Evidence of Legitimate Concerns of Corruption

Here is a list of some of the documents that point to legitimate evidence of corruption in the Arms Deal. Click on each item for more detail and to get the document itself.

1. The ‘SFO’ Affidavit

What: The UK Serious Fraud Office affidavit for warrants for Hlongwane and Bredenkamp properties, showing how over £100m was paid to ‘covert agents’ in support of BAE Systems, which won two of the biggest contracts.

The UK Serious Fraud Office submitted an affidavit to support its request for search and seizure warrants on the properties of Fana Hlongwane and John Bredenkamp. Hlongwane and Bredenkamp were believed to have acted as ‘covert agents’ for BAE Systems, which won the two largest contracts in the Arms Deal. Hlongwane was the Special Advisor to Defence Minister Joe Modise during the Arms Deal.

The affidavit shows how BAE Systems made use of a secret offshore company – Red Diamond Trading – to make huge payments to agents on the South African deal. BAE also contracted directly with Fana Hlongwane’s South African companies. The SFO discovered over £100m (about R1.7b at current exchange rates) had been paid to ‘covert agents’ on the South African deal.

  • See the document HERE.
  • Download all the annexures to the affidavit HERE.
  • Download the search warrant that was issued against Hlongwane and additional warrants that were filed in asset forfeiture proceedings against him HERE.

2. The first BAE Plea Agreement: US Dept of Justice vs. BAE Systems

What: The BAE Systems plea agreement, admitting to making huge payments to secure defence contracts around the world, and agreeing to pay a $400m fine to the US Department of Justice.

In 2011, BAE Systems entered into a plea bargain with the US Department of Justice in return for a fine of $400m (about R4.2b at current exchange rates). The plea bargain agreement, amongst other things, included an admission on the part of BAE Systems that it had made payments of at least £135m and $14m (with a total of over R2.5b at current rates) to ‘advisors’ and ‘agents’ to secure contracts around the world. BAE admitted that the it ‘made payments to certain advisors through offshore shell companies even though in certain situations there was a high probability that part of the payments would be used in order to ensure that BAES was favored in foreign government decisions regarding the sale of defense articles.’

  • See the document HERE.

3. The second BAE Plea Agreement: US Dept of State vs. BAE Systems

What: Another BAE plea agreement, admitting to use of ‘unauthorised brokers’ to support its bids, and to the use of brokers for the South African arms deal – and agreeing to pay a $79m fine to the US Department of State.

In 2012, BAE Systems entered into a further plea agreement with the Department of State, in return for a fine of $79m (about R445m at current rates) for violating a number of arms trading regulations in the US. BAE admitted that it had made over 1000 payments to ‘unauthorized brokers’ around the world between 1995 and 2007. BAE admitted that it, or its shell company Red Diamond, had ‘made payments to brokers involved in securing the sale to South Africa.’

  • See the document HERE.

4. The BAE Systems/Stella Sigcau Faxes

What: Faxes suggesting that BAE Systems arranged a job in the UK for the daughter of Stella Sigcau (who was on the Cabinet Minister Committee overseeing the Arms Deal), and that Sigcau was considered vital to the bid’s success.

These faxes appear to have emerged during the Serious Fraud Office Investigation into BAE Systems involvement in the South African contract. The faxes appear to indicate that BAE’s representative in South Africa, Alan McDonald, had helped to arrange for Stella Sigcau’s daughter to be given a job in the United Kingdom, and had paid for other costs. The faxes seem to indicate that Sigcau, who was part of the four-person Cabinet Minister Committee that oversee the Arms Deal, was vital to secure the success of BAE Systems in their bid. One fax even claims that BAE’s bid was successful despite the fact that their actual offer was poor!

  • See the document HERE.

5. The Saab Statement and supporting documents

What: Document by winning jet bidder, Saab, on its failure to report South African subsidiary payments in financial reports, and on a gift to Chippy Shaik’s PhD supervisor.

