A damning draft report recommends that Transnet lay corruption charges against four key players in state capture: its former group chief executive Brian Molefe, former chief financial officer Anoj Singh, board subcommittee chairperson Iqbal Sharma and Gupta lieutenant Salim Essa. All four men had close ties to the Guptas and have been accused of enabling the family’s access to business in parastatals and government entities. Compiled by Mncedisi Ndlovu & Sedumedi (MNS) Attorneys, the report also recommends that Transnet pursue Molefe to repay money that the company lost because he allegedly misled the board about why the cost of the tender to build 1 064 locomotives rocketed from R38.6bn to R54bn. The tender allowed Gupta-linked companies to loot billions of rands from the state.The report found that the R15.4bn increase in the cost of the tender “appears inexplicable, unreasonable and excessive”.MISLEADING THE BOARDThe MNS report also found that Molefe further “misled” the board into believing that it did not have to inform then public enterprises minister Malusi Gigaba about the rocketing cost of the deal or seek his approval, which was “completely incorrect”.The report was delivered to the new Transnet board a week ago. It further recommends that Transnet group chief executive Siyabonga Gama and members of his executive be disciplined for their role in the transaction.MNS was instructed to identify which current and former Transnet employees were responsible for the dramatic cost hikes, as well as what sanctions they should face.The report also reveals that seven laptops, which were “dedicated to be used during the [tender] evaluation process”, and which contained “all the workings and spreadsheets that were used during the evaluation”, had gone missing.The MNS report follows a previous one Transnet commissioned from law firm Werksmans, which was finalised in December. The latest report confirms many of the findings of the Werksmans report, which former board audit committee chair Seth Radebe told Parliament last month was “inconclusive” and failed to find individual employees responsible.The MNS report, which City Press has obtained, outlines the roles each individual allegedly played in the multibillion-rand deal. It recommends that: - Transnet lay criminal charges against Molefe in terms of the Prevention and Combating of Corrupt Activities (Precca) Act and the Public Finance Management Act (PFMA), for allegedly misleading the board about the reasons for, and the extent of, the cost of escalation, and for approving the transaction two months before the board approved it. The report found he also told the board that the price increase did not need to be reported to Gigaba, saying: “Given [Molefe’s] previous position as the group chief executive, Transnet should recoup monies lost due to his conduct”; - Transnet lay criminal charges of financial mismanagement and contravening the PFMA against Singh for allegedly misleading the board, helping to drive up the tender cost by R2.7bn and supporting a R1.2bn project that helped a Gupta-linked rail company score R647m more from the parastatal; - Transnet lay criminal charges against Sharma, the former chairperson of the board acquisitions and disposals committee (BADC), in terms of Precca, and for allegedly violating the Companies Act by failing to declare his business relationship with his “friend”, Essa, in a company that was securing work from the bidders. The report also states that there was “a reasonable suspicion that Sharma had unduly benefited from the transgression as a result of corruption”, and that Sharma be reported to the Companies and Intellectual Property Commission, and a court application be made to have him declared a delinquent director; - Transnet lay charges against Essa for “corruption” in terms of the Precca act; - Gama, the chief executive of Transnet Freight Rail (TFR) at the time the tender was issued, be disciplined for “being part of the team” – which included Molefe and Singh – “that misrepresented the true reasons and extent of the increase of the initial contract value” to the board, “failing to exercise reasonable care and skill”, and “failing to properly manage his subordinates, who compromised the fairness of the procurement process”; - Former chief procurement officer of TFR and current Transnet Engineering boss Thamsanqa Jiyane be disciplined for allegedly contravening Treasury regulations, and for failing to ensure that the tender process was fair, legally compliant and unbiased. The report also recommends he be disciplined for failing to disqualify three successful bidders – including two with Gupta links – after they fell well short of requirements to use locally sourced parts and content in their locomotives; - Senior supply chain manager Lindiwe Mdletshe be suspended and disciplined for failing to ensure that the process was legal and fair, and failing to look after Transnet’s property – specifically, the seven missing laptops used during the bid evaluation