delays and buck passing, despite the fact that
the suspected bribes dwarf the amounts featured in the Jacob
The SFO document mentions as
beneficiaries of the suspected bribes, among others, former defence minister Joe
Modise's adviser, Fana Hlongwane, and FTNSA Consulting, a company whose
principal is, according to the SFO document, former Anglovaal and First National
Bank (FNB) chairperson Basil Hersov.
BAE has always maintained that it
merely pays "normal" commissions and not bribes. However, the SFO document
states: "The whole [commissions paying] system is maintained in such conditions of secrecy that there is a legitimate suspicion concerning the real purpose of the payments."
The SFO also notes
that "the failure of BAE to produce documentation believed to be located in
office locations in Switzerland" adds to the suspicion that the "underlying
documents which govern the payments cannot withstand
The SFO document names a "highly
secretive unit within BAE" called Headquarters
Marketing, or HQ Marketing *1, "which coordinates all agreements and
contracts with agents". It discloses the main front company used for the
commission transactions, Red Diamond Trading, a mystery offshore entity
registered in the British Virgin Islands.
The document states that "between 2000 and 2005 *2, South African agents received
over £70-million through Red Diamond and over £6-million and $4-million through
HQ Marketing accounts".
It adds that "hardly any
funds were paid to bank accounts within South Africa; the vast majority of
payments being made to offshore accounts".
beneficiaries of the bribes mentioned in the document are:
According to the SFO document: "Documentation disclosed by BAE has
revealed that … FTNSA was incorporated in Nevis in the West Indies in April
1992, and two months later entered into a consultancy agreement with BAE in
relation to procurement of the Hawk aircraft in South Africa."
- Hlongwane Consulting, incorporated in 1999 by Hlongwane, the then
adviser to Modise. The SFO document states: "Documents disclosed by BAE have
revealed that Hlongwane entered into a general consultancy agreement with BAE in
2002 on a retainer of £1-million [R14-million] per annum. In 2005 there was an
agreement to pay $8-million [R55-million] as a settlement figure to Hlongwane in
relation to work done on the Gripen project."
- Brookland Management, led by a Swiss-based David Clark, who has also
registered companies in South Africa. According to the SFO, Clark entered into a
consultancy agreement with BAE in 1997 and with Red Diamond in 1999 on the Hawk
and Gripen projects. Brookland is suspected to have received about £8,5-million
(R118-million) through Red Diamond.
- Huderfield Enterprises, incorporated in 1997 in
the British Virgin Islands. The SFO has found that the man behind Huderfield was
Richard Charter *3, BAE's main and most public agent in South Africa in
the run-up to the Hawk and Gripen contracts. According to the document,
Huderfield was paid almost £25-million (R350-million)
between 1999 and 2005, including a "final settlement" of £5,5-million. Charter
died in a canoeing accident on the Orange River in January 2004, so it is not
clear who benefited from the final settlement.
- Osprey Aerospace, a South African company founded and run by Charter
as the "overt" agent for British Aerospace in South Africa. Says the SFO
document: "It is reasonably believed that Osprey [was] the 'overt' agent but
that there is in existence a 'covert' agent, possibly Huderfield." "Overt"
Osprey received, according to the document, just less than £2-million (about R27-million) from BAE between 2002 and
- Kayswell Services, incorporated in 1994 and contracted as a BAE
consultant for the Hawk contract in the same year, was paid more than £37-million (R517-million). The contact at Kayswell,
according to the SFO, is Jules Pelissier, a long-standing business partner of
Zimbabwean arms dealer John Bredenkamp, who was also an agent for BAE in
- FTNSA Consulting, a company registered in the West Indies, whose
principal, according to the SFO document, is Basil Hersov, former chairperson of
FNB and member of President Thabo Mbeki's economic advisory panel. Hersov, now
80, is described as a man "with considerable influence". Agreements with him
"allow access to the very top", according to BAE documents quoted by the SFO.
time, in 1992, the South African government was still led by the National Party,
with FW de Klerk as president. Apparently, BAE expected that FTNSA/Hersov's
influence would continue to allow "access to the very top" and help secure the
desired Hawk contract after the elections and the installation of an African
National Congress government in 1994. According to the SFO request, FTNSA was
paid, like the others, after delivery of the contract, between 2000 and 2005. It
received a sum of £5,5-million (R77-million).
