POLITICS

Ferrostaal report devastating - David Maynier

DA MP says huge sums were paid to secure submarine contract

DA calls on Hawks to investigate "questionable and improper" payments by Ferrostaal

The Democratic Alliance (DA) believes that General Anwa Dramat, Head of the Directorate of Priority Crimes (Hawks), should launch a preliminary investigation into "questionable and improper payments" made by Ferrostaal, which was part of the consortium that supplied submarines to South Africa (see Amabhungane report).

The German Submarine Consortium, which included Ferrostaal, supplied three Class 209 submarines to the South African Navy as part of the arms deal signed on 1 December 1999.

As part of a company "clean up", Debevoise & Plimpton, a United States based law firm, was commissioned by Ferrostaal to conduct a compliance investigation.

The final report of the investigation, entitled Ferrostaal: Final Report - Compliance Investigation, was completed on 13 April 2011.

The report found that "questionable and improper payments" were made by Ferrostaal on several "high-profile projects", including the submarine project in South Africa.

In the case of the project to supply submarines to South Africa, the report found that Ferrostaal:

  • "paid very little care to defining and monitoring the precise services of its consultants";
  • "spent a considerable amount of money on offset projects, most of which failed or performed poorly"; and
  • "had close business connections with Chippy Shaik".

The report found specifically that there were three "key consultants" involved in the project, including:

  • Tony Georgiadis, a prominent businessman, who was paid approximately R165 million (Euros 16.5 million);
  • Tony Ellingford, a former executive in the defence industry, who was paid approximately R165 million (Euros 16.5 million); and
  • Jeremy Mathers, a retired admiral, who was paid approximately R12 million (Euros 1.2million).

In the case of Tony Georgiadis, the report found that:

  • his "chief role was as a conduit to politicians" and that there was little evidence that he "did work commensurate with the fee received".

In the case of Tony Ellingford, the report found that:

  • he "was paid to provide political access" and that "the amount of work done does not seem commensurate with the payments received".

In the case of Jeremy Mathers, the report found that:

  • he was hired to provide "information on the Navy's requirements"; and

that he was paid under three contracts but he "would not be doing substantial work under the contracts".

Additionally, as regards Chippy Shaik, the report found that Ferrostaal:

  • had numerous business dealings with Chippy Shaik after he left the defence department; and
  • that these dealings were "problematic" for several reasons, including that the "commercial rationale for some of them was difficult to understand".

The report found that Chippy Shaik may have been behind a company called Illima Community Financial Services (Pty) Ltd, which received a payment of R1.8 million from Ferrostaal South Africa (Pty) Ltd. The company's directors reportedly included Julekha Mahomed, President Jacob Zuma's attorney at the time, and it was thought to have been used as a vehicle to pay Chippy Shaik.

The final report, prepared by Debevoise & Plimpton into "questionable and improper payments" made by Ferrostaal, is devastating.

The report does not contain any direct evidence that "forward payments" were made to politicians or decision makers in return for any benefit in securing the contract to supply submarines to South Africa.

However, the final report does find that enormous sums of many were paid to consultants, particularly Tony Georgiadis and Tony Ellingford, to secure political access for Ferrostaal, and that they did not produce work commensurate with the fees they received.

Moreover, the report notes that there is "some evidence" that Tony Georgiadis "passed on money received in connection with a contract to sell frigates to South Africa".

The findings in the Debevoise & Plimpton report amounts, in my view, to prima facie evidence that there was massive corruption in the deal to secure that contract to supply submarines to South Africa.

The report raises some serious questions, including:

  • Is there evidence that Tony Georgiadis, Tony Ellingford or Jeremy Mathers made forward payments to individuals or institutions involved in the process of decision-making?
  • Is there evidence that Chippy Shaik make any promises to confer benefits on Ferrostaal when he was in charge of acquisition at the defence department?
  • Is there any evidence that Tony Georgiadis, Tony Ellingford, Jeremy Mathers and Chippy Shaik failed to comply with all the relevant tax laws and regulations in South Africa?

We need answers to these questions. That is why we need an investigation.

I will, therefore, hand a copy of the report to:

  • General Anwa Dramat, Head of the Hawks, who I have already approached to open an investigation into the new information contained in the compliance investigation commissioned by Ferrostaal; and
  • Themba Godi, Chairperson of the Standing Committee on Public Accounts, which is responsible for dealing with the investigation into the arms deal in Parliament.

Statement issued by David Maynier, MP, DA shadow minister of defence and military veterans, August 14 2011

Click here to sign up to receive our free daily headline email newsletter