26 November 2024
The Special Investigating Unit has identified five accounting firms that helped loot Lottery funds. Graphic: Lisa Nelson
A four-year probe by the Special Investigating Unit (SIU) has exposed five accounting and auditing firms that helped dodgy non-profit companies loot hundreds of millions of rands meant for “good causes” from the Lottery.
These firms were described by the SIU as “professional enablers,” who “compiled fraudulent financial statements” that were used by the companies to apply for Lottery funding.
The five companies were named in Parliament by the SIU’s acting chief national investigations officer Zodwa Xesibe. They are TTP Consulting, Dzata Accountants, Magodi Consulting, Mageba Ntuli Consulting and Tafta Consulting and Accounting Services.
Fraudulent financials produced by these five accounting firms helped nearly 40 companies get their hands on lottery funding, according to the SIU presentation.
Based on a tool containing data with all lottery grants since 2002, these companies got over R314-million in funding.
“These NPCs were funded by the National Lotteries Commission (NLC) but the funds were not used for their intended purpose,” Xesibe told Parliament’s Trade, Industry and Competition Portfolio Committee last week.
The SIU, the Hawks and the National Prosecuting Authority (NPA) were in Parliament to report to the committee on progress in bringing people and organisations involved in looting the lottery to book.
Xesibe told GroundUp that the SIU intended to lodge complaints against the accounting firms involved and was checking if these firms were registered and, if so, with which professional bodies.
“We want these companies to be blacklisted,” she told GroundUp.
To qualify for Lottery funding, an organisation was required to produce two years of annual financial statements, Xesibe explained in Parliament.
However, as an ongoing six-year investigation into lottery corruption by GroundUp has revealed, hijacked non-profit organisations (NPOs) or new shelf non-profit companies (NPCs) with no financial track records were used to apply for funding.
In some instances, almost identical financial statements were produced for unrelated organisations, often with only the names of the organisations changed, GroundUp’s investigation found.
Documents submitted by genuine NPCs for unsuccessful grant applications were often used by new or hijacked NPCs and NPOs to apply for funding. The details and documents of the unsuccessful applicants were supplied by senior Lottery officials to the dodgy applicants.
With cursory or - often - no verification, these dodgy applicants were awarded millions of rands in grants. Sometimes additional tranches of funds were paid out without much checking on the progress of projects.
The vast majority of these grants were made via proactive funding, which was at the heart of the looting of the lottery. Proactive funding allowed the Minister of Trade, Industry and Competition, or the NLC in conjunction with its board, to identify causes to fund without first requiring an application. This was stopped when a new NLC board was appointed.
SIU head Advocate Andy Mothibi said the SIU was currently investigating grants valued at over R2-billion, and the unit was still regularly receiving tip-offs about more corruption.
He told MPs that the SIU’s investigation had been broken into three phases: the first, which has been finalised, probed dodgy grants amounting to R280-million, and the second, also completed, involved R247-million. In the third phase, due to be finalised at the end of the year, the SIU is investigating grants valued at almost R906-million, involving 40 NPOs and NPCs, Mothibi said.
He said that the SIU would apply “soon” for the Presidential Proclamation, originally granted in October 2020 to investigate corruption involving lottery grants, to be extended to include procurement by the NLC.
The SIU investigation had so far led to 13 disciplinary referrals to the NLC, and administrative referrals to SARS and the Companies and Intellectual Properties Commission to blacklist people implicated in the looting. Complaints involving two people had been referred to the Legal Practice Council and the SA Institute of Chartered Accountants.
The SIU had observed several trends under the previous NLC board and executive - many of whom have been implicated in looting - Mothibi told MPs.
This included a “trend of collusion between NLC officials and NPOs and NPCs”, “the hijacking of NPOs and NPCs” and “general maladministration in the approval of grants,” he said.
The SIU has frozen homes, properties, cars and other assets worth tens of millions that were bought with lottery funds, but MPs expressed concern at slow progress in prosecuting those involved in the looting. (The SIU is mandated only to recover assets bought with stolen state funds and does not have prosecuting powers).
While the SIU has referred 15 matters to the NPA, so far only two people have been brought before a court. Two men appeared in court in Kimberley recently in connection with misappropriated funds collected for a project to combat gender-based violence.
In August 2022 Christopher Tshivule was sentenced to eight years in prison for his part in a R1.5-million lottery grant fraud. Charges against two people charged with him, who the SIU has described as “kingpins” in the corruption that overwhelmed the NLC, were dropped.
Major-General Mmeli Makinyane, the acting divisional commissioner for priority offences, told MPs that the Hawks were currently investigating 16 lottery corruption-related cases. Another one - the Kimberley matter - is before a court and two have been sent to the NPA for a decision to prosecute. A further five cases are being investigated by the SAPS detective and forensic services, he said.
Explaining the reasons for the delay in prosecutions, NPA Deputy National Director Rodney de Kock said part of the reason was that the Hawks had to do further investigations when they received dossiers from the SIU.
“In essence, the investigations undertaken by the SIU do not satisfy criminal standards for prosecutions.”
Therefore, the NPA had to work with investigators in the DPCI (the Hawks) and SAPS to conduct criminal investigations and ensure that the evidence meets criminal prosecution standards, he said, adding: “That said, the work of the SIU is important and contributes greatly to this process.”
De Kock said that the SIU’s investigation “often results in multiple referrals. The referrals may ultimately result in one docket and one court case.”
He said that 12 matters, which are “approximately 85% complete”, were being jointly investigated by the Hawks and the SIU’s Specialised Economic Operations Unit. (Most of these cases, seven of which were lodged in 2020, involve former NLC chief operating officer Phillemon Letwaba, who resigned under a cloud in 2022, and Pretoria lawyer Leslie Ramulifho.)
De Kock said the NPA faced several “challenges” in prosecuting cases. These, he said, included
“The NPA is committed to ensuring finalisation in these matters. To this end, a team of dedicated prosecutors has been allocated to oversee all NLC matters currently under investigation,” de Kock said. “Matters are handled as a priority. Once [the] investigations are completed, the NPA will make a decision.”
GroundUp was only able to get comment from one of the five companies accused by the SIU in Parliament of producing fraudulent annual financial statements,TTP Consulting.
Aubrey Moeng, one of TTP’s two directors, said in an email in response to questions: “Due to client confidentiality, we wish to advise that TTP Consulting is not willing to divulge clients’ financial confidential information with the public or media … without the consent of the client or a legal reason.”
The company is a “partner” of several state entities, including SARS and the CIPC, according to its website.
Neither of the two directors of Dzata Accountants, who are both listed as inactive on the CIPC register of companies, responded to emailed questions. The company has been deregistered by the CIPC for failing to submit financial statements since 2021.
The sole director of Mageba Ntuli Trading and Consulting Service, Patrick Zulu, died three years ago, according to official records. The company was deregistered by the CIPC for failing to submit financial statements since 2021.
Matamela Magodi, the sole director of Magodi Consultants, did not respond to questions emailed to him.
GroundUp was unable to find any listing for Tafta Consulting and Accounting Services with the CIPC. We were also unable to trace any of the company’s directors to ask for comment.