Status of SIU investigation into allegations of corruption at the National Lotteries Commission

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Trade, Industry and Competition

02 March 2022
Chairperson: Ms J Hermans (ANC)
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Meeting Summary

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Proclamation R32 of 2020, Published in GG: 43885 of 06 November 2020

Letter from Minister Patel requesting a delay in presenting a response to the public comments on the Remitted Bills (not made available to the public)

In this virtual meeting, the Special Investigating Unit (SIU) briefed the Committee on the ongoing investigation into the National Lotteries Commission.

These investigations emanated from the proclamation by the President on 6 November 2020 for an investigation covering activities by the Commission from 1 January 2014 to 6 November 2020. The scope of the investigation included maladministration in the affairs of the NLC pertaining to the investment of funds of the National Lottery Distribution Trust Fund and the allocation of money in the fund to beneficiaries who were not entitled thereto.

The SIU had found a web of corrupt networks following detailed observation and investigation, noting particularly the modus operandi of the NLC in using Non-Profit Organisations, Non-Profit Companies and the offices of legal practitioners. The Unit noted the abuse of Non-Profit Organisations and Companies through “hijacking” or simply abusing them but it had also observed a high measure of collusion between the Non-Profit Organisations, NLC officials and some board members. A review of the NLC Pro-Active Funding process showed abuse of the system. In total, the SIU would investigate approximately 50 allegations relating to irregular allocation of funds by the NLC to unqualified beneficiaries. The SIU would further investigate maladministration in relation to the investment of funds in the National Lottery Distribution Trust Fund contrary to the provisions of the Lotteries Act.  The SIU had commenced with Civil Litigation proceedings to preserve illegally gained properties and set to aside grants awarded to various Non-Profit Organisations; ten identified criminal referrals against NLC officials, Non-Profit Organisations and Companies would be finalised and referred to the National Prosecuting Authority on or before 31 March 2022.

Members had strong views on events leading to the investigation but all were unanimous in thanking the SIU for its sterling work. Members asked for the total value of misappropriated funds that the SIU had found in the 12 cases in the first phase of the investigation. Had the remaining NLC officials and board members assisted in the investigation? How many cases of fraud, had been investigated at the NLC? What recommendations could the SIU offer to strengthen financial controls and eliminate corruption at the NLC, considering the years of clean audits? Who had been auditing the NLC during those years and what was being done about the audit company? Had the SIU found any wrongdoing on the side of the attorneys who had received vast amounts of money in their trust accounts?

 

The DA Members reminded the Committee that the only reason they had reached that point was as a result of the hard work of investigative journalists and the Opposition who had consistently exposed the corruption at the organisation and applied pressure on government to act. They argued that it was important to look at the actions of the Committee and ask what oversight role it played and how it had allowed so much money to be looted.

Responsibility for the identification of the fraud at the NLC was debated and Members asked why the Financial Intelligence Centre had not been able to flag the suspicious transfer of money. Why did one only hear of money laundering from whistle blowers and not from the institutions that should alert the authorities to money laundering? What measures had the SIU adopted in the interim to prevent members of the Non-Profit Organisations from disposing of assets purchased with the stolen money? What remedial action was being taken against the construction and engineering companies that had participated in the corruption? What action had been taken to locate and hold the people involved accountable?
 

Meeting report

Opening Remarks
The Chairperson informed the Committee that the President had issued Proclamation R20 of 2020 on 6 November 2020 for an investigation into the National Lotteries Commission (NLC) covering the period from 1 January 2014 until 6 November 2020. The scope of the investigation included maladministration in the affairs of the NLC pertaining to the investment of funds of the National Lottery Distribution Trust Fund and the allocation of money in the fund to beneficiaries who were not entitled thereto. The Head of the Special Investigating Unit (SIU), Adv. J L (Andy) Mothibi, would provide a Status Report to the Committee as work on the corruption at NLC had not been completed.

