Publication: Richard Young Issued: Date: 2004-06-07 Reporter: Richard Young

A Brief History of a Short Period of Time

 The Arms Deal - a Litany of a Rampant Corruption of Power
Richard Young


We are now just ten years and three elections into the latest phase of the history of our country. It is indeed time to take stock - to do an audit - of the claims being trumpeted out by the ruling elite.

Many of their current claims go around the progress in constitutional and democratic development since 1994.

While we are so far doing better than the right mess north of the Limpopo, I would say that most of the democratic development in this country since that sorrowful event of 1948 (which was quite a long time before I was born) happened between 1989 when Ronald Reagan brought The Wall crashing down and 1994 when Frederick de Klerk finally crossed The Rubicon. Since 1994 it's been mainly downhill, despite the honeymoon Madiba years between 1994 and 1999, and pretty much all downhill since then.

Why do I say this?

My connection to the political world has been enlightened mainly by one set of extraordinary circumstances; major in the national context and critical in my own - this being the Department of Defence's Strategic Defence Acquisitions, the so-called Arms Deal. This has extinguished forever my former political naivete.

While I make no bones about the fact that I have a personal and vested interest in this matter, there is no conflict of interest.

I have therefore made it my business to find out every possible thing about the Arms Deal acquisition process and its subsequent joint investigation.

On a cold clinical assessment of the facts and circumstances, the only conclusion one can come to is that much is most unwell in the Rainbow Nation.

The logic of the deal

Despite always having been a strong supporter of the South African National Defence Force, the illogicality of the Arms Deal just cannot be overlooked. The enormous size of the single acquisition, the DoD's ill-preparedness to manage the simultaneous acquisitions, the SANDF's questionable ability to absorb the state-of-the-art equipment thrust upon it, the choice of the most expensive options in most cases, the initiation of the acquisition of new Gripen JAS-39 fighter aircraft in precisely the same year as the previous generation of Cheetah Cs had been taken into service by the SA Air Force, all point to a Government agenda quite divorced from its now stated objective of re-equipping the SA Navy and SAAF.

On 21 July 1999, at the height of the bidding process, as well as on other occasions, the DoD's Chief of Acquisitions stated publically and before senior officers and managers of the DoD, Armscor and the SA Defence Industry (including me), that: "we the Government, do not care about the defence equipment itself; we are only interested in the counter-trade", "we do not care whether or not the corvettes have engines" and "if the planes can fire a missile, it'll be the cherry on the top". Enough said.

The processes of the deal

Firstly, we saw the usurping of Armscor's statutory acquisition role by the Department of Defence under the rule of Joe Modise and his personal runner, Chippy Shaikh. Shaikh was to become the Chief of Acquisitions after being appointed to the DoD in 1995 at the age of 35, with just 4 years of professional engineering experience and four years of lecturing at a technical college. In his interview with the Scorpions in October 2001 he claimed to have "20 years of engineering experience". In his position of Chief of Acquisitions, Shaikh had a clutch of air force generals and colonels, as well as navy admirals and captains, reporting to him; each having almost an order of magnitude more relevant military and defence materiel acquisition experience. This was political intervention in its crudest form.

Next, we saw the well-proven and statutorily stipulated processes, obliged to be followed by the Armscor and the DoD, as well as laid down in Section 217 of the Constitution, simply being discarded on the altars of expediency and self-interest.

The Secretary of Defence, Lt Gen Pierre Steyn, resigned soon after the outset of the acquisition process when he personally experienced what was happening. He was not replaced with a permanent appointee until three days before the contracts were signed. The new Secretary of Defence signed R30 billion worth of contracts on his third day in the post.

Then the highly experienced managing director of Armscor, Erich Esterhuize, did the same thing and resigned, only to be replaced by the ruling elite's own man, Llew Swan.

All these factors gave free reign to Modise and Chippy Shaikh to manipulate the laid down processes. This led to choices of equipment suppliers well aligned with family and friends of the ruling elite (including themselves) and sadly, to equipment ill-suited to the SANDF's operational requirements and the country's budget; whatever the Chiefs of Service are trotted out to say with regular monotony.

