UNCAPTURING A STATE

Ajay Gupta is on the run and some of his key lieutenants have been arrested. Now it seems prosecutors are looking to cut a deal with consulting company Mckinsey. Will the cases stick?

Less than 24 hours after the ANC recalled Jacob Zuma as president of the country, a dozen Hawks officers descended on the Gupta family’s Saxonwold compound. It was 6.45 am. As residents, journalists and curious joggers thronged the entrance of the family’s mansion, officers arrested two men: the Gupta brothers’ nephew, Varun Gupta, and Sahara Computers CEO Ashu Chawla.

“They were very shocked,” an investigator told the Financial Mail.

“You could see they didn’t believe this was actually happening to them.”

That disbelief has defined much of the response to the raids carried out by the enforcement team handling the state capture cases.

Already in December, the Asset Forfeiture Unit (AFU) had obtained a court order to freeze R1.6bn paid by Eskom to consulting firms Mckinsey and Trillian on the basis that it had been “the proceeds of unlawful activities”.

In an affidavit, AFU investigator Samson John Schalkwyk said: “Payments were made out of fraudulently generated invoices and in circumstances where services were not rendered — none whatsoever.”

He said Mckinsey played a major role in siphoning R1.6bn out of Eskom by “fraudulently [instructing] Eskom to pay Trillian”, when it knew no services had been delivered.

The words were a warning to New Yorkbased Mckinsey that it faced the real prospect of criminal prosecution if it did not come clean.

The Financial Mail has now learnt that the National Prosecuting Authority (NPA) is seeking to conclude a section 204 deal with Mckinsey, in which the firm will be granted immunity from prosecution if it discloses how the R1.6bn payments were arranged. That may involve Mckinsey admitting it was complicit in fraud, theft, corruption or money laundering. It would be a major U-turn, as Mckinsey has repeatedly denied wrongdoing.

The NPA has declined to say whether it is negotiating with Mckinsey over a section 204 deal. “That is an operational issue, involving an ongoing case,” says spokesman Luvuyo Mfaku. “It would not be appropriate for us to comment.”

A Mckinsey spokesman says the company has not received a “formal request from the authorities” to conclude a section 204 agreement. But she adds: “We continue to co-operate with all official investigations.”

Just days after the Mckinsey/trillian freezing order, the AFU also persuaded acting judge Fouché Jordaan to freeze R220m linked to the Estina dairy farm project as “the proceeds of criminal activities”. (See more on how the Estina deal went down on page 26.) That order directly names Atul Gupta as one of the parties who received money — R10m of it — from Estina.

What it means: Investigators and prosecutors have begun unravelling the project of state capture — and the Gupta empire at the centre of it

“There was no justification for the payment of an amount of R10m to Atul Gupta,” AFU investigator Nkosiphendule Mradla said in the AFU application, “as he had no interest in Estina nor did he provide any farmingrelated services to Estina.”

Nonetheless, Atul Gupta filed an application to overturn that order on February 8. Gupta-linked companies also cited as beneficiaries said they will fight the freezing of R62.7m.

Oakbay CEO Ronica Ragavan argued in affidavits that the state had “failed to show on a balance of probabilities that the property that is subject to the preservation order [is the] . . . proceeds of unlawful activities.”

A day after those applications were filed, Hawks officers arrived at Ragavan’s Midrand estate and showed a photograph of her to her mother. Ragavan says her mother claimed the officers asked where the woman in the picture was. When she told them her daughter was in hospital, Ragavan says they replied: “If she knows what’s good for her, she’ll call the Hawks.”

She later handed herself over, and appeared in court alongside the Oakbay CEO she had replaced: Nazeem Howa. The leaked Gupta e-mails portrayed Howa as a fixer for the family who helped Gupta-aligned officials deal with public scrutiny.

One of those officials is mineral resources minister Mosebenzi Zwane, the former Free State agriculture MEC who green-lighted the Estina dairy project.

A few weeks before Zwane spoke at the Mining Indaba in February 2016, Howa reportedly sent an e-mail to Duduzane Zuma and Rajesh “Tony” Gupta. In it, he proposed answers for Zwane, should he be asked about his relationship with the Guptas, the sale of the Optimum coal mine to Guptalinked Tegeta Exploration & Resources and his inexperience. Fin24 reported that the answers Zwane gave at the indaba “corresponded largely to Howa’s draft responses”. Howa, however, has denied wrongdoing.

Equally, Atul Gupta claims there’s no proof that money paid to Estina was channelled to him — even though investigators submitted five lever-arch files of bank statements to the court in support of their application.

The ordeal isn’t just a legal headache for the Guptas — it’s a public relations nightmare for them too.

Lest we forget, the family initially denied any involvement in Estina, save for a R138,000 consulting contract. However, the leaked e-mails showed this to be a lie.

There were also claims by investigative journalism outfit amabhungane that the Guptas had given Zwane and his gospel choir “an all-expenses-paid Indian tour”