Cynical cartel fooled tribunal

2013-07-28 14:00

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At a 2006 hearing about Murray & Roberts’ acquisition of them, Concor fended off collusion concerns – two months before colluding

An important member of the construction cartel successfully played down the risks of “coordination” on road tenders before the Competition Tribunal just two months before meeting with peers to divvy up road tenders.

The tribunal held a hearing in June 2006 about the acquisition of Concor by Murray & Roberts where Concor fended off concerns raised by the SA National Roads Agency Limited (Sanral).

The road construction cartel meeting that City Press reported on last week was held in September 2006, when construction companies that work in the road sector met to agree to divide up contracts between them.

Sanral made representations to both the Competition Commission and tribunal during the merger process, arguing the merger would result in less competition and potential collusion in the road sector.

At the 2006 tribunal hearing, Sanral CEO Nazir Alli testified that the merger would reduce competition in the market for toll road concession tenders by reducing the number of willing bidders from three to two.

According to the hearing transcript and ultimate ruling, he said this would increase the likelihood of “co­ordination” in the market.

Concor, however, testified that it would not lead to a lessening of competition and collusion and the merger was unconditionally approved.

The man who testified for Concor, Trevor Robinson, was identified as a key player in alleged collusive meetings that took place in the construction cartel between the years 1995 to 2007.

This is according to the affidavit of construction boss Schalk Ackerman to the National Prosecuting Authority.

Robinson was then an executive director of Concor and held the position of managing director of Concor Mining.

Asked this week if the commission and tribunal erred in its 2006 approval of the Concor merger, deputy commissioner Trudi Makhaya said: “We are not in a position to discuss the merits of your enquiry at this stage as this necessitates further consideration by the commission.”

While the point of merger hearings is precisely to evaluate the future risks of collusion, Makhaya said: “The secretive nature of cartel behaviour renders both its detection and investigation difficult.

“It is a global challenge for competition authorities to uncover such behaviour unless a cartel member is willing to come forward.

“It should be noted that misleading the competition authorities is an offence that attracts criminal sanctions.

“The act also makes provision for the commission to revoke its merger decisions,” she added in her emailed response.

Sanral’s Alli said he doesn’t see the tribunal’s ruling as a mistake, arguing that the scale of the collusion could never have been predicted.

Responding to questions from City Press this week, Murray & Roberts said they could not comment on allegations made by Ackerman, as they had not seen his affidavit.

They added that Robinson was not prepared to talk to them during their own investigations into collusion.

“We are reserving our right to pursue criminal and civil charges against the implicated former executives and are taking legal advice on the matter,” said Murray & Roberts.

City Press was unable to contact Robinson for comment this week.

Sanral weighs legal options

As City Press reported last week, Sanral is currently weighing up legal action against the firms that conspired against it.

The road contractors who met in September 2006 included representatives of major construction firms WBHO; Basil Read; Grinaker-LTA, a subsidiary of Aveng; and Concor, which was acquired by Murray?&?Roberts in June that year.

Also represented at the meeting were smaller construction players Raubex, Haw?&?Inglis, and Rumdel.

Affected roads include the N1, N2, N5, N12 and N17, as well as major provincial routes like the R61, R51 and R40.

Other road projects on which the construction cartel colluded include the Gauteng Freeway Improvement Project and the Bayhead Khangela Bridge Project.

Concor placed at centre of cartel

Murray & Roberts subsidiary Concor appears to have been a major player in the construction cartel, participating in the rigging of tenders for 2010 Fifa World Cup stadiums and roads, among other things.

In his affidavit before the National Prosecuting Authority, construction boss Schalk Ackerman states that when he was inducted into the collusive meetings of the cartel in 1997, the “coordinator” of these meetings was John Willmott.

Willmott was the executive manager of civil engineering at Group Five at the time, but joined Concor as group managing director in January 2000.

In his affidavit to the NPA, Ackerman also details the history of the practice of paying “loser’s fees” to unsuccessful tenderers.

A loser’s fee is an inflated amount that is added on top of the project cost so that the successful tenderer can pay the unsuccessful tenderers for the cost of submitting bogus tenders to make it appear to be competitive.

Ackerman says this practice started in about 2000 and ran until 2004, after which the cartel continued without this practice.

According to Ackerman, in 2004 Concor reneged on paying out loser’s fees that had been agreed on for the Coega harbour project.

The fallout from this decision, says Ackerman, brought the collusion to the attention of the Concor board and Willmott jumped ship shortly afterwards, resigning in December 2004 and taking up a new job in Australia working for Evans?&?Peck in January 2005.

Attempts to contact Willmott over the last few weeks have been unsuccessful, and Murray?&?Roberts said he had refused to engage with the construction giant when it was doing its own investigation into collusion.

“John did not confess to any collusive behaviour to the Concor board while in the company’s employ, thus the Concor board was not aware of collusion,” Murray?&?Roberts said this week.

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