The Acting Chief Operations Officer and the Chief Director for Audits from the Department of Trade, Industry and Competition (dtic) were in attendance.

Presentation by the SIU
Adv Andy Mothibi said he hoped to conclude Part 1 of the investigation by 31 March 2022 and would  present the Interim Report to the President in April 2022. The Committee could obtain a copy from the President, unless the President made it public, in which case it would be available to everyone.

The Chief National Investigations Officer who was heading the team investigating the NLC, Adv Leonard Lekgetho, would assist in the presentation to the Committee. The other team members were on the platform.

Adv Mothibi began by explaining what had led to the involvement of the SIU in the investigation of the NLC and the processes that the SIU had followed during, and would engage in following, an investigation. The investigation was far more wide-ranging than the Proclamation [R32 of 2020] as the SIU investigated any other maladministration or misconduct that it came across.

Where a focus area had been completed to the point of consequence management, the SIU took action and he could only mention the names that had been made public. Where a name had not yet been made public, the name would be redacted. The detailed report for the President would contain full details, including all names.

Adv Lekgetho provided details of the investigation into former Board Members 1 and 2 and an official from the NLC. The organisations that received NLC funds were identified as Non-Profit Organisation (NPO) 1, 2, etc. and Non-Profit Company (NPC) 1, 2, etc.

One former board member was appointed as a NLC Non–Executive Board Member on 20 April 2017, by the then Minister of Trade and Industry. His period of appointment was for five years with effect from 1 April 2017 and ending on 13 March 2022. A Disciplinary Recommendations letter dated 13 August 2021 was submitted to the current Minister of Trade, Industry and Competition, for the former NLC board member 1. When requested by the Minister to furnish him with reasons why he should not be fired as result of the findings and/or recommendations of the SIU, the Board member promptly resigned.

“Former Board member 2” was also investigated for money laundering and conflict of interest. Much of the funds that he had acquired had gone into payments on his R27 million home.

Investigation 3 was into a Senior Official of the NLC whose wife and elder brother were also involved in the receipt of funds. The SIU submitted a Disciplinary Recommendations letter to the NLC dated 27 August 2021 against the Senior Official of NLC. The Disciplinary hearing was conducted from 17 January 2022 and the SIU had received the outcome of the Disciplinary processes. The SIU would study the outcome of the hearing and would chart the way forward thereafter. There were some reservations with regard to the way the disciplinary hearing had been conducted. Further disciplinary recommendations would be referred to the NLC as and when the evidence became available.


The SIU had commenced with Civil Litigation proceedings to preserve illegally gained  properties and to set aside grants awarded to various NPOs; it had started with the preservation of properties acquired by members of the Inqaba Yokulinda NPO. The SIU was currently in the process of appointing Senior Counsel to institute Civil proceeding in the Special Tribunal to recover stolen money from all NPO’s and NPC’s mentioned in the presentation.


A Preservation Order was granted in favour of the SIU in respect of the following:
Erf 1618 Swartkop Ext 8 township belonging to  Mr. Tshifhiwa Terrance Magogodela
Vehicles belonging to Mr Jabu Sibanda (i.e. Honda Jazz, Mercedes Benz AMG E63 , Mercedes Benz 63 and Mercedes Benz CLK AMG 63)
Vehicle owned by Boitumeo Diutlwikeng AUDI A3

On the main application, the SIU sought to set aside the award of the grant to Inqaba Yokulinda by NLC to the amount of R19 275 000 000.00. The SIU would also request the court to order Buyisiwe Khoza, the CEO of the NPO, to pay back the R5 000 000.00 which she had used for her personal gain.

Ten identified criminal referrals against NLC officials, NPO’s and NPC’s would be finalised and referred to the NPA on or before 31 March 2022.