The cover up

But, democratically, all the above pales into comparative insignificance when it comes to the cover up.

Initially the job of reviewing the regularity of an acquisition of the size of the Arms Deal falls to the Office of the Auditor-General (OAG). In the early days of the Arms Deal, the Auditor-General was the inscrutable Henry Kluever. However, in the anxiety of the Government to institute "affirmative" action, he soon got replaced with one Shauket Allie Fakie CA(SA), who was then Chief Executive Officer of the OAG, which was then in a miserable state of chaos.

Nevertheless, the OAG's capability for auditing the DoD was in the excellent hands of Etienne Smith CA(SA) under the direction of Executive Manager, the highly experienced Wally van Heerden.

The OAG proceeded with their regulatory audit of the Arms Deal under these highly capable persons and, despite the almost unbelievable fact that Chippy Shaikh remained on the Arms Deal Audit Steering Committee, they produced a credible, albeit reticently-worded, Special Review in September 2000. At this stage, neither Fakie nor PricewaterhouseCoopers (PWC) were involved in the investigation, although Fakie signed the Special Review.

The Special Review was the seed that Parliament's Standing Committee on Public Accounts (SCOPA), then led by the indefatigable Dr Gavin Woods and Andrew Feinstein, needed to initiate a full forensic audit of the Arms Deal. SCOPA produced its own 14th Report in October 2000 setting out a raft of points and issues pointing to gross irregularities, fraud and other criminal conduct that they required to be investigated. SCOPA also envisaged that a primary investigative role would be taken by the highly experienced, successful and mandated Special Investigation Unit (SIU), but only if the SIU could get a Presidential Proclamation.

What was the result?

The Government came out blazing on all fronts; the Leader of Government Business in Parliament, Deputy President Dr J.G. Zuma, wrote a highly aggressive and inappropriate letter to Woods in the latter's position as chairman of SCOPA, a position he eventually resigned after continued harassment by the ruling elite. The ruling party's Chief Whip, Tony Yengeni, came down so heavily on Andrew Feinstein that the latter not only resigned from SCOPA, but from Parliament as well and also left the country.

The four Cabinet Ministers who had been responsible for the Arms Deal, Alec Erwin, Jeff Radebe, Trevor Manuel and Mosioua Lekota were rolled out at a press conference in January 2001 where they literally ridiculed both SCOPA and the OAG and the latter's Special Review.

These rulers also claimed then, as they have done time and time again since, including during testimony under oath and to SCOPA, that "the Government had nothing to do with the sub-contracts". They are wrong.

Very soon after that, the President himself came out on national television in an hour long special broadcast, blazing away against all and sundry involved in the Arms Deal investigation.

However, most of his venom was reserved for the head of the SIU, the hapless Judge Willem Heath.

The poor judge was accused of many things, including drawing up the famous Organigrams which, he said waving them angrily and theatrically at the pre-positioned SABC TV cameras, indicated the SIU's accusations of impropriety against both himself and the ex-President, the beloved Nelson Mandela.

What the President had failed to ascertain, despite all manner of communications intercept by the ruling elite's intelligence resources, was the true origin of these simplistic relationship diagrams. The person who drew up these four diagrams was me, with the input of an intelligence consultant (who was not a journalist). I still have the pencil originals in my own handwriting locked securely in a fire-proof safe, as well as all the subsequent digital versions safely backed up on many CD-ROMs and digital tapes.

None down and four to go

But the sad litany of misrepresentation only started there. The President then had the temerity to announce to the whole country that a formal legal opinion by the Attorney-General of the Western Cape, Adv Frank Kahn SC and the SIU's own senior legal advisor, Adv Jan Lubbe SC, was that no prima facie evidence of unlawful conducted existed concerning the Arms Deal and, based on this, that the SIU should not get his presidential proclamation to investigate.

The truth was exactly the opposite; the precise words of the two senior counsel in their letter of 18 January 2001 were as follows :

One down and three to go

The rot was well set. But the Joint Investigation by the Auditor-General, the Public Protector and the National Director of Public Prosecutions still had to be seen to run its course. Just how were the problems to be made to go away?

