This administrative sleight of hand allowed the Guptas to import and employ foreign labour at the expense of local jobseekers, and conveniently sidestepped the onerous legal red tape meant to protect South African workers from being overlooked in favour of foreign employees.

Chawla was a key Gupta lieutenant and director of the now-bust Sahara Computers (Pty) Ltd (Sahara Computers), as well as its counterpart in India, Sahara Computer and Electronics Limited (SCEL).

Khosla was Chawla’s co-director at SES Technologies, another Indian company belonging to the Guptas. The #GuptaLeaks show how the pair abused their positions as directors to sign off on the dodgy contracts.

• READ: Second phase of Gupta naturalisation inquiry kicks off

Home Affairs

As Parliament’s home affairs committee last week heard officials explain the intricacies of the Gupta family’s dubious early naturalisation, it also emerged that scores of their non-South African employees were working locally using “intra-company transfer visas”.

Department of Home Affairs director general of immigration Jackson McKay told committee members in his written answers that none of the foreign employees employed by ANN7, or any other Gupta company, were working in South Africa using visitor or tourist visas.

Instead, these Indian nationals were issued with “intra-company transfer” permits. McKay told the committee that an earlier raid on the Gupta-owned television station found 31 Indian nationals working for ANN7 under such permits. A further nine were in South Africa using visitor’s permits, but only to attend meetings.

This means at least 40 foreign employees were working at ANN7 alone.

• READ: Home Affairs immigration head denies knowledge of Gupta visa ‘corruption’

In March this year, former ANN7 editor and Gupta-employee-turned-whistleblower Rajesh Sundaram published his book, Indentured: Behind the Scenes at Gupta TV. In it, he tells of his turbulent months working for the Gupta family as they tried to get the fledgling television news station off the ground. He also directly implicates Chawla in circumventing visa requirements.

“I had heard his (Chawla’s) name mentioned for the first time when I was asked to apply for my temporary residence permit under the intra-company transfer process before I left India for South Africa,” Sundaram wrote.

Sundaram tells of how an Indian executive of one of the main shareholders of Infinity Media, ANN7’s holding company, lamented the difficulties in obtaining a work visa for foreigners in South Africa.

“It can take months to get a South African work permit. It is a cumbersome process. We have to advertise the position in South African newspapers and then wait for six months, after which we provide evidence that we have not found a suitable local candidate. Only then can we start the process of getting a work permit. Even so, if there is an official who does not agree, the request for a work permit can still be rejected.”

But they had a plan.

• READ: Exclusive: Ex-editor reveals Jacob Zuma’s role in creating ANN7

“But Ashu-ji (Chawla) is a genius, and he has found a way around it. We will show the visas of people going to work in South Africa as intra-company transfer. Just fill in the visa form, get police and medical clearance and get back to my office. My office will issue papers certifying that you are an employee of Essel Media being transferred to South Africa.”

Later in the book, Sundaram asked the same Indian executive a question that hinted at how the operation worked:

“But all the people I have recruited to be the core team to launch ANN7 have got contracts from Infinity Media [in South Africa] and not Essel Media [in India]. They have never worked for Essel Media. I hope this is not illegal?”

Legal hoops

The Immigration Act, 2002, and its regulations require a South African business seeking to employ a foreign national to first jump through a plethora of legal hoops before the foreign employee can take up work in a local business.

Björn van Niekerk, operations director for Intergate Immigration, told News24 that a local employer needs to consider South African applicants for the position first.

“An employer intending to employ a foreigner is required to confirm that that they have first made a reasonable effort to find, interview and consider South African applicants for the position that is required to be filled. The employer must confirm that:

• they have conducted a diligent search for a suitable South African candidate;
• they were unable to find a suitable South African with the relevant skills, experience, etc.

The lengths to which the employer went to advertise the position nationally, how many South Africans were interviewed, and why the South African candidates interviewed were not considered would all be taken into account.

“These efforts are assessed by the Department of Labour which will offer a recommendation based on whether they consider the need for a foreigner to be employed, over any potential South African, to be justified. The applicant also needs to have their qualifications assessed and evaluated by SAQA (South African Qualifications Authority).”

These requirements are meant to protect South African jobseekers, and to prevent employers from simply shipping in cheap labour from overseas to do jobs local citizens can perform.

But the Gupta family found a way to circumvent these requirements.

• READ: Rajesh Sundaram: MultiChoice, ANN7 and the president’s stick

Intra-company transfers

By claiming that the applications were for “inter-company transfer visas” instead of “general work visas”, Chawla and his Sahara Computers only needed to show that these employees had been in the service of one of their Indian sister companies for a period of at least six months.

They did this by falsifying and backdating the Indian employment contracts struck with these workers.

The fraud was trivialised because Chawla was also the director of the Indian companies creating the forged records, as well as the South African Sahara Computers that employed them locally. The same occurred between Essel Media and Infinity Media, where the directors of the two companies arranged employment contracts for ANN7 staff from India.

Karan Singh

The documents and emails contained in the #GuptaLeaks shed some light on the logistics of the scheme. Between October 15 and December 15, 2014, 22-year old Karan Singh visited South Africa from his home country of India on the invitation of Sahara Computers and Chawla. He was later joined by his parents and sister: Sunil, Sunita and Vidushi Yadav were also invited by Sahara Computers on tourist visas from December 4 to 10, 2014.

The invitation letter to Singh’s parents claimed that Singh was an intern at Sahara Computers. This is despite a tourist visa prohibiting a foreigner from being employed in the country while issued with such a visa.

During his time in South Africa, Singh also met with Jitendra Tiwari, the human resources professional for Sahara Computers. Tiwari was responsible for the majority of the employment agreements between the foreign employees and Sahara, and the #GuptaLeaks show he was involved with most of the visa applications contained therein. Flight bookings contained in the #GuptaLeaks show that Tiwari accompanied Singh and his family on a flight from Johannesburg to Cape Town and back between December 8 and 10, 2014.

On December 16, 2014, the day after their return to India, Chawla forwarded Singh’s passport to Tiwari, who responded with a draft employment contract between Singh and South African Sahara Computers, appointing him as a “project manager” from January 12, 2015.

Shortly afterwards, Chawla sent an email to Khosla, a fellow director at SES Technologies in India, containing the passport of Singh.

“Please send me an appointment letter in SES for about eight months before as a project manager and I am doing inter-company transfer for him (sic).”

Khosla responded within hours, attaching a backdated appointment letter stating that Singh was appointed as a project manager at SES Technologies. SES Technologies is an Indian company of which Chawla and Khosla were co-directors.

Although the letter was backdated to May 16, 2014, the pair made a mistake. Singh’s commencement date with SES Technologies would only be on July 21, 2014, an error that was picked up on by the South African consulate. They refused Singh his visa on the basis that he had not been employed with SES Technologies for long enough, and on January 11, 2015, Singh wrote to Chawla:

“I will submit [my visa application] tomorrow. They had rejected the application before because the letter [you] had send earlier had date of joining as 21 July 2014, so [they rejected] it as it was not completing 6 months. Will submit it again tomorrow attaching the letter u had again sent me showing 21 May 2014 as the joining date for 6 months in India. Hope the embassy will not complain for the change in date (sic).”

The consulate didn’t complain, and Singh obtained his visa. He landed at OR Tambo International Airport on February 8, 2015. Two days later – on February 10, 2015 – Singh sent Chawla an email containing a scan of his passport and work permit, proudly displaying the words “intra-company transfer permit”.

• READ: ANC, ministers threatened Standard Bank to force it to keep Gupta accounts open, state capture commission hears 

Esheetaa Gupta

A second example originated late in March of 2014. Chawla received an email from Mr Sanjeev Gupta, enclosing his daughter Esheetaa’s resume and payslip for April 2014. Sanjeev Gupta, while unrelated to brothers Tony, Atul and Ajay, was closely connected with the Bank of Baroda’s chief executive officer in South Africa, Murari Lal Sharma. So close, in fact, that Esheetaa Gupta’s resume used Sharma’s mobile number as her South African contact number.

Esheetaa Gupta, an intellectual property lawyer working for a Wipro Technologies in India, was seemingly keen to secure work in South Africa.

