Hlongwa’s R1.4bn ‘cor­rup­tion ring’

Ex-MEC al­legedly re­ceived kick­backs from two com­pa­nies

The Sunday Independent - - FRONT PAGE - CANDICE BAI­LEY

GAUT­ENG ANC heavy­weight Brian Hlongwa faces im­mi­nent, and would face mul­ti­ple charges of cor­rup­tion and money laun­der­ing re­lated to two ten­ders worth over R1.4 bil­lion, sources have told The Sun­day In­de­pen­dent.

Hlongwa, the for­mer MEC for health in Gaut­eng, has emerged as a cen­tral fig­ure in the ten­der scandal that threat­ens his ca­reer as well as that of other officials im­pli­cated. He al­legedly re­ceived kick­backs from both firms.

Al­le­ga­tions have also been made that the ANC in Gaut­eng ben­e­fited from the kick­backs.

The R1.4bn has be­come a hon­ey­pot in a tug-of-war be­tween the govern­ment’s Anti-Cor­rup­tion Task Team (ACTT) and two com­pa­nies, 3P Con­sult­ing and the Baoki Con­sor­tium. The two com­pa­nies al­lege that they are owed the mil­lions for ser­vices ren­dered in terms of two sep­a­rate ten­ders granted by the Gaut­eng De­part­ment of Health.

How­ever, the ACTT – made up of the Hawks, the Spe­cial In­ves­ti­gat­ing Unit, the As­set For­fei­ture Unit and the Na­tional Pros­e­cut­ing Au­thor­ity (NPA) – con­tend the mil­lions that the two com­pa­nies claim be­long to them, are, in fact, pro­ceeds of crime.

The NPA this week asked the South Gaut­eng High Court to place preser­va­tion or­ders on any claims 3P and Baoki have filed, en­sur­ing that if it was un­able to for­feit the claims al­to­gether and the com­pa­nies are suc­cess­ful, they would still for­feit the money.

In 2007, 3P won a ten­der to set up a Project Man­age­ment Unit at R120m. But 3P con­tracted 144 en­ti­ties to pro­vide ser­vices to the de­part­ment and ex­tended their con­tract by three years, even­tu­ally paid R392m by the time Health MEC Qedani Mahlangu can­celled the con­tract in 2009.

In 2008 Baoki was given a R1.2bn ten­der to set up a health in­for­ma­tion sys­tem and elec­tronic health record.

It was paid over R400m with­out in­stalling any sys­tem by the time its con­tract was can­celled one year later.

Should the NPA’s preser­va­tion or­ders be fi­nalised, it will come as a mas­sive re­prieve for the Gaut­eng De­part­ment of Health, which has been em­broiled in le­gal bat­tles with the two com­pa­nies since 2009, when Mahlangu re­placed Hlongwa and can­celled the two con­tracts.

Both are de­mand­ing the fi­nan­cial re­main­der of their con­tracts.

They will be al­lowed to op­pose the ap­pli­ca­tion and – ac­cord­ing to sources within the task team – the State’s tough­est lit­i­ga­tors are pre­par­ing them­selves for a lengthy and gru­elling bat­tle to en­sue as the com­pa­nies at­tempt to re­coup their gains.

Firm 3P Con­sult­ing, which is cur­rently in liq­ui­da­tion, is claim­ing over R100m from the de­part­ment.

This week liq­uida­tor Kevin Chow from the Har­vard Cor­po­rate Res­cue Ser­vices re­ferred queries to at­tor­ney Alec Brooks of Brooks and Brand In­cor­po­rated, who is han­dling the in­sol­vency in­quiry into 3P on be­half of the liq­uida­tors.

Brooks, how­ever, told The Sun­day In­de­pen­dent that he could not com­ment on the mat­ter as he was still await­ing the or­ders.

At­tor­ney James Hay­dock, speak­ing on be­half of the Baoki Con­sor­tium, said the con­sor­tium was still con­sid­er­ing its po­si­tion.

The de­part­ment has been un­able to re­solve an ar­bi­tra­tion with the Baoki Con­sor­tium for over R650m it claims to be con­trac­tu­ally owed.

Baoki and the provin­cial health de­part­ment have been in ar­bi­tra­tion since June last year when they hit a stale­mate.

Hay­dock said that the ar­bi­tra­tion by na­ture was con­fi­den­tial.

The com­pa­nies will have eight days to lodge their ap­peals.

The NPA’s court ac­tion this week is the cul­mi­na­tion of four years of in­ves­ti­gat­ing by the SIU and the Hawks.

Hawks spokesman Paul Ra­maloko de­clined to dis­close who the crim­i­nal pro­ceed­ings would tar­get first.

Task team sources have told The Sun­day In­de­pen­dent that Hlongwa is top of the list.

The ap­pli­ca­tion for the re­strain­ing order has lifted the lid on an in­tri­cate web of cor­rup­tion, al­legedly in­di­rectly co-or­di­nated by Hlongwa and his friend Richard Payne, who owns 3P Con­sult­ing.

AN AL­LEGED cor­rupt re­la­tion­ship be­tween Brian Hlongwa, the cur­rent ANC chief whip in the Gaut­eng Leg­is­la­ture, and two com­pa­nies that won ten­ders worth hun­dreds of mil­lions is at the cen­tre of a probe by mul­ti­ple govern­ment agen­cies.

The in­ves­ti­ga­tion dates back to when Hlongwa was MEC for health. Now he may be charged on sev­eral counts of cor­rup­tion over al­leged mas­sive cor­rup­tion in the award­ing of con­tracts in the province’s health de­part­ment.

