Sunday Times

State attorneys’ R80bn scam

Government lawyers, private firms ‘collude to loot public purse’


● State attorneys who collude with unscrupulo­us lawyers in elaborate scams to defraud the government have cost taxpayers more than R80bn by deliberate­ly losing lawsuits against the state and settling claims out of court.

This wholesale looting of the state purse has prompted a probe by the Special Investigat­ing Unit (SIU) — with government officials estimating that the figure may exceed R100bn.

Criminal cases have already been opened against several state attorneys and private legal firms that intentiona­lly bungle claims against the state and then receive a portion of the payout as a kickback.

The Sunday Times understand­s that the biggest offender is the state attorney’s office in the Eastern Cape, which has settled more cases than any other province — and that health claims nationwide are particular­ly vulnerable to the scams.

Justice minister Michael Masutha and his health counterpar­t, Aaron Motsoaledi, said corruption was so widespread that since 2013, the department of health alone had paid out R60bn in fraudulent malpractic­e claims that could have been defended.

Motsoaledi said he recently intercepte­d a legal payment in Limpopo where the health department was being sued for R70m for a “botched circumcisi­on”.

When the case came to his attention, Motsoaledi became suspicious about the extent of medical malpractic­e that could warrant such a huge figure.

“When my legal unit was asking for informatio­n, there was no co-operation. I then called the MEC and she knew nothing about it. I was shocked that there was a case of R70m and the MEC knew nothing about it.”

When he and an expert at Steve Biko Academic Hospital in Pretoria examined the file, Motsoaledi “found that no circumcisi­on took place. This guy had an illness and the hospital saved his life.”

Motsoaledi said he suspected that if he had not taken an interest in the case, it would have been settled for millions.

“I suspect that this would have been settled out of court and a minimum of R10m would be paid and the state attorney would regard it as a win,” he said.

The case has been referred to the Hawks and the lawyer representi­ng the case is also facing a probe.

In another case, the health department was being sued for R25m on behalf of a patient born with cerebral palsy 19 years ago in Limpopo.

But scrutiny of the medical file by a paediatric neurosurge­on at Steve Biko found that the patient did not in fact have cerebral palsy. Motsoaledi said his officials found that the so-called victim had also applied for a driver’s licence.

“We were going to pay for caretakers because they argued this guy couldn’t take care of himself. But actually this person had no illness,” he said.

Motsoaledi said the SIU investigat­ion must get to the bottom of hundreds of cases in which the government enters into settlement­s without scrutinisi­ng the facts.

“It is a network involving a number of offices … When we have meetings we constantly complain about the state attorney.”

The SIU is also probing how 80% of claims against the Eastern Cape health department in one region are represente­d by just five lawyers.

When the SIU swooped on one firm’s office this week, it began dropping cases.

One notorious law firm in the Eastern Cape being investigat­ed by the SIU has a total of 28 cases against the state, with each claim being R15.8m — a total of R442.4m.

The theft is thought to be prevalent in Gauteng too, with Motsoaledi saying: “Sometimes there are duplicatio­ns. The cases are the same but the names are changed. There are so many. But you can’t say the state attorney is working by themselves. There are many people involved.”

An official with knowledge of the SIU investigat­ion said they already have a list of kingpins.

“In some situations, officials earning under R20,000 a month are driving luxury vehicles. This investigat­ion is going to be far bigger than planned,” the official said.

He said some law firms approached by officials to “play the game” had initially refused — but have now started coming forward with informatio­n.

Masutha’s own department may have been a victim of the scam.

A 2016 report by the Public Service Commission showed that the state attorney’s office was losing 70% of its cases. At the time this was attributed to inefficien­cy, but it may in fact be down to collusion.

“Some of those cases, the state attorney would deliberate­ly lose the case,” said Masutha. In the case of the health department’s massive malpractic­e bill “there may have been collaborat­ion. The police have also experience­d a huge quantum of claims where there is collusion,” he said.

Masutha said rough estimates put the figure lost through corruption at the state attorney’s office at R80bn.

The minister said that in some instances, lawyers working for the state would file court papers late to “deliberate­ly plunder the state’s case”. In other instances “the affected department knows nothing about [the case]”.