On April 4, 2014, Chawla forwarded Esheetaa Gupta’s passport, CV and payslip to his secretary. Later that same day, she scanned and forwarded a bundle of documents signed by Chawla.

Among these was an employment agreement between Sahara Computers and Esheetaa Gupta, confirming she would be appointed as an “IP analyst” from May 15, 2014. It contained a letter from Sahara Computers to the South African consulate, stating the following:

“This letter serves to confirm that Ms Esheetaa Gupta will be transferred from SES Technologies to Sahara Computers (Pty) Ltd for a period of 24 months. This transfer qualifies as an intra-company transfer since these companies form part of the same global group. Esheetaa Gupta holds a foreign contract of employment with SES Technologies in India.”

It also contained a letter dated April 4, 2014, to the South African consulate (erroneously referred to as an “embassy”) from SES Technologies, the same company used to fabricate the employment contract for Singh. The letter from SES Technologies was also signed by Chawla and contained an exact copy of the paragraph confirming that Esheetaa Gupta was employed by SES Technologies.

These documents were sent to Esheetaa Gupta’s father on the same day. Esheetaa Gupta responded to Chawla on May 8, 2014, requesting additional documents, and in particular she required a “job offer letter from Indian company provided earlier at the time of employment”.

• READ: How the Guptas made money while being unbankable

A comedy of errors and mistakes followed, as Chawla and his secretary compiled the documents requested by Esheetaa Gupta.

The pair could not keep their story straight. Suddenly, the employment confirmation letters and backdated employment offer, previously done on the SES Technologies letterhead, resurfaced sporting SCEL letterheads, Sahara Computer’s sister company in India.

The initial set of documents also claimed that Esheetaa Gupta had started working for SCEL as an IP analyst in 2010, a peculiar oddity considering that her resume claimed that she only began working in the intellectual property field a full year and a half later, in June of 2011. Her resume stated that at the time she was employed as a project trainee at Nucleus Software Exports Limited.

The final backdated employment offer sent to Esheetaa Gupta had a more reasonable commencement date of June 27, 2013, although this still does not explain why Esheetaa Gupta’s resume sent to Chawla in April 2014 does not mention either SES Technologies or SCEL in either her employment history or references.

It also does not explain how she obtained a payslip for April 2014 as an employee of Wipro Technologies, if she was an employee of either SCEL or SES Technologies at the time.

Comment requested

Both Esheetaa Gupta and Karan Singh were sent detailed questions regarding these allegations. They were asked to confirm their employment history with either SES Technologies or SCEL, and the reasons for the subsequent intra company transfers.

Despite follow-up requests, neither Singh nor Gupta have responded to our requests for comment.

Khosla was also requested to provide comment on the evidence contained in the #GuptaLeaks but did not respond to our questions.

Questions were also emailed and sent via WhatsApp to both Chawla and his wife, Harsh Chawla. No response has been forthcoming.

It appears that the company’s management has followed the example set by the controversial Gupta brothers and bolted for India. Mediosa recently made headlines, following revelations that the North West government had paid the medical technology company R30m in advance. Mediosa was also providing similar services in the Free State.

This was before Mediosa conducted any work for either province. “Yesterday we did not get paid and there was no communication whatsoever from management regarding not being paid,” Mediosa employee Noxolo Majola told News24.

“We called the lab and the staff said Dr Vijay Balani has gone back to India. We are now worried that all of them will run away to India and leave us hanging.”

Companies and Intellectual Property Commission (CIPC) records show Mediosa Health is managed by Indian nationals Sundeep Kalsi and Inish Merchant.

Staff claim both are out of the country and have not communicated with staff regarding the payment of their salaries.

Yesterday, the SABC reported that the Kalsi’s personal assistant told them that “Kalsi isn’t here, we clossing(sic)”.

Majola also claims that the head of human resources, Nalika Jugwanth, has been avoiding their calls.

Suman Kar, who is apparently running the business in the absence of Inish Merchant, has also failed to communicate with employees.

Clear relationship

The Gupta Leaks emails show a clear relationship between the Guptas, Mediosa and its directors.

The first semblance of what would become Mediosa is contained in an email from Sunil Sachdeva, sent on May 9, 2015 to Tony Gupta.

Attached to the mail is a PDF titled “Doctors on Wheels” which details plans for a “mobile medical unit” closely resembling Mediosa’s operations.

Anita Roy was the author of the document. Roy followed this up with a document titled “MOU-Free State” on June 2, 2015. Curiously though, the draft agreement was between an Indian company called Cureva Pvt Ltd, and the Free State Department of Health. Sachdeva is a director of Cureva India.

The MOU (memorandum of understanding) contained a clause stating “[Cureva India] requests The State to use its domain expertise in Legal and Regulatory subjects to facilitate the sourcing of the equipment from outside of South Africa and more particularly from India.

“[Cureva] also requests the State to streamline the process of manpower entry into the State from India and elsewhere for the duration of the mobile facility, subject to the accreditation and registration of the manpower in India by appropriate authority, and provided that such an entry shall be specific to the contract/agreement with the State.”

Mediosa’s management has links to the Guptas and several Indian-based companies. (Graphic: Jean le Roux.)

Cureva India was literally asking the Free State provincial government to pay it to procure goods, services and employees from India. In July 2015, the Guptas purchased a shelf company called Dinovert (Pty) Ltd.

Roy and Sunil Kumar were initially appointed as the directors of Dinovert.

Dinovert changed its name to Cureva (Pty) Ltd, and eventually to Mediosa Health (Pty) Ltd in late 2017. Roy was so inspired by her role in Mediosa that she penned a blog post on LinkedIn about her experience.

Over time, the directorship of Dinovert changed. Notably though, former Minister of Mineral Resources Mosebenzi Zwane’s special advisor Kubentheran Moodley was appointed as a director from August 25, 2015 until June 12, 2017.

Both Zwane and Moodley have links to the Guptas through the Optimum Coal Mine. At present, Inish Merchant and Sundeep Kalsi are the directors of Mediosa Health.

In early February, Merchant told City Press reporters that “there is no connection at all” between himself, Mediosa and the Gupta family.

READ: Gupta friends in state’s health pie

But the Gupta Leaks contradicts this claim.

On June 15, 2015, Ashu Chawla was requested to provide a visa invitation letter for Merchant’s visit to South Africa.

Chawla cleared this with Tony Gupta, and on June 17, 2015 a letter was sent to the South African High Commission in New Delhi.

Sporting a Sahara Computers logo, it requested the High Commission to issue a business visa for Merchant.

A similar letter dated 4rd (sic) February 2016 is also contained in the Gupta Leaks emails.

Both letters indicated that Merchant would be staying in Saxonwold Drive for the duration of his stay.

Indian companies Dinovert’s sole shareholder was a company called SAS Global Services Limited, a Dubai-based company.

In a previous investigation, News24 reporters were unable to find any physical presence of the company in Dubai.

Staff at the 39-story office block listed as its address had never heard of SAS Global.

READ: Dubai: the Guptas’ city of shells

But Indian company records show Sundeep Kalsi is a director of several companies, including SAS Infrabuild, SAS Servizio, SAS Infotech and SAS Heights.

In the majority of these companies, Sunil Sachdeva, the Cureva India director, is Kalsi’s co-director. Company records also show that Cureva India’s contact email is “sas@sasgroup.in”.

A company called Ramsons Projects ties all of this together. Sachdeva and Kalsi are two of the directors of the company. Ramsons’ 2016/2017 Annual Report listed Roy is a director of the firm, and between Sachdeva’s and his companies, he controls 45% of the shareholding.

Ramsons’ business address is the same as the one used to register the sasgroup.in domain name, used in Cureva India’s email contact.

Goodbye

On Friday, Minister of Health Dr Aaron Motsoaledi called on the North West Premier Supra Mahumapelo to sack the province’s health department head, describing Mediosa as an ATM used to loot from the state.

None of this will reassure the employees of Mediosa that they will be paid.

Management informed staff they would be paid on March 6 at the earliest, but this was before the apparent abscondment of the firm’s management.

Payment troubles have haunted Gupta-linked companies in recent weeks. Staff at the Optimum mine in Mpumalanga downed tools last week after not being paid on time.

