The Standing Committee on Public Accounts (SCOPA) has called Advocate Menzi Simelane, the National Director of Public Prosecutions and Lieutenant General Anwar Dramat, head of the police’s Directorate of Priority Crimes investigation to explain their decision to end all investigations into allegations of wrongdoing regarding the R47.4 billion 1999 Strategic Defence Package.
The Afrikaans daily, Beeld, reports SCOPA chairman Themba Godi last Wednesday gave them written notice to appear before the Parliamentary watchdog. Dramat in September ordered that two remaining probes be abandoned. This only emerged a month later and immediately drew fire from Members of Parliament, including Godi.
Dramat’s spokesman Musa Zondi said the decision was made because the investigation “wasn’t really getting anywhere. It’s closed. The National Prosecuting Authority, on the basis of the evidence we had, couldn’t charge anyone.” The decision reportedly surprised Godi, who told the Cape Times the investigation had been ordered by Parliament and only Parliament could close it. “To cease the investigation is a dramatic development,” Godi separately told the Sowetan.
The Sunday Times newspaper reported yesterday that Britain’s Accountancy and Actuarial Discipline Board (AADB) is to investigate BAE Systems’ audit firm, KPMG, regarding its oversight of the defence giant between 1997 and 2007. The paper added controversial businessman Fana Hlongwane, who was an adviser to then-defence minister Joe Modise when the arms deal was initiated, would be a key figure in the latest probe.
BAE Systems in February agreed to pay around US$448 million in fines in the United States and Britain to settle long-running corruption investigations on both sides of the Atlantic. In the US it pleaded guilty to one charge of conspiring to make false statements to the government and agreed to a US$400 million fine, one of the largest penalties ever against a defence contractor, Reuters reported at the time. The company also pleaded guilty in Britain to one charge of breach of duty in relation to records of payments made in Tanzania. It paid £30 million (US$48 million), the largest penalty imposed to date by Britain’s Serious Fraud Office (SFO).
AADB spokesman Jonathan Labrey declined to comment, other than to say that the investigation was the result of the SFO’s probe into BAE’s practices in South Africa. The SFO obtained signed affidavits in 2008 regarding bank statements which showed that the arms company paid £115-million to advisers “to assist in the securing and maintaining of the Hawk and Gripen contract” with South Africa and other countries. According to the AADB, “BAE set up a system of offshore, anonymous companies to funnel payments around the world. Two of them were in the British Virgin Islands tax haven.”
Among these is Red Diamond Trading, which was investigated over a series of payments made through it, including £70-million distributed to agents in South Africa. In addition to these payments, the AADB said it would probe KPMG’s advice to BAE on the operation of offshore companies, including Red Diamond Trading, Poseidon Trading Investments and Novelmight. The AADB declined to confirm whether it was investigating Arstow, another offshore company set up by BAE Systems, which paid out more than R53-million.
The Sunday Times reported in March that deputy director of public prosecutions Billy Downer had written a 106-page affidavit detailing how Hlongwane was effectively paid £4.9-million between October 1999 and July 2001 by Arstow. The paper said Hlongwane could not be reached for comment despite numerous attempts. KPMG spokesman Gavin Houlgate said the company would be “co-operating fully with the AADB”.
BAE Systems said it noted that the “AADB has … announced an investigation of KPMG’s past audits of the company up to 2007. The AADB has not indicated to BAE Systems that it has any basis for reaching a view that there is any material inaccuracy in any of the Company’s accounts.”