Publication: Sunday Independent
Reporter: Michael Schmidt
Reporter: Eleanor Momberg
Arms-Deal Allegations May Be Hard To Prove
being probed by Britain's Serious Fraud Office (SFO) that prominent South
Africans were paid bribes to the tune of millions of pounds to secure part of
the controversial arms deal might be hard to prove, if an SFO document, itself
leaked, this week is anything to go by.
According to extracts of the
document - a request by the SFO for assistance by the South African authorities
- published in the Mail & Guardian on Friday, arms giant BAE Systems first
tried to sell its Hawk fighter-trainer jet to apartheid South Africa in
FTNSA Consulting, a company founded in that year at St Kitts &
Nevis in the Caribbean, and apparently presided over by Anglovaal Limited
chairman Basil Hersov, started consulting for BAE Systems regarding the
potential sale of the Hawk to South Africa in June 1992.
There is nothing
particularly unusual about this: Denel currently has paid agents in Turkey who
are trying to convince the Turkish government to buy its Rooivalk attack
The question for the SFO is whether, in BAE System's trading
on Hersov's presumed influence with the ruling circles of the Nationalist regime
and its post-1994 successor, any undue influence was brought to bear on the
government in selecting the Hawk.
In any event, the Hawk deal was signed
in 1999 and the SFO claimed that FTNSA was paid only consultancy fees of £5,5 million *4 (about R77 million) between 2002 and 2005 - well after the ink had dried on the
Hersov told the M&G that the sum paid to himself
was substantially less.
The very fact, as claimed by the SFO, that most
commissions paid by BAE Systems to its agents were made from an account held by
a company, Red Diamond Trading, registered in the British Virgin Islands, is no
proof of skulduggery: the islands are a tax haven and it
makes sense for BAE Systems to have accounts there *3.
the M&G that his role as consultant was usurped by Richard Charter's Osprey Aerospace, which became BAE
Systems' agent in South Africa, allegedly receiving just under £2 million *4 for its work - also in the period between 2002 and 2005 *2.
Paying one's agents is
normal business practice, but the biggest question faced by the SFO appears to
be why another entity, Huderfield Enterprises, of the British Virgin Islands,
which it claims was run by Charter, was allegedly paid almost £25 million *4 between 1999 and 2005 as BAE Systems'
Charter, who served as the chairperson of BAE Systems
South Africa, accidentally drowned in the Orange River in 2004, so he won't be
answering any questions, though his estate might be forced to disclose
The SFO document also claimed that Hlongwane Consulting,
founded in 1999 by Fana "Styles" Hlongwane, briefly
an adviser to Joe Modise, the defence minister, while the Hawk deal was being
mulled over, was paid a retainer of £1 million a year *4
from 2002 by BAE Systems, then a final settlement of $8 million in 2005
*2*4 "in relation to work done on the Gripen project", referring to
SAAB/BAE System's successful pitch to South Africa.
The problem for the
SFO in proving that Hlongwane exerted any undue influence on the selection of
the Hawk or the Gripen is that at the time they say his retainer contract was
signed with BAE Systems - 2002 - the deal was water under the bridge, Modise had
passed away in 2001, and Hlongwane had long since left his board position at
Denel (assumed in 1998) to start a private arms group - so he had no official
position to abuse.
A hint that a 1998 pledge by BAE Systems of R4,5
million to the MK Military Veterans Association (MKVA), of which Hlongwane was
once the chairperson, may have been shady also bears little fruit as not much
Helmoed-Römer Heitman of the defence journal Jane's,
said that although Hlongwane's positions were such that he had "minimal" chance
of influencing arms-purchase decisions, "that doesn't mean BAE didn't think he
might have an impact".
But even Richard Young
of the Cape-Town based arms firm C²I², an arms deal critic, who said Hlongwane's
name had cropped up in the earliest allegations of impropriety and who said he
suspected him of being the "bag man" and "point man" for whoever benefited from
the deal in South Africa - admitted that the MKVA pledge was "not unlawful".