Well, it wasn't too difficult. One of Fakie's first steps was to sideline Wally van Heerden and Etienne Smith from the investigation, citing incompatibility with their previous responsibilities of annual regulatory audits of the DoD. van Heerden had been especially critical of the public hearings being planned by Public Protector, Selby Baqwa SC.

Then, thin on the ground without these two, plus without the experience and depth of the SIU's investigative capacity, Fakie called in his own private investigators in the form of two directors of PWC Forensic Services, Adv Lionel van Tonder and recently retired head of the Office of Economic Offences (OSEO), Adv Jan Swanepoel. Soon they were joined at PWC by Adv Charles de Chermont, until then the AG's lead investigator into the Arms Deal.

It is interesting that PWC Inc., or their predecessors in title Coopers & Lybrand, or their then potential equity partners, Gobodo Inc., were auditors of many Arms Deal supplier companies who stood to be prejudiced should any of the contracts be delayed or set aside. For example, PWC were auditors of Denel, BAe Systems's largest local supplier ATE, the Coega Development Corporation, as well as Modise's own armaments company Marvotech, while Gobodo were auditors of Armscor itself. PWC also had excruciatingly close links as international defence business advisors to BAe Systems, Saab and Rolls Royce, as well as to prime contractor for the Corvette combat suite, Thomson-CSF (now Thales), all of these being major Arms Deal beneficiaries.

It is even more interesting that one of Thales senior directors and shareholders is or was also a PWC partner as well as the chairman of PWC's Aerospace and Defence Group and of PWC Corporate Finance in the UK. Another member of the Advisory Board of PWC is a former Business Development Director of BAe Systems.

Nonetheless some good forensic investigative work was done by these outside investigators, especially by Advocates de Chermont and Swanepoel. Fakie then appointed van Tonder as the OAG's Investigation Project Leader. van Tonder also became chief author of the Joint Investigation Report, along with Advocate Christoffel Fourie of the Office of the Public Protector. However, who really authored or edited the final version is a subject of great intrigue. There has been speculation that a non-legal or non-accounting type of person, with a mother tongue of English rather than Afrikaans, could have had a great deal of influence in reducing a thousand-odd pages of three agency reports into a single 380-page Joint Report in those interesting few days at Task Team Operations Centre in Brooklyn, Pretoria between 14 October and 14 November 2001.

The result was that both crucial facts and findings were simply left out of the Auditor-General's draft reports, or, more ominously, were edited out of the final Joint Report, clearly after direct invention by the Department of Defence and by Office of the President. The hired investigating advocates simply kept quiet about their findings being excised from the final Joint Report. One has to question whether they were just following the orders of their paymaster Fakie, who himself had to follow orders of his masters in the Cabinet and the Presidency itself.

Fakie managed to explain this to Parliament by deciding to interpret the Auditor-General Act and Special Defence Account Act as obliging him to provide his draft forensic audit report to his auditee before its finalisation and publication. I have some of the chapters of these draft reports and can prove to anyone that the differences are stark and material, despite Fakie and Baqwa assuring assembled parliamentarians and SCOPA members that the only differences were ones of style and readability, or as they cutely explained, for "user-friendliness" - indeed.

Fakie also espoused the following questionable wisdom to Parliament on 5 December 2000: "It is not pragmatic and practical to hold Government responsible if the officials do something wrong especially if there are policies and procedures in place". I'm not so sure the Supreme Court would agree.

The other consultant that he used to aid him was a senior counsel who gave a professional written legal opinion to SCOPA that there were no material differences or omissions between the AG's draft report and the final joint version. This is plainly false and should receive the most serious censure of the professional legal fraternity.

In November and December 2001, Fakie and his two fellow stooges repeatedly crowed in Parliament both about the lack of culpability of the Government in the Arms Deal and the efficacy and integrity of its forensic investigation. It took nearly three years for him to finally admit the following :

Yet the resolute chartered accountant said that he stood by his belief that he had produced a "good" report which was the "best we could have done under the circumstances".

