In the High Court of South Africa
(Durban and Coast Local Division)
In the matter between :
Case no. CC 27/04
Schabir Shaik and Others
A. THOMSON-CSF/THALES/THINT GROUP
1. The French Thomson-CSF (hereinafter referred to as “Thomson-CSF”) group of companies has global industrial interests, including interests in the international arms industry.
2. Thomson-CSF was later renamed the Thales group of companies.
3. Thomson-CSF International (France), which later became Thales International, is a division within the Thomson-CSF group. Thales International in its turn has a subsidiary Thales International Africa Ltd (Mauritius).
4. On 21 May 1996, Thomson-CSF Holding (Southern Africa) (Pty) Ltd (hereinafter referred to as ‘Thomson Holdings’) was incorporated in South Africa to promote the development of South African industry by entering into joint ventures.
5. Thomson Holdings had an authorized share capital of 100 ordinary shares at a nominal value of R1000.00 per share. On 27 May 1996, 85 shares were issued to Thomson-CSF (France), 10 shares to Nkobi Investments (see below) and 5 shares to Gestilac SA (Switzerland). On 9 June 1998, the authorised share capital was increased with 17 000 1% redeemable non-cumulative preference shares at R1 000.00 per share and 14 450 shares were issued to Thomson-CSF (France). On 26 July 1999, Gestilac SA transferred its 5 ordinary shares in Thomson Holdings to Thomson-CSF (France) for $1 000.00 (R6 145.00). On 27 July 1999, Thomson-CSF (France) transferred its 90 ordinary shares to Thomson-CSF International (France) for R90 701.98. The effect of these transactions was that Thomson-CSF International (France) and Nkobi Investments became the only shareholders in Thomson Holdings. Also on 27 July 1999 Thomson-CSF (France) transferred 14 450 preference shares to Thomson-CSF International (France) for R14 554 679.00. On 16 September 1999, the authorised share capital was increased with 22 412 ordinary shares at R1 000.00 per share. On 29 September 1999, 22 412 ordinary shares were issued to Thomson-CSF International (France) at the nominal value of R1000 per share. On 30 September 1999, Nkobi Investments transferred its 10 ordinary shares to Thomson-CSF International (France) at R50 000 per share, totalling R500 000.00. The effect of this transaction was that Thomson Holdings became wholly owned by Thomson-CSF International (France).
On 4 April 2001, Thales International (formerly Thomson-CSF International), transferred 22 512 ordinary shares and 14 450 preference shares to Thales International Africa Ltd (Mauritius), the latter company thereby replacing the former as sole shareholder of Thomson Holdings.
6. Thomson Holdings changed its name to THINT Holding (Southern Africa) (Pty) Ltd on 23 October 2003.
7. Accused 1 was a director from the date of incorporation in 1996 to 30 September 1999, when he resigned from the board. Alain Thétard (hereinafter referred to as “Thétard”) was appointed as a director on 1 April 1998.
8. On 16 July 1996 Thomson-CSF (Pty) Ltd (accused 11) was incorporated in South Africa, also to promote the development of South African industry by entering into joint ventures.
9. Thomson Holdings has been the majority shareholder and Nkobi Investments the minority shareholder since 1 August 1996 when 70 shares were issued to Thomson Holdings and 30 to Nkobi Investments. On 16 September 1999 the share capital was increased and on 29 September 1999 shares were issued to Thomson Holdings and Nkobi Investments to cause Thomson Holdings to become the owner of 75% and Nkobi Investments 25% of Thomson (Pty).
10. Thomson (Pty) changed its name to THINT (Pty) Ltd on 19 August 2003.
11. Accused 1 has been a director since the date of incorporation in 1996 to date. Thétard was appointed as a director on 1 April 1998.
THE NKOBI GROUP
12. Nkobi Holdings (Pty) Ltd (accused 2) was registered on 27 February 1995 as a holding company. It was initially wholly owned by accused 1. The shareholding went through various permutations subsequently. The current shareholders are:
i. Star Corp SA (Pty) Ltd (60%), ii. Clanwest Investments (Pty) Ltd (20%), iii. Floryn Investments (Pty) Ltd (10%) (accused 10), and iv. Workers College (10%).
Star Corp is in its turn wholly owned by accused 1 and he also has an interest in Clanwest Investments. Accused 1 therefore has an effective majority shareholding in Nkobi Holdings, whose only known investment is Nkobi Investments.
Floryn Investments is ostensibly wholly owned by accused 1. Accused 1 purports to hold the shares as nominee or cedent for the African National Congress, making the latter, from the point of view of accused 1 and/or the Nkobi group, a 10% shareholder in Nkobi Holdings.
13. Nkobi Investments (Pty) Ltd was registered on 24 February 1995 as an investment company. It was initially wholly owned by accused 1. The shareholding went through various permutations until, on 20 August 1998, Nkobi Holdings became the sole shareholder.
14. As described above, Nkobi Investments had an initial minority shareholding in Thomson Holdings. In addition it had, and continues to have, a minority shareholding (25%) in Thomson (Pty).
Accused 4 to 8
15. Accused 4 to accused 8 are all entities within the Nkobi group, being 100% owned by Nkobi Investments. (There are a number of other entities within the Nkobi group.)
Accused 9 and 10
16. Accused 1 is the sole shareholder of accused 9 - Clegton Investments (Pty) Ltd.
17. Accused 1 is the sole shareholder of accused 10 - Floryn Investments (Pty) Ltd, which in its turn is a 10% shareholder of accused 2 - Nkobi Holdings. As described above, accused 1 purports to hold the shares as nominee or cedent for the African National Congress
Control and directorship
18. Accused 1 was and remains a director of all the corporate accused and exercises effective control over the Nkobi group and also accused 9 and 10.
