More questions than answers

The Arms Procurement Commission found no one guilty in the arms deal, but it failed to draw a definite line under the controversial agreement, writes Louise Flanagan

A contractor paid “advisers” £115 million but it wasn’t for bribes. German and French law enforcement weren’t much help.

Millions of pages of documents were sought, including the financial records from a minister’s estate.

And legal precedent is that privileged documents remain privileged.

These are some of the fascinating details in the Arms Procurement Commission’s final report released by President Jacob Zuma on April 21.

The commission’s report should have decisively drawn a line under the controversial 1999 Strategic Defence Procurement Package (SDPP) but it seems unlikely to achieve that. The report found nothing wrong with the deal and nobody to prosecute, so arms deal critics immediately dismissed it as a whitewash.

It leaves the quandary: the dozens of witnesses from various entities, departments, contractors and international law-enforcement agencies who all say there was nothing wrong with it aren’t likely to all be part of an international conspiracy to cover up wrongdoing, but then why did Schabir Shaik go to jail and where did the extra money come from for Number One’s luxurious lifestyle?

The investigations

The report is a fascinating read and the criticism of a whitewash isn’t justified. What counts is what can be prosecuted, not wishful thinking.

It’s three volumes, totalling 767 pages (there was an executive summary, but the Presidency didn’t release that).

It explains the commission’s investigation and the public hearings, detailing a massive document hunt.

The first documents sought were the court records from the Constitutional Court case brought by activist Terry Crawford-Browne, which initiated the inquiry.

They collected records of all the court cases linked to the deal, then information from the government including Parliament, the Presidency, the Treasury, Trade and Industry, the auditor-general, the National Prosecuting Authority (NPA), the Scorpions/Hawks, the Special Investigating Unit, the public protector, the Department of Defence and Armscor.

The financials from the estate of the late minister of defence Joe Modise – often pointed to as a likely recipient of bribes – were requisitioned but showed “no information that was material to any of the issues”.

They sought the minutes of decisions, the contracts, the finance deals, bank statements, transcripts of interviews, technical specifications, procurement rules, investigation files and reports on money laundering.

They discussed historic investigations with the Hawks and NPA, considered the Hawks’s three shipping containers full of arms deal documents and took a hard drive with 1.3 million pages of scanned documents. “This information constituted one third of the documents in the containers and was deemed to be the only information that was relevant to the commission’s investigation,” said the report.

They used summonses to get records on hundreds of companies and directors from the Companies and Intellectual Properties Commission, to get details of international banking transactions for 87 entities and individuals from the SA Reserve Bank, and on more targets from the big four banks. Those targeted in the searches aren’t named.

They wrote formal requests for mutual legal assistance to international agencies, seeking investigation records in the UK’s Serious Fraud Office (SFO) (included reports from British aircraft contractor BAE Systems justifying payments to advisers but noted that the SFO “never found any evidence of untoward payments to officials of the South African government”), Germany (not much help), France (unhelpful), Lichtenstein (they’d already got these documents from the Hawks), Sweden, Switzerland, the US, Liberia and the West Indies. When blocked, they tried for copies from another jurisdiction.

They found that while BAE was fined $400m in a US plea deal there was no information there relevant to the SDPP.

BAE told them they paid advisers £115m (about R1.4 billion in 2010) but said that was reasonable and legal as the main contracts were worth more than £2bn.

Modise’s private adviser Fana Hlongwane denied advising Modise on the SDPP and said he never paid bribes to anyone; he later advised BAE on the offsets. No finding was made against him.

The commission was strongly criticised for ruling inadmissible the leaked Debevoise and Plimpton report, which was an audit report commissioned by Ferrostaal of the submarine consortium. Ferrostaal refused permission to use it.

The commission twice heard legal argument on the legality of using it, but ruled it inadmissible. The report cites Concourt judgments and ruled that privileged documents remained privileged even when stolen or lost (those who want to contest police seizures of letters from lawyers might want to remember this).

But by then the commission had read the report anyway, and said it would not have changed its findings because it showed “no evidence of any bribery, fraud or corruption in the SDPP”.

The investigations were followed by two years of public hearings in Pretoria, involving 54 witnesses, including admirals, generals, former president Thabo Mbeki, former ministers, government officials, manufacturers and critics.

The critics

The report is quite kind to the critics, despite the savaging some got from government lawyers in the hearings. Most ran into difficulty by bringing allegations to the commission, without documents or clear sources to back them, and without making any reference to the evidence of government officials and official records that refuted their claims.

Much of what they wanted to know could have been provided years ago through more transparent reporting by government departments.

The critics’ evidence ranged from well-meaning – and the report indicates this was followed up by the commission – to embarrassing drivel. Some critics refused to appear, angry over restricted access to documents.

The commission was most critical of businessman Richard Young, calling him unreliable, embittered over losing out on some contracts, and having a “propensity to make and persist with baseless but serious allegations”.

What emerged from the inquiry was a picture of a massive, complicated deal that took thousands of hours, endless documents, an unbelievable number of acronyms, and dozens upon dozens of people.

No bribes

Bribes may indeed have been paid in the arms deal (who really believes those huge payments to “advisers” were justified?) but the commission said there was no clear evidence of this.

Instead, it looked at what bribes would have bought: undue influence. It assessed the main contracts (but did not look at sub-contracts) and found there was no evidence of undue influence in any of them.

The link between Zuma and his former financial adviser Schabir Shaik, jailed for trying to arrange a bribe for Zuma from an arms deal company, is barely mentioned.

The commission looked at the Scorpions/Hawks investigation on this, which said that “this investigation and prosecution ultimately included offences that were entirely unrelated to the arms deal. It has thus become a misnomer to regard the Shaik/Nkobi/Zuma/Thint leg as an ‘Arms Deal’ prosecution, when in fact it is not”.

The public can be forgiven for having assumed that Shaik, Zuma and the arms deal were linked because even Shaik thought they were. “I was convicted over the arms deal where I maintained I did nothing wrong... The report vindicates me and brings the conviction against me into question,” Shaik told The Star's sister newspaper The Mercury hours after the report was released.

The lessons

There are crucial lessons from this inquiry: the foolishness of making allegations you can’t back up, the dangers of too much secrecy, and the long-term 
cost of failing to guard against and prosecute corruption.

Allegations of corruption are dangerous if they can’t be backed up, particularly when they are repeated for years.

But the difficulty of finding such evidence doesn’t mean there is no corruption: it’s difficult to track payments through layers of secrecy, through intermediaries and across international borders.

That means that big deals should have built-in safeguards against corruption, and be heavy on transparency and oversight, so that even if contractors pay bribes their money will be wasted.

Ditching unnecessary secrecy is crucial and clear public accounting helps public 
confidence.

Transparency in political-party funding is urgently needed, to identify possible bribes. Rules outlawing those in government from doing business with the state need enforcing.

Officials and politicians should show more tolerance of public questioning, as citizens are entitled to feel reassured that their money is being spent wisely.

And when there are realistic indications of wrongdoing, then the state and politicians should take action or expect scepticism of the deals. That includes removing from public office those who are widely regarded as susceptible to corruption, even if that is the president.

We live with those big deals for a long, long time, so it’s worth ensuring they are clean. The arms deal was signed in December 1999, before this year’s matrics were born, but many of them will help pay for it as the last foreign loan is paid off only in October 2020.