In 2011, the Swedish TV show, Kalla Fakta, reported on payments from a Saab subsidiary, Sanip, to Fana Hlongwane. Sanip was established to help BAE and Saab, co-builders of the Gripen jet that was bought in the Arms Deal, fulfil their offset agreements. Saab, after an investigation, found that the payments were made, but were not reflected in Saab’s audited annual statements.

Among the documents that Saab released included details of how the company moved from the control of Saab to BAE Systems, as well as annual statements. The documents showed that R750 000 was transferred from Sanip to a company by the name of Veriytech CC by means of a loan that was later written off without a single repayment. Veryitech CC’s sole director was Professor Viktor Verijenko. In the year that the loan was written off (2003), Verijenko approved the award of a PhD in mechanical engineering to Chippy Shaik. Verijenko was Shaik’s PhD supervisor. The PhD was later revoked as it was found that it had plagiarised from other sources, including Verijenko’s own work.

  • See the document HERE.

6. The Debevoise & Plimpton Report

What: Report prepared by a law firm for winning submarine bidder Ferrostaal, pointing to massive payments to SA consultants thought to have strong political connections, as well as potentially-improper business dealings with SA procurement officials.

This is a vital document that the Commission has ruled inadmissible despite our attempts to have it admitted during proceedings.

In 2011, the US law firm Debevoise & Plimpton delivered its report on the activities of Ferrostaal. Ferrostaal was one member of the German Submarine Consortium, which won the contract to supply submarines in the South African contract. The Report indicates that Ferrostaal made millions of euros in payments to two well-connected individuals: Tony Georgiades and Anthony Ellingford. Georgiades was rumoured to be close to government officials, while Ellingford was particularly close to Defence Minister Joe Modise. The Report also suggested that two further former Navy employees – Jeremy Mathers and Llew Swan (who was part of the selection team on the submarine deal) – had acted as consultants to Ferrostaal during and after the Deal.

The report also provided evidence that Chippy Shaik, the Chief of Acquisitions during the Arms Deal, had entered into a joint mining venture with Ferrostaal’s South African subsidiary, Ferisa.

Finally, it claimed that Ferrostaal employees had told investigators that the offset program was merely a means of paying bribes rather than generating proper economic benefits for South Africa.

  • See the document HERE.

7. The German-Swiss Mutual Legal Assistance Request

What: German authorities’ request for Swiss banking information on payments from winning bidder ThyssenKrupp to SA consultants and Chippy Shaik, and suggesting that bribes had been paid to win the corvette contract.

In 2007, German authorities began investigating ThyssenKrupp regarding allegations of bribery. ThyssenKrupp was a member of the German Frigate Consortium, which won the contract to supply corvettes in the Arms Deal. To undertake the investigation, the German authorities laid a request with Swiss authorities for them to secure additional banking information in Switzerland. The request identified payments to a letter-box company Mallar Inc (controlled by Tony Georgiades) as well as $3m paid to Chippy Shaik via the middleman Ian Pierce. Based on their seizures in Germany, German authorities were of the opinion that ‘the consortium had, in fact, paid considerable bribes to achieve the conclusion of the agreement.’

  • See the document HERE.
  • Download the internal GFC memorandum indicating that Chippy Shaik had requested a $3m payment from ThyssenKrupp HERE.

8. The List of Luxury Vehicles

What: The list of procurement officials and connected politicians who received discounts on luxury cars from a subsidiary of a successful subcontractor.

As long ago as 2001, we have known that a whole host of individuals connected to the Arms Deal received discounts on luxury vehicles from EADS, a subcontractor on the corvette contract. Amongst the recipients of discounts were Siphiwe Nyanda (Chief of the SANDF), Llew Swan (a member of the arms selection team), Vanan Pilly (a member of the Arms Deal negotiation team) and Tony Yengeni.

See the document HERE.

9. The Tony Yengeni Guilty Plea

What: Tony Yengeni, then Chairperson of Parliament’s Joint Standing Committee on Defence, admits to failing to disclose the car discount he received.