Phase 1: The SIU was in the process of finalising 12 investigations that formed part of phase 1. Allegations of the said investigations had been received in the latter part of 2021 and would be finalised on the 30th of June 2022.
Phase 2: The SIU was currently in receipt of 23 new allegations. The investigations into the new allegations would be conducted from 1 March 2022 to November 2022.
In total, the SIU would investigate approximately 50 allegations relating to irregular allocation of funds by the NLC to unqualified beneficiaries. The SIU would further investigate maladministration in relation to the investment of funds in the National Lottery Distribution Trust Fund contrary to the provisions of the Lotteries Act. 

Adv Mothibi summarised the activities to date. The SIU had found a web of corrupt networks following detailed observation and investigation, noting particularly the modus operandi of the NLC using NPO’s, NPCs and the offices of legal practitioners. The Unit noted the abuse of NPOs and NPC’s through “hijacking” or simply abusing them, but it had also observed a high measure of collusion between the NPOs, NLC officials and some board members. A review of the NLC Pro-Active Funding process showed abuse of the system.

He added that while a resignation terminated relations with an organisation or a board, civil action could, nevertheless, be taken, as could criminal action. The SIU would recommend the action to be taken.

 

(See Presentation)

Discussion

The Chairperson thanked the SIU for the presentation and invited comments and questions. The Chairperson explained that given the gross corruption, the Minister had to be informed. The Portfolio Committee would call the dtic to account for the corruption that had taken place under its watch.


Mr M Cuthbert (DA) thanked the SIU for its sterling work and commended it as one of the few crime-fighting agencies that really worked. He was disappointed that the Minister of Trade, Industry and Competition and the NLC leadership were not in attendance. It proved that they were not interested in addressing corruption within the NLC. The only reason that the Committee was sitting here today was as a result of the hard work of investigative journalists and the Opposition that had consistently exposed the corruption at the organisation and applied pressure on government to act. He wondered what it was like to be an ANC member today and to see how money meant for drug rehabilitation, old age homes, and women and youth empowerment had been used for luxury cars and homes. The ANC had smeared journalists and tried to silence the Opposition and make sure that they did not uncover the rot. It was really a day of reckoning for those Members and he sincerely hoped that their consciences were speaking to them today.

He asked the SIU for the total value of funds misappropriated that the SIU had found in the first phase of the investigation, i.e. for the 12 cases discussed in the presentation. Had anything been handed over to the Hawks or the National Prosecuting Authority (NPA)? Had the remaining NLC officials and board members assisted in the investigation? Considering the fact that the NLC had received a series of clean audits, despite the looting taking place over the years, what recommendations could the SIU offer to strengthen financial controls and eliminate corruption at the NLC?

Mr D Macpherson (DA) said that it was the culmination of a very long journey and many people had walked that long road. He agreed that the evidence would not be before them if it were not for the work of many brave journalists in exposing the rot, especially Mr Raymond Joseph who had frequently put his life on the line to expose the rot, and the Committee owed him a great deal of gratitude for ventilating many of the issues in the public domain, despite the disgusting attacks and accusations that he was subjected to by the NLC and Members of that Committee.

He said that sort of corruption could not take place in isolation, on its own, without being enabled and abetted. Regrettably, Members of this Committee and the previous Minister of Trade and Industry had allowed it to take place since 2015 when Minister Rob Davies had enacted and enabled proactive funding. That was the root cause and the vehicle used for all of the corruption that had taken place. He had warned the Minister against that action and had written a submission to him, saying that it would lead to corruption, a lack of transparency and would end in disaster. His submission was rebuffed and Members were now seeing the truth of what he had said.

Mr Macpherson recalled that in 2017, noting Mr Joseph’s reports, he had asked the Portfolio Committee on Trade and Industry of the Fifth Parliament to call the NLC to the Committee to speak to what was then the first evidence of corruption involving Denzhe Primary Care, a centre intended to help people with HIV. The ANC Committee Members voted against such an engagement. He had suggested that the Committee itself investigate possible corruption but again the ANC Members had voted against his request. The ANC Members were against the release of the names of those who had benefitted from Lottery funds. They had stalled that process as long as they could.

