Municipal officials duped by ‘free funding’ 419 scam

Treasury blocks deals with company that promised trillions of dollars in grants

TOP officials of four South African municipalities have been duped by a rudimentary scam after they struck “agreements” to receive between $2-billion and $5-billion (about R22-billion to R53-billion) “free” funding from a shady international grant facilitator.

The four councils are Sekhukune district, Ba-Phalaborwa and Greater Tubatse in Limpopo, and Distobotla in North West.

Contracts and letters signed by the municipalities’ managers and finance bosses indicate a willingness to receive “development funding” facilitated by a company called Metro Grant Holding Corp.

But the amounts Metro Grant claimed to be able to donate should have set off alarms because they are more than South Africa’s national budget.

Metro Grant produced letters to the South African Reserve Bank detailing a “direct government investment grant to the Republic of South Africa of $1-trillion plus further rolls and extensions as your government deems necessary”.

“We have also made assignments to each of your intelligence agencies for $1-trillion each, which are awaiting draw- down from them,” the letters state. For municipalities, it says it can provide “only” up to $5-billion each.

According to 2012 figures, the four municipalities had combined assets of R5-billion. They provide services to about 1.5 million people.

More municipalities may have fallen for the scam.

The Treasury said Metro Grant approached at least 13 municipalities.

The amounts Metro Grant claimed to be able to donate should have set off alarms

The officials at the four municipalities appeared eager to get the “loans” and provided banking details to Metro Grant to “expedite all processes and accept the international bills of exchange”.

Metro Grant claims to be a “sovereign trust” with access to trillions of dollars that it wants to distribute because it strives to fulfil its goal of “creating global prosperity for all”.

The company was tracked down to an office in Sandton.

Its CEO, Carlos Araujo, was unable to provide evidence to support the claim that Metro Grant had access to trillions of dollars.

Citing a fear for his life, he refused to supply evidence of any successful grant it had provided, despite the claim that it operated in scores of countries, notably in Africa.

Investigators close to the case said that it was a typical “advance-fee scam”. Metro Grant would have been able to use the documents from the municipalities to provide a front of legitimacy to scam other small businesses by offering them contracts in exchange for an initial fee.

Contracts signed by the municipalities provided “for the authority that Metro Grant would retain 50% of the funds to be placed into various prearranged investment vehicles”.

Only the Treasury’s intervention stopped this, but it has exposed a lack of financial expertise at municipal level.

The Treasury blocked the agreements and warned the municipalities of the risks of dealing with an organisation that “appears to be a scam”.

The Treasury investigated the legal structure of Metro Grant, including the proposal for “free funding”, and conclud- ed that there were serious inconsistencies in both its legal status and funding structure.

Concerns were also raised by the Treasury that the municipalities flouted the requirements of the Municipal Financial Management Act and municipal supply-chain management regulations, according to which the Treasury must vet agreements for funding.

The municipal officials could have avoided embarrassment

It is a fraudulent advance-fee scam using fabricated financial instruments

through a simple Google search that would have produced warnings about Metro Grant Holdings Corp, such as that on the website Ripoff Report.

Metro Grant has no track record in funding and no corporate presence such as a company telephone line. Its South African “agents” use free gmail e-mail addresses.

This lack of a traceable history in legitimate business dealings, combined with zero accreditation, appear to be at odds with Metro Grant’s claim of having access to trillions of dollars in free money.

Metro Grant is a “totally fraudulent advance-fee scam using fabricated financial instruments”, said Chad Thomas of IRS Forensic Investigations after reviewing the documents.

“It is exactly the same as a 419 scam.”

Since signing for the “free funds”, the North West government has placed Distobotla municipality under administration because of “administration, governance and service delivery” issues.

Attempts to contact officials at the Greater Tubatse municipality failed.

Sekhukune municipality’s chief financial officer, Meldah Mokono, who co-signed the Metro Grant documents, said “the agreement that is referred to never took off the ground as we were immediately advised by the Treasury not to pursue such agreement”.

Ba-Phalaborwa municipal manager Setimela Sebashe said he had no recollection of signing the agreements.