One of the first scandals of the Arms Deal happened when it emerged that Tony Yengeni had received a discounted vehicle from EADS, the Arms Deal subcontractor. After a lengthy investigation, Tony Yengeni pled guilty to fraud in relation to the arrangement. Yengeni, at the time of the Arms Deal, was the Chairperson of Parliament’s Joint Standing Committee on Defence.

See document HERE.

10. The Schabir Shaik Judgment

What: The famous Squires judgement that found Schabir Shaik guilty of corruption for arranging a bribe for Zuma from another winning bidder, Thomson-CSF.

In one of the most famous trials of the post-apartheid era, Schabir Shaik, brother to Chief of Acquisitions ‘Chippy Shaik’, was found guilty of having a corrupt relationship with Jacob Zuma. The judgment, which was upheld by both the Supreme and Constitutional Courts, found Schaik guilty on two counts of corruption. One of these counts involved soliciting a bribe from Thomson-CSF, who supplied the combat systems for the corvettes, for Jacob Zuma, in return for protection from investigation.

The other, of ‘general corruption’, found that Schabir Shaik had turned to Jacob Zuma to ensure that his company, Nkobi Holdings, was made a joint-venture partner with Thomson-CSF in African Defence Systems, which provided the combat suite for the corvettes.

See the document HERE.

11. The Jacob Zuma Indictment and Supporting Documents

What: The corruption charges against Zuma.

In 2007, after a substantial delay, Jacob Zuma was charged with corruption and racketeering due to his relationship with Schabir Shaik. According to the indictment, Zuma was important in securing Schabir Shaik’s participation in the Arms Deal, while it was alleged that Chippy Shaik had met with representatives of Thomson-CSF to ensure that his brother received a portion of corvette combat suite contract.

See the document HERE.

12. Interview with Ambassador George Trail III regarding Futuristic Business Solutions

What: A prominent bidder’s claim that was informed by Chippy Shaik that if he wanted to win, he would need to hire a company part-owned by defence minister Joe Modise’s relatives.

During research for his book on the Arms Deal, Paul Holden interviewed the former US ambassador, George Trail III. Ambassador Trail had worked for Bell Helicopters in trying to win the Light Utility Helicopter contract in the Arms Deal. In this on-the-record interview, Trail claimed that he was instructed by ‘Chippy’ Shaik that, in order to win the contract, Bell would need to hire Futuristic Business Solutions as a consultant. Futuristic Business Solutions featured two relatives of Joe Modise as shareholders, along with Ian Pierce (the man that German investigators believed had facilitated a $3m (R32m at current rates) payment to Chippy Shaik from ThyssenKrupp).

See the document HERE.

13. The Light Utility Helicopter Investigation

What: The Scorpions documents showing that Modise’s relatives’ company got paid R17m by a winning bidder.

In 2001, the Scorpions instituted an investigation into the Light Utility Helicopter contract. In documents that were submitted to the High Court during the Schabir Shaik trial, it was confirmed that Futuristic Business Solutions (FBS), half-owned by relatives of Joe Modise, had received a contract to supply logistic services on the Light Utility Helicopter contract less than a month after the final Arms Deal contracts were signed. FBS was to receive R17m from the contract.

See the document HERE.

14. Payments to the ANC?

What: The letters about payments from Schabir Shaik’s companies to the ANC.

During the Schabir Shaik trial, investigators found correspondence between Shaik and Zweli Mkhize, an ANC representative in KwaZulu-Natal. The correspondence indicated that one of Shaik’s companies had made regular payments to the ANC during the Arms Deal, and that it had been established predominantly for the purpose of making donations to the ANC. One letter referred to such payments as a ‘dividend.’

This may have been a mistake, or may be indicative of the fact that the ANC was considered a de facto partner in Shaik’s companies. Included in this bundle is the testimony of Johan Van Der Walt, an auditor who testified during the Schaik trial about the mechanisms used by Shaik to pay the ANC.

See the document HERE.