David Jones, a spokesperson for the SFO, would neither confirm nor deny
that Hersov and Hlongwane were among the South Africans being investigated for
allegedly receiving payoffs in exchange for their influence in securing the BAE
"It is not our policy to discuss investigations against
individuals until they have been charged or not," said Jones.
an initial examination by us and we decided to take it forward in mid-2004."
Jones said the SFO was investigating "any illegality in payments in
relation to the contracts" for the provision of aircraft and other equipment by
He said the probe into any wrongdoing by BAE Systems in
securing its contract to supply South Africa with Hawks was being run alongside
various investigations in relation to BAE Systems in
The SFO has liaised with the South African
authorities about the investigation because of jurisdictional issues.
Lucinda Moonieya, a Scorpions spokesperson, confirmed that the SFO had
contacted the National Directorate of Public Prosecutions, requesting mutual
legal assistance in the investigation.
"Whatever assistance they
request, we will give them," she said, pointing out that no specific requests
had been laid out in the SFO document.
Hersov and Hlongwane could not be
contacted for comment. Lisa Hillary-Tee, a spokesperson for BAE Systems, said
the company was unable to comment - because the investigation was still under
way - other than to say they were co-operating with the SFO.
"I can only
echo [chief executive] Mike Turner who said, and rightly so, that it has been taking a long time *5 and that [our critics]
should put up - or shut up".
With acknowledgements to Michael Schmidt, Eleanor Momberg and
*1 This is simply not correct. I
personally meet Richard Charter in his Osprey offices in early 1999 and he told
me directly that his company was the official British Aerospace agent and that
he had "kept BAe's interests in the Republic alive from the time that the UN
arms embargo had been set".
*2 I would be very
surprised if these dates were true, or that if the payments were made during
this period, the commitment had been made much earlier.
Why do I say
Well, in late 2000, maybe early 2001, substantially before the
indicated period, allegations had been made to the investigation team such that
(and recorded as) :
is nonsense. It might make sense for agents to have their bank accounts in tax
havens, but supplier companies want to be able to claim agents' fees as tax
deductable expenses. Therefore a legitimate business, especially a
publicly-owned company, retains all of its operations and administration in
certain known places and transparently operates and administers itself and its
- "Joe Modise Former Minister of Defence :
- The following are also mentioned as part of the group :
- I Hlongwane"
- "British Aerospace :
- Allan McDonald (Head of Bae) and Richard Charter indicated who were to be
- A director of Denel is suspected to be working for British Aero Space (sic).
His first name is Fana. Seems that the said person also involved with a South
African company, Vuwani."
There is no known defence business in the
British Virgin Islands or Cayman Islands and it makes no sense for British
Areospace to have subsidiaries there, especially with nondescript names such as
Red Diamond Trading, unless these are used for laundering illegal payments to
bribees and corruptees.
Thomson-CSF do exactly the same thing with
pseudo-operations in Mauritius, Lebanon, Lichtenstein for the making of undue
payments in respect of :
However, the real aspect that
both the SFO and DSO need to get behind is whether, as the allegation goes, BAe
paid 7% of the contract price, i.e. some £105 million or R1,575 billion, in
agency or other payments.
- " OCED / THOMSON-CSF INTERNATIONAL
- - Les cas specifiques
- cas sensibles - paiements off-shore, etc...
- SECRET GROUPE"
If so, such an amount invalidates all the
references to amounts such as £5,5 million, £2 million, $14 million, even
If £105 million was paid, this is serious money whose end
recipients need to be identified and its purpose
*5 It has taken a long time because
the South African investigation authorities never investigated this allegations
properly - or more likely (indeed almost surely), they did so but closed the
file when Modise died.
*6 This smacks not of "we
are not guilty of any unlawfulness in the country concerned" (BAe's standard
response), but of "catch us if you can" or "the evidence no longer