The mining company is one of eight companies with ties to the Guptas that initiated business rescue proceedings last week. Staff at The New Age and ANN7 were also paid late this month. Management of the media companies ascribed the delays to a “payment glitch”.

The Guptas sold the media companies to Mzwanele Manyi’s Lodidox last year in a vendor financed arrangement.

The Guptas are well known for their alleged role in state capture in South Africa. But the #GuptaLeaks show how Gupta lieutenants allegedly went about capturing an Indian aviation company.

Heritage Aviation is an Indian aviation company with no apparent direct links to the Guptas or South Africa. The company was formed in 2009, operating mostly chartered pilgrimage and temple tours from a small helipad in the unfortunately named town of Guptkashi.

But the leaked Gupta emails show how its sole director, Rohit Mathur, was duped, browbeaten and eventually strong-armed into giving up control of Heritage to the Guptas.

– See the GuptaLeaks site

A fiddling enterprise

To set the scene, we take a step back. Last year, News24 journalists Pieter-Louis Myburgh and Angelique Serrao attempted to crack open the City of Shells. Tellingly, it was what they didn’t find in Dubai that was of significance: of the six Gupta associated companies linked to Dubai, only one, Griphon Line Trading, had an actual office. And even that office appeared permanently closed.

Dubai is a low-disclosure jurisdiction, which means obtaining official records of company shareholding and directorships is extremely difficult, if not impossible.

One of the shell companies News24 journalists could not find in Dubai was Fidelity Enterprises Ltd. Fidelity was traced, using information in the #GuptaLeaks, to Al Quoz, an industrial district in the western reaches of the city. There the trail went cold among the dusty warehouses: locals had never heard of Fidelity, nor did they have any idea where its business address was.

READ: Dubai: the Guptas’ city of shells

Except for a brief mention in Oakbay Resources and Energy’s pre-listing documentation, no apparent links exist between the businessmen from the rural town of Saharanpur and Fidelity.

Until the #GuptaLeaks.

Fidelity is first mentioned in the #GuptaLeaks in a string of dodgy transactions between Gupta-linked companies starting June 1, 2011. SES Technologies (SES), another Gupta-linked company based in India, transferred US$400 000 to Fidelity, with the payment confirmation sent to Ashu Chawla. Chawla was a director of SES at the time and a known Gupta lieutenant. On February 15, 2018, Chawla appeared in the Bloemfontein Magistrate’s Court on charges relating to the Estina dairy farm, where millions in state funds intended for developing emerging farmers were funnelled to the Guptas.

A relationship between Fidelity and the Guptas could also be witnessed in several other transactions. A US$1m payment was made to Oakbay Investments on March 5, 2014. An unsigned loan agreement was sent to Gupta lieutenant Ronica Ragavan’s JIC Mining email address. In the agreement Fidelity undertook to lend $15m to an as-yet-to-be-identified borrower. It is clear from the #GuptaLeaks that service providers were frequently requested to invoice Fidelity for trips undertaken by the Gupta brothers.

In February 2012, Gupta-owned Sahara Computers paid Fidelity US$1m for “software”. A few days later Sahara paid another US$180 000 into Fidelity’s dollar account, as well as EUR320 000. Considering the exchange rate at the time, Sahara paid Fidelity at least R12.2m in February 2012 alone.

Not bad for a business without an address.

Pre-flight inspection

Fidelity’s lofty aviation aspirations took off in mid-2014. On June 6, 2014, Fidelity sent a letter of interest to Green Lane Capital Corporation. This expressed Fidelity’s interest in purchasing a 2005 Agusta A109E helicopter.

While Fidelity had an aircraft, it still needed an operator in India licensed to use the helicopter over there.

Heritage Aviation, headquartered in India, had previously managed another aircraft on behalf of Sahara Computers. Sahara leased its Beechcraft King Air B300 (bearing registration number VT-ACD) airplane to Indian company Air Charter Services. Heritage was without a licence at the time, and was mainly responsible for the logistical arrangements around the aircraft.

After obtaining its own licence in May 2014, Heritage Aviation’s Mathur requested Ajay Gupta “to kindly give me an opportunity about the lease of aircraft to my company so that I can start the procedure in DGCA (director-general of civil aviation) immediately”. The director-general of civil aviation supplied a no-objection letter to Heritage Aviation on October 9, 2014, giving it the green light to operate.

The problem was simple: Fidelity had the aircraft, but needed an operator in India; Heritage had an operator licence, but needed aircraft to fly. Their solution was to have Fidelity lease its aircraft to Heritage, thereby securing Fidelity an income while allowing Heritage to pocket any profit it made after the cost of the lease was accounted for. Heritage would fly charter services, charging wealthy individuals for the privilege of private flights.

Fidelity was greedy: as a foreign company, Fidelity would be taxed 25% of the lease revenue in terms of Indian tax legislation. Its tax obligations could be reduced to only 10% if the transactions were funnelled through a permanent account number (PAN) member. As Suresh Tuteja, former chief financial officer of Sahara Systems in South Africa, pointed out in correspondence to Chawla, Fidelity either had to apply for a PAN itself, or make use of another entity that was already a PAN member.

On October 16, 2014, Gupta lawyer Martinus van der Merwe, of the firm Van der Merwe and Associates, supplied Chawla with a new lease agreement between Fidelity, Heritage and Islandsite Investments 180. This appears to be an attempt to structure the agreement as per Tuteja’s instructions. Islandsite is a Gupta investment holding company, and owns, among others, the Guptas’ Sahara building in Midrand and the family’s R17m Constantia compound in Cape Town.

READ: The Guptas’ Saxonwold-lite home in Cape Town seems to be heavy on water

The plan was abandoned when it became clear that Islandsite would be in the same position as Fidelity in terms of its tax obligations, and that Heritage had already informed aviation authorities that the aircraft would be leased from Fidelity.

The deal was decidedly global. The seller was in the United States. The buyer, a company in Dubai, managed from South Africa. An operator was waiting in India, eager to take on the helicopter waiting in Rio de Janeiro. The contractual wrangling between Green Lane Capital, various brokers, Fidelity and eventually Heritage was facilitated by the Guptas’ lawyers in South Africa at the time.

Headwinds

Heritage’s Mathur attempted to negotiate better terms for himself and his company in respect of the lease agreement.

His attempts were shut down by Chawla and Tuteja. On November 24, 2014, Tuteja drafted an email to Mathur on behalf of Chawla.

“I am really surprised to receive your mail in which you mentioned that you need below mentioned amendments in the signed agreement which you have already signed and received from FEL (Fidelity). Now once the helicopter is in transit you need the amendment in agreement without any reason for it.”

Fidelity and Heritage finalised the lease agreement on Chawla and Tuteja’s terms on January 20, 2015. Heritage would lease the aircraft for 20 million rupees per annum, payable in quarterly instalments of 5 million rupees. This equated to R3.6m per year, payable in quarterly instalments.

Turbulence

At around the time that Mathur signed the lease agreement for the Agusta helicopter, Chawla and Tuteja were engaging Airbus Helicopters to purchase another two aircraft. On February 21, 2018, Airbus invoiced Fidelity Enterprises for two Airbus AS350 B3e helicopters. The purchase price for the aircraft was just short of R51m and R2.5m was paid to Airbus on February 23, 2015, securing the brace of aircraft.

The legal vetting was once again undertaken by the Guptas’ attorney, Van der Merwe. Mathur’s Heritage Aviation was approached to lease the aircraft, and the deal was finally concluded on March 5, 2015.

On March 7, 2015, Mathur once again attempted to negotiate better terms in respect of the lease agreement between Fidelity and Heritage.

“I don’t want to make any commitment to you which becomes difficult for us to honour. I am also providing first 50 hours as absolutely free of flying charges. Therefore Rs 2.5 Crores (25 million rupees) lease will be too much for my company and so I will sincerely request you agree to my suggestion,” he pleaded.

Chawla and Tuteja pushed ahead remorselessly.

At the same time, Chawla and Tuteja arranged for Heritage to take over the lease of Sahara Computer’s Hawker Beechcraft Beechjet 400XP for another 7.5 million rupees per annum.

