Publication:Sunday Independent Issued: Date: 2003-11-02 Reporter: Estelle Ellis

Arms Lawsuit May Open New Can of Worms



Sunday Independent

Date 2003-11-02


Estelle Ellis

Web Link


A case in which a businessman is suing the government for millions could see the opening up of a new can of worms surrounding the arms deal and, in particular, the activities of the company owned by Schabir Shaik, Deputy President Jacob Zuma's close friend.

Richard Young is demanding R150-million after he lost a subcontract in the controversial multibillion-rand arms deal to a company owned by Shaik.

Young has also listed Shaik's company, African Defence Systems (ADS), as a defendant in the claim.

He alleges that the contract for the combat suites for corvette warships was awarded to Shaik after some "less than honest footwork".

A combat suite is the part of the corvette from where its weapons are controlled.

Young's system allows for information about prospective targets to be entered, and then co-ordinates the aim of these weapons.

The damages claim, instituted against the minister of defence, Armscor and Shaik's ADS, is a landmark one, as it is one for damages based on a contract that never existed.

If it goes to court, the case could also run concurrent with a major court case in which Shaik has been charged with corruption, theft and tax evasion. He is out on bail and is expected back in court in April.

In the voluminous court papers filed at the Pretoria high court, Young backs up his claims that he was done out of the multibillion-rand subcontract by some nimble footwork.

He claims his bid for the subcontract was sidelined through a series of clever manoeuvres.

Young can afford to take the government to court. He recently sold the same corvettes combat suite to the US air force for millions.

The system is now used in the latest US aircraft carrier, the USS Ronald Reagan, and the US Navy's latest class of ships, the San Antonio class of marine corps assault vessels.

Young's company, C2I2, was once the preferred developer for part of the combat suites fitted to the navy's new corvettes.

The company had been involved in developing the software for these suites since September 1992. During South Africa's arms procurement programme, C2I2's system was eliminated in the bid process and replaced by another system, called the Detexis system.

"The Detexis system was in fact deficient..." Young said in papers before court, adding that a technical team tested both systems and concluded that C2I2 had developed the better system.

Shortly before this, Altech (which held all the shares in ADS) sold 50 percent of the shares in ADS to Thomson-CSF, a French company with extensive interests in the armaments industry. Shortly afterwards, Pierre Moynot was appointed chief executive of ADS.

Thomson-CSF set up two companies in South Africa. Nkobi Investments, under the direct control of Shaik, held 10 percent of the shares in one and 30 percent of the shares in the other.

Shaik became a director of one of the South African Thomson companies in July 1996.

In February 1999, the remaining 50 percent shareholding in ADS was transferred by Altech to Thomson.

During September 1999, 80 percent of the shares in ADS were transferred to one of the South African Thomson companies and Shaik was appointed as an alternate director of ADS.

During 1995, Shaik's brother, Chippy, was appointed to the planning division of the department of defence and, in May 1998, promoted to chief of acquisitions.

In June 1998, Armscor informed ADS that it was selected as the main contractor for the combat suite. Armscor's letter did not state if any selection had been made regarding the information systems.

Unknown to Young at the time, as stated in papers before court, it had, however, been decided to completely exclude his system and have it replaced by the Detexis system.

Young now contends that the department of defence and Armscor breached his right to administrative justice by making unlawful decisions that led to C2I2's system being replaced.

Young also claims he had a legitimate expectation that the state would select his system for the combat suite.

Why? He had been involved in the development of the system for a number of years and it was specifically developed for the new corvettes, Young says in papers before court.

"This development was funded by C2I2," Young says.

Audits had found C2I2's system to be highly satisfactory as well as substantially superior to the Detexis system.

Young claimed there was a conflict of interest as Schabir Shaik had an interest in ADS, while Chippy Shaik did not recuse himself from the deliberations.

Young alleges that Chippy Shaik "actively promoted the interests of ADS", among other things, by claiming that C2I2's system was "merely a technology with potential rather than a developed product".

He is now asking the court to compensate C2I2 for the losses the company suffered by losing out on the subcontract, for what Young described in papers before court was allegedly less than honest reasons.

With acknowledgements to Estelle Ellis and The Sunday Independent.