B. AFRICAN DEFENCE SYSTEMS (PTY) LTD
19. African Defence Systems (Pty) Ltd (hereinafter also referred to as ADS) was first registered in 1967 under another name. After a history of various owners, Thomson-CSF (France) acquired 7 000 001 shares on 14 April 1998, to become a joint shareholder with Allied Technologies Ltd. On 19 February 1999 Allied Technologies Ltd transferred its shareholding in ADS to Thomson-CSF (France). On 9 June 1999 Thomson-CSF (France) transferred its shareholding in ADS to Thomson-CSF International (France). On 15 September 1999 Thomson-CSF International (France) transferred its shareholding in ADS to Thomson (Pty) (80%) and FBS Holdings (Pty) Ltd (20%).
20. Jacob Zuma (“Zuma”) was a member of the KwaZulu-Natal legislature and the Minister of Economic Affairs and Tourism from May 1994.
21. In terms of section 136 of the Constitution of the Republic of South Africa, 1996, Zuma as a member of the executive council of a province, may not have-
a. undertaken any other paid work;
b. acted in any way that is inconsistent with his office, or exposed himself to any situation involving the risk of a conflict between his official responsibilities and private interests; or
c. used his position or any information entrusted to him, to enrich himself or improperly benefit any other person.
22. Zuma was appointed as Deputy President of the Republic of South Africa, Leader of Government Business in Parliament and a member of the National Assembly of Parliament on 17 June 1999. The Code of Conduct in Regard to Financial Interests, as adopted by the Joint Meeting of the Rules Committees of the National Assembly and the Senate on 21 May 1996, applied to him in this capacity. In terms of paragraph 1.1, Zuma was duty bound to maintain the highest standards of propriety to ensure that his integrity and that of the political institutions in which he serves are beyond question. In terms of paragraph 1.2, Zuma was duty bound not to have placed himself in a position which conflicts with his responsibilities as a public representative in Parliament nor may he have taken any improper benefit, profit or advantage from the office of Member.
23. In terms of section 96(2) of the Constitution of the Republic of South Africa, 1996, Zuma as a member the cabinet may not have-
a. undertaken any other paid work;
b. acted in any way that is inconsistent with his office, or exposed himself to any situation involving the risk of a conflict between his official responsibilities and private interests; or
c. used his position or any information entrusted to him, to enrich himself or improperly benefit any other person.
24. Zuma, by virtue of the various offices he held, had the powers and/or duties attendant to such offices.
D. ZUMA’S FINANCIAL BENEFIT FROM ACCUSED 1 to 10
25. Accused 1 and/or the corporate accused 2 to 10 have benefited Zuma in the period 1 October 1995 to 30 September 2002 in the amount of R1 340 078.01, as set out in the schedule (hereinafter referred to as the schedule benefits). This is by way of payments from accused 1 and/or the various corporate accused 2 to 10 to Zuma and various parties for the benefit of Zuma.
26. The following facts are relevant in determining the true nature of the abovementioned payments :
a. Such amounts are not reflected as a liability in any financial documentation relating to Zuma.
b. Such amounts are not reflected as an asset in any financial documentation relating to accused 1.
c. Acknowledgements of debt in Zuma’s name have been found in the Nkobi documentation, amounting to some R340 000. These documents are patently incomplete and irregular, being undated, seemingly hurriedly signed in the wrong place, and indicating interest-free loans with no date of repayment. They seem to reflect consolidated expenses over a period. The first page of one is missing, with the result that no amount appears. They were all compiled in 1998, which is prior to the date in 1999 when the amounts owing were written off in Nkobi’s books as explained below. No acknowledgements of debt have been discovered which accurately reflect the total amount owing to accused 1 or which were compiled after 1998.
d. There is no evidence of any repayments to accused 1 or Nkobi.
e. On 28 February 1999 an amount of R1 282 027.63 was irregularly written off in the Nkobi accounting records (Kobifin (Pty Ltd)) under the description of development costs of Prodiba. This included an amount that was paid to Zuma. The balance represented amounts that accused 1 and accused 10 owed to the Nkobi group. This resulted in the misrepresentation of the 1999 Annual Financial Statements of Kobifin (Pty) Ltd, in that accounts receivable or director’s and/or related third party loans were understated. Alternatively, retained income was overstated. The write-off to Prodiba development costs is false, irregular and does not comply with GAAP (Generally Accepted Accounting Practice).
f. Zuma could at no stage afford to repay the “loans”. Accused 1 knew this as he had intimate knowledge of Zuma’s financial affairs. Zuma was in financial difficulties. This is illustrated, inter alia, by the following:
i. During October 1997, Standard Bank instituted action against Michigan Investment CC (the close corporation in whose name Zuma’s home loan account had been opened) for R443 618.52. On 19 February 1998 Standard Bank was provided with a number of cheques in settlement of a portion of the outstanding amounts.
ii. He had an overdraft with Nedbank to the amount of R66 500 on 14 May 1998.
iii. On 14 May 1998 he had an outstanding debt with Wesbank in respect of the purchase of his motor vehicle of R291 145,95.
iv. He also owed SA Permanent Bank an amount of R75 000 on 14 May 1998.
v. In September 1998 Zuma’s personal overdraft with Standard Bank totaled a further R105 717,61.
vi. On 7 October 1998 Zuma owed AQ Holdings (Pty) Ltd an amount of R86 500. AQ Holdings (Pty) Ltd threatened him with an application for sequestration. Accused 1 through Nkobi settled the debt.
vii. Zuma’s expenditure constantly exceeds his income.
viii. An analysis of Zuma’s financial records reflects an unfortunate history of dishonoured cheques and unmet debit orders.
g. The payments to Zuma make no legitimate business sense, in that neither accused 1 nor the Nkobi group could afford the payments, being at all times in a cash starved position relying on and at times exceeding bank overdrafts and thus effectively borrowing money from banks at the prevailing interest rates to make the said payments interest free. On the other hand, the group’s survival depended upon obtaining profitable new business, inter alia with the assistance of Zuma. An analysis of Nkobi’s financial records reflects an unfortunate history of dishonoured cheques.
