NPA’s municipal corruption crackdown in the Eastern Cape

The NPA in the Eastern Cape has recently obtained some notable convictions in cases involving fraud and corruption. They also give insight into how corrupt public officials have managed to manipulate financial management systems, either on their own or in collaboration with others.

As the National Prosecuting Authority (NPA) continues to make progress in bringing high-profile national corruption cases to court, significant gains are also being made in several cases in the Eastern Cape — most of which involve municipal officials.

In many of these cases, the modus operandi is the same as that seen in some of the high-profile cases elsewhere in the country: public servants working in informal consortiums and collaborating with service providers to siphon money from the public purse.

Milongani Eco Consulting

One of the most significant of these cases, where the loss is R25.6-million, has already resulted in a restraint order to the value of R11-million obtained on 27 July 2021. The charges relate to a three-year tender contract issued by the Nelson Mandela Bay Municipality for an environmental impact assessment awarded to a company trading as Milongani Eco Consulting.

In terms of the contract, Milongani was to be paid R350 an hour for its services; however, it submitted its first invoice for R1-million within 24 hours of appointment. As the charge sheet states, the service provider couldn’t have done worth R1-million within 24 hours, and an investigation was commissioned. This probe assessed 42 invoices, which had been submitted for more than R25.6-million.

The investigation found complicity in the abuse of official power (ie corruption) between municipal employees and Milongani, including the suggestion that a retired municipal official had been re-employed by the municipality and paid through Milongani.

The case has already been enrolled and the accused will appear again on 15 July. In the meantime, the prosecution will finalise the charge sheet and prepare an application for racketeering authorisation.

Another matter involving Nelson Mandela Bay Municipality is the Integrated Public Transport System (IPTS) case.

The National Director of Public Prosecutions authorised the institution of racketeering charges in March and the case has since been transferred to the high court for pre-trial procedures. The total amount involved in the charge sheet is R100-million.

The 112-page indictment alleges an intricate web of lies and deceit orchestrated by former high-ranking political officers and metro officials, including now-deceased former mayor Mongameli Bobani, business owners and a lawyer, between August 2013 and May 2015.

The accused include former Nelson Mandela Bay ANC regional secretary Zandisile Qupe, former deputy mayor and MPL Chippa Ngcolomba, businessman Fareed Fakir, businesswoman Andrea Wessels, company director Rukaard Abrahams, former assistant director in the metro’s budget and treasury department Nadia Gerwel, attorney David le Roux, Mhleli Tshamase — who was initially in charge of IPTS projects — and former metro infrastructure and engineering executive director Walter Shaidi. Le Roux’s law firm, Le Roux Inc, is also cited in court papers.

Among the charges faced by the accused are 16 counts of fraud, two of racketeering, 59 of money laundering, 53 of corruption, two counts of contravening the Criminal Procedure Act for supplying false information, two of contravening the act for impeding an accounting officer and five counts related to the contravention of the Act by failing to report suspicious or unusual transactions.

If found guilty, the accused could be sentenced to life imprisonment or a fine of up to R100-million.

Significant allegations

The NPA is working with its Asset Forfeiture Unit (AFU) on another three cases involving significant allegations of fraud and corruption with potential for asset recovery:

• One in East London, where R31-million was allegedly defrauded from the Buffalo City Municipality;
• A high-profile case involving the theft of R4-million in public funds from the Mount Ayliff municipality; and
• A money-laundering and fraud case in Butterworth, also involves violations of the Municipal Finance Management Act (MFMA).

All four cases have been enrolled and will proceed soon.

Notable convictions

The NPA in the province also recently obtained some notable convictions in cases involving fraud and corruption. They also give insight into how corrupt public officials have managed to manipulate financial management systems, either on their own or in collaboration with others.

In Gqeberha, former Eastern Cape Training Centre (ECTC) creditor’s clerk Estelle Burgess (65) was jailed after being found guilty in the Specialised Commercial Crimes Court of defrauding the centre of R13-million over 10 years.

Burgess pleaded guilty to the crimes, which involved the abuse of the centre’s online internet payment system — changing the banking details of creditors and making their payments into her bank accounts.

She was found to have access to nine bank accounts at four banks, some of which were in her name. The fraud had a crippling effect on ECTC. The court heard that the company, as a result, was unable to pay its employees during the hard lockdown in 2020 and no recovery of the money as possible.

In another Gqeberha case, attorney Anne Swanepoel was sentenced to 15 years’ imprisonment — of which five were suspended — after being convicted of various charges of theft, fraud and contempt of court. She was not a first offender and continued to practise and accept fees from clients despite being struck off the roll of attorneys.

In another case, Morne Pretorius was convicted in Gqeberha of theft from his employer. Over a period, he misappropriated stock under his control and sold it for his benefit. He was sentenced to 12 years’ imprisonment. In S v Reeners, the accused was sentenced to eight years’ imprisonment of which one year was suspended. She also committed theft from her employer, the Nelson Mandela Bay Municipality.

In S v Sixishe, the Port Elizabeth Specialised Commercial Crimes Court sentenced the accused to an effective term of six years imprisonment after he was convicted of various charges of fraud, theft of petrol involving the use of cloned bank cards, as well as charges under the Electronic Communications Transactions Act. The amount involved was R675,137.