The SFO has asked the South
African authorities to compel Nedbank and FNB to produce banking documentation on accounts belonging to Hlongwane, Osprey
Aerospace and a company called Measuring Instruments Technology (MIT),
registered in Pretoria in 1993.
It is not clear where MIT fits in.
Though it was an agent for certain BAE components, the company says it had
nothing to do with the arms deal. MIT MD Maurice McDowell said he was unaware of
the SFO request, but added: "There'll be no problem; it's all open."
the United Kingdom, the SFO is investigating "principally" the affairs of BAE
itself and those of four named individuals: group marketing director Michael
Peter Rouse, former chairperson Sir Richard Harry Evans
*5, BAE chief executive Michael John Turner and Julia Aldridge, the
deputy head of the secretive HQ Marketing unit.
The SFO says "there is
reasonable cause to believe that all the above-named persons
and company have committed offences of corruption".
investigation flows from allegations of pay-offs and sweeteners being used to
secure the massive al-Yamamah deal with Saudi Arabia, first concluded under the
Conservative government but whose additions and extensions have been assiduously
pursued by the government of British Prime Minister Tony Blair.
long-running Saudi investigation was controversially halted by Blair in December
last year as the Saudis threatened to pull out of a huge new deal with BAE.
Blair cited reasons of "national security" *6, and
there were claims that the Saudis had threatened to end intelligence sharing if
the probe went ahead.
However, it appears that some of the same
commission channels were used by BAE in other contracts, notably in South
Africa, the Czech Republic and Chile, and those investigations
The South African response to the SFO
request for help appears to have been exceptionally
ponderous. The original request was sent in June, both to the Director
General of Justice and Constitutional Development, Menzi Simelane, and to the
National Directorate of Public Prosecutions, according to a follow-up fax sent
The M&G understands that the Department of
Justice and Constitutional Development first asked for advice from the Foreign
Affairs Ministry, and then contacted Scorpions investigators working on the Zuma
case. They responded that they had their hands full
and asked if other investigators could be appointed to handle the BAE matter.
Apparently, other such investigators were not found
within the Scorpions *7. It was after this that the police were
A fax from Interpol to the South African Police Service,
dated October 10 last year, attached a copy of the SFO request and asked the
police to appoint an investigating officer as well, but noted that the request
still needed Justice Department approval.
The request remained with the
police's Office for Serious Economic Offences until, finally, the matter was
recently referred back to the National Prosecuting Authority (NPA), which told
the M&G this week: "We confirm receipt of a request for assistance
and will assist within the framework of international cooperation in criminal
Additional reporting by Sam Sole and Nic Dawes
With acknowledgements to Evelyn Groenink and Mail and Guardian.
*1 Probably the new incarnation of
British Aerospace's IMSO or International Marketing and Sales Organisation,
previously headed by Allan McDonald, which was structured so as to provide an
arms length between the legitimate operational divisions and the wonga
*2 Yet the allegations were made in
1999 and 2000.
Clearly either the dates are wrong or the money was
actually paid by BAe only once Armscor's advance payment was made to them and
Saab in April 2000 and subsequent progress payments were made at the beginning
of each financial year.
*3 Clearly Osprey
Aerospace was BAe's overt agent receiving a mere £2 million while their covert
agent received a more deserving £25 million or
*4 For more than three years now is has
been suspected that Osprey Aviation was merely the local "agent" while the true
"agent was Aviation Consultancy Services owed by John
*5 When it comes to BAe, Sir Dick is
always a usual suspect.
One wonders why Allan McDonald is not
*6 I think Blair cited reasons of
*7 Me thinks the powers that
be would not want to be too successful in a South African re-investigation as it
- show up the pathetic efforts of the Three Stooges the first time round; and
- begin the unravelling of the entire Arms deal jersey leading to highest and
mightiest individuals and political organisations.
In the UK,
successful prosecutions of bribers and bribees, could (should) lead to the end
of the institution known as British Aerospace - one of the most corrupt entities
in the western world.