27. The payments received by Zuma as aforementioned constituted benefits which were not legally due to Zuma.
E. THE SHAREHOLDERS’ AGREEMENT BETWEEN THE THOMSON AND NKOBI GROUPS
28. Shareholders agreements were entered into between the Thomson and Nkobi Groups on 22 May and 17 July 1996. In terms of these agreements, Thomson was bound to conduct its business in South Africa through Thomson (Pty) and thus effectively in partnership with Nkobi.
29. This joint strategy was developed at this early stage when Thomson had no knowledge of the existence of the South African entity Altech Defence Systems (Pty) Ltd, (later called African Defence Systems (ADS) as described above) and SA military systems in general. It was agreed in Paris and SA that a strategy be developed for Nkobi’s meaningful participation in all Thomson’s local business ventures. This took place at a time when SA was first becoming known as a military power and arms supplier. It was also made clear that decisions would be made in South Africa on political rather than business interests. Nkobi received financial assistance in the form of loan equity. This was in return for Nkobi providing an opening into SA for Thomson-CSF.
30. It was not at that stage considered “politic” for Nkobi to have a direct interest in ADS, given Nkobi’s political relationships and the speculation which would arise from that.
31. Consequently, Thomson and Nkobi were joint venture partners (together with Denel) in obtaining the award of the contract for the drivers’ licences during 1996 – 1997 (the Prodiba joint venture).
32. There were a number of possible future joint ventures between Nkobi and Thomson, including Durban airport, the ID card contract, the N3 and N4 road projects, the third cellular telephone network, other military deals, and smart card technology.
F. THE ARMS DEAL
33. In the design for the South African Defence Force, which was recommended in the Defence Review, military equipment types were identified as being required by the Force.
34. In order to procure the said military equipment, requests for information were submitted during or about September 1997 to various other countries, and upon receipt of such information, requests for offers were issued to short listed potential suppliers.
35. The process to procure the various types of equipment was generally known as the Strategic Defence Package Acquisition Programme, or the arms deal.
36. In response to the request for offers, inter alia for corvettes, the German Frigate Consortium submitted an offer dated 11 May 1998 to supply the corvettes. The German Frigate Consortium included Thomson CSF NCS (France) and ADS.
37. Offers were also received from the other short listed parties. The German Frigate Consortium bid was eventually approved as the preferred bidder by the South African cabinet on 18 November 1998.
G. THOMSON’S STRATEGY IN PREPARATION FOR THE ARMS DEAL
38. The Thomson group positioned itself at an early stage to obtain a slice of the arms deal in South Africa. The group considered that it was necessary to obtain black empowerment partners to assist in achieving this goal. It was anxious that the partners it chose should meet the approval of the South African Government or more specifically the ANC leadership.
39. The French conglomerate was urgently seeking influence in South African government circles in this period, as the change of government in 1994 had left it with few friends in high places. Pierre Moynot (the Thomson delegate in South Africa and later director of Thomson (Pty) and ADS) sought entrance to government circles and information concerning the progress of the arms deal bidders. During November 1997, Moynot thought that it was necessary to rapidly arrange for a visit by Jean-Paul Perrier, the head of Thomson CSF International, to Deputy President Mbeki and take advantage of this to get him a meeting with Zuma, in order to either succeed in a bid to sell the corvettes, or at least assure a successful bid in respect of the combat system and the sensors. 40. All in all, Thomson perceived that strong political backing would be essential for clinching the combat suite sub-contract.
41. As explained above, Thomson-CSF France first positioned itself by buying at first 50% of Altech Defence Systems, which later became African Defence Systems (ADS), on 24 February 1998. Thomson-CSF France and ADS were joint venture partners within the German Frigate Consortium that was a bidder for the corvette part of the arms deal (project SITRON).
42. During this period Thomson was wracked by uncertainties over the “suitability” of their political contacts in South Africa, as well as the “political correctness” of their partners in ADS, seemingly due to rumours they had received that the then Deputy President, Thabo Mbeki, did not approve of Nkobi as a partner. On 17 March 1998, Shaik conveyed to Jean-Paul Perrier Zuma’s wish to meet with Perrier to address this issue.
43. Shamin (“Chippy”) Shaik is accused 1’s brother and was the Chief of Acquisitions at the Department of Defence. De Bollardiere (a Thomson representative) and his colleague Thétard met Chippy Shaik on 9 July 1998. Chippy Shaik indicated that he would facilitate matters for Thomson if Thomson’s position with partners and friends was convenient to Chippy Shaik. He would otherwise make things difficult. Chippy Shaik confirmed that Zuma would be a member of the next cabinet.
44. Thomson-CSF France chose to invest initially directly in ADS, as described above, and not through Thomson Holdings or Thomson (Pty). This direct investment in ADS excluded Nkobi [being a shareholder of Thomson (Pty)] from the corvette bid, seemingly in contravention of the Thomson/Nkobi shareholders agreement.
45. Thomson continued to regard Zuma as a rising force, whilst at the same time regarding it as necessary that what was regarded as “the Zuma problem” must be resolved.
H. NKOBI’S STRATEGY IN PREPARATION FOR THE ARMS DEAL
46. Accused 1 had as early as June 1996 during a bosberaad, informed other directors that Nkobi should strategically place itself to tender for the corvettes. He did not consider its lack of applicable expertise a problem, since its political connectivity would ensure a partnership with a big international company with the necessary expertise or skills. It was understood that accused 1 would use his political connections in order to facilitate the contracts and tenders. It was understood from Shaik as early as 1996 that Zuma would become the deputy president in the post Mandela government.
47. Nkobi regarded its initial exclusion from the arms deal extremely negatively and sought to rectify the situation, inter alia, with the assistance of Zuma, who was being paid for performing such favours.
48. The evaluation of the corvette bid started on 12 May 1998. At this time, accused 1 sought to arrange a meeting between Zuma, at Zuma’s request, and Perrier, to resolve a matter that had been outstanding for some time then.