In ad­di­tion, sev­eral for­mer Gaut­eng De­part­ment of Health officials are likely to face crim­i­nal charges for their in­volve­ment in a cor­rup­tion ring, al­legedly co-or­di­nated by Hlongwa when he was health MEC.

This is ac­cord­ing to ev­i­dence sub­mit­ted to the South Gaut­eng High Court this week as part of the Na­tional Pros­e­cut­ing Au­thor­ity’s ap­pli­ca­tion for preser­va­tion or­ders on claims by two sets of com­pa­nies that ben­e­fited from ir­reg­u­larly awarded con­tracts.

The ev­i­dence has pro­vided in­tri­cate de­tails of an al­leged “gen­er­ally cor­rupt re­la­tion­ship” be­tween Hlongwa and busi­ness­man Richard Payne and the web of govern­ment officials, busi­ness­peo­ple, em­ploy­ees and com­pa­nies that man­aged the ad­min­is­tra­tion of the con­tracts and spe­cific cor­rupt ac­tiv­i­ties.

The charges are rec­om­mended in a re­port by foren­sic au­di­tor An­dre Prakke, who formed part of the Anti-Cor­rup­tion Task Team’s in­ves­ti­ga­tion team and a sep­a­rate re­port pro­duced by the Spe­cial in­ves­ti­gat­ing Unit (SIU) last year, which de­scribes a se­ries of al­leged frauds and cor­rupt acts through lo­cal and in­ter­na­tional trips, cash pay­outs, and al­leged bribes.

SIU spokesman Boy Ndala did not wish to com­ment, say­ing the mat­ter was sub ju­dice as it was be­fore the courts.

Hawks spokesman Cap­tain Paul Ra­maloko con­firmed the cor­rup­tion in­ves­ti­ga­tion was at a ma­ture stage but said nei­ther Hlongwa nor Payne, or any de­part­ment of health officials, had been charged.

“We are guided by the in­ves­ti­ga­tion as to who should be brought to book,” said Ra­maloko.

How­ever, in his re­port Prakke al­ludes to mas­sive kick­backs which would form the heart of the State’s case against Hlongwa and the officials: “Money, do­na­tions, gifts, loans, spon­sored trips, spa treat­ments, renovation­s and al­ter­ations, fur­ni­ture and or any other form of grat­i­fi­ca­tion from 3P Con­sult­ing, Uk­wakha and or any other af­fil­i­ate en­tity to any de­part­ment em­ploy­ees or officials con­sti­tutes grat­i­fi­ca­tion as de­fined in sec­tion 1 of the Pre­ven­tion and Com­bat­ing of Cor­rupt Ac­tiv­i­ties Act.”

Payne’s com­pany 3P Con­sult­ing ini­tially won a con­tract to do a bud­get com­pi­la­tion for the de­part­ment, which led to it pro­duc­ing a turn­around strat­egy which called for a project man­age­ment unit (PMU) to be set up.

Payne’s 3P crafted a pro­posal of the PMU and later bid for the es­tab­lish­ment of the unit, which even­tu­ally man­aged 144 con­tracts for the de­part­ment.

Ini­tially the con­tract was signed off at R60 mil­lion per year but by 2008, it in­creased to R138m.

And in 2009, be­fore Hlongwa was re­de­ployed to the leg­is­la­ture as chief whip, he ex­tended the con­tract for three years at an ad­di­tional R273m.

Health de­part­ment staff acted un­der the un­war­ranted dic­tates of Hlongwa in award­ing the con­tract to 3P, in­creas­ing its value and ex­tend­ing its pe­riod, ac­cord­ing to an af­fi­davit by Hawks Colonel Thabo Motedi, which formed part of the ap­pli­ca­tion.

In ex­change for the con­tracts, 3P, through Payne, made over R3.5m in cash pay­ments to Hlongwa in ad­di­tion to pay­ing R1.6m to­wards a R7.2m house in Bryanston.

Reg­i­ments Cap­i­tal chief ex­ec­u­tive Niven Pil­lay, who re­ceived the con­tract to re­view the Fo­lateng Hos­pi­tals, con­trib­uted R1m to the pur­chase of the house.

Ac­cord­ing to the ev­i­dence, Hlongwa, his head of de­part­ment Sy­bil Ng­cobo, chief op­er­a­tions of­fi­cer Ab­dul Rah­man and deputy direc­tor-gen­eral Obak­eng Mookeletsi were al­lo­cated of­fices in the ex­ec­u­tive wing of 3P’s of­fices and had spe­cial ac­cess rights.

And Uk­wakha Dezign, a shelf com­pany owned by Payne, fur­nished the res­i­dences of Hlongwa, Mookeletsi and sup­ply chain direc­tor Valdis Ra­maano, at no cost to them.

Nei­ther Hlongwa nor Ng­cobo, Ra­maano or Rah­man could be reached for com­ment this week.

But Mookeletsi, speak­ing to The Sun­day In­de­pen­dent, de­nied any of the trips listed were for ma­te­rial ben­e­fit.

Com­ment­ing on pos­si­ble charges be­ing lev­elled against him, he said: “If there is ev­i­dence of wrong­do­ing, there should have been a charge.”

He said one of the trips listed to Cape Town was for a stand­ing com­mit­tee on pub­lic ac­counts meet­ing and was not paid for by 3P but rather by the Project Man­age­ment Unit. It was pos­si­ble that Pil­lay in­vited him to the Dur­ban July in 2008 but it was not a se­cret in the of­fice, said Mookeletsi.


IN HOT WA­TER: Brian Hlongwa is the for­mer Gaut­eng health MEC.


LIV­ING LARGE: The Bryanston prop­erty which Gaut­eng ANC chief whip Brian Hlongwa bought al­legedly with the help of com­pa­nies which won ten­ders in the health de­part­ment.

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