He said that while it was important to look at controls in the NLC, it was important to look at the actions of the Trade and Industry Committee and ask what oversight role the Committee played and how it had allowed so much money to be looted. Why did they allow so much money be stolen from poor black people, the very constituents whom the Members claimed to represent? The Committee had to do some soul searching and reflect on how things got to that point because if members of the governing party continued to protect what was so blatantly wrong and illegal, the Committee would soon find itself in a similar position and it would be another entity and other members of those entities doing exactly the same. Only when people saw the inside of jail would there be adequate consequences. Members of the Committee had fought for a person, now known to be implicated in serious corruption, to become the Chairperson of the NLC. They had wanted to extend his contract and the Opposition had fought against it, but had lost those battles to the ANC Members who were at the forefront of allowing the corruption to take place.

He thanked the Chairperson for allowing the matter to come to the fore, but Members before her should be held accountable, as much as the Committee wished to hold members of the NLC accountable.

Ms R Moatshe (ANC) welcomed the report from the SIU and thanked the SIU for the report that exposed the extent of the corruption at the NLC. She wished the SIU well in recovering every cent of the money. The core mandate of the ANC was to fight corruption. Had the SIU found any wrong doing on the side of attorneys who had received vast amounts of money in their trust accounts? If so, had the attorneys been reported to the Legal Practitioners’ Council? If not, why? Would it be correct to say if there had not been support from the Minister, it would have been difficult for the SIU to have succeeded? The ANC-led government called on the law enforcement agencies to take action against those criminals.

Ms Y Yako (EFF) said that it was an interesting report. It was shocking how much money could be taken by people who should have been serving the community, i.e. building an old age home, a rehabilitation centre, an athletics track, boreholes, museums and libraries – all things that society needed. And if the ideas had been executed, things could have been so different. It was insane when one looked at the amounts looted with no accountability whatsoever. The SIU had alluded that the NLC had been audited each year. Who had been auditing the NLC during those years and what was being done about the audit company? She believed that the auditors could be complicit.

She stated that Minister Patel had not taken the Committee very seriously. The Committee had complained the previous year about his non-availability when he did not attend Committee meetings, but he always had an excuse, despite the Committee being part of his reporting structure. The Committee should express its unhappiness about his lack of attendance in writing and raise the fact that he did not really account to the Committee. The Minister spoke well but there seemed to be little truth or honesty in his words in terms of what was really happening in his Department.

Mr C Malematja (ANC) said that it was easy to speak, forgetting the responsibility of who you are. It was not easy to govern because one had to govern everybody and there were people who did not have the interests of the country at heart. There were people who should be doing the right things but they found themselves doing the wrong things. The ANC-led government was so proactive that it had alerted the relevant authorities to the situation and had enabled them to uncover the syndicates set up by people who were entrusted to manage the lottery funds. The Committee really needed to applaud the ANC which talked and acted. The uncovering of the truth was all thanks to the former Chairperson Mr Dumi Nkosi who, when he had realised that there was a problem, had acted.  The Minister had also acted. The SIU would not be there if not by the invitation of the ANC.

He asked if the investigation had revealed any wrongdoing on the side of junior officials who received and processed the applications from NPOs. The rot had to be deeper than just at the top. How was the Financial Intelligence Centre (FIC) not able to flag the suspicious transfer of money? Why did one only hear of money laundering from whistle blowers and not from the institutions that should alert the authorities to money laundering? He pointed out that it was not final report and that normally such information was not shared until the report was complete. He commended the report.    

Mr F Mulder (FF+) agreed with previous speakers. He remarked that in the Committees and in Parliament, Members were confronted by so much rhetoric and he quoted from the NLC website that told wonderful extraordinary things that the NLC did to improve the lives of people and communities in SA. Every time one bought a lottery ticket, one helped to make that happen.