In Komani (Queenstown), a plea and sentence agreement was entered into with Elaine Heuer, who was convicted of theft from her employer. She was sentenced to eight years’ imprisonment of which two years were suspended.

In East London, in S v Voogd, the accused was sentenced to an effective term of imprisonment of 15 years. She was convicted of 30 charges of fraud and 17 charges of money laundering. The accused misused her position at a firm of accountants and paid large amounts from accounts under the control of her employer into her accounts as well as accounts of family members. The amount involved was more than R11.5-million.

In the Mthatha Specialised Commercial Crimes Court, Gcobani Mntumni, the former financial officer at Mbhashe Municipality, was sentenced to six years imprisonment for fraud and money laundering. Mntumni added bank accounts belonging to his siblings and friends to the municipal payroll, resulting in R304,000 being paid to them as ghost employees.

In the Nelson Mandela Municipality, the NPA also achieved a significant victory with the dismissal in March of an appeal by Bishop Mzukisi Samuel Banzana against a 12-year sentence for corruption relating to housing contracts.

Banzana was sentenced on 14 September 2017 after a corruption and maladministration investigation into Mzingisi Development Trust, which was awarded a contract by the Department of Human Settlements to build 1,211 RDP houses in then-Port Elizabeth’s northern areas in 2007.

An investigation by the Special Investigating Unit (SIU) found that:

• Banzana entered into corrupt relationships with suppliers, project managers and government officials associated with the project.
• He forced an implementing company, MOM Construction CC, to use his preferred suppliers. These included Duranco Blocks (Pty) Ltd, of which he is a director.
• Cash payments and cheques made out to Banzana were used to buy luxury vehicles and settle an R1.4-million bond.

On 20 January 2015, following successful forfeiture proceedings, the AFU recovered and deposited more than R1.6-million — including three luxury vehicles and a house — into the Criminal Asset Recovery Account as proceeds of Banzana’s gratifications. A further R358,609 gratification was also deposited into the account on 21 January 2021.

Prosecutors in the province are hard at work preparing case files against several other officials involved in corruption, and increasing pressure on those who have stolen funds from the public purse — whether on their own or in partnership with corrupt service providers.

Nelson Mandela funeral case

The Nelson Mandela funeral case was transferred towards the end of 2021 to the high court and the 14 people and entities accused of defrauding the Buffalo City Municipality pleaded not guilty in February 2022.

The state was due to start leading evidence on 11 April but has been delayed as a result of interlocutory applications by some of the accused. At the time of going to press, the high court was still hearing arguments on some of these applications.

The gist of the state’s case is that R5.9-million was earmarked for transporting mourners to various venues where memorial services were held for Nelson Mandela in December 2013 was misappropriated when the municipal procurement procedures were captured by the accused. The AFU recovered and repaid to the National Treasury a sum of R4.1-million in 2014/15.

Attorney Zintle Nkuhlu, one of the accused, is paying monthly instalments of R5,000 towards the settlement of the R350,000 benefit she received from the funds. A restraint dated 1 August 2014 is in place and a conviction is awaited for the recovery of the outstanding balance.

Social services procurement fraud

S v Chetty & Others is another procurement fraud matter involving the Eastern Cape Department of Social Development. The amount involved is just under R30-million. The case has been transferred to the high court, where the trial is due to commence during the fourth term of 2022. A restraint dated 27 August 2020 for R26-million is in place and a conviction is awaited for its recovery.

Siyenza tender

Following arrests in various provinces by the Hawks, 10 people plus three companies appeared in the East London Magistrates’ Court in connection with a tender awarded for the accelerated sanitation programme, dubbed “Siyenza”. They were released on bail on 2 December 2019.

The Grahamstown High Court then granted the AFU a restraint order, effectively freezing their assets with an estimated value of R60-million. The restraint order stems from serious charges of corruption, fraud and money laundering in the “toilet” scam.

It is alleged that the Amathole District Municipality (ADM) irregularly awarded the tender to Blue Nightingale Trading (trading as the Siyenza Group), with its sole director, Bongani Mpeluza, whose Gauteng house remains preserved from 31 July 2020, as proceeds from the scam.

It was for the supply, delivery and installation of 66,700 toilets in various villages of Eastern Cape. Only R16-million has been proved to have been used to erect the toilets. Some of the toilets built started to collapse within weeks because of poor workmanship.

According to the indictment at the Grahamstown High Court, the group face eight charges, including corruption, fraud, money laundering, conspiracy to commit a crime and the contravention of the MFMA.

Some will also face charges of conspiracy and inducing another person to commit an offence, assisting another to benefit from proceeds of unlawful activities, as well as the acquisition, possession or use of proceeds of unlawful activities.

The accused include former Amathole District Municipality municipal manager Chris Magwangqana, former CFO Nkosinathi Soga, former Amathole director of engineering Mpumelelo Shezi, and the district’s former director of corporate services, Lulama Taleni. They will reappear on 3 May for a trial date.

As can be seen, corruption among municipal and provincial officials is a cause for real concern in the province. It is increasingly the focus of the NPA’s activities in the province, with a growing number of charges being laid — and an ever-growing list of asset seizures and convictions to confirm the success of the close collaboration between the Hawks and the NPA. DM

Advocate Barry Madolo is the Eastern Cape director of public prosecution.