process; - Disciplinary action be taken against Transnet Group Treasury official Danie Smit, executive finance manager Yousuf Laher, and Mdletshe and Jiyane for their roles in allegedly driving up the cost of the project by more than R2bn during post-tender negotiations, which are supposed to drive prices down; and - Action against Transnet former chief financial officer Garry Pita, who resigned dramatically in April, be held over until the outcome of an investigation by an independent rail expert into the cost of relocating the production lines of two of the winning bidders to Durban – deemed as excessive – is determined.The report states: “It would not be unreasonable to conclude that Anoj Singh and Brian Molefe, as well as members of the Capital Investment Committee [Capic] and BADC [led by Sharma], either have failed to apply their minds one way or another, or had intended to provide misleading, incorrect and inadequate information to the board. On this basis, we recommend that Singh and Molefe, as well as members of Capic and BADC, should be held personally liable for their conduct.“If there is a suspicion that Singh, Molefe or any other member of the committee had unduly benefited from the transgression, or if there is evidence that shows that they misled the board as a result of corruption, Transnet is required by law to report such known or suspected corruption to the law enforcement agents.”The report also states that, for current employees of Transnet who it recommends be disciplined.MNS was commissioned in February to further investigate Transnet’s tender to build 1 064 diesel and electric locomotives, which was originated in 2012 and awarded to four companies – General Electric, Bombadier Transport (BT), China South Rail (CSR) and China North Rail (CNR).CSR and CNR have since been implicated in Gupta Transnet corruption. CSR entered into R5.3bn in kickback agreements with the family and their associates, and CNR paid a frontman for Essa to syphon R647m from Transnet for a project initially “estimated at an amount of R4m”.The MNS report also found that the entire tender was irregular and invalid because it was not, from the outset, legally compliant and is now “susceptible to judicial review by any affected party”.THE RELOCATION PROJECTThe relocation of two of the winning bidders – CNR and BT – to Durban was supposed to create jobs, grow the rail industry and ensure that the country’s train-building capacity was no longer concentrated in Gauteng. But the project, which was initially estimated to cost R4m, according to a CNR proposal to Pita and Mdletshe, ended up costing R647m for CNR, and R618m for BT.The MNS report found that, despite the cost involved, neither CNR nor BT “relocated” to Durban at all, because they had not by then established any manufacturing line at the Koedoespoort facility in Gauteng.Despite this, Gama approved the so-called relocation and associated costs, even though his earlier queries were ignored, because he assumed the “relocation” negotiation team – which included Singh, Jiyane, Pita and Mdletshe – “had considered the costs and found them to be reasonable”.“We have considered Gama’s qualifications, knowledge and experience against his conduct,” the report states, adding that he “authorised the expenditure of R1.2bn without satisfying himself as to the cost benefit analysis that had been conducted”.MISLEADING THE BOARD AGAINLike the Werksmans report, the MNS report found Molefe “misled” the board by claiming that the price of the tender escalated from R38.6bn to R54bn because contingencies such as foreign exchange fluctuations had not been factored into the cost. But they had.Also, Molefe had approved the cost escalations two months before the board was presented with them.The MNS report also found that Molefe, Singh and Gama signed a memorandum to the board containing misleading information about the reasons for the price hikes.“Gama, during our interview with him on May 31 2018, indicated that he became aware for the first time that the price of the estimated total cost had increased to R54bn on March 17 2014 when the announcement was made by Molefe. What is not clear from Gama’s version is that he recommended the increase of the estimated total cost to the board on the memorandum that he signed on May 21 2014,” the report states, adding that Gama recorded no objection to the cost increase.The report also found that Gama, Singh and Molefe all recommended that the tender be split into four – for two diesel and two electric locomotive manufacturers – and proposed to speed up the production to three years from seven years, which drove up the cost of the tender by an extra R2.7bn. For this, and for misleading the board by saying that acceleration would result in savings, they should be held personally liable.“It is clear that the original equipment manufacturers have not achieved the envisaged accelerated delivery schedule in that only 419 locomotives have been delivered out of a total of 1 064 locomotives,” the report said.