Publication: Sunday Independent Issued: Date: 2011-08-15 Reporter: Ivor Powell

DA to hand new arms deal details to Hawks



Sunday Independent

Date 2011-08-15
Reporter Ivor Powell

The DA’s David Maynier will tomorrow be handing over to Hawks chief Major General Anwa Dramat prima facie evidence of massive arms deal corruption and fraud in the procuring of three submarines for the South African Navy – and asking again: what are the Hawks going to do about it?

This follows earlier approaches to Dramat by Maynier as well Themba Godi, chairman of Parliament’s watchdog, the Standing Committee on Public Accounts.

On Tuesday this week, in the face of revelations emerged that an internal probe into the affairs of the German industrial giant Ferrostaal by international auditing firm Debevoise and Plimpton (D&P) had uncovered e36 million (R367m) in questionable money transfers to South African “consultants” and other arms deal wheelers and dealers, Maynier wrote “to confirm that you (Dramat) are aware of this information and that the information will be investigated by the Hawks”.

While a pro forma acknowledgement of receipt was dispatched from Dramat’s office, no substantive response has yet been forthcoming.

Neither has Dramat yet responded to Godi’s “urgent” request that Dramat take cognisance of the new allegations as well as the fact that Ferrostaal “would willingly provide information if they are approached”.

The new revelations come as Hawks investigators are interacting with Swedish authorities and the UK’s Serious Fraud office over the admission by Swedish weapons manufacturer SAAB that its accounts had been used by its UK partner British Aerospace to pay a seemingly irregular “consultancy fee” to arms deal entrepreneur Fana Hlongwane in 2003.

The Hawks – who were called off the case by Dramat in November 2010 – are also sitting with substantial bodies of evidence relating to allegedly irregular payments by BAE and its offshore front companies after engaging with the SFO in a mutual legal assistance operation in 2008.

The assistance arrangement was later blocked by then Director General in the Department of Justice Menzi Simelane, now National Director of Public Prosecutions – but not before mountains of documents were seized in a series of search and seizure operations.

The document Maynier plans to lodge with Dramat consists of 13 pages extracted from a much longer report commissioned by a new-broom management at Ferrostaal as a group of former executives from the previous corporate administration face criminal charges of bribery, corruption and failures of fiduciary duty in the German courts.

The D&P audit uncovered a total of at least e336m (R3.4bn) in bribes and otherwise irregular payments, over a 10-year period, in its business dealings worldwide.

Startlingly, the D&P audit reveals in its investigations into the South African submarines deal that (in addition to a string of other “questionable payments” more than 25 percent of the company’s total revenues was paid to two “consultants” – who did hardly anything that could be discovered in the paperwork to earn it.

One of these was Tony Georgiadis, the ex-husband of former president FW De Klerk’s current wife, whose usefulness, according to D&P was “as a conduit to politicians. The record shows that he knew a number of senior politicians, including president Thabo Mbeki and possibly Nelson Mandela, and introduced Ferrostaal employees to these politicians”.

Noting “there is little evidence to suggest Georgiadis did work commensurate with the fee received, D&P records that between 2000 and 2004, Georgiadis was allegedly paid a nearly fantastical e16.5m by Ferrostaal.

The audit report goes on to note that a top Ferrostaal executive indicated to the company’s suspicious chief financial officer in justifying a e2m “consultancy” payout in 2003 that “political contacts” of Georgiadis’s companies “had a decisive influence on the tender for the submarines”.

The other major consultant named by D&P as a recipient of Ferrostaal’s municificence was former defence industry executive Tony Ellingford, who, likewise was allegedly paid e16.5m between 2002 and 2003.

Another consultant, retired admiral Jeremy Mathers is recorded as having allegedly received e1.2m, most of which was initially styled as a “success fee” after the German Submarine Consortium.

Ferrostaal was the leading contractor in the GSC which, in 1999 was awarded the contract to supply the Navy with three of the undersea vessels at a cost of R5.35 billion as part of South Africa’s notorious Strategic Defence Procurement project. D&P also noted that the German arms manufacturer – seemingly unquestioningly – wrote off around e60m in investments in offset projects that either never got off the ground or self-destructed within months of their inception.

Most of these, according to D&P were given a contradictory definition of “non-refundable loans”.

Other investments – of more than R10m – were simply given up for lost when projects collapsed.

Commenting on Ferrostaal’s offsets, arms deal campaigner Terry Crawford Browne said the D&P findings were less than surprising: “The offsets were a scam from the start, the investments were built into the sale price from the beginning.”

With acknowledgements to Ivor Powell and Sunday Independent.

One that never went out previously.