News24.com | Justice minister’s legislation agency bungled lottery corruption probe

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  • Three forensic studies into Nationwide Lotteries Fee funding have discovered no proof of corruption.
  • The seven-month probe cleared Phillemon Letwaba, who was accused of nepotism in reference to dodgy lotteries grants, of any wrongdoing.
  • However the studies, by attorneys Ndobela Lamola Inc, are affected by cast paperwork.

Three forensic studies compiled by a high-profile agency of attorneys commissioned by the Nationwide Lotteries Fee to analyze corruption with lottery funding are affected by cast paperwork.

Justice Minister Ronald Lamola was a director within the agency, Ndobela Lamola Inc (NL Inc), when two of the studies had been submitted.

GroundUp reported late in 2018 how a hijacked NPO, Denzhe Main Care, was used to use for hundreds of thousands of rand in lottery grants to construct a drug rehabilitation centre close to Pretoria. It was by no means completed and a minimum of R20 million of the R27.5 million given to Denzhe is unaccounted for

The story additionally revealed how the brother of the lotteries fee’s COO, Phillemon Letwaba, headed up a development firm that acquired the contract to construct the centre.

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NL Inc was subsequently commissioned by the lotteries fee to analyze and “to determine the veracity of allegations made” in newspaper studies relating to Denzhe.

The studies submitted to 2 successive ministers of commerce and trade included cast affidavits and proof of fee receipts, a bogus annual monetary assertion, and cast resolutions supposedly handed by Denzhe Main Care.

These embrace a decision claiming Denzhe’s founding administrators had resigned and appointing three new administrators, who had been behind its hijacking. One of many resolutions additionally gave the three “new” administrators signing powers on the corporate’s checking account.

The paperwork are included in annexures to the three studies, dated 3 March 2019, 3 Might 2019 and 30 September 2019. The studies, which have by no means been made public, had been rejected out of hand by two ministers charged with oversight of the lotteries fee.

When two of the studies had been submitted to the lotteries fee, Lamola was one among two administrators of the agency, which nonetheless bears his title.

His title options as a director on NL Inc letterheads included within the first two studies. On the time, the agency was small: it had two administrators, three associates and two candidate attorneys.

Lamola was appointed to Cyril Ramaphosa’s Cupboard on 30 Might 2019; 27 days after NL Inc produced its second report. However he’s recorded as having resigned as a director of NL Inc a number of months later, on 2 September 2019, in response to Firms and Mental Properties Fee (CIPC) data.

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The NL Inc studies, which run to virtually 700 pages, encompass voluminous annexures that embrace duplicate copies of paperwork, and quite a few photocopied images which can be barely legible.

The studies are superficial, poorly researched and edited, and are affected by spelling errors and poor grammar. In some instances, annexures referred to usually are not appended.

Dodgy paperwork

Lots of the paperwork that NL Inc quoted and likewise used to achieve its conclusions are forgeries.

Dodgy paperwork within the studies embrace:

  • 2018 financial statement included as an annexure, which was allegedly signed off by Denzhe founder Takalani Tshikalange. (Tshikalange was unaware that the dormant NPO had been hijacked till she received SMS alerts of actions of enormous sums into and out of its account). The signature on the financial statement is totally different to the one on an affidavit that Tshikalange made to the police quickly after she found Denzhe had been hijacked. Tshikalange instructed GroundUp she knew nothing concerning the monetary assertion and the signature was a forgery, and never hers.
  • A fraudulent affidavit supposedly sworn by Tshikilange quickly after the GroundUp story below investigation by NL Inc was revealed. Tshikalange has categorically denied data of this affidavit and says the signature on it’s a forgery.
  • A fraudulent Denzhe board resolution appointing controversial Pretoria lawyer Lesley Ramulifho as chairperson, changing Tshikalange, after the organisation was hijacked. The decision additionally gave signing rights on Denzhe’s checking account to Ramulifho and Liezl Moses, one among his workers, in addition to Themba Mabundza, an lively director of over 50 firms, and a director of a number of firms linked to Philemon Letwaba. Tshikalange denied data of the decision and stated her signature on it was cast.
  • A fraudulent Denzhe decision “reappointing” Tshikalange as Denzhe’s chairperson. Tshikalange instructed GroundUp that she had by no means resigned as chairperson and her “signature” on this doc was a forgery;
  • Fraudulent proof of financial institution funds supplied by Ramulifho, that purport to show that Ramulifho repaid Lottery funds “borrowed” from Denzhe to purchase two Ocean Basket restaurant franchises for himself. GroundUp has laid a criminal complaint with police, in addition to lodged a grievance with the Gauteng Authorized Observe Council (LPC), setting out proof of how Ramulifho used cast paperwork in a authorized matter he’s pursuing in opposition to them. The LPC dismissed the complaint. GroundUp has utilized for this determination to be reviewed within the Gauteng Excessive Court docket, and the LPC has elected to not oppose. A criminal complaint of perjury has additionally been laid in opposition to Ramulifho with police. Two cast “proof of fee” receipts totalling R535 240.31 to Ocean Basket are paperwork in GroundUp’s case.
  • An email exchange through which Tshikalange seems to reply questions on Denzhe, and utterly exonerates Ramulifho of wrongdoing. Somewhat than a duplicate of the e-mail, which might show its provenance, the questions and solutions are contained in a typed doc. Tshikalange has confirmed to GroundUp that she acquired the questions from NL Inc, however stated she had by no means responded. She additionally confirmed that she had sworn a brand new affidavit to an impartial investigator appointed by Patel to probe Lottery corruption, through which she denies key details and identifies a number of of the solid paperwork.

There isn’t any proof NL Inc was conscious it was coping with cast paperwork.

“In conducting our investigation, now we have assumed the authorized capability of all people, genuineness of all signatures, the authenticity of all paperwork submitted to us as originals and the conformity to genuine authentic paperwork of all paperwork submitted to us as licensed,” it stated within the studies.

However the truth that paperwork weren’t correctly scrutinised throughout a forensic investigation, in addition to different obtrusive omissions within the studies, raises questions concerning the high quality and thoroughness of the investigations.

After its seven month probe, NL Inc cleared Letwaba, who was accused of nepotism in reference to the dodgy Denzhe grants, of any wrongdoing. The agency additionally stopped in need of making suggestions on a number of key points, together with steps the lotteries fee ought to take to get better the Denzhe funds.

Proceed

As an alternative, it really helpful the lotteries fee ought to await the end result of a civil lawsuit earlier than deciding how one can proceed. That is an virtually three-year-old civil case through which Denzhe is suing Ado Krige and his spouse, Alet, the proprietor of the property the place the drug rehab is located, for R17 million for development work Denzhe stated was performed.

“We had been … unable to make any discovering on points which can be presently earlier than the court docket,” the report stated.

On “whether or not any funds may very well be recovered or frozen instantly”, NL Inc acknowledged: “This step might be triggered by the end result of the court docket course of.”

However the case in opposition to Krige and his spouse might take one other two to 3 years to return to court docket, “if it ever does”, in response to Paul Goosen, the lawyer performing for them.

NL Inc did discover due diligence had not been performed and Denzhe didn’t have any rights over the property. It really helpful that beneficiaries of lottery cash ought to provide proof of possession, a signed provide to buy, or permission to occupy earlier than grants had been paid.

However NL Inc dismissed the GroundUp story and advised the lotteries fee ought to search a retraction. It additionally advised inner leaks on the lotteries fee must be investigated, because it discovered the GroundUp story was primarily based on leaks.

Key witness by no means interviewed

NL Inc stated it made a number of makes an attempt “telephonically” to fulfill Krige and to go to the rehab.

“Krige suggested us that he’s solely ready to fulfill with us provided that we might be negotiating a settlement. On this regard, we had been unable to go to the location and to acquire Mr Krige’s model of occasions.

“Throughout our telephonic dialog with Mr Krige, he suggested us that he has already met with individuals from the DTI [Department of Trade and Industry] and due to this fact sees no level in assembly us,” NL Inc stated.

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Krige instructed GroundUp he had beforehand met Mampane and former lotteries fee board chairperson Professor Alfred Nevhutanda and reported his issues about Ramulifho and doable corruption. He had additionally met with representatives of the DTI and the lotteries fee.