The aircraft was transferred from Lanseria’s Execujet (using registration number ZS-POT) to Heritage Aircraft (using registration VT-HBX). Heritage entered into a lease agreement with Sahara Computers at 7.5 million rupees per annum. The transfer was concluded in mid-2015.

The final lease agreements saw Heritage coughing up US$400 000 to lease each of the two B3s, 5 million rupees per year for the Agusta and another 7.5 million rupees per year to lease the Beechcraft. Heritage had been bound to a total annual obligation of almost R25m per year towards the Guptas.

Brace for impact

Between November 2014 and June 2015, Fidelity engaged Heritage with a view to establish a joint venture between the two companies. It made business sense: Fidelity had planes, and Heritage had the licence needed to operate in India the planes it had leased from Fidelity.

From correspondence in the #GuptaLeaks, it is established that Heritage insisted on a 50/50 partnership. Ajay Gupta, Chawla and Tuteja were however pushing Mathur to settle for a 51/49 partnership in their favour, in essence giving them control over Heritage. On April 6, 2015, a final joint venture agreement was sent to Mathur. He appears to grudgingly agree to the 51/49 ownership.

It is unclear if the joint venture went ahead. But on September 12, 2015, Heritage hit turbulence.

In a letter dated September 11, 2015, addressed to Heritage, Fidelity informed Heritage it was in breach of the lease agreements it signed. Fidelity required Heritage to pay 15 million rupees and US$400 000 in terms of the first and second lease agreements respectively, within three days. Should Heritage fail to pay, Fidelity would terminate the lease agreements and inform the DGCA, resulting in a termination of Heritage’s operating licence. Heritage had to find a way to pay nearly R9m within three days, or lose everything upon cancellation of the leases.

Four days later Tuteja and Naresh Khosla, a former employee of Sahara Computers in India, met with Mathur, and attempted to convince him to hand over his financial control of Heritage to Tuteja. Mathur would only be allowed to keep operational powers.

“Tuteja ji also… threatened in a subtle way that if I don’t agree to his suggestion, bosses will take a decision on closing the operation,” Mathur confided to Chawla later that day. Chawla promptly forwarded the message to Tuteja.

“When we were discussing final points of JV [joint venture] with Ajay Sir around 22 April you were also on the phone line. Ajay Sir told me that I must agree for giving 51% stake to Sahara and in return all management rights will always remain with me. I am very eager to understand why after 1 – 2 months of getting NSOP (operator permit) I am being pressured to give away financial powers. Why there is a drastic change in your stand?” The response and eventual agreement reached with Mathur is not clear.

It was a case of Heritage needing Fidelity’s aircraft more than Fidelity needed Heritage to operate them. While Fidelity could easily lease its aircraft to another operator, Heritage was entirely dependent on Fidelity’s aircraft for its income. Heritage could either agree to the Guptas’ demands, or stand to lose its sole means of generating revenue while still owing millions to Fidelity.

Disarm doors and crosscheck

Less than two months later, Indian company records show Mukul Tekchandani was appointed as a director of Heritage Aviation. Tekchandani is also a director of SES Technologies, a company directed by Chawla’s wife, Harsh.

In the weeks following his appointment, Tekchendani sends weekly financial reports and cash flow statements to Chawla. Mathur’s correspondence dwindles and is limited to operational matters – pilot’s salaries, maintenance expenses and insurance costs for the company.

Mathur is still listed as the contact person for Heritage Aviation. As of February 1, 2018, aviation records show that Heritage sports an additional two Airbus Helicopters EC130 helicopters that have been added to the fleet, as well as the Beechcraft B300 that Mathur used to manage on Sahara’s behalf. This brings the operator’s fleet to a total of five helicopters and two airplanes.

Despite requests for comment, neither Mathur nor Chawla responded. Detailed questions to Van der Merwe and Associates were also not responded to.

It remains unclear exactly how much money the Guptas have allegedly ferreted out of the country. The web of shell companies, opaque shareholding and the Gupta’s use of their lieutenants make tracking down their companies difficult. But if their conduct in Heritage Aviation is anything to go by, millions of state funds could already be locked away in entities without any clear links to the Guptas.

In March this year, Indian revenue authorities raided several of the Gupta brothers’ properties on charges of money laundering and tax evasion.

The temple was among these properties.

SPECIAL REPORT: Gupta Leaks

Despite the Guptas themselves footing the bill for the construction of the temple, a local Indian politician, Mansoor Badar, and Sanjay Grover, a known Gupta lieutenant in Dubai, were used as the “donors” of the money earmarked for the temple’s construction.

In this multi-part investigation, we consider how the Gupta family laundered money using companies set up in Dubai and India, freeing them up to fund the temple’s construction.

First stop: Saharanpur

Construction started on the Shiva Dham temple, located in the northern outskirts of the Gupta brothers’ hometown of Saharanpur, in June 2014. The temple complex consists of several buildings, including the main temple itself, and a hall designed by architectural firm Trivedi Corporation in India.

The temple was still under construction in January this year.

And while documents in the Gupta leaks claim that Badar and Grover are the sole funders of the temple’s construction, at least a portion of the donations were bankrolled by the Guptas themselves, making fools of Indian revenue authorities in the process.

To get the money into India, the Guptas needed a plan. The Gupta leaks show that Tony Gupta expressed an interest in establishing the family’s own religious trust early in 2014. The Guptas also discussed ways of transferring money out of the country with their auditors at the time, KPMG.

“We also note there is a desire to investigate the feasibility of transferring funds off-shore, especially to India, to be utilised as religious donations (as part of funding to build the temple in the vicinity of your home town in India) as well as for business purposes,” wrote Muhammad Saloojee, director and head of corporate tax at KPMG, on June 30, 2014.

ALSO READ: Guptas dodge another tax deadline

Between June 2014 and December 2014, the family appeared to have abandoned establishing their own trust and focused on using an existing religious trust instead. The Gupta leaks show that the temple’s construction was overseen and paid for by an entity called Sh Siv Mandir Gor Sankar Vishwana Banunth Dham & Samsa Bumi Prabndak Saba (the Siv Mandir trust), a religious trust founded in 1990. The Siv Mandir trust was responsible for paying service providers and labourers for the construction of the temple.

The reasoning behind using a trust was economic: in terms of Indian tax laws, a religious trust can apply for favourable treatment of its own income as well as any donations made by its funders.

On December 10, 2014, Atul and Tony Gupta drafted a letter on behalf of their mother, the Gupta matriarch Angoori Gupta. The letter begged the Indian revenue authorities to grant the Siv Mandir trust exemptions from certain tax regimes.

Atul Gupta and his mother Angoori at the laying of the temple foundation stone. (www.shivadham.in)

“This temple is being constructed at the total project cost of Rs 100 Crores (about R180m), the donation for which will be contributed by all individual persons in Saharanpur and [a] major portion of this donation will come from Smt Angoori Devi Gupta and her family members and friends from all over the world.

“Trust has also applied for Income Tax Exemptions u/s 12 A of [Income] Tax Act and will also apply for exemption u/s 80 G of Income Tax Act. Once these exemptions are granted by the appropriate authority’s donation [sic] from all across the world will start flowing in.”

The letter was addressed to the tourism minister in Uttar Pradesh, the province of the Guptas’ hometown of Saharanpur, appealing to the minister to intervene with the tax authorities.

The letter makes it clear that the Guptas intended funding the construction of the temple using donations from their “friends and family”.

With a tax efficient and opaque trust set up to receive its donations, the Guptas could begin funding it.

Funnelling the funds

The Gupta leaks show that the temple had two intended sources of income. The first funder was Badar, a municipal councillor in Saharanpur. Badar was earmarked to provide Rs 23 million (rupees) towards the construction of the temple.

As part of the donation, Badar was required to submit a letter containing very specific wording to the revenue authorities. The accountant for the family’s businesses in India, Ashok Khandelwal, drafted an example of the letter to be used.

Khandelwal initially denied any role in the funding of the temple construction.

“Without going into the merits of your allegations, we have absolutely nothing to do with the so-called Temple construction with which you are trying to associate our name,” he wrote in an email.

