Gupta-linked firm was appointed to market and sell Alexkor joint venture diamonds, inquiry hears

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  • In its first sitting for the year, the judicial commission of inquiry into state capture heard evidence relating to state diamond mining company Alexkor.
  • According to a former director at forensic a forensic investigator, Scarlet Sky Investments - which was appointed to sell diamonds for a joint venture Alexkor was part of - had links to the Gupta family.
  • Investigators also concluded that the firm's bid evaluation processes was manipulated so it could secure the deal.

A firm which was appointed to market and sell diamonds for a joint venture that state-owned diamond mining company Alexkor was part of had links to the Gupta family, the judicial commission of inquiry into state capture heard.

The commission, chaired by Deputy Chief Justice Raymond Zondo, held its first sitting for the year on Friday to hear evidence of state capture in the mining industry.

In her opening remarks, evidence leader Advocate Carol Sibiya said a whistleblower had informed the commission that state capture at Alexkor had taken place to benefit Gupta entities.

Former executive director of Gobodo Forensics, Albert Torres, appeared before the commission to give evidence during the morning session. Before retiring Torres was part of a team appointed by the Department of Public Enterprises to investigate several matters relating to a pooling and sharing joint venture the state miner had with the Richtersveld community in the Northern Cape.

Torres, now a non-executive director of Gobodo Forensics, is a registered accountant with South African Institute of Professional Accountants and a certified fraud examiner. The investigation was conducted over three months in 2019. Torres described it as a preliminary probe, saying there  was scope for a second investigation.

Fin24 previously reported that this investigation found that procurement processes were flouted in the appointment of Scarlet Sky Investments to market and sell diamonds. Furthermore the probe found that the diamond evaluators used were not fully qualified, and diamonds were marketed below their value.

According to Torres, Scarlet Sky investments appeared to have been a shelf company when it first submitted its expression of interest to take part in a tender to market and sell diamonds for the joint venture.

Upon investigating the directors for the company, they found that one was Kubentheran Moodley, linked to Gupta family business associate Salim Essa. Moodley's name has come up various times at the commission, particularly in assisting another Gupta-linked firm, Trillian, Torres pointed out.

Moodley had also requested a court to interdict the Zondo Commission from accessing documentation and personal items belonging to him, such as jewellery and cash, Torres recalled. The Gobodo investigation also picked up that Moodley had been an adviser to former Mineral Resources Minister Mosebenzi Zwane, as has also been widely reported.

Torres said that Scarlet Sky was 60% owned by a firm Moodley represented, while 40% was owned by another of its directors, Daniel Nathan.

Flawed process 

Scarlet Sky's appointment, in 2014, was agreed to and signed off by the former CEO of the joint venture, Mervyn Carstens, even though the procurement process was flawed, Torres said. 

According to Torres, a review of the procurement process showed it was "manipulated to favour Scarlet Sky."

The company also did not have licence to sell rough diamonds. While an external company, Gamiro Advisory Services, who did the bid evaluations for the tender scored Scarlet Sky zero in this regard, the tender committee apparently ignored the fact that it had no licence.

When Zondo asked Torres whether Gobodo had confronted the tender committee for disregarding something which could be considered a "main requirement" in the tender process, Torres said that most of those on the tender committee are now former board members who could not be contacted.

Zondo found this to be a feeble excuse and pushed Torres to explain why they had not tracked the former board members down. Torres responded that the investigators had tight deadlines and time constraints. Zondo said that Gobodo should have requested more time from the department of public enterprises to investigate, as because not having a licence is a "crucial" aspect that should have seen Scarlet Sky disqualified from the ender process.

The chairperson said that Gobodo should have worked to include the explanation from the tender committee in the final report. "The report has more value than if you leave them (responses) out," he explained.

Torres said the report also found that Carstens had told the joint venture's board of the joint venture that due diligence had been conducted on Scarlet Sky before its appointment, but the company secretary later admitted to Gobodo that it had not. It became apparent to investigators that Scarlet Sky was operating with a licence which was not theirs. 

Gobodo also raised issues with Gamiro Services being appointed for the bid evaluation – when this could have been conducted internally. Torres said there were allegations that Carstens had contact with Gamiro in his previous job, but this could not be confirmed in Gobodo's investigation. In confronting Carstens about Gamiro's appointment, Gobodo was told that the firm had expertise and knowledge" to do the task. Gobodo did not investigate this further. Zondo however was not pleased that an external service provider was appointed, as it added to fruitless and wasteful expenditure, given that the task could have been performed internally.

Speaking about the a second appointment of Scarlet Sky, for an additional period of up to five years, Torres said this process was also flawed. The Bid Evaluation Committee had allegedly not done an evaluation because there were no records of it, he said. The committee had just checked that the firm met minimum requirements. This was an administrative process which could have been conducted by supply chain management staff, said Torres. "The BEC in itself was a hoax," said Torres.

When Zondo asked Torres what the minimum requirements were that had to be met, Torres said no written document was provided to indicate what the requirements were. He said he assumed the requirements would be things like B-BBEE certificates or tax certificates.  

When Zondo questioned Torres why Gobodo did not push to find out what the requirements are, he once again explained there was limited time. Zondo was not convinced, and said this was a simple task which did not require more time.

The sitting continues with evidence from a long-term contractor to Alexkor and its joint venture, Gavin Craythorne.

Sibiya, meanwhile, said the Scarlet Sky ha been invited to provide evidence to the commission.

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