How the Lottery used an ethics company to launder money

Lottery officials got an ethics company to make payments for questionable third-party services. Illustration: Lisa Nelson

• The National Lotteries Commission (NLC) instructed service providers to pay third parties it had appointed, thereby concealing the source of the money.
• The NLC ran a parallel procurement process that bypassed its official supply chain management system.
• Millions of rands are involved.
• Celebrities were paid huge fees as speakers and panellists at NLC “ethics events”.

The National Lotteries Commission (NLC) used service providers to pay millions to third-party suppliers it appointed. This effectively bypassed its supply management system and concealed that it was the source of the funds, a GroundUp investigation has found.

This occurred at a time when the NLC was overwhelmed by fraud and corruption under its previous board and management. The new management and board have been working hard to bring the organisation right.

The NLC instructed companies to use and pay service providers they had no say in appointing.

The Auditor-General has found many of these payments to be unauthorised expenditures.

ProEthics, which received over R28.4-million from the NLC between 2019 and 2022, was one company used to channel millions to suppliers.

At least half of this was then paid on to NLC suppliers, a source told GroundUp.

“It was basically a parallel procurement process that avoided the NLC’s supply chain management systems,” the source said.

Asked why ProEthics had paid NLC service providers, director Janette Minnaar said, “This was done in circumstances where and when the NLC appointed and instructed other service providers, and then instructed us to collaborate with them to deliver a project.”

“The scope of and expertise needed for all ethics-related projects were decided by the NLC. The NLC appointed service providers at their sole discretion and we were instructed by the NLC which service providers to collaborate with to deliver certain projects.”

SIU wants its hand untied

The Special Investigating Unit (SIU) has uncovered multiple examples of suspicious procurement. However, its hands are currently tied as a presidential proclamation signed by President Cyril Ramaphosa in October 2020 only authorised the SIU to investigate fraud and corruption involving NLC grants.

As the SIU’s probe into grant corruption gathered steam, it became clear that hundreds of millions of rands had also been spent via questionable procurement processes.

An application for President Ramaphosa to extend the SIU mandate to allow it to investigate fraud and corruption involving dodgy procurement is at “an advanced stage”, a source with knowledge of the process told GroundUp.

Internal investigations by the NLC, as well as forensic audit firms retained by the Commission’s new board, have also identified multiple cases of dodgy procurement payments.

The SIU has seconded two of its staff to the NLC to assist with investigations into procurement, “to bolster capacity” in its forensic investigations unit, and assist with the lifestyle audits of staff.

One of the problems the NLC and SIU investigators have faced in their probe is that a large quantity of hard copy documents were destroyed and electronic files deleted to cover up corruption. Key documents stored with Metrofile, a document storage company, were signed out and disappeared.

However, investigators have managed to piece together evidence by recovering key documents from the NLC’s cloud storage system.

Using “ethics” to spend millions

Millions of rands were paid to ProEthics, which in turn paid suppliers appointed by the NLC.

A reliable source with knowledge of these payments said ProEthics paid “at least half” of the R28.4-million it received from the NLC to third-party service providers appointed by the NLC.

GroundUp has reported previously on the details of the payments to ProEthics, including a “Mental Health Day”, “Conflict of interest vetting” and an “International Fraud Week virtual conference”. These came to millions of rands each.

Just over a month after he was appointed acting NLC commissioner on 1 September 2022, Lionel October instructed company secretary Nompumelelo Nene to stop using ProEthics and to suspend any outstanding payments to the company.

Nene is currently on suspension and facing 145 charges. Her disciplinary inquiry began last week.

Celebs cash in

Alexandra-based Digital Dynasty is another company paid by ProEthics for services provided at NLC ethics-related events.

This included invoicing ProEthics for R200,000 for entertainer and social media “influencer” Lebo Molax to participate as a speaker or panellist at three NLC ethics events in April and May 2021. (On 5 April GroundUp revealed how Molax starred in a video for a flash mob activation that never happened which cost R1.7-million.)