“We would have no problems if you were publishing the truth, but publishing false stories without any facts should not be done. If you have any evidence, of our involvement in this, kindly share the details of the same with us before publishing the story in order for us to respond, because your inference of the information, if any, that you have seems to be absolutely wrong.”

ALSO READ: Gupta fight goes to Dubai

Khandelwal failed to respond when confronted with a copy of the donation letter he drafted. He also failed to clarify why he drafted the letter under instructions from Gupta family associates if the donor was Badar, an apparently unrelated party. Instead, Khandelwal threatened legal action on the basis of defamation and blackmail in response to the questions posed.

Badar’s motivation appears to have been political. In December 2014, Gupta lieutenant Ashu Chawla received two letters introducing Badar to the leader of a local political organisation. The letters, which had to be translated, introduce Badar to the leader of the Samajwadi Party, Akhilesh Yadav, and propose Badar as an ideal candidate for the elections to be held the following year.

Both Yadav and Badar also attended the Gupta family’s infamous Waterkloof wedding in 2013. Attempts to reach either Yadav or Badar for comment have been met with no response.

But Badar was not about to use his own money to fund the temple, and this is where the laundromat kicked in. The Gupta leaks indicate how it worked.

The laundering cycle used to fund Mansoor Badar his donations to the temple trust. (Graphic: Jean le Roux and Jaco Grobbelaar)

By making several back-to-back payments, the true source of the funding would be hidden behind several layers of transactions. All of these companies are either under the direct control of Gupta family members, or their close associates.

The next day the cycle is repeated. ITJ Retails pays LCR Investments, who in turn pays Anil Gupta. Anil Gupta arranges for the funds to be transferred by unknown means to Badar, who in turn pays ITJ Retails.

This cycle was repeated for several days until about Rs 21 million was paid towards ITJ Retails by Badar.

But the trick lies herein: Badar never paid ITJ Retails. By skipping the last link in the chain, Badar would in effect “borrow” the money from ITJ Retails by not paying it over. This was confirmed by the balance sheet for ITJ Retails, which showed that as at March 4, 2014, Badar was owed exactly Rs 23 million, the same amount contained in the planned budget for the temple.

The modus operandi becomes even clearer in another string of transactions or journal entries ordered a year later.

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On March 6, 2015, another Gupta lieutenant, Suresh Tuteja, again requested that several payments be reflected, either as transactions or journal entries in the books of the affected entities. Among these payments was Rs 17.6 million that Akash Khandelwal, the accountant-on-call for the Guptas, was to receive from “Sanjay ji”. This presumably referred to Sanjay Grover, the former Gupta associate in Dubai.

This amount would then be transferred to ITJ Retails, who would in turn “repay” Badar the Rs 23 million he borrowed ITJ Retails. Badar would then make a Rs 23 million payment to “Temple”.

Akash Khandelwal denied that he received or made any such payments, but would not explain why these payment instructions would be made using his name as the recipient of the money to be paid to ITJ Retails.

The entries also showed that the “Temple” would in turn be used to settle a vehicle loan for the benefit of SES Technologies, another Gupta-linked company that will feature prominently in the next instalment.

We can now trace a trail from the temple trust to Badar and eventually LCR Investments and SES Technologies.

Going global

The source of the money received from LCR Investments and SES is a bit murkier. But the Gupta leaks show how these companies were used to launder money paid from several overseas sources.

The first of these sources were donations paid by the Gupta family from South Africa. In late 2013, Rajesh Gupta, his wife Aarti, and Atul’s wife, Shivani, each gifted R1m to their sister in India, Achlia.

Achlia Gupta is the sister of brothers Ajay, Atul and Rajesh, and is married to the same Anil Gupta mentioned above that provided Badar with the money to pay ITJ Retails. The donations made in late 2014 appear to have been made directly into Achlia’s account.

The donations made to Achlia would invariably find their way back into the LCR Investments and SES Technologies laundry cycle. Bank records for SES show that Achlia frequently made large deposits into its account, which were subsequently funnelled away. Achlia, and other members of the Gupta family, frequently made large unsecured loans to Gupta-linked companies, among them LCR Investments.

Payments made to LCR Investments by Gupta-owned companies in Dubai were a second source of foreign income. In 2014, Indian tax authorities queried the source of funds used to provide several unsecured loans provided by the family and its companies to LCR Investments during the previous financial year.

Anil, Achlia and Doon Leisure and Hospitality (an Indian company owned by the Guptas, previously known as Sahara Computers and Electronics) were queried in this matter.

In response, Achlia referred to a donation made to her by Shivani “out of her natural love and affection for me and the same has been accepted by me”.

Yet this heart-warming gesture of charity was not paid directly to Achlia. Instead, the money was paid from her sister’s Bank of Baroda account into that of the Dubai-based Global Corporation LLC. Global Corporation would in turn pay this into the bank account of LCR Investments, again funding the cycle.

ALSO READ: Dubai: the Guptas’ city of shells

Global Corporation was one several Gupta-linked shelf companies that a News24 investigation last year was unable to track down, despite journalists spending a week in Dubai.

A third source of funds was direct payments from the Guptas’ Dubai-based companies. An elaborate example of the way the money is laundered is found in the Gupta leaks, and involves several companies that the Guptas have direct control over.

This launder process will be delved into in the next instalment of Pillars of Sand, as well as its links to the family’s Dubai operations.

Since submitting our enquiries to the affected parties, the temple’s website has been taken down. Archived versions of the website can be found here and here.

OVERVIEW: The laundry cycle used to fund the Gupta temple in India. (Graphic: Jean le Roux and Jaco Grobbelaar)

A scandal involving the BoB’s South Africa operations, a cabal of businessmen of Indian origin, and South African President Jacob Zuma, has undermined the reputation of India’s second largest bank and resulted in an unprecedented penalty by the South African Reserve Bank.

• This article was first published in the Hindustan Times.

In June 2017, an anodyne footnote to the Bank of Baroda’s (BoB) quarterly results mentioned a fine levied by the South African Reserve Bank (SARB), headquartered in Pretoria.

The sum — R11-million — was insignificant for an institution the size of BoB. No further details were given; the penalty passed unnoticed in India.

But in South Africa, the SARB’s actions suggested BoB’s involvement in the “State Capture” scandal: an avalanche of allegations that President Jacob Zuma was under the sway of three brothers from Saharanpur, Uttar Pradesh — Ajay, Atul, and Rajesh Gupta, collectively known as “The Guptas”.

As the scandal continues to unfold, BoB’s role as the Gupta family’s banker of choice for their most controversial deals, has attracted increasing attention from South African regulators, investigators and the press.

A joint investigation of thousands of pages of court documents, bank records, SARB records, internal Gupta company correspondence, and interviews with bank officials, by Hindustan Times, South Africa’s amaBhungane Centre for Investigative Journalism, Finance Uncovered and the Daily Maverick’s Scorpio unit, reveals a laundry list of potential violations, and a seeming disregard for banking ethics and regulations by BoB executives.

An example: As early as 2010, BoB financed the purchase of a luxurious house that was bought in the name of President Jacob Zuma’s fourth wife, but paid for by the Guptas through BoB accounts operated by secretive trusts.

And as late as November 2016, an investigation into the Guptas’ controversial purchase of a coal mine by the South Africa’s Public Protector, a constitutional public ombudsman, found that “the conduct of the Bank of Baroda appears highly suspicious” in the bank’s role in underwriting the deal.

BoB stood by the Guptas as four major South African banks shut their bank accounts in 2016 on the grounds that anti-money laundering laws made it too risky to do business with the family.

While BoB executives say they began to “exit” their relationship with the Guptas in July 2016, the bank sent out account termination notices a full year later in July 2017.

The Guptas took the bank to court.

At the time of going to press, BoB was stuck with the accounts of at least 35 Gupta companies according to the most recent court disclosures.

What follows is an inside account of how a culture of wilful blindness in BoB’s South Africa operations exposed India’s second largest bank to a damaging investigation in a foreign jurisdiction.

Bank executives sought personal favours from the Guptas and enjoyed their hospitality, emails show, while the family used BoB accounts to funnel millions through an international network of secretive companies and trusts.

