Zondo wants Alexkor directors, diamond dealers to be probed for fraud

29th April 2022 By: News24Wire

A decade after the state-owned diamond company Alexkor became a site of Gupta influence and corruption, the Judicial Commission of Inquiry into State Capture issued a long list of recommendations to pursue perpetrators.

In its report, released on Friday, the commission details how former minister of public enterprises Malusi Gigaba appointed a new Alexkor board – with links to the Gupta family - in 2012. The chair of the board was Rafique Bagus, who was in close contact with associates of the Gupta family for years and attended the infamous Gupta wedding in 2013.

During the board’s term, Alexkor’s joint venture with the Richtersveld community appointed a company called Scarlet Sky Investments 60 (SSI) to market and sell all their diamonds. Gupta associate Kuben Moodley owned the majority of SSI. (Moodley was arrested last year in connection with alleged money laundering of the proceeds from contracts improperly awarded by Transnet to Gupta-link Regiments and Trillian, as well as alleged theft of funds from a Transnet pension fund.)

READ | Gupta ghosts still haunt 'destroyed' Alexkor mine

SSI received the contract without having a licence to sell diamonds or any track record in the diamond industry. The tender committee ignored that. The state-capture report found that the bid should have been disqualified from the outset.

Instead, SSI went on to procure R2 billion in diamonds from the joint venture, which probably constituted a criminal offence due to its lack of a licence, the report found. In addition, the commission heard testimony that SSI underpaid the Alexkor joint venture for diamonds, and that its selling prices for diamonds was substantially lower than average market prices.

The commission’s recommendations include that law enforcement agencies must investigate whether the members of the tender committee – Bagus, Duncan Korabie and Roger Paul – perpetrated fraud by misrepresenting SSI’s compliance with the tender requirements.

Bagus Paul and Korabie must also be investigated – and possibly be declared delinquent directors – to confirm whether they have breached their fiduciary duties.

In addition, the commission wants the authorities to investigate whether Bagus, Paul and Korabie acted in contempt of court – after the Western Cape High Court found in 2014 they were unlawfully appointed as directors of Alexkor’s partner company in the joint venture.

The commission also wants law enforcement agencies to investigate and possibly prosecute all the directors of SSI, along with its part-owner Daniel Nathan, for "wilfully furnishing false information" to the South African Diamond and Precious Metals Regulator (SADPMR). Other companies associated to Nathan should also be investigated for contravening the Diamonds Act.

In addition, the commission wants law enforcement agencies to investigate and possibly prosecute Mervyn Carstens, CEO of the Alexkor joint venture, and Zarina Kellerman, chief legal officer of Alexkor, for fraud – following their presentation to the board that a proper due diligence was performed prior to the award of the tender to SSI. Both Carstens and Kellerman were in contact with Gupta associates, the commission heard.

Other recommendations include that SSI directors be investigated with regards to a charge that more than R5.1 million in diamonds was allegedly not accounted for, and that the Alexkor joint venture was underpaid R1.718 million for diamonds.

The commission also wants SADPMR to conduct an inquiry to determine if all the buyers to whom SSI sold rough diamonds were in possession of the requisite licences. The board of Alexkor must investigate all fees paid to the Gupta-associated company Regiments. 

The report also covers Alexkor’s diversification into coal, and the commission found that the entire venture "was a strategy of the Gupta enterprise to position itself to control Alexkor coal business, which consisted of IPC, WesCoal and Nungu Mining".