Digital Dynasty also invoiced ProEthics for R100,000 for satirist and author Coconut Kelz (real name Lesogo Thlabi) to participate as a panellist at an NLC ethics event.

These rates appear to be well above industry standards.

Other fees that Digital Dynasty invoiced ProEthics for included R1.42-million to livestream an ethics-related “internal virtual conference”. The invoice is dated 30 August 2020, but the date of the conference is not stipulated.

Digital Dynasty invoiced R36,200 for “goodie bags” for an NLC staff “ethics intervention” and R135,000 for “production costs” for photographing and videoing an internal NLC event billed as “Respectful Work Environment” in May 2021.

Attempts to contact Mpho Tlhape, sole director of Digital Dynasty, using a phone number on the invoice it submitted to ProEthics, as well as several numbers listed for him with the CIPC, were unsuccessful.

Attempts to contact Thlabi, who moved to Paris in 2023, via a Twitter message and her South African cellphone number were also unsuccessful.

Flash mob

GroundUp reported last week how the NLC used MSG Group Sales, the owner of Power FM and Capricorn FM, to pay Elsisicope R1.7-million for a “flash mob activation” to celebrate Women’s Day in 2021 with a video starring Molax’s dance group Boys in Heels.

The video was supplied to GroundUp by former NLC official Mabontle Mokwebo as “proof” that the flash mob had taken place.

Molax said he had been appointed as a service provider by the NLC, which “brought in its own production team”.

Molax said that the video was shot at several locations over a few days and the dance scene was videoed in a deserted gym. The scenes in the gym were of a rehearsal, Molax said.

“All the different scenes were meant to be edited into a single video,” said Molax, who admitted that he had never seen the final product.

“I was ‘shocked’ to read [in GroundUp] how much the NLC had paid for the video. It was a few years ago and I don’t remember exactly what I was paid, but it was nowhere even close to R1.7-million,” he said. “I have been attacked on social media by people who think I was paid R1.7-million for the flash mob video.”

When MSG invoiced the NLC for the flash mob, it made it clear that it had nothing to do with the video.

Tshifhiwa Mulaudzi, MSG managing director, previously told GroundUp that the company “had no prior or subsequent relationship” with Elsiscope.

“MSG Group Sales did not have any contact and was not party to any arrangements between Elsiscope and NLC. Due to time pressures, they [the NLC] requested MSG Group Sales to assist in paying their service provider.”

Expensive equipment

The NLC also commissioned Elsiscope, which was responsible for the flash mob video, and other services.

A close relative of Mokwebo’s husband is the sole director.

Mokwebo had been “Senior Specialist: Corporate Governance and Ethics Relations” for the NLC.

The NLC did not renew her contract when it ended last year. She has reported the NLC to the CCMA.

Elsiscope invoiced ProEthics on 11 November 2021 for over R2-million for an NLC “Ethics Office Mental Health Awareness Campaign”. The invoice did not list the services provided. Instead, it contained a long list of expensive audio and video equipment and a MacBook Pro.

It is broken into four different sections, listed as – “Audio, Av, Av2, Structure” – with a list of equipment under each. But the total for each section is bizarrely exactly the same – R263,500. On the same invoice were: “Gift bags” for R180,000; “Staffing: mental health professional sourcing” for R150,000; and “Graphics and booklets” for R385,700.

The following day, Elsiscope invoiced ProEthics for over R1.1-million for “NLC fraud event production”. Unlike the previous day’s invoice, this one itemised the actual services provided, and included R175,800 for “Event Corporate Identity Development.”

More about National Lotteries Commission

• Suspended Lotteries company secretary loses again in court 13 November 2024
• Former lottery executive fired after disciplinary hearing 11 November 2024
• Gardener mauled to death by former Lottery boss’s guard dog 28 October 2024

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