Personal favours aside, the systemic shortcomings identified by the SARB audit lead back to BoB’s compliance department in Mumbai, raising questions about the bank’s operations in India and across the world.

South African investigators now are probing if the money in these accounts included kickbacks for prominent South African politicians for awarding dodgy government contracts to the Guptas.

In October 2017, the Financial Times reported that American authorities had begun probing the Gupta family as some of these transactions were in US dollars, raising questions of how much BoB knew, and what action, if any, the bank took?

Today, as the Indian government prepares to pump Rs 88,100 crore into the country’s ailing public sector banks, of which BoB will get Rs 5,307 crore, the bank’s actions in South Africa offer a sobering glimpse of how some of India’s biggest banks may be doing business.

When Hindustan Times sent BoB a detailed questionnaire, the bank arranged two interviews with CEO PS Jayakumar, only to cancel both meetings without explanation at the last minute. BoB has not responded to repeated requests for comment on the events described below.

Hindustan Times also wrote to the Gupta brothers, their family lawyer, and the South African High Commission in India, but did not receive a response.

A House for Mrs Zuma

On June 29, 2010, Bank of Baroda signed off on a mortgage of R3.84-million for a residential property in Waterkloof Ridge, a leafy suburban neighbourhood with some of the most expensive real estate in Pretoria.

The loan, mortgage documents reviewed by Hindustan Times reveal, was to be repaid in monthly instalments of R79 715.

It was unusual for BoB to offer this home loan in South Africa, as the bank did not offer retail banking services and its primary products in the country were fixed deposits, trade credit and overdraft facilities.

Stranger still was that the loan was granted to Sinqumo Trust, whose primary trustee was Bongekile Gloria Ngema Zuma, the fourth wife of Jacob Zuma, the President of South Africa.

Sinqumo’s other trustee was Duduzane Zuma, President Zuma’s son from a previous marriage. “Sinqumo”, is the name of President Zuma’s son with Ngema Zuma.

The documentation included a declaration by Ngema Zuma, under South Africa’s Financial Intelligence Centre Act of 2001, that the loan was to finance the purchase of the house, and the money used to repay the loan was her own.

Yet transaction details and emails reviewed by Hindustan Times suggest that the loan was repaid by the Guptas by routing regular payments to Sinqumo’s BoB accounts via an entity called Mabengela Investments, a company controlled by Duduzane Zuma and Rajesh “Tony” Gupta.

An email by Ugeshni Naidu, an accounts officer for the Guptas, shows how this worked: In a mail dated February 8 2012, Naidu lists a cascading array of transactions in which a large sum of money is moved between three Gupta fronts before R65 000 is transferred to Mabengela, and then from Mabengela to Sinqumo’s BoB current account, and from the current account to the BoB’s mortgage account.

Hindustan Times found 17 such emails, including one in September 2013, in which a lump-sum of R535 000 was transferred from Mabengela to Sinqumo.

These transactions correspond to what money laundering experts call ‘structuring’, where large sums are broken into smaller transactions to evade detection, ‘layering’, in which the money moves through multiple companies to remove links to its source, and ‘integration’, where layered funds are gathered in a seemingly innocuous investment – like buying a house.

“By this stage it is practically impossible to trace the funds to its originator or illicit origins except as ‘disproportionate assets’,” said M Nanda Kumar, a London-based anti-money laundering specialist, who declined to comment on specific Gupta transactions.

BoB internal documentation, viewed by Hindustan Times, lists Sinqumo as a Gupta affiliated entity, indicating that the bank knew the Guptas, the Zumas, and Sinqumo Trust were connected, and of the complications this posed, yet went ahead with the loan anyway.

Indian, South African, and international banking laws require banks to identify Politically Exposed Persons (PEPs) like Ngeme Zuma — and flag suspicious transactions within 15 days.

BoB labelled Sinqumo Trust as PEP only in 2015, five years after giving the loan.

“A loan to a President’s wife, in a foreign country, serviced by a private company, is an immediate red flag,” said Hemindra Hazarika, an independent banking analyst, “As an Indian, government-owned bank, Bank of Baroda should not have touched this loan.”

A former BoB official put it more bluntly: “Imagine a purchase of a house for the wife of a prominent Indian politician, involving Chinese businessmen and a loan from a Chinese state-owned bank,” the official said.

“How would that look?”

The purchase of Mrs Zuma’s house is not the only controversial Gupta deal underwritten by Bank of Baroda.

The bank underwrote progressively riskier Gupta deals until it caught the attention of South African regulators.

Indians with a Business Plan

Bank of Baroda’s Africa connections date back to 1953, when the bank opened its first foreign branches in Mombasa and Kampala to cater to traders from the Gujarati diaspora.

The bank opened shop in South Africa in 1997 in Durban, another diaspora hub, followed by Johannesburg in 2007.

Ajay, Atul and Rajesh Gupta moved from Saharanpur, Uttar Pradesh, to South Africa in the mid 1990s, and opened their first South African BoB account in 2005, court documents show.

Over two decades starting in the 1990s, the brothers used their business acumen and political connections to build an empire spanning everything from computer peripherals to uranium mining, and lucrative government contracts.

“Our international operations go where the Indian diaspora goes,” said a BoB executive seeking anonymity, “So when the Guptas came to us, we just saw them as Indians with a business plan.”

Over the next decade, the client-banker relationship would deepen to the point where senior bank executives tasked with monitoring Gupta accounts were instead asking for personal favours from their riskiest client.

Visas, Internships, Hotel Rooms

On January 30, 2013, Ashu Chawla, a key Gupta aide, sent an email to Jack Monedi, Chief Director of Permits at South Africa’s Department of Home Affairs, requesting him to expedite the renewal of the work permit of Ramesh Salian, a senior manager at the Johannesburg Branch, who oversaw the Gupta loan accounts.

The trailing mails contained a long-running correspondence between Salian, from his official BoB email address, and Monedi’s department, regarding a waiver of certain technical requirements for Salian’s visa.

Chawla’s mail to Monedi was direct: 

“Dear Sir,
As discussed, I request you to sign the below waiver tomorrow. Thanks
Ashu”

Salian got the waiver on February 22, 2013, and a new work permit, signed by Monedi, soon after.

Two years later, in July 2014, Salian sent another email from his official BoB email account to the Guptas — this time to get a study permit for his daughter to pursue a degree in South Africa.

Salian wasn’t the only BoB official requesting Gupta favours.

On February 17, 2014, Salian’s superior, Sanjiv Gupta, wrote a one-line mail from a personal Yahoo account to Chawla, “Please find enclosed herewith CV of my son for internship at T systems from 15.05.2014 to 15.07.2014.”

Chawla forwarded the email right away to his boss Rajesh “Tony” Gupta, saying “This is the CV I received for BoB Chief Manager son; please advise how to go further.”

On February 26, Sanjiv, the BoB manager wrote to Evan Tak, a Gupta employee, saying, “Archit Gupta will be available for internship from 15th May to 15th July. He plans to travel from 10th May to 19th July.”

Tak wrote back a week later with a return ticket on Emirates in Archit’s name: Delhi to Johannesburg on May 10, 2014, with a return two months later on July 19, 2014.

BoB’s chief executive for South Africa, Murari Lal Sharma’s name appears in a hotel bill for at Taj Palace Hotel in New Delhi, dated July 24, 2015, for two nights in Room 872 as a guest of Rajesh Gupta.

Other guests on the same bill include Duduzane Zuma — President Zuma’s son, and co-owner of the house that BoB provided the mortgage for.

Murari Lal Sharma, is now a General Manager at BoB’s corporate office in Mumbai, where he heads the asset recovery division.

If these allegations were proved true, Hazari the analyst said, “It would appear that BoB’s senior management was asleep at the wheel, while executives at Johannesburg were complicit.”

Dodgy Deposits

The Guptas gradually came to account for a disproportionate share of BoB’s South Africa business, to the point that it posed a risk to the bank.

“When we go into a foreign country, we don’t do loans where only one party accounts for 40% of our book,” said another BoB executive, speaking off record. “We don’t involve ourselves with risky clients. We don’t do business we don’t understand.”

But in South Africa, it seems BoB did.