He congratulated Adv Mothibi on an excellent investigation and well-presented report. The contents said it all. There were consequences to corruption that had gone that far. It threatened economic values and justice; it destabilised SA’s psyche and endangered the rule of law; it undermined the institutions and values of democracy. The same could be said of some of the rhetoric that one heard in Parliament. Another set of consequences was seldom seen: the Executive should be held accountable for allowing the situation to deteriorate as far as it had. People should be prosecuted so that trust could be reinstated in the lottery.

Mr Z Burns-Ncamashe (ANC) welcomed the draft report of the SIU but noted certain distortions and misconceptions that had to be corrected. He accepted that there might be Members of the Committee who were so fixated with the hysterical obsession about the ANC being associated with corruption. What some of the Members forgot was that it was the ANC government and ANC President who had signed off the Proclamation that had enabled the investigation because it was part of what the ANC government sought to restore, i.e. to ensure that in all government institutions where there were traces of corruption it should be dealt with within the legal structures. To attribute the investigation to anything other than the processes instituted by the President and the Minister was incorrect. The ANC was committed to uprooting corruption.

He said that the Chairperson of the Committee was a member of the ANC and he appealed to some Committee Members to disabuse their mind of institutionalised paternalistic posturing, seeking to patronise the Chairperson by employing the age-old tactic of divide and rule. The ANC had consciously taken the decision to leave no stone unturned when it came to corruption. He assured everyone in SA that the ANC was steadfast in rooting out corruption. There were those who joined the ANC for easy access to resources but that had come to a stop. As the government, the ANC worked with jurisprudence doctrines, principles and presumptions. When everything was brought to a court of law, it would pass constitutional muster.
He reminded the Committee that it was a draft report which contained only indicators.

He asked what measures the SIU had adopted in the interim to prevent members of the NPOs disposing of assets purchased with the stolen money? What remedial action was being taken against the construction and engineering companies that had participated in the corruption? There were bodies to deal with professional practitioners.

Mr S Mbuyane (ANC) said that it was an impressive interim report which, on completion, should account for every bit of wrong-doing and every cent of public money had to be accounted for. The report painted a picture of a syndicate at work and he welcomed the fact that the SIU would report the criminals to the relevant authority. The extent of the alleged wrongdoing pointed to the action taken previously by the ANC-led government against corruption and wrongdoing. He pointed to the request by the previous Minister to the NLC to undertake a forensic investigation. When the new administration came in in 2019, the new Minister immediately brought the report to the attention of the NLC so that when the NLC sought to challenge the powers of the Committee and the Minister, that could easily be dealt with.

He responded to the complaints that the Minister was not part of the meeting. The Minister had apologised for his absence and, besides, the report was for the Committee and not the Department. The Minister had agreed to come when the Committee called the Department.

Mr Mbuyane asked about the process moving forward. What did the SIU foresee by November 2022? He hoped that the report would be concluded by that time and that it would be presented to the Committee. In respect of the Proclamation, he asked the SIU how many cases of fraud had been investigated at the NLC and how long would it take or was the timeline for November a fixed timeline?

Ms N Motaung (ANC) hoped the report would not gather dust but would bring to book those responsible.
What action had been taken to locate and hold the people involved accountable? Had the investigation been able to identify those who had used the NPOs? How were they linked to the officials at the NLC?

Adv Mothibi informed the Committee that the quantified amount to date added up to R300 million but the SIU had to investigate another 12 NPOs before finalising the report and so he suspected that the final figure would be much higher. The persons identified had not yet been handed over. Referrals to the Hawks and the NPA but would take place no later than 31 March 2022 and would include individuals, entities and professionals identified, both those within and outside the NLC. Evidence would be presented to the relevant authorities.