49. Accused 1, Perrier and Zuma met in London on 2 July 1998.
I. THE RESOLUTION OF THOMSON’S AND NKOBI’S STRATEGIES RELATING TO THE CORVETTE BID
50. Nkobi’s attempts to rectify its exclusion from the corvette bid were protracted. The minutes of a joint general meeting of directors and shareholders of Thomson Holdings and Thomson (Pty) on 9 June 1998 reveal the extent of accused 1’s dissatisfaction. He threatened to obtain redress by way of an interdict should the matter not be satisfactorily resolved.
51. The ADS portion of the corvette contract was worth R1,3 billion, with R450 million coming directly to ADS and the balance going to sub-contractors.
52. On 18 November 1998 the South African cabinet selected the German Frigate Consortium as preferred suppliers of the corvettes.
53. On the same day, a meeting was held at the Nkobi offices between Nkobi and Thomson-CSF France. The subject matter of the meeting was the sale of 10% of Thomson-CSF France’s share in ADS, through Thomson (Pty), to Nkobi. The minutes reflect that the meeting was attended by accused 1, Moynot, Thétard, Perrier, Anand Moodley (attorney) and “Minister JZ”
54. Zuma was there as a mediator to resolve the dispute between Thomson and Nkobi and to facilitate Nkobi (also in the promotion of empowerment) obtaining effective shareholding in ADS. The result of this would be effectively the resumption of the partnership between Thomson and Nkobi and thus Nkobi’s entry into the corvette bid.
55. The result of the abovementioned meeting was that Nkobi Investments, with Zuma’s assistance, became a joint venture partner with Thomson in the German Frigate Consortium and so joined the successful bidder in the corvette bid. This resolved Nkobi’ strategy to enter the arms deal. It also resolved Thomson’s strategy to obtain an approved empowerment partner.
56. The actual transactions involving the sale of shares were registered in 1999. The most relevant transaction is that of 15 September 1999, when Thomson-CSF International (France) transferred 25 500 000 shares in ADS to Thomson (Pty), giving Thomson (Pty) 80% of ADS and consequently Nkobi Investments an indirect 20% interest in ADS.
J. FURTHERING OTHER PRIVATE BUSINESS INTERESTS OF ACCUSED 1 AND/OR THE OTHER CORPORATE ACCUSED
57. Accused 1 and/or the other corporate accused 2 to 10 also paid Zuma to further their private business interests other than those specifically related to accused 3’s entry into the arms deal.
58. Accused 1 accords specific prominence to his relationship with Zuma in promotional material relating to accused 1 and the Nkobi group.
59. Accused 1’s apparent appointment as Zuma special economic adviser was not in terms of any regulations relating to such appointments, and accused 1 received no remuneration for apparently performing such an office. Accused 1 used the terms “special economic adviser”, “financial adviser”, “personal adviser” and “special adviser” variously. He enjoyed full power of attorney in respect of Zuma’s personal financial affairs and in respect of funding and managing them. He assisted Zuma in his official duties, advised on matters pertaining to the economy and policy and assisted in ANC party matters.
60. Accused 1 made it clear that Nkobi Holdings’ role was to provide political connections (as opposed to financial backing or technical expertise) and everybody understood that the political connection was so strong from accused 1’s side that there was no need for Nkobi to come up with the money.
The Point Development, Durban
61. The Renong group (“Renong”) is a large diversified Malaysian conglomerate with close ties to the Government of Malaysia.
62. Renong owns several international hotels in Malaysia and an extensive land bank for future development and was interested in finding similar opportunities for investment in South Africa after 1994. After investigating several potential investment opportunities in South Africa, the Hilton Hotel and the Point Development in Durban were identified as possible investments in the third quarter of 1995. In particular, the Point Development was seen as a potential empowerment project, because the land was effectively owned by the Government through Transnet, Portnet and the City of Durban.
63. Discussions were held with Mzi Khumalo, the chairman of Point Waterfront Company (Pty) Ltd, the Minister of Public Works and the Director General of the Public Works Department at which Renong outlined their ideas on how the Point Development could be implemented as an empowerment project.
64. Subsequently Renong was advised through Khumalo of the names of the representatives who had been nominated to look after the empowerment interests. Renong understood that these nominees had been endorsed and approved by the South African Government.
65. In the third quarter of 1995, an initial shareholders agreement was signed between Renong Overseas Corporation Sdn Bhd, representing Renong, and Secprop 60 (Pty) Ltd, a shelf company representing the empowerment interests. The shareholders’ agreement set out the principles upon which the shareholders were to work together to bid for and, if successful, implement the Point Development and, inter alia, described the arrangements by which Renong would provide the funding for the 49% shareholding of Secprop 60 (Pty) Ltd in the proposed development. The nominated empowerment representatives were the directors of Secprop 60 (Pty) Ltd and the company was later renamed as Vulindlela Investments (Pty) Ltd.
66. In October 1995 the Point Waterfront Company called for proposals from interested parties in the private sector for the development of the Point and presentations were made to the Board of the Point Waterfront Company in November 1995. Besides the Renong / Vulindlela joint venture, two other consortia made proposals including one consortium led by the Nkobi group.
67. The day before the presentation to the Point Waterfront Company, the managing director of Renong, David Wilson (“Wilson”), was requested by accused 1 to attend a meeting in the Nkobi group’s offices in Durban. Accused 1 said that the meeting would be to Renong’s benefit.
68. Wilson attended the meeting. When he confirmed that Renong intended to make a presentation to the Point Waterfront Company, accused 1 and others present indicated that the consortium whose members were present at the meeting, was very powerful and influential and that it would not be in Renong’s interests if they proceeded with the presentation with their current partners. Accused 1 proposed that a joint presentation should be made with his consortium.
69. Wilson rejected this proposal and went ahead with its presentation as planned, which was well received. Renong was left as the only bidder. Wilson experienced delays as a result of accused 1’s interference and insistence that his consortium should be involved in the project.