Email records suggest that the bank’s exposure to the Guptas was even higher than what was reflected on the books.

In 2011-12, BoB offered a R16-million loan overdraft facility to Everest Global Metals, a company controlled by Piyoosh Goyal – an Indian businessman accused by the CBI of allegedly bribing a senior State Bank of India executive to enhance a 250-core loan facility in November 2013.

A CBI spokesperson said a chargesheet has since been filed.

Everest Global Metals is not a known Gupta company; BoB court documents listing all Gupta-related accounts held by the bank make no mention of Everest.

Yet, much like Zuma’s house, the Guptas made the monthly interest payments on Everest’s BoB loan.

Emails reveal BoB would send Everest a monthly statement on the loan, which Everest would forward to the Guptas.

The money would then be wired from JIC — a Gupta company — to Everest, who would settle accounts with the BoB.

This circular lending, three bankers interviewed by HT said, is a not uncommon, but illegal, practice to surreptitiously give new loans to a favoured client who already owes the bank too much money.

“You want to give someone a loan, but you can’t because you are already over-exposed to them,” said a risk officer with a European bank who asked not to be identified. “So, you give the loan to a front company instead.”

In this case, the fronting was so transparent that when Everest missed a payment on November 13 2012, Salian, the BoB manager, wrote directly to Ronica Ragavan, a director of several Gupta companies, to say, “Good Day, we are yet to receive credit for interest charged on M/S Everest Global Pty Ltd for the month of October 12.”

Politically Exposed Bank

On December 9, 2015, President Jacob Zuma fired his well-regarded finance minister Nhlanhla Nene.

The move spooked investors and prompted intense speculation that Nene had been removed at the behest of the Guptas. The media outcry was so intense that even the normally placid BoB was moved to act.

On December 13, BoB senior manager in Johannesburg, Gurbax Singh sent a note to his superiors recommending that 35 accounts held by the Guptas and Gupta affiliated companies at the Johannesburg branch be designated “Politically Exposed Person” accounts “which pose a high money laundering risk to the bank because of their position of influence.”

Included in the list was Sinqumo Trust, the entity used by the President’s wife to buy her house, and Mabengala Investments, the company used by Tony Gupta and Duduzane Zuma to pay for the house.

“Banks must conduct extra scrutiny of PEP accounts as laundering risk is high,” said a retired official of the Reserve Bank of India, questioning why the bank didn’t flag the accounts as politically exposed earlier, when they knew the President’s family was involved.

“Why did they wait till 2015?”

Sanjiv Gupta, the chief executive who had asked the Guptas for an internship for his son, signed off on the note, saying the accounts could be kept open on the condition of “enhanced due diligence” and that “transactions must be monitored.”

BoB opened eight fresh accounts for the Guptas from January to May 2016.

Meanwhile, South Africa’s biggest banks severed their ties with the family citing money laundering concerns.

On June 1, 2016, Standard Chartered Bank faxed a letter to the Guptas’ lawyers explaining they were shutting accounts as continuing business with the family would expose them to “an unacceptable level” of risk of prosecution under local and international anti-corruption laws.

A year would pass before BoB’s head of international banking would formally write to the Guptas to terminate their account on July 1, 2017.

By then BoB had already concluded its most controversial deal, which would lead to an audit and penalty from South Africa’s Reserve Bank.

Optimum Coal Mine

Like the mortgage for Mrs Zuma’s house, the first question haunting the Guptas’ controversial purchase of the Optimum coal mine is why such a complex deal was structured by BoB’s tiny, understaffed office of 16 employees rather than its South African competitors with many thousand employees on their rolls.

In 2015, Optimum Coal Holdings (OCH) — a subsidiary of global mining and commodity giant, Glencore – was bankrupt.

The company was saddled with millions of rand worth of debt, and a looming penalty from its principal customer, Eskom – South Africa’s state-run electricity utility.

In September that year, the Guptas offered to buy the company. On December 10, 2015, Glencore agreed to sell for R2.15-billion.

Bankruptcy resolution professional Piers Marsden said the deal was concluded on the understanding that the Guptas had the money to buy OCH.

“We were given a letter of comfort from their bankers that they did have the funds available to conclude the transaction,” Marsden said in a sworn testimony to Parliament.

“We relied on that letter for concluding the transaction.”

But on April 11, 2016, 10 days after BoB’s letter of comfort expired, Nazeem Howa, a Gupta aide, approached Marsden to say the Guptas were R586-million short of the agreed price and asked if OCH’s lender consortium would finance the shortfall to ensure the deal went through.

The consortium declined, but the Guptas mysteriously stumped up the cash in three days and bought Optimum.

It later emerged that Eskom, the electricity utility, had given the Guptas the same amount of money – R586-million — as a pre-payment for future sales of coal.

The Guptas used the money to conclude the sale.

The revelation that South Africa’s state-owned electricity utility had part-financed a Gupta takeover of OCH resulted in a public scandal, and an investigation into the acquisition.

In a parliamentary inquiry into the deal, South African lawmakers expressed bewilderment about the credibility of the BoB’s letter of comfort.

“The Bank of Baroda says we’ve got 2.15 to pay over for the transaction, am I right?” asked Pravin Gordhan, a former finance minister who had clashed with the Guptas.

“But just prior to that 585 was the missing amount out of the 2.15.”

Misappropriated Funds

When the Guptas bought OCH, they also became custodians of two mine-rehabilitation trusts called Optimum and Koornfontein, collectively worth R1.75-billion, that they deposited in BoB accounts.

Under South African law, the money in mine-rehabiliation trusts is meant to ameliorate the environmental impacts of mining, and cannot be used by the mining company for commercial purposes.

But the Guptas wanted to get at the money locked away in these trusts, so BoB found a way.

BoB documents indicate that in June 2016, the bank used R170-million deposited in the Koornfontein Rehabilitation Trust as collateral to give the Guptas a R150-million loan.

This was a threat to both the bank and the environment.

“If indeed the mine used the Rehab Trust fund as collateral for a business or bank loan, and the mine went into liquidation or bankruptcy, then the bank would attach the rehab fund,” said Stephanie Fick, head of legal affairs for Organisation Undoing Tax Abuse, a South African NGO.

“The public will be without the funds required to rehabilitate the environment.”

Alternately, if the bank was legally prevented from seizing the rehabilitation fund, it would not have been able to recover the loan.

“If indeed the BoB were ignorant of the prevailing laws I imagine this would be of great concern to amongst others the shareholders of BoB,” Fick said.

Audit Woes

“As a bank, you never want to be audited by a regulator,” said an anti-money laundering investigator, seeking anonymity as he works with banks and auditors. “Once they go in, they are always going to find something.”

In BoB’s case, the SARB found that the bank’s Financial Crime Risk Manager (FCRM) system, software that automatically flags suspicious transactions, was incorrectly configured.

BoB’s FCRM, the audit noted, was run out of a data-centre in India, suggesting the BoB might be struggling to adequately monitor transactions in India as well.

Auditors also found that BoB had not “applied sufficient scrutiny/ care while processing transactions involving loans and fund transfers among entities within the same group” – which accounted for a lion’s share of the bank’s business with the Guptas.

The SARB’s findings were backed up by BoB’s own auditors in the South Africa branch’s 2017 annual report.

“The bank did not maintain a complete record of business relationships,” the auditors wrote.

“Furthermore, documents subsequently submitted by the bank appeared inconsistent with those submitted for audit purposes, thereby raising suspicion.”

When BoB’s acting chief executive in South Africa Manoj Kumar Jha appeared before the South African high court for permission to close Gupta accounts, he noted that the SARB fine “is the most severe sanction that may be imposed before the imposition of a restriction or suspension of the bank’s business.”

Keeping Gupta accounts open, Jha continued, was not feasible as any compliance slip-ups in the future would have prohibitive consequences for the bank’s operations.

The SARB could impose a fresh penalty, Jha said, prompting investigations by every regulator the 26 countries where BoB operates.

“The adage that the currency of every bank is trust is absolutely true,” Jha said. “The international community will lose all trust in the bank.”

amaBhungane and Scorpio

Former Indian government minister and leading Congress Party politician Kapil Sibal has refused to explain a business deal with Worlds Window, a firm that apparently helped the South African Guptas to launder hundreds of millions around the world.