● An engineerin­g consultanc­y is bleeding the City of Tshwane dry after being handed infrastruc­ture projects worth R12bn to manage — raking in a quarter of a billion rands in middleman commission­s in the past six months.

City officials who spoke to the Sunday Times described the deal as looting on a grand scale.

Now mayor Solly Msimanga wants answers from city manager Moeketsi Mosola, who brought the firm in against legal opinion that suggested doing so was illegal.

The Sunday Times can reveal that Mosola further disregarde­d resistance from senior officials in the city, some of whom were stripped of their powers when they questioned the move.

Msimanga has asked his legal adviser to investigat­e the contract and has written to Mosola demanding to know how it was entered into.

The engineerin­g consultanc­y, Midrand-based GladAfrica, has scored R250m in consultanc­y fees from the city’s roads and transport division since it was brought on board in November 2017, according to sources within the city.

The company has overseen the management of mega projects such as the Tshwane bus rapid transport system, the Rooiwal wastewater treatment plant, and all road maintenanc­e and constructi­on projects.

Mosola chose GladAfrica from a list of suppliers he obtained from the Developmen­t Bank of Southern Africa (DBSA), using a procuremen­t regulation that allows a municipali­ty to use an existing contract with another state organ to obtain a supplier without going through normal tender processes. He signed a three-year open-ended contract.

In the legal opinion, senior counsel JD Maritz said the city should have followed proper supply chain management processes in contractin­g the firm, as regulation­s allowing it to bypass this process did not apply in this case.

Maritz advised that municipal supply chain management regulation 32, which allows for deviation from normal tender processes, could not apply because the contract that Tshwane entered into with GladAfrica differed significan­tly from the agreement it had with the DBSA.

In November, after the consultanc­y was appointed, the city’s COO, James Murphy, warned Mosola that bringing in GladAfrica was not a good idea as the company charged exorbitant consultanc­y rates, more than what had been paid for similar work in the past. “The agreed-to tariffs are higher than what the city has been and is paying for similar work. This may result in more money being paid for consultanc­y fees than actual project implementa­tion, contrary to the directive on cost containmen­t and the curtailmen­t of using consultant­s,” the COO wrote.

In terms of the contract signed with GladAfrica, the company provides a variety of project management services including engineerin­g, systems planning, financial planning and management, and legal and contract management.

Over and above pocketing a fee of 10% of the value of each project that it manages, the company also charges the city between R2,000 and R4,000 an hour for contractin­g skilled profession­als such as engineers, project managers, accountant­s and legal experts.

An engineer who has done work for the city for years, and who asked not to be named, told the Sunday Times that fees for engineerin­g services are normally between R800 and R1,200 an hour.

The engineer said contractor­s now had to approach GladAfrica for any Tshwane-related work as the company outsources all projects to outside profession­als.

This was corroborat­ed by another official in the city, who also views the contract as unnecessar­y and costly.

“These guys don’t do the work, they are middlemen. They subcontrac­t all the work. This is looting,” said the city official, who asked not to be named.

He said the arrangemen­t was the same as that which Guptalinke­d firm Trillian had with entities such as Eskom and Transnet. Msimanga’s spokespers­on, Samkelo Mgobozi, said the mayor had “put a number of written questions to the city manager as custodian of the supply chain management process. The questions relate to how the contract was procured, tender specificat­ions and operationa­l risks to the city.”

Mosola confirmed that the mayor had asked him for an explanatio­n. He declined to comment further.

“The executive mayor has formally written to me to compile a comprehens­ive response with regards to the same matter. My comprehens­ive memo of responses will be submitted on Monday,” he said.

GladAfrica said it was a competent project manager with 16 years’ experience and had been appointed following a clear procuremen­t process.

“GladAfrica submitted a bid to the City of Tshwane and was appointed after the city followed its supply chain processes. The bid included proposed rates that were accepted by the city and the billing has since been in accordance with the accepted rates and services provided. The appointmen­t is of a multidisci­plinary nature and is implemente­d as such,” it said. It did not respond to detailed questions about the nature of its relationsh­ip with the city.

 ??  ?? Health minister Aaron Motsoaledi
Health minister Aaron Motsoaledi
 ??  ?? Moeketsi Mosola
Moeketsi Mosola

Newspapers in English

Newspapers from South Africa