70. As a result of this interference and the uncertainty that it caused, it was considered necessary to obtain confirmation at a political level that the empowerment partners that had been chosen were indeed acceptable. In June 1996, the chairman of Renong sent a letter to Zuma, in his capacity as national and provincial chairman of the ANC, asking his assistance in resolving the matter of suitable partners.
71. Accused 1 addressed a letter dated 10 June 1996 to the chairman of Renong, in which he confirms Nkobi’s interest to acquire 49% equity in the Point Development. Accused 1 reminded the chairman that he should send a letter to Zuma, whereafter accused 1 would be in a position to influence and accelerate the development.
72. Zuma eventually invited the chairman or a representative to meet with him in Durban. Arrangements were made by accused 1 for a representative of the Renong chairman to meet Zuma as proposed. The meeting took place during January 1997 and was attended by Zuma, accused 1 and the Renong representative. The meeting was held in the evening in accused 1’s apartment in Durban.
73. Zuma appeared to be uncomfortable during the meeting. Accused 1 led the discussions and Zuma supported him and expanded on the topics.
74. Zuma said that he was not happy with the persons nominated to represent the empowerment interests in the Point Development and proposed that accused 1 should be involved in the project. At one point Zuma made mention of the support and assistance he had received from accused 1.
75. Wilson indicated that he regarded the selection of empowerment nominees as a matter for the South African Government to decide. It was Renong’s intention to continue with its partners unless formally advised otherwise by the South African Government. Such an instruction was not forthcoming.
76. A further meeting between Wilson and accused 1 was held on 3 February 1997, during which Wilson indicated to accused 1 that Renong would not make any changes unless and until it had Zuma’s written affirmation as ANC chairman that he was happy with the representatives of the empowerment interests in the Point Development. Zuma’s queries regarding the nominees were a source of frustration to Renong, since he raised no objections initially and had previously endorsed the involvement of Vulindlela.
77. Because of the difficulties that accused 1 had caused Renong, no further business discussions were held with him after 1997.
Peter Watt of Altron
78. Accused 1 had correspondence and meetings with Peter Watt of Altron in mid-1996 concerning, inter alia, their respective groups’ synergies in the Malaysian market from a defence and other technologies point of view. Accused 1 arranged a meeting between Peter Watt and Zuma and recommended that this contact should be maintained.
Eco-tourism school in KZN
79. In January 1999, accused 1 and his UK associate, Deva Ponnoosami, attempted to position Nkobi as a joint venture partner for a project regarding the opening of a tourism school in KwaZulu-Natal with the assistance of Professor John Lennon of Glasgow University. Ponnoosami employed accused 1’s assistance to draft letters in Zuma’s name and to have the letters signed by Zuma. Zuma signed two letters dated 4 February 1999, both on the letterhead of the KwaZulu-Natal Ministry of Economic Affairs and Tourism.
80. In the first letter, drafted with accused 1’s assistance, Zuma expressed his “full support” for Professor Lennon’s proposal, and stated that he would “appreciate if funding could be rapidly progressed in order for this project to commence as soon as possible.”
81. In the second letter, also drafted with accused 1’s assistance, addressed to Professor Lennon himself, Zuma recommended that a local partner was required to form a joint venture with Professor Lennon. Zuma stated that he had had discussions with one such local company, being Nkobi Holdings. Nkobi Holdings was keen to participate and he had suggested to Nkobi that it should make direct contact with Professor Lennon to speed the process. Zuma hoped that together Nkobi and Professor Lennon would both enhance the KwaZulu-Natal tourism industry through raising the profile and excellence of the personnel involved in this industry.
82. When it transpired that Lennon wished to utilise the first letter to open doors for his project in KwaZulu-Natal, without involving Nkobi in the project, accused 1 indicated that he regarded Nkobi’s exclusion seriously. He threatened to inform Zuma and seek to do whatever was necessary to stop Professor Lennon’s progress.
83. A Thomson-CSF France mission visited South Africa in February 1999, and a meeting was held with accused 1 during which he enumerated big investment plans for which the South African government (Ministries of Transport, Tourism, Justice and Finance) wished to find partners, on the basis of SDI (Special Development Initiative). This included a proposed new airport at Durban and the possibility of Thomson’s involvement. Accused 1 offered to travel to Paris with Zuma to give a full account of the projects if Thomson-CSF could help to form consortiums for the airports or any other project.
84. On 27 October 1999 accused 1 wrote to Kuwaiti businessman Fouad Alghanim that he hoped the latter, if he eventually decided to visit South Africa, would have the pleasure to meet his close friend, Zuma. Accused 1 noted that both Zuma and he shared a long time common economic goal, i.e. to establish an investment bank. They were still pursuing this socio-economic and socio political objective for critical economic and political reasons. Accused 1 suggested that this should be one of the key issues of discussion in a meeting with Zuma.
Vision of an Nkobi Bank
85. This strategy is further elaborated in a document entitled “Vision of an Nkobi Bank”. In the document, accused 1 outlines his and Zuma’s strategy to establish an Nkobi Bank to act also as financial adviser to a bidding consortium on any given large scale public or private sector project, thus deriving the necessary fees for its investment advice in structuring the debt element of the transaction and/or the equity. The bank would also compete for Government and various Ministry’s budgets as a deposit taker and the financial management thereof, for example, the Ministry of Economic Affairs and Tourism, KwaZulu Natal, headed by Zuma, where they believed they stood a better than equal chance on receiving a Ministry’s deposit.
86. During November 1999, the Nkobi group and Crane (Africa) were in a joint venture, attempting to obtain financing for various tourist initiatives in the province of KwaZulu-Natal. Crane suggested that accused 1 should travel with Zuma to the opening function of the Kosi Mouth campsite and further solidify Zuma’s support
United Bank PLC
87. On 31 March 2000 accused 1 extended an invitation to the chairman of United Bank for Africa PLC, Hakim Belo-Osagie, to visit the Nkobi head office during his visit to South Africa. He also stated in the letter that he would like to introduce him to “our Deputy President Mr. Jacob Zuma either in Pretoria or at his private residence in Durban during the weekend of the 15th / 16th April”.
