Former Eskom senior manager wins appeal against 15-year fraud and money laundering conviction

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Dawid Malherbe.
Dawid Malherbe.
Wesley Martin
  • Former Eskom senior manager Dawid Malherbe has been acquitted of fraud and money laundering by the High Court following an appeal.
  • In 2016, the Specialised Commercial Crimes Court in Bellville had sentenced him to prison for a term of effectively 15 years.
  • After previous attempts to appeal the ruling, the Supreme Court of Appeal eventually granted Malherbe leave to appeal and the matter ended up at the Western Cape High Court in 2021.

Former Eskom senior manager Dawid Malherbe's appeal against his 15-year sentence for fraud and money laundering has succeeded.

In 2016, the Specialised Commercial Crimes Court in Bellville had sentenced Malherbe to a term of effectively 15 years in a matter that related to contracts worth R65 million outsourced by an Eskom subsidiary, PN Energy Services (PNES), to his own company, Energy Utility Services (EUS).

Malherbe was arrested with another suspect in 2013 after a whistleblower alerted the Hawks to irregularities in the power utility’s tender awarding process, News24 reported. The second accused was granted immunity from prosecution after agreeing to testify against Malherbe. 

Malherbe's role in bringing about the conclusion of the contracts between the two entities was the foundation of the fraud charge against him. Malherbe had seconded as a managing director of PNES.

He had previously tried to appeal his conviction at the trial court but this was dismissed, as was his petition to the Judge President. Leave to appeal was, however, granted by the Supreme Court of Appeal, which is how the matter ended up at the Western Cape High Court, five years after he was sentenced.

The ruling by three judges of the Western Cape High Court upheld the appeal, setting aside the previous orders, effectively acquitting Malherbe and EUS of fraud and money laundering.  

The ruling unpacks the context in which the contract between PNES and EUS came about.

PNES was a wholly owned subsidiary of Eskom and delivered services for the electrification of Khayelitsha and the Cape Flats in the Western Cape.

In 2008, Eskom's Investment and Finance Committee resolved to dispose PNES, as these services could be provided by the power utility itself. In the interim, before Eskom could fully take over, the services that would have been provided by PNES had to be outsourced. In addition, in order to retain the skills and expertise for such services, EUS agreed to employ workers on the basis that it would conduct services on behalf of PNES.

While there were concerns raised of a potential conflict of interest, given Malherbe's shareholding in EUS, he had begun steps to resign from Eskom before the commencement of the contracts that PNES had concluded with EUS, the judgment indicated.

He also declared his conflict of interest, disclosing his "100% shareholding in EUS". The contracts were in force until Eskom unilaterally terminated them in 2010, but this was not due to any alleged fraudulent conduct on Malherbe's part, the court found.

"… the agreements offended against certain regulatory legislation that was applicable. The setting aside of the contracts had no connection with the allegedly fraudulent conduct of the appellant [Malherbe]," the judgment read.

'Ineptly drafted'

The judgment also considers the allegations of fraud and notes that the charge was "ineptly drafted", with some allegations of misrepresentation being a matter of opinion. "Some of the alleged misrepresentations were also plainly recognisable as expressions of opinion rather than representations of fact," the judgment read.

It is with respect to an alleged misrepresentation of the B-BBEE status of EUS that the state had built a case of fraud. But the judgment notes this allegation was from a witness that provided contradictory evidence.

"On the common cause facts, the representation that EUS was 45% black-owned was made by the attorneys, not by the appellant. 

"Properly considered, the relevant question was therefore not whether the appellant had positively misrepresented the position, but rather whether, by failing to point out the apparent error, he had made himself guilty of a fraudulent non-disclosure … The essence of his defence in this regard was that he had not been under a duty to speak up because of the directors' own knowledge of the facts and that his silence on the point had in any event not been informed by any intention to defraud," the judgment read. 

The judgment highlighted that Malherbe's indication that he had a 100% shareholding in EUS was inconsistent with allegations that he intended to misrepresent the company as 45% black-owned. 

The judgment noted that as a start-up enterprise, EUS could be deemed a level four contributor, with a B-BBEE procurement recognition of 100%. "It should perhaps also be recorded that the appellant did arrange the establishment of a shareholding trust for the benefit of the employees of EUS, the vast majority of whom were black. Dividends were paid to the employees as beneficiaries of the trust," the judgment read.

The prosecutor had put forward that the contracts between PNES and EUS did not comply with the Code of Good practice because a generic scorecard was not submitted. The judgment noted this, but added that establishing noncompliance with certain aspects of the code was not grounds to justify that Malherbe be convicted of fraud.

With the conviction of fraud set aside, the foundation for the conviction of money laundering also fell away.

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