“Why would I see so many alternative individuals after which refuse to see them [NL Inc]? They need to show that I stated I might solely see them if they’d negotiate a settlement. It is nonsense and it isn’t true.”

Protecting it within the household

Denzhe signed a contract with Upbrand Properties on 25 November 2016 to assemble the rehab centre, in response to an annexure to the third NL Inc report.

Johannes Letwaba, the brother of lotteries fee COO Phillemon Letwaba, was registered with the CIPC as a director of Upbrand.

Upbrand was solely registered in January 2016; the identical 12 months it landed the contract to construct the rehab centre.

Phillemon Letwaba was positioned on special leave whereas being paid more than R265 000 per month in March 2020, after the lotteries fee board appointed audit agency Sekela Xabiso to investigate alleged lottery grant corruption.

Johannes Letwaba subsequently resigned from Upbrand on 1 March 2017, in response to CIPC data.

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Through the interval that he was nonetheless a director, and in response to financial institution statements, Upbrand acquired a minimum of 4 funds totaling R3 588 700: R123 500 on 21 October 2016, for “first part development”; R61 200 on 10 November, for “second part development”; R3 350 000, on 23 November, for “third part development” and R54 000 on the identical day for “labour development”.

In January 2018, after Johannes Letwaba’s resignation, there have been additional funds to Upbrand Properties of R900 000 and R100 000.

After his resignation on 1 March 2017, he was changed on the identical day as Upbrand’s sole director by Keneilwe Maboa, the spouse of his first cousin, Karabo Sithole, who occurred to be the treasurer of Denzhe on the time.

She subsequently resigned on 31 October 2018 and was changed, once more on the identical day, by Kenneth Sithole, one other first cousin of the Letwaba brothers. Sithole resigned on 21 July 2020 and was changed by Jim S’Thembiso Skosane, who’s now Upbrand’s sole director.

But, NL Inc reported:

In our interview with Mr Johannes Letwaba, he knowledgeable us that he doesn’t know Kenneth Sithole.

Regardless of this denial, Kenneth Sithole and Johannes Letwaba are co-trustees, with Phillemon Letwaba’s spouse, Daisy, of the Upbrand Properties Belief.

Nonetheless NL Inc did discover Johannes Letwaba was the only director of Upbrand Properties when it signed the contract to assemble the rehab.

But, it cleared Phillemon Letwaba of any breaches of the lotteries fee’s policy on conflict of interest involving the awarding of the Denzhe development contract to Upbrand Properties.

The report did discover the lotteries fee’s circumstances within the grant settlement had been “too relaxed relating to the appointment of contractors”.

It really helpful that the lotteries fee impose a situation within the grant settlement that “beneficiaries should report on the procurement of contractors and supply proof that an open and aggressive course of was adopted within the appointment of service suppliers”.

However NL Inc discovered Tshikalange had acknowledged within the [forged] affidavit that Upbrand was “appointed by means of a aggressive course of, as required by the grant settlement. Additional, Ms Tshikalange states that Denzhe had no prior data of those firms nor had any relationship with its administrators”.

“… in any respect materials occasions, the CEO [Letwaba] was not conscious of any battle scenario that existed. Accordingly, we discover that there was no battle of curiosity or perceived battle of curiosity on the a part of the COO in relation to the Denzhe undertaking.”

Ministers sad

It’s clear from their responses that neither former commerce and trade minister Rob Davies, who acquired the primary report, nor his successor, Ebrahim Patel, who was the recipient of the second and third studies, had been happy with the standard and thoroughness of the investigations.

After the primary report, dated 3 March 2019, was submitted to Davies, the minister replied, mentioning critical omissions. He listed 13 points the NL Inc report had didn’t cope with.

These included:

  • A failure to “interview officers talked about within the report”.
  • A failure to produce a breakdown or price evaluation of how the R27.5 million in lottery funding allotted to Denzhe was spent, moreover the mere  R535 240 paid for 2 Ocean Basket franchises.
  • The report was “silent” on Letwaba’s position within the approval means of Denzhe’s utility;
  • No proof was produced of a web site go to to the rehab.
  • There have been issues with an affidavit supposedly sworn by Tshikilange, the founding father of Denzhe.
  • Annexures had been referred to, however not included within the report.

Davies requested the lotteries fee to increase the phrases of reference for its investigation to incorporate “misappropriation of funds” for the rebuilding of Vhafamadi Excessive Faculty in Limpopo, which was destroyed throughout a protest.

GroundUp reported the brand new faculty skilled serious structural issues lower than two years after it was constructed with a R28.3 million lottery grant.

Davies additionally requested the lotteries fee to probe “alleged fraudulent actions” involving a R6 million grant for a music pageant in East London.

The lotteries fee then prolonged NL Inc’s mandate.

A brand new report, dated 3 Might 2019, was handed to it and a ultimate report in September 2019. In neither was there something to counsel the agency had investigated Vhafamadi, as Davies had requested.

Month

When Patel, the brand new commerce and trade minister, who had been appointed lower than a month earlier, acquired the second report he was removed from happy with it.

Patel wrote to then-lotteries fee board chairperson Professor Alfred Nevhutanda recommending felony costs be laid and steps taken to get better the cash given to Denzhe.

“In view of the 2 forensic investigation studies out of your impartial investigators, and in mild of the investigation end result, it’s evident that the proactive funding allotted to Denzhe was not used for its supposed function,” Patel wrote. “… I thus advocate restoration of the funds paid to Denzhe and the pursuit of a felony case below the Public Finance Administration Act.”

The lotteries fee has by no means laid any costs, regardless of the minister’s request.

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After receiving the third report, Patel lastly misplaced endurance with the investigation and commissioned his personal impartial inquiry into corruption on the lotteries fee.

In September final 12 months, Lionel October, the director-Common of the commerce and trade division, briefed Parliament on the impartial investigation and confirmed a file was handed to the Hawks to analyze additional.

The docket particulars investigations into multimillion-rand grants to 4 NPOs, that are linked to Phillemon Letwaba or members of his household, and to Ramulifho.

The lotteries fee subsequently made good on its threat to sue Patel. Judgment on this case has been reserved.

Quite a few issues

The studies are affected by additional issues.

For instance, NL Inc didn’t examine with the Division of Social Improvement on who the official administrators of Denzhe had been. Had they performed so, they’d have found Ramulifho isn’t, and has by no means been, a director of Denzhe.

Division records for Denzhe provided to GroundUp in Might 2021 additionally revealed it was each dormant and non-compliant and had not met statutory reporting necessities since 2013.

One other instance of poor fact-checking by NL Inc is obvious in one of many questions despatched by it to Tshikalange.

It refers to a fraudulent affidavit through which she appears to say she is the applicant in a civil lawsuit in opposition to Krige, his spouse and their organisation. NL Inc included a duplicate of the summons in its studies.

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Had it checked the doc in its possession, it might have seen the plaintiff on this case was Denzhe, not Tshikalange, who was not talked about wherever in it.

After which there are the monetary statements that don’t add up.

The Lotteries Act specifies that recipients of enormous grants – R10 million or extra – should submit audited monetary statements.

However the one copies of Denzhe’s annual monetary statements within the studies are for 2018 and are unsigned. There isn’t any indication NL Inc questioned the dearth of annual monetary statements for earlier years.

Opposite to what the Lotteries Act requires, these monetary statements usually are not audited and had been merely “reviewed by a consulting firm, Dalia Consulting. The statements usually are not signed by an auditor and there’s no apply quantity.

Dated 25 April 2019, the monetary statements have apparent inconsistencies, and lift questions as to whether or not they had been correctly scrutinised.

The monetary assertion signifies Denzhe owns property price R13.27 million. This, nevertheless, isn’t doable, as NL Inc’s personal studies establish issues with the transaction between Home Regeneration – the place the drug rehab centre is located – and Denzhe.

Even when Denzhe’s administrators did plan to purchase the property, the sale by no means materialised and the property by no means belonged to it.

Non-current belongings are omitted from the monetary statements, leaving a “lacking” steadiness of R4.48 million.

An quantity of R1.58 million is listed as a legal responsibility, which within the notes part is attributed to Worth Added Tax (VAT) payable. However Denzhe has by no means been registered for VAT. And even when it had been, it might have been close to unimaginable for it to “owe” SARS R1.58 million in VAT.

One other obtrusive inconsistency is within the income columns, which solely checklist an R18 million grant from the lotteries fee. But, NL Inc had in its possession a abstract of tranches paid to Denzhe, totalling greater than R27.5 million.

There aren’t any opening balances, with no references to what had occurred in earlier years. The notes spell out how depreciation is calculated, however by no means present the calculation.

Aside from ludicrous bills of R2.166 million for workers for a rehab centre that’s unfinished and non-operational, there aren’t any “line gadgets” resembling financial institution prices, phone prices or stationery, which one would count on from an working centre. And with such a wage invoice one would count on liabilities resembling PAYE and UIF, however none are listed.

The annual monetary assertion lists R9 million in fairness, describing it as “share capital”. It’s unclear why anybody would make investments R9 million in an NPO. This cash can also be not mirrored within the financial institution steadiness.

The chief director of Dalia, Valentine Zinhumwe, stated he knew Ramulifho however had not heard of Denzhe or Upbrand Properties when initially contacted. Later, he referred to Ramulifho as a consumer and stated he couldn’t focus on his consumer’s monetary affairs.

“You’re free to put in writing what you’re feeling is true however I can not remark additional than this,” he stated.

It’s not recognized how a lot NL Inc was paid for the three-part investigation, which was carried out over the course of 2019.

However in a written answer to a query posed by Mat Cuthbert, the DA spokesperson on commerce and trade, lotteries commissioner Thabang Mamopane stated NL Inc had earned greater than R19 million in charges for work performed for the lotteries fee between 2016 and 2020.

This reply to Parliament reveals NL Inc booked extra enterprise with the lotteries fee than every other legislation agency between 2016 and 2020. It accounts for 25% of the R75.69 million paid to 37 legislation companies over the four-year interval.

Faceless informants

Lastly, NL Inc dismissed the GroundUp story out of hand.

The story was primarily based on leaked and public paperwork, public data and different info within the public area, in addition to first-hand info primarily based on a go to by GroundUp to the rehab, and interviews with a number of key individuals who had been all recognized by title.

However NL Inc advised the lotteries fee ought to search an apology and retraction of the article. Weighing up “the proof of two affidavits” (each forgeries) in opposition to “the article with faceless informants”, NL Inc discovered no substance within the allegations made by GroundUp.

Proper of reply

Questions had been despatched to Lamola through e-mail to his spokesperson, Chrispin Phiri. When a reminder was despatched to Phiri that the seven-day lengthy deadline was about to run out, he responded: “Thanks sir, please word the legislation agency might be coping with the enquiries.”

Pressed additional, Phiri stated: “The work was performed not in his private capability. It was performed below the auspices of the consumer by means of the agency. So, the agency can greatest clarify its course of and which director did what, and so on.

“None of those processes pertain to the person Ronald Lamola. You could separate the 2.”

He added the lotteries fee “didn’t contract with Lamola, however a separate entity within the type of Ndobela Lamola Inc”.

Detailed questions had been additionally despatched to Rhulani Ndobela, now the only director of NL Inc.

He initially responded, saying he was “not at liberty to reply” because of a consumer confidentiality settlement with the lotteries fee.

However the next day, Ndobela despatched a second response, through which he described the questions despatched to NL Inc as being “affected by [a] sophisticated set of logical incongruity”.

He confirmed Lamola “has certainly resigned”, saying: “The main points and extent of our involvement are lined by lawyer and consumer confidentiality, and thus, you’re most welcome to deal with your questions on this matter immediately with our consumer.”

“We have now no additional statements in as far as the remainder of the allegations made in opposition to our agency.”

We despatched the lotteries fee detailed questions.

Its attorneys responded with a quick letter stating the issues referred to had been below investigation by the Hawks and SIU.

“We have now subsequently suggested our consumer not to reply to your questions till the above investigations have been concluded.”

Each Lesley Ramulifho and Phillemon Letwaba didn’t reply detailed questions despatched to them.

Ramulifho was despatched the questions through WhatsApp and two e-mail addresses he makes use of. Letwaba was despatched questions through a WhatsApp quantity on which GroundUp has beforehand communicated with him.