88. The proposed meeting was to discuss mutually beneficial business opportunities. These included participation with Nkobi on the 3rd Cellular Network in South Africa and banking opportunities specifically with regards to structured finance on Public Sector Contracts.
89. Accused 1 suggested that the chairman should meet Zuma, being the Deputy President of the country and the ANC. Apparently, Zuma indicated that there was an extremely good political goodwill in developing bilateral ties with both countries. Accused 1 suggested that both he and the chairman needed to take advantage of this “conduciveness” to develop their business relations.
Grant Scriven of Venson PLC
90. On 5 October 2000 accused 1 wrote to Zuma requesting that Zuma arrange a meeting between accused 1’s UK partner Grant Scriven, and then Minister of Safety and Security Steve Tshwete, regarding the possibility of creating a fleet service for the SAPS. Zuma duly arranged the meeting in Cape Town before the end of the year. Tshwete, however, did not pursue accused 1’s and Scriven’s proposal. Accused 1 complained to Tshwete in a letter dated 3 May 2001 that the meeting had been arranged through the office of Zuma and after taking advice from Zuma. Accused 1 pointed out further that the lack of response from Tshwete was contrary to the advice from Zuma.
91. Accused 1, through Zuma, arranged it so that Scriven attended a function attended by the cabinet and others in July 2001, during which Scriven received “bear hugs” from Zuma in public view. Scriven replied to accused 1: “I think I can safely say I am in!”
K. INVESTIGATIONS RELATING TO ALLEGED IRREGULARITIES IN THE ARMS DEAL
92. During November 1998, the Defence Audit Centre of the Office of the Auditor-General identified the procurement of the Strategic Defence Package Acquisition Programme as a high-risk area from an audit point of view and decided on the need to perform a special review of the procurement process. On 28 September 1999 the Minister of Defence, MPG Lekota, approved the Auditor General’s audit review into the procurement process.
93. Questions relating to alleged irregularities in the Strategic Defence Package Acquisition Programme arose from September 1999. These were raised in the press and Parliament. On 9 September 1999 the Office of the Presidency issued a statement denying allegations of Zuma’s involvement in the arms deal. Allegations of corruption in respect of the award of the contract for the corvette programme were raised in the media from February 2000.
94. As the matter progressed, the South African government eventually faced a barrage of public requests to appoint the Heath Special Investigation Unit to investigate irregularities relating to the arms deal. The Heath Special Investigation Unit was a statutory agency mandated to investigate irregularities.
95. During September 1999 Patricia de Lille, the former chief whip of the PAC and a Member of Parliament, publicly complained about the arms deal, made allegations of corruption and called in Parliament for a commission of inquiry into the matter. She handed over documentation pertaining to these allegations to the Heath Special Investigation Unit on 30 November 1999.
96. During February 2000 it was reported in the press that the Heath Special Investigation Unit intended requesting the appropriate proclamation in order to commence with an inquiry into the matter.
L. THE BRIBE AGREMENT
97. Thétard met accused 1 in Durban on 30 September 1999. During and/or before this meeting, accused 1 requested Thétard to arrange the payment of a bribe by Thomson-CSF to Zuma. The two main objectives of the bribe were Zuma’s protection against the then current investigation regarding project SITRON and permanent support for future projects. The amount of the bribe was agreed to be R500 000 per annum until the payment of dividends by ADS.
98. At a stage, Thétard requested accused 1 to obtain confirmation or an encoded declaration from Zuma to validate the request.
99. On 30 September 1999 Nkobi Investments transferred 10 ordinary Thomson Holdings shares to Thomson-CSF International France for R500 000. The price was agreed upon in mid 1999. Nkobi insisted on the payment in cash. Nkobi was in a characteristically cash starved position and refused the suggestion that the payment be set off against Nkobi’s obligations to Thomson arising from the Thomson loan to Nkobi to purchase Thomson (Pty) shares. The money was paid to Nkobi.
100. Accused 1 sought a meeting with Perrier in Paris on 22 October 1999.
101. Thétard met Perrier in Paris on 10 November 1999. The discussion concerned Zuma.
102. On 11 March 2000 a meeting was held in Durban at 10h30 between Thétard, Zuma and accused 1. Zuma gave the necessary confirmation or encoded declaration.
103. Thétard informed Thomson-CSF in France and Mauritius of the proceedings of the meetings and the request was agreed to.
M. PAYMENT OF THE BRIBE
104. In terms of the agreement confirmed between Zuma, Shaik and Thétard on 11 March 2000, Zuma would receive R500 000 per annum until the first ADS dividends were paid. ADS dividends were paid in September 2001, being almost exactly two years after the bribe was requested on 30 September 1999 as described above. The bribe due was thus R1 million.
105. Accused 1 experienced difficulty in securing payment of the bribe from Thomson. He threatened Thétard in August 2000 to seek alternative remedy as a result of Thétard apparently ignoring this concern.
106. In October 2000 he complained to Thétard that accused 1’s party (Zuma) was accusing them of reneging on the agreed understanding, the request having been agreed to by Jean-Paul Perrier of Thomson-CSF France, and which understanding had been communicated to accused 1’s party (Zuma). Zuma apparently felt let down. Accused 1 shared this sentiment and was particularly displeased, given Perrier’s positive response. Furthermore, Zuma had proceeded to an advanced stage on a matter that was requiring to be resolved. (Zuma needed funds at this time to pay for his development at Nkandla – see below) The delay was proving to be extremely detrimental and embarrassing for all the parties. Accused 1 urged Thétard to respond timeously on this “extremely delicate matter.”
107. Nkobi eventually entered into a so-called “service provider agreement” with Thomson-CSF International Africa Ltd in Mauritius as a device to disguise the payment of the bribe.