Regarding recommendations on improving financial control, he said that was part of the systemic improvements that the SIU always looked at. The financial forensics officials would have looked at controls that had failed and maybe even at the systems themselves and would include recommendations in the report.

He took into account the need to have people arrested and sent to jail and the SIU would present evidence to the NPA and to the Hawks so that could happen. The SIU would remain part of the process even after the hand-over to assist. In response to the question of whether the SIU had found wrong-doing on the part of attorneys, he had referred to the presentation slide on consequence management: all wrong doing was taken to logical conclusion for consequence management. Money had been traced by forensic accountants etc who had followed the flow of money and that would assist with the process of recovering the money. The audit revealed that a company had conducted the audit and the investigator would be finding out what processes it had followed and if it had not fulfilled processes accurately, it too would be held accountable.

Adv Mothibi agreed that it was a well-organised syndicate that had been syphoning money from the NLC. The Hawks would deal with all members of the syndicate effectively. He had received support from the FIC and would work with the entity so that it could flag such issues in future. Acknowledging the critical role played by whistle blowers, the SIU did everything in its power to protect the whistle blowers. He assured Mr Mulder that the SIU held people accountable at all levels, be they junior or the Executive authority i.e. Board members. They would all be referred to the NPA and Hawks and the SIU would support further processes – the Unit would not let anyone off the hook.

He agreed with Mr Burns-Ncamashe that all instances of corruption had to be dealt with within the legal processes – from the SIU Act to the Criminal Law Act and civil law that enabled civil litigation. The SIU was committed to upholding the rule of law. When it came to the preservation of assets, the SIU could institute civil litigation which it would take to the Special Tribunal which sped up the recovery process. Where investigators had evidence of wrong-doing, as in the cases indicated in the presentation, they could take possession of assets. The financial investigation led to financial profiling and so a process could be instituted for courts to preserve assets so that people should not continue to benefit from or dissipate the assets.
He informed Mr Burns-Ncamashe that remedial actions would also be taken against other companies involved and if a finding was made against directors, those directors would be treated as individuals and declared delinquent directors so not only company but also directors and professionals faced consequence management in line with the rules of the professional bodies and/or legislation. He agreed with Mr Mbuyane that they were dealing with organised crime.

Legislation governing the SIU said that status and progress reports could be given to the President, Parliament and Departments. His timeline was that the current Progress/Interim Report would be given to the President and he could make it publicly available or available to the Committee specifically, if the Committee asked for a copy. The 6 November 2022 date was the final deadline and the SIU was required to submit a final report to the President by that date. Adv Mothibi committed to adhering to timelines and would ensure that consequence actions took place.

The Chairperson looked forward to the Phase 1 Report to the President and hoped the SIU could present it. The President had told the ANC to root out corruption. Everyone guilty of maladministration and corruption had to receive consequence management.

Mr Cuthbert supported the Chair’s suggestion that SIU should present after the Interim Report had been delivered to the President. He asked that the matter be put in the Portfolio Committee programme.

The Chairperson agreed that Members were all together in the fight against corruption. She thanked Members for the robust engagement and stated that she would invite the Minister to brief the Committee.

Consideration of Draft Programme
The Chairperson referred to a letter from Minister Patel which would prompt a revision of the Committee’s programme: “Given the concerns raised by stakeholders in this round of public comments (on the remitted Bills), the Department officials have requested additional time to address the technical matters and unintended consequences for libraries, broadcasters, etc They request an extension until the end of April 2022.”

The Chairperson stated that considering the need to manage the process of the Bills carefully, she believed the Committee should agree to postponement.

The Committee Secretary stated that two weeks in March had been set aside to deal with the Bills and those slots would have to be amended. He suggested alternative engagements for March 2022.

The programme was adopted unopposed.         
           
Closing Remarks
The Committee Secretary informed Members that the following meeting would be on 8 March 2022: a briefing on Special Economic Zones by the dtic.

The meeting was adjourned.

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