Major elements of state capture are set to be tested in court against one of its alleged architects next week.
The Transnet Second Defined Benefit Fund (TSDBF) has thrown the state capture book at Eric Wood.
In court papers it spells out damning allegations of "serious criminal conduct" against Wood, who the fund accuses of setting up a scheme to launder the proceeds of corrupt contracts the Guptas swung the way of Regiments Capital.
Regiments is the financial services company where Wood was a director before a fallout with his co-directors over the terms of his departure to Trillian, a successor company set up by Gupta lieutenant Salim Essa.
Wood, who is still a Regiments shareholder, launched an urgent application seeking to prevent the TSDBF from executing an agreement to claw back R500m in damages from Regiments.
The deal would settle (at a discount) R825m in claims by the fund against the Regiments group, based on Regiments' allegedly corrupt appointment to manage the fund's assets.
Litha Nyhonyha and Niven Pillay, the majority shareholders and remaining directors in Regiments, are fingered as "co-conspirators" with Wood – but they have signed the deal with the TSDBF, partly, it seems, to try to regain control of Regiments, which has had all its assets frozen by the fund.
Wood has gone to court to quash the deal, claiming his former colleagues are using the company's money to save themselves, leaving him to face the music.
The TSDBF has hit back hard, setting out in detail the evidence of Wood's role in arrangements which saw more than 50% of Regiments' revenues from Transnet funneled off to letterbox companies the fund says were fronts for the Guptas.
"The Fund has been a victim of State Capture related crimes perpetrated by Wood and … the Regiments respondents [Nyhonyha and Pillay and the companies they control]...
"State capture related crimes in which Wood has been centrally involved have caused the Fund to suffer damages running into hundreds of millions of rands."
The settlement agreement which Wood seeks to interdict would compensate the TSDBF to the tune of R500m plus a 10% discount on the market value of 810 230 Capitec shares that Regiments controls as a result of a 2006 empowerment deal. (The settlement would involve the TSDBF buying all of these Capitec shares, the first R500m at Regiments' expense.)
Controversially, Capitec has joined forces with Wood to try to block the deal.
The fund has argued that Wood's hands are filthy and that his application is self-serving as well as technically deficient. It has also launched a counter-application to stop Capitec interfering with the settlement.
'Business development' fees
The fund says its claims arise out of "a sustained project by Wood and the Regiments respondents to profit by assisting the Gupta family and their associates in State Capture related activities".
This secret project, the fund argues, saw to it that "the Gupta family, through their influence over organs of state … would procure the appointment of Regiments … as advisors or fund managers".
"In turn, the Regiments companies would launder hundreds of millions of rands of public funds for the Gupta family by paying the bulk of the fees that they were paid from public funds to Gupta front companies which, in turn, would launder them on to other laundry entities until the funds finally made their way into offshore Gupta accounts.
"The money laundering payments made by Regiments were euphemistically described in the Regiments records and books of accounts as 'business development' fees."
The fund says that, on a version provided by Pillay himself, Regiments could afford to hand over the bulk of their earnings because they charged state owned entities like Transnet 400% more than they would ordinarily have charged.
The fund alleges Regiments also served a second important purpose for the Gupta family and their associates: As "advisors" to state owned enterprises, they were perfectly placed to give advice designed to advance the interests of the Gupta network rather than the state-owned enterprises who had engaged them.
The fund has gathered evidence of what it calls "the Wood, Regiments, Gupta Money Laundering Scheme" from various sources, including internal Regiments documents disclosed in the disputes between Wood, on the one side, and Nyhonyha and Pillay on the other. It has also trawled the #GuptaLeaks.
Some of this evidence has been published before by amaBhungane, but some is new.
For instance, the fund discloses that one of the Gupta lieutenants who dealt directly with Regiments, Ashok Narayan, was so close to the family that he was vested with power of attorney over the Dubai affairs of the revered mother of the Gupta brothers, Mrs Angoori Gupta.
The fund retrieved a copy of the 2015 power of attorney documents from the #GuptaLeaks.
Spreadsheets drawn from Regiments internal calculations on splitting part of the company off to Wood and Essa's Trillian show that, apart from one deal, "every Regiments Capital advisory account was subject to 55% payments to 'business development' partners".
The fund says the figures, drawn from March 2015 to February 2017, shows: "Of the aggregate amount of R429 044 962.01 paid out by the state-owned enterprises, R274 164 718.11 was paid to "business development" partners. This was 64% of the amount that Regiments Capital received from the relevant state-owned enterprises."
The fund says spreadsheets showing projected revenue demonstrate that Regiments was intent on expanding this extraordinary exploitation, both within Transnet and to the Cities of Johannesburg and Tshwane, to Eskom, South African Airways, SA Express, the SA Forestry Company, Denel, the Free State Government and several unnamed "other" clients.
It notes: "It is difficult to conceive of any innocent explanation for the payment to "business development" partners of between 50% to 55% of the value of the contracts Regiments Capital actually was performing for organs of state in the 2016 financial year and those it hoped to obtain going forward…
"In fact, it now seems clear that under the euphemism of 'business development" payments, Regiments Capital was laundering hundreds of millions of rands of public funds for the benefit of its 'business development' partners who in all cases in respect of which there is evidence of their identities, were … front companies linked to the Gupta family."
The fund deals in detail with one transaction in which the benefit to 'business development' partners was as high as 78%.
"Regiments Capital invoiced Transnet R166m (plus VAT) for its services in relation to the raising of the China Development Bank loan.
"The Regiments Capital ledger summary spreadsheet reflects that of this R166m, R129 480 000 was paid to 'business development' partners, and the net amount retained by Regiments Capital was only R36 520 000 00.
"R36 520 000 is exactly 22% of R166m. So the business development partners received 78% of the amount paid by Transnet."
Of this, the fund shows, 75% went to the Guptas and 3% to Albatime, a now defunct company that made its fortune by introducing Salim Essa, the Guptas' business partner, to Regiments.
It alleges the 75% payment to the Guptas (R124m) was laundered to their company, Sahara Computers, through Albatime. (See our story on this transaction.)
The fund argues: "The criminality of the Wood, Regiments, Gupta money laundering scheme speaks for itself."
The urgent applications are due to be heard on in the Johannesburg high court on 10 September.