108. The application form attached to the service provider agreement is dated 1 November 2000. The agreement that is signed by accused 1 is undated. The agreement indicates that it was to be signed in January 2000.
109. The covering letter by which accused 1 forwarded to Thétard the application form for the service provider agreement is dated 8 December 2000. He urged Thétard to expedite “our” arrangement as soon as possible, as matters were becoming extremely urgent with accused 1’s client (Zuma).
110. During this period in the last quarter of 2000, Zuma was liable to make payments in respect of his Nkandla development but he was failing to do so. The total amount looming in the near future was in the region of R1 340 000 – see below.
111. Article 7 of the Service Provider Agreement deals with remuneration. Nkobi’s annual fee charged to Thales was R500 000. The printed form provides for 2 payments of R250 000 (before end December 2000 and on 28 February 2001). Two further handwritten figures of R250 000 have been added. The total due in terms of the agreement was R1 million.
112. Article 3 provides for the extension of the contract for successive 1 year periods. 113. A warranty clause relating to non-bribery has a handwritten note in the margin (it is apparently accused 1’s handwriting) as follows:
“Conflicts with intention”
114. Nkobi experienced difficulty in receiving payment of this fee, and had to reflect the fees as still to be received in its frequent cash flow financial statements for the period.
115. Arrangements were made for Zuma to meet Perrier, de Jomaron and/or Defarges (the latter being French Thomson senior personnel) in November and December 2000 in Paris.
116. The initial fee of R250 000 was eventually paid on 16 February 2001 into the ABSA current account of Kobitech (Pty) Ltd (accused 5). (The further analysis of this payment is continued in paragraph 153 and following below).
117. Thomson-CSF International Africa Ltd (Mauritius) reflected in an invoice dated 18 May 2001 addressed to Thomson-CSF International CAI (Turkey) - to whom Thomson-CSF International Africa Ltd in Mauritius reported – the R250 000 in respect of Kobifin as “lobbying fees, Afrique du Sud Kobifin”.
118. Nkobi did little by way of any service to justify this fee of R1 million (or the amount of R250 000 that was paid during February 2001), beyond providing a letter dated 15 April 2001 referring to a submission regarding guidelines and procedures for counter trade offset obligations that would follow and a letter dated 16 July 2001 dealing with potential offsets projects, all of which would in any case benefit Nkobi.
119. Accused 1 drafted both letters. Both letters were prepared on the same day and backdated. Both letters were created for the first time on 23 August 2001 on the same Nkobi computer.
120. At the time of the creation of the documents in question, accused 1 was attending a Thomson board meeting in Mauritius, during which the arms deal investigation was discussed.
121. Jean-Daniel Chabas, another member of Thomson senior management, visited South Africa from 19 to 21 February 2001. He met with accused 1 in Durban on 21 February 2001. The subject of the loan repayments by means of the dividends was discussed. Accused 1 enquired when the dividends could be paid, over and above the loan repayments. Accused 1 was concerned about being able to help those who had helped him.
122. Accused 1, Zuma and Perrier had supper together in Cape Town on 28 March 2001.
123. In a letter dated 17 July 2001 from accused 1 to Moynot regarding an unrelated issue he threatens to “withdraw from all structures of ADS and Thompson……[I]n addition to me throwing in the towel on matters in which I believe will be in the interest of our state.”
124. At this time the multi-agency investigation into the arms deal had already commenced and the first witnesses in respect of this leg of the investigation had already been questioned by the Investigating Directorate of Serious Economic Offences (IDSEO), later called the Directorate of Special Operations (DSO), a division within the National Prosecuting Authority.
N. ZUMA’S REACTION TO THE INVESTIGATION OF THE ARMS DEAL
125. In a letter dated 19 January 2001, written in his capacity as “Leader of Government Business” in parliament, Zuma wrote to Gavin Woods, then chairperson of the Parliamentary Standing Committee on Public Accounts:
“Furthermore, we are convinced that [..] there is no need for the ‘Heath Unit’ to be involved in any ‘investigation’ of the defence acquisition.
We hope this strange manner of proceeding was not driven by a determination to find the Executive guilty at all costs, based on the assumption we have already mentioned, that the Executive is prone to corruption and dishonesty.”
O. FUTURE THOMSON/NKOBI PROJECTS
126. As mentioned above, Nkobi’s meaningful participation in all Thomson’s local business ventures was planned. Nkobi and Thomson had a number of joint business ventures. Apart from being joint venture partners in obtaining the award of the national contract for the drivers’ licences and their partnership in respect of the corvette bid, planned future joint ventures included the Durban airport, the ID card contract, the N3 and N4 projects, the third cellular telephone network, other military deals, and smart card technology.
127. As mentioned above, Thomson regarded as very important the approval of the South African Government and the ANC leadership for its business ventures, including its choice of empowerment business partners.
P. NKANDLA DEVELOPMENT
128. In the year 2000, Zuma commenced with a project to develop his traditional residential village estate at Nkandla in rural northern KwaZulu-Natal.
129. A site plan drawn by architects Tasker & Schuman is styled “Proposed New Traditional Village at Inkadla (sic) Kwazulu Natal” and is dated March 2000.
130. By way of an informal agreement with Zuma during July 2000, Eric’s Industrial Plumbing and Building CC (Eric’s Industrial) was appointed as the construction developer. Eric Malengret is the sole member of Eric’s Industrial.
Cost of the development
131. A document resembling a quotation, dated 19 July 2000, is addressed to Zuma. This refers to plans and a site layout upon which a “tender” was prepared. The “tender” amount is R2 428 360 (excluding VAT). According to the quotation, payment was required on a contract valuation every two weeks with a 10% retention being withheld until contract completion and then reduced to 2½ % for a maintenance period of six months.