The suspicious money flows are explained in a new investigation by amaBhungane and Scorpio, based mainly on the #GuptaLeaks.

There is no evidence that Sibal was party to money laundering or corruption, but it is worth noting his refusal to explain a deal with Worlds Window, an Indian scrap metal and logistics conglomerate.

Sibal is also a top lawyer in India.

Between 2010 and 2015, hundreds of millions of rand flowed between companies linked to the Guptas and Worlds Window.

The money included Chinese kickbacks for Transnet crane and locomotive contracts. The transactions moved money between South Africa, China, UAE and India.

Many transactions appeared to lack commercial substance, although the source of the money was not always known.

Worlds Window was founded by Indian national Piyoosh Goyal.

After entering business with the Guptas in 2010, Goyal visited South Africa often. The Guptas also visited India.

In 2011, Gupta staff chartered flights to ferry the families of Sibal, Goyal and the Guptas between Delhi and Mumbai, for a Cricket World Cup match.

Sibal had been a government minister since 2004 and was, at that time, in charge of two portfolios: communications and information technology and human resource development. He was also a member of parliament.

Sibal was joined by his wife and adult son Akhil, also a lawyer.

Sibal senior said: “I have never had any dealings financial or otherwise with the Guptas. I have met Mr Gupta in Delhi only once when my friend Piyoosh Goyal invited me to watch the Cricket World Cup.

“We did not travel on the invitation of Mr Gupta nor am I aware of any charter by him. My wife, Akhil and I went on the invitation of Piyoosh. Even while watching the match we did not sit with Mr Gupta nor go to the ground with him.”

Akhil also said he did not know the Guptas had chartered the flight.

Later that year, the Guptas paid for Akhil and his wife to stay at the luxurious Queen Victoria Hotel at Cape Town’s V&A Waterfront over Christmas and New Year, the #GuptaLeaks show.

Akhil said: “I had requested Mr Goyal to help with arranging a car in Cape Town, and offered to pay the charges… I have known him for several years, and he is my client.”

The leaks show Goyal passed the request on to Gupta staffers, who arranged the car.
Akhil said he tried to pay in full for the hotel accommodation.

But, he said: “At the time of checking out of the hotel in Cape Town, when we asked to settle the bill for incidental expenses at the hotel, apart from the room rate, which was already settled by us in advance, the hotel staff informed us that the incidentals had been settled at the instance of Mr Goyal.

“Subsequent to my return to India, I discovered the pre-paid charges for the accommodation were also reversed. None of this was done at my request. Despite my remonstrations with Mr Goyal, on his insistence, I accepted his generous gesture.”

The #GuptaLeaks show the Guptas’ company Sahara actually paid. Akhil said he had no knowledge of this.

In November 2013, India’s Central Bureau of Investigation (CBI) charged Goyal with allegedly bribing a senior state banker for a loan.

The CBI reports to a number of ministries, including law and justice. Kapil Sibal was law and justice minister from May 2013 to May 2014.

There is no evidence to suggest Sibal interfered in Goyal’s case. In fact, CBI told us that it filed a charge sheet with a Mumbai court in 2015.

The case is still outstanding.

Indian corporate records show that, in February 2017, Sibal became a director of Grande Castello. Until then, Grande Castello had been a 100% Worlds Window subsidiary. It appeared to be a shell company, without assets or revenues.

We asked Sibal to explain his directorship of “Worlds Window subsidiary Grande Castello”.

He was curt: “You don’t seem to have your facts right.”

We provided him with details from the corporate records and asked him which facts were incorrect.

He stonewalled again, saying: “I have never been a director of any subsidiary company of any company.”

We provided proof the corporate register listed him, not a different Kapil Sibal.

He did not respond.

On further investigation, we discovered that Worlds Window had transferred ownership of Grande Castello into Sibal’s name in November 2016.

We explained this to him asked him to explain in light of his previous responses. We also asked him to explain substantial new loans on Grande Castello’s balance sheet and name the lender.

He said: “From your last mail, it is apparent that your assertion regarding Grande Castello in your first mail was incorrect. You now abandon that position, assert a new fact, and still wrongfully accuse me of lying.

“Sans a relevant factual foundation, you nevertheless proceed from conjecture to wild speculation and deem it reasonable to ask unwarranted questions, entirely ignoring the categorical responses already provided to you, which sufficiently answer your queries.

“I am now convinced that your intent is mischievous and your approach less than objective. I don’t intend to correspond with you any further.”

• The amaBhungane Centre for Investigative Journalism is an independent non-profit. Be an amaB supporter to help it do more. Sign up for its newsletter to get more.
• Scorpio is the Daily Maverick’s new investigative unit. If you’d like to support its work, click here.

amaBhungane and Scorpio

Britain’s biggest metal recycling firm holds a 49% stake in Indian firm Worlds Window, which moved hundreds of millions in kickbacks around the world for the Guptas.

The money flows are exposed in a new amaBhungane and Scorpio investigation, based in large part on the #GuptaLeaks.

The British firm, European Metal Recycling (EMR), is a Liverpool-based business. It says its “heritage” reaches back to the 1940s. It turns over more than £2-billion a year, and is largely owned and run by one family, the Sheppards.

EMR bought 49% of Worlds Window Impex India (the parent company) in 2008. EMR’s audited financials state that it “exercises significant influence over the operating and financial policies of” Worlds Window.

EMR has regularly injected capital into Worlds Window, EMR’s financials and other records show.

There is no evidence that EMR knowingly contributed to Worlds Window’s suspicious financial activity.

Between 2010 and 2015, Worlds Window directors and staff involved themselves in private bids for multibillion-rand crane and locomotive tenders at state-owned logistics company Transnet.

The Worlds Window directors and staff then worked with offshore shell companies, which received “agent fees” – structured like kickbacks – and helped to disperse the money around the world, including to businesses associated with the Gupta family in South Africa and abroad.

Together, the Guptas and Worlds Window also moved more millions in many suspicious transactions, according to our investigation. These transactions bore multiple hallmarks of money laundering, although the source of the money was not always known.

The Guptas are friends with president Jacob Zuma and kept Zuma’s son on their payroll. They have been accused of grand corruption here.

This week, the Asset Forfeiture Unit moved to seize R1.6-billion in assets linked to the Guptas and firms they did business with. It said it hoped to seize at least R50-billion in 17 related cases under investigation.

EMR responded to our initial questions. It said that before 2008, it had “a pretty long established trading relationship with Worlds Window who effectively acted as a sales agent into India”.

It said: “EMR is disturbed to hear press reports of the alleged involvement of Worlds Windows in money laundering, which we became aware of late last year through #GuptaLeaks. We are currently carefully looking at this investment as a consequence.”

We had asked EMR if it also had a business relationship with a number of offshore companies central to the laundering of Transnet kickbacks. These included JJ Trading, Century General Trading and IMR General Trading, all registered in UAE financial havens.

EMR’s response was confusing. It said: “EMR has no involvement with any of the companies mentioned, however a few companies have been counterparties in the legitimate trade of scrap metal.”

We asked it to explain, name its trading partners and provide evidence of legitimate business. It did not.

EMR spokeswoman Olivia Healey sent us a general response, referring to a statement in EMR’s audited financials in which it classifies Worlds Window companies as “associate undertakings” because EMR “exercises significant influence over the operating and financial policies of the company”.

She said this statement “misrepresents the reality of this situation”.

She continued: “When consolidating our accounts, we work on standard assumptions as follows: ‘An associate is an entity in which the group has significant influence, but not control, over the operating and financial policies of the entity. Significant influence is presumed to exist when the investor holds between 20% and 50% of the equity voting rights.’

The important word in here is presumed. So, for the purpose of accounting, Worlds Windows is presumed to fall into this category as we have a significant minority interest.

“The reality of the situation is that [EMR] had no board representation and exercised no management control over the business. This financial investment was effectively managed by a post audit financial review which had not raised any red flags to date.

“So unfortunately we are simply unable to assist you any further with your enquiries.”

Among our questions, we had asked EMR whether it knew about or had