Just what can these circumstances have been?

The AG's part, at least, of the forensic investigation reeks of a cover-up of a criminal conspiracy by the DoD, Armscor and certain of its preferred prime contractors to defraud bidders in the tendering process. At the very least there are multiple instances of incontrovertible documentary evidence of investigative negligence and/or incompetence of such breathtaking significance that it is impossible to imagine why this has been left out of the JIT's Joint Report, even out of the draft reports.

I am prepared and believe well qualified to make the direct accusation - Shauket Allie Fakie CA(SA) is a shameless liar. He and/or the investigators reporting directly to him are also guilty of gross negligence and/or incompetence in their conduct and reporting of their investigation.

Fakie should be impeached from his position as Auditor-General as well as dealt with by the professional accounting fraternity.

Two down and two to go

A most bizarre sequence of events occurred in October and November 2000. The provincial director of public prosecutions issued a summons against the senior ombudsman of the Republic after a lady friend of the latter laid a charge of common assault against him following an incident late one night in a Durban hotel during the 13th International Ombudsman Conference (where the accused man was both official host and voted vice chairman of the international body).

Legal developments in this regard would of course be especially compromising considering that the subject of the summons was a married man and the father of three young children. But strangely, ten days after reporting the matter to a medical doctor and making a formal complaint at the Durban Central Police Station on 7 November 2000, the complainant withdrew her complaint. This might indeed explain why the State had no alternative but to withdraw its summons, but there is certainly no satisfactory explanation why the Public Protector and a Senior Counsel of the Realm was in a hotel room late at night with a woman other than his wife.

As the only non-Government witness at the Public Hearings during the last week of August 2001, I personally bore the brunt of what Guy Oliver of eTV News described as a "bludgeoning by questioning" and the use of the DoD's counsel of "tactics as obvious as a tank on the front lawn" in what was supposed to be an inquisitorial rather than adversarial process.

Unconstrained by the tribunal's chairperson, I was subjected to the most adversarial of serial cross-examination; this after having been advised by the Public Protector's previous Arms Deal lead investigator that I would be their "star witness". When my senior counsel tried to examine the DoD's first rebuttal witness, ex Chief of the Navy Vice Admiral Robert Simpson-Anderson, he was severely constrained.

Afterwoods, all Baqwa could do was publicly call me a "coward" for failing to cross-examine the second of the DoD's rebuttal witnesses, Rear Admiral (Junior Grade) J.E.G. Kamerman. What unadulterated nonsense - my legal team were simply not provided a reasonable opportunity for doing so. In any case, these two rebuttal witnesses had only been announced during the final session of my own testimony on the Wednesday afternoon and Kamerman only completed his evidence at lunchtime of the Friday before returning to his post in Germany the next day.

Further stemming from my testimony, I was threatened with legal action by the DoD for "jeopardising state security", by ADS for conduct unknown and, the richest of all, by Chippy Shaikh, probably for exposing his contravention of his farcical recusal regarding his conflict of interest. So far nothing has happened, that is apart from a series of ominous letters and telephone calls from Armscor's Security Division, a further investigation by Fakie's hired PWC guns into where I got some of the documents (despite me having not only told them, but also having given them copies) and even more ominously, certain current investigations by the National Prosecuting Authority (NPA) into the same matter.

But, quite what the Public Hearings achieved, apart from being a forum for a procession of compliant Government witnesses and intimidating me both on and off the witness stand, I do not know.

Three down and one to go

According to the National Director of Public Prosecutions, Adv Bulelani Ngcuka, in both his short three page draft Arms Deal investigation report, as well as in his section in the final Joint Report, there was evidence of a range of misconduct of a criminal nature.

However, thus far after over three years, the prosecution score card is as follows :


Partly Successful



Charges Never Instituted

One of the most firm and significant findings of the whole Arms Deal Joint Report was that the DoD's Chief of Acquisitions, Chippy Shaikh, had a material and declared conflict of interest in the acquisition process, but acted in direct contravention of his supposed recusal. Yet the report contained no recommendation of any sanction in this regard. Bizarrely, the DoD allowed Chippy to resign gracefully in May 2002 after nicely tidying up his desk at the DoD's Defence Acquisition and Projects Division. Nice work if one can get it.

More strange is that the Joint Report makes no mention of the fact that, despite Chippy reporting his conflict of interest to, inter alia, Joe Modise, Alec Erwin, head of the SANDF General Siphiwe Nyanda and to Thabo Mbeki himself, as well as being instructed to formally recuse himself regarding any programme involving Thomson or ADS, Chippy was allowed to remain in all of his diverse positions of influence. These positions included attending and briefing the Ministers' Committee on the very subjects where his conflicts of interest were not only relevant, but also acting as secretary of the meeting and taking the minutes thereof. Copies of these self-same minutes were later found by the Scorpions under Schabir Shaikh's wife's underwear in a cupboard in his Durban penthouse.

During the investigation and under oath Chippy continued with his monotonous refrain that his conflict of interest regarding ADS and its owner Thomson-CSF was only apparent and not material and in any case only began with brother Schabir's acquisition of shares in ADS in late 1999. Yet he failed to testify that he had met with two senior directors of Thomson in July 1998 to discuss the corvette combat suites and that he would "facilitate matters for Thomson if Thomson's position with partners and friends was convenient to Chippy Shaikh. He would otherwise make things difficult". At this meeting Chippy confirmed to these Thomson directors that provincial Minister Zuma would be in the next national Cabinet.

Is it merely co-incidental that Thomson soon gave an effective 20% of its shares in ADS to Nkobi Holdings where Chippy's two brothers Schabir and Yunis were already at the trough and Zuma was a probable occult shareholder through one of Nkobi's juristic shareholders. All the while the ruling African National Congress was a prima facie shareholder through another of Nkobi's juristic shareholding vehicles, Floryn Investments.

Ever wondered where the ANC gets its funds to garner a two-thirds election majority?

In a recent case in the Johannesburg High Court, counsel for the defendant, state-owned Transnet, admitted that the particular tender process had been "irregular, fraudulent and dishonest" and confessed that the plaintiff's tender bid had been unsuccessful because Transnet's "rulers laboured under conflicts of interest.....actuated by considerations arising out of their connections with the ruling African National Congress".

There are a host of similar instances ranging from deals in oil, diamonds, state-owned forests, cellular telecommunications and property development.

Ever wondered why the ANC refuses to reveal the sources of its party funding? Wonder no longer. But now back to Chippy, Thomson and ADS.

So Chippy had made things convenient for family, what about friends? Well, Thomson soon sorted this out by giving a further 20% of ADS's shares to FBS,.two of whose shareholders co-incidentally were long-time friend Yusuf Mohamed and long-time friend and personal accountant Ian Pierce.

But the boss's interests were, of course, also not to be forgotten. Two of FBS's shareholders were Joe Modise's brother-in-lay Lt Gen Lambert Moloi and his son-in-law Tshepo Molai.

Interestingly, 65% of FBS's shares were held by Pierce - the accountant. Just why would this be?

But which ever way, this interest of the head of defence materiel acquisition looks to me more like a head-on train collision than a mere conflict. I wonder why this never came out in the JIT's Joint Report or an NPA charge sheet?

Or is this in reality the Government's economic empowerment at work?

Yet the Government and its three stooges continue to spew out their familiar line that the Government's position is faultless and only that certain of its officials were at fault, obviously in their private capacities - far out of reach of private litigation. Such deniability is not even plausible, there is not the slightest element of truth about it.

Getting back to Ngcuka for just a moment, it must now be clear that the whole Mac and Mo Show debacle in Bloemfontein during the last quarter of 2003 was just a diversionary tactic to take the heat off Fakie and Zuma, especially with elections looming half a year hence.

But in the meantime, the NPA's chief investigator into the Arms Deal, Deputy Director Adv Gerda Ferreira completed her Investigation Report into Zuma, citing prima facie evidence and recommending prosecution for bribery and corruption, only to have this overturned by Ngcuka and his line manager, Minister of Justice Dr P.M. Maduna.

The National Director of Public Prosecutions nevertheless found it necessary to extend his greatest appreciation to Dr Maduna for "once more demonstration of political leadership".

Ferreira's response was to resign from the NPA's Directorate of Special Operations just a month later to join Nedcor. After prosecuting Yengeni, even the prospect of prosecuting Schabir Shaikh after three years of investigation just couldn't have been enticing enough under the circumstances. Who can blame her?

Four down and none to go.

Cop Out

The chairman of Thales International (now Thales International) is Jean-Paul Perrier, who is also Executive Vice-President, Marketing and Sales of the entire Thomson-CSF Group. The NDPP had this unflattering statement to make on Thomson and its directors :

Further attacks from the rulers

Even after the JIT's Joint Report being rejected as a "whitewash" by whistleblower-in-chief, Patricia de Lille" and as "poor and superficial (with) virtually no thorough forensic investigation in evidence" by SCOPA chairman Gavin Woods, the President again came out himself to verbally attack the detractors and label them as "racist" and "counter-revolutionaries".

He later used the digital soapbox of the ANC Today website to label investigating journalists and others sceptics of the Arms Deal investigation as "fishers of corrupt men" - as if there might be anything wrong with this.

The defensiveness is startling.

Where does this all leave us?

The Government has most successfully and in front of our very eyes poured some megatons of figurative concrete over the suppurating sarcophagus of its own Chernobyl. The elections are over and the majority is intact - that is all important (apart from the bank accounts in the Channel and Cayman Islands and Malaga as well as some trust accounts in the UK and USA).

But, like the gamma rays and alpha particles of Chernobyl, the half-life of the partially buried facts and truths is long and they want out.

But unlike Chernobyl, I intend to help get the facts and the truth out where they belong; that is into the courts and into the public conscienceness.

The ruling elite know this and behind the scenes are using their mighty resources accordingly. During just these last few weeks a deputy director of the National Prosecuting Authority has been interviewing persons closely connected with the initial Arms Deal investigations about the circumstances how crucially incriminating documents got into the semi-public domain. The common denominator in all the questioning is how I came into possession thereof and was thereby able to use relevant portions of the evidence to incriminate Chippy Shaikh regarding the lies of his recusal, as well as exposing the supporting lies of a host of senior naval officers and Armscor managers during Baqwa's Public Hearings, all of which should have led to immediate perjury charges.

So I phoned the lady investigator in question a while back to ask her two things: firstly, whether I was the subject of the investigation and secondly, whether I could help her in her investigations. Her hardly credible reply to the first question was that I was not. So I asked her that seeing my name came up repeatedly in these interviews and that, outside the Government and its three stooges, I probably know more about the Arms Deal than anyone anywhere, why she had not approached me. Her reply was that she was cautious of me because of my alleged propensity to go to the press. The ludicrousness of this reply needs no further elucidation other than to say that two of these very same people from whom she was attempting to elicit such sensitive information happened to be two investigative journalists of two publications most successful in the country in exposing the Arms Deal shenanigans, the Weekly Mail & Guardian and the Sunday Times. The other person was a source of very many of these and other press exposés of the Arms Deal.

These ill-thought out responses clearly demonstrate for me that the Government has not only made it its priority to quash the Arms Deal investigations whatever this takes, but also that it still has an agenda of intimidating and possibly even charging the primary whistleblowers in this sordid affair.

Why would this be?

If one considers the Government's, even the President's, oft stated public views on combatting corruption, but at the same time their desperate and almost overt efforts to firstly initiate the Arms Deal and then secondly, to stifle its forensic investigation, the only logical conclusion is that this corruption extends far and wide among the ruling elite.

Little seems to stand in the way of the economic enrichment of a small group, the usual suspects - who are well-connected with the ruling elite - whether this be the common law or the statutory Prevention of Corruption Act or the Whistleblower's Act or Promotion of Access to Information Act.

Certainly much is unwell in this beautiful and beloved land. Unchecked, circumstances and events to our north will be a sad, but comparatively tiny "picnic".