132. The estimated time for completion was noted as six months.
133. At a stage, the tender was amended to an amount of R1 340 000.00, which was accepted.
Progress with the development
134. The development commenced on 20 July 2000.
135. During the period of the development from 20 July 2000 to 30 March 2001, Eric’s Industrial incurred expenses of R926 538.28 in respect of the development on Zuma’s behalf.
136. In terms of the informal tender agreement, payment was required from Zuma every two weeks from after 20 July 2000.
Payments for the development
137. Arrangements were made during the development and after its completion for payments to be made by various third parties on Zuma’s behalf.
138. On 14 August 2000, an amount of R100 000 was deposited in the bank account of Eric’s Industrial. This comprised three different amounts as follows :
a. R30 000.00 ex Bohlabela Wheels (Middelburg);
b. R60 000.00 ex Bohlabela Wheels (032 89 2075); and
c. R10 000.00 ex Fakude P.Z.N.
139. On 4 October 2000 an amount of R40 000 was deposited in the bank account of Eric’s Industrial by way of a Bohlabela Wheels cheque.
140. On 18 October 2000 an amount of R50 000 was deposited in the bank account of Eric’s Industrial in cash. 141. On 31 October 2000 Vathasallum Reddy, a businessman, made a payment in the amount of R50 000 from one of his companies, Edison Health (Pty) Ltd, to Eric’s Industrial.
142. On 3 November 2000 a cheque in the amount of R50 000 drawn on Reddy’s personal account, was also deposited into the account of Eric’s Industrial. The close corporation’s cashbook reflects the receipt of the R50 000 on 3 November 2000 as ‘RECEIPT JZ’. Both payments of R50 000 are reflected as ‘members loan account - long term’. This is the manner in which Eric’s Industrial treated all monies received for Zuma’s Nkandla development.
143. Steps with a view to obtaining a bank loan for Zuma were commenced in March 2002. On 9 December 2002 a bond in the amount of R900 000 was registered over the Nkandla property in favour of Firstrand Bank Ltd. On 18 November 2002, Reddy had signed as surety (limited to R400 000) for the payment of the loan. He had also accepted responsibility to pay Zuma’s monthly installments which amount to R12 117.11 per month. Zuma signed a deed of indemnity whereby he indemnified Reddy and held Reddy harmless against any loss or damage or claim as a result of Zuma’s indebtedness to the bank.
144. Reddy commenced payment of the monthly installments of R12 117.11 from 25 January 2003. Payments to 26 May 2003 total R60 585.55.
145. The proceeds of the bond, being an amount of R900 000, was reflected as having been received by attorneys Franke & Associates in its trust account on 12 December 2002 under the name of “Zuma.” Franke & Associates, during the period 12 December 2002 to 14 February 2003, made various disbursements on behalf of Malengret. No amounts owing to Eric’s Industrial are reflected as having been settled in the accounting records of the close corporation. 146. In terms of an ‘Acknowledgement of Indebtedness Memorandum of Agreement’ concluded between Malengret and Zuma on 22 February 2003, Zuma still owes Malengret an amount of R250 000. The sum due, payable together with interest calculated at a rate of 15,5% per annum, has to be paid in installments of R10 000 per month as from March 2003. Zuma is also liable for the related legal costs.
147. Zuma remains liable in total for the development costs of Nkandla and related expenses through the various mechanisms described above, being at least R1 340 000.00. No evidence has been discovered to show that Zuma has yet made any personal contribution in respect of any amount owing by him relating to the Nkandla development.
The accuseds’ involvement in the Nkandla development
148. On 19 October 2000 accused 1, in his capacity as adviser to Zuma, instructed Malengret in writing to stop the development with immediate effect. Zuma, however, requested him to ignore accused 1’s instruction and asked him to continue with the development. Zuma informed him that he was arranging a bond. As described above, negotiations regarding a bond commenced only in March 2002.
149. Zuma drew a cheque dated 4 December 2000 in the amount of R1 million. Development Africa was the payee. By this date, Eric’s Industrial had received R290 000 from the parties mentioned above, leaving a balance on the agreed tender price in respect of the Nkandla development of R1 050 000.00.
150. The account into which the cheque was initially deposited was opened on 7 November 2000 by Reddy in his name trading as Development Africa. Reddy is the only signatory to the account and operates the account. The account was opened as the account for a charitable trust styled Development Africa Trust. This trust has not been registered as a fundraising institution and neither has it been registered for tax purposes. Reddy is both the founder of the trust and a trustee.
151. Zuma’s cheque was presented but payment was stopped on the instruction of accused 1 on 7 December 2000.
152. Since Reddy’s last payment of R50 000 on 3 November 2000 to Eric’s Industrial on Zuma’s behalf, further expenses of approximately R100 000 had been incurred up until 4 December 2000 in respect of the Nkandla development. No payment had been forthcoming in respect of such expenses. No further payments were recorded up to the completion of the development in March 2001.
153. On the 16 February 2001, R250 000.00 was transferred from Thales International Africa – Mauritius to the ABSA current account of Kobitech (Pty) Ltd (Accused 5). The amount was paid ostensibly in terms of the service provider agreement, as explained above.
154. Within eight days, on 24 February 2001, Kobitech (Pty) Ltd paid Development Africa R250 000 as part of the scheme.
155. At the same time, Nkobi issued three post-dated cheques, with numbers sequential to the first paid cheque of R250 000, each also in the amount of R250 000 and each in favour of Development Africa.
156. On 19 April 2001 Kobitech (Pty) Ltd requested ABSA Bank to stop payment on the three cheques each for R250 000 in favour of Development Africa.
157. On 4 September 2001 accused 1 received a deposit of R175 000 from Kobitech (Accused 5). On 5 September 2001, a cheque in the amount of R125 000 was drawn against accused 1’s account in favour of Development Africa. On 17 September 2001 a further cheque of R125 000 was drawn against accused 1’s account in favour of Development Africa.
158. The abovementioned synopsis constitutes a scheme to disguise the payment of the money due to Zuma in terms of the agreement to bribe him.