‘LOW-HANGING FRUIT’ STILL TOO HIGH FOR NPA?
All but one of the eight accused in the R25m Nulane Investments trial are seeking discharge as the prosecuting authority seemingly bungles its first state capture case
The credibility of the National Prosecuting Authority (NPA) hangs in the balance after it appears to have dropped the ball in the first state capture prosecution to go to trial — a case it had said would be a slam-dunk.
Last Thursday, the Free State high court learnt that all but one of the eight accused in the R25m Nulane Investments criminal trial were preparing applications to be discharged, given the state’s apparent inability to make a case against them.
The outcome of those applications — due to be heard on Friday — may have repercussions for the extradition of the Gupta brothers from the United Arab Emirates (UAE), and, potentially, for the state capture cases still to come.
Nonprofit public accountability organisation Open Secrets has been following the trial closely.
“Open Secrets thought that the [NPA] strategy to bring a relatively straightforward prosecution of a ‘low-hanging fruit’ case was the correct one,” says the organisation’s head of investigations Michael Marchant. “Having fewer accused and less complexity should have been an advantage for the prosecutors. However, it appears there is a real possibility that the accused will be discharged.”
Among matters of concern is the state’s decision to roll over on the issue of the admissibility of the “Gupta leaks” — information that has been central to the findings of the Zondo commission of inquiry into state capture.
Abandoning the “trial within a trial” is a curious decision. A source with inside knowledge of the state capture inquiry’s efforts to verify the contents of the Gupta leaks hard drive, tells the FM: “The work has been done, the research has been done. It was a big project — a hell of a lot of research and preparation.” The source spoke on condition of anonymity,
While Marchant believes it is “deeply troubling” that the NPA didn’t appear
ready to make an argument for admitting the Gupta leaks as evidence, he believes there is a “silver lining”. It means the court hasn’t had to make a decision on their admissibility — which leaves the leaks in play for future state capture cases.
In any event, says a former prosecutor, speaking on condition of anonymity, the Gupta leaks may not be the point on which the Nulane case turns. “Even without the Gupta leaks, there was sufficient evidence to prove charges of fraud and money-laundering if properly argued,” the prosecutor says. “The bottom line is, money flowed from the Free State department to Nulane investments. What was the underlying basis for those flows? The contract.”
It’s the state’s view that the contract amounts to fraud.
More important than the leaks, the state capture commission source says, is whether the case has been “properly researched”. “It doesn’t seem to me that it’s in the correct hands.”
It’s a common view among the legal experts the FM canvassed for this story. At issue is whether the NPA has the capacity to tackle complex financial crimes in the first place — and whether the prosecution, with advocates Peter Serunye and Jacyntha Witbooi representing the investigating directorate (ID), is adequately prepared.
“[The prosecution] just doesn’t have the wherewithal,” says one legal expert. “You have junior people against the most experienced advocates in the country.”
Another point of concern for them is that senior counsel Nazeer Cassim advised the state on the Nulane matter. One source notes that Cassim is not a criminal law expert; another is concerned that he lacks expertise when it comes to digital forensics.
What makes this case pivotal is not just that it’s the first state capture case from the ID to go to criminal trial, it’s that it is also the basis for the extradition of the Guptas from the UAE.
Back in June 2021, Interpol issued red notices for Atul and Rajesh “Tony” Gupta on the strength of the Nulane indictment. A year later, police in the UAE announced they had acted on the red notices and arrested the brothers.
Now, former Free State government officials Peter Thabethe and Seipati Dhlamini, Gupta associates Iqbal Sharma, his brother-in-law Dinesh Patel and former Oakbay CEO Ronica Ragavan, and Gupta company Islandsite Investments and Nulane Investments have applied for discharge. (Free State official Limakatso Moorosi is the only one of the accused not to do so.)
If the seven accused are relieved, it could pave the way for the Guptas to challenge the red notices against them.
At the heart of the state’s case is a high-level due diligence report conducted on the Mohuma Mobung venture in the Free State — a feasibility study that gave rise to the controversial R288m Estina dairy project. The Free State government is alleged to have fraudulently awarded the contract to Nulane Investments for R24.9m. Nulane then subcontracted Deloitte to produce the report for R1.5m — and is alleged to have amended the auditing firm’s study in select ways.
These, the state says, included doubling capital expenditure to R500m, turnover to R80m and net profit to R16m, increasing the projected tally of jobs from 400 to 600 and inserting Indian dairy producer Paras as a desired co-investor.
According to the state’s version, the funds paid to Islandsite were then channelled between companies in the Guptas’ business matrix to conceal the fraudulent source of funds. However, senior counsel Mike Hellens, acting for Ragavan, has said the cash flows were ordinary business transactions — intercompany loans duly recorded in ledgers and financial statements. And while Patel and Sharma have argued that former Free State premier Ace Magashule’s erstwhile political adviser Ashok Narayan controlled
Nulane, no witness has been called to prove otherwise.
But perhaps the most problematic aspect of the prosecution case is that acting judge Nompumelelo Gusha has now ruled out a number of exhibits that had been admitted on the understanding that witness testimony would justify them.
In other cases, copies of documents were submitted as evidence on the basis that the state would furnish the court with the originals. Only, “all other documents provisionally admitted into the record remained copies even after the state closed the case without the state tendering into evidence the originals thereof”, said Gusha.
She was, she said, “not satisfied that the originals of these documents are either lost or that a diligent search was conducted”, and she noted that the state hadn’t led evidence suggesting a thorough search for primary sources or called a handwriting expert to attest to signatures.
As attorney Ulrich Roux told Newzroom Afrika, “the best evidence rule is applicable, and the onus is then on the state to say, well, we obtained the evidence in the following way. These are the reasons why we cannot produce the originals.”
Open Secrets’s Marchant is deeply critical of the state’s prosecutorial failures. “The state’s biggest errors in this matter appear to have been quite rudimentary procedural errors by law enforcement agencies and the prosecutors,” he tells the FM.
“It is hard to imagine they did not foresee challenges to the authenticity of documents and chain of evidence, so that lack of preparedness to persuade the court on these issues is inexcusable and deeply concerning.”
Still, while Gusha’s ruling is a “big blow” and “setback” for the state’s case, “whether that’s going to be fatal or not, one would have to wait and see”, Roux said, adding, “it would be irresponsible to make an adjudication on that”.
He also cautioned against overblowing an ID loss, should the accused be discharged.
“It won’t be to anyone’s benefit to stereotype all these matters and [suggest that] because one matter is not successfully prosecuted that means there was never any state capture,” Roux told Newzroom Afrika. “I think the Zondo commission proved the so-called capture that has taken place with our stateowned entities and each matter must be adjudicated on its own merits and based on the evidence gathered in each matter separately.”
The developments in the Free State high court took on a new complexion after South Africa’s greylisting by the Financial Action Task Force (FATF) on Friday for its laxity on combating money-laundering and the financing of criminal and terrorist activities. In announcing its decision, the global financial watchdog noted eight measures on which South Africa had fallen short — including deficiencies in law enforcement.
As Marchant notes, the FATF decision serves to confirm that the “remaining systemic deficiencies in South Africa” don’t relate to a lack of laws designed to combat financial crimes, but the failed enforcement of those laws.
“Those involved in money laundering and other illicit financial crimes are not being properly investigated and prosecuted,” says Marchant. “Arguably, the Nulane matter is emblematic of these failures and an indication of the extent of rebuilding required in law enforcement and the NPA in order to achieve some accountability.”
While the state has taken a battering in cross-examination, the likes of Serunye and Witbooi are among those adamant that the case is still winnable.
Says the former prosecutor: “There are still sufficient documents [to argue the state’s case]. There is a hope of salvaging the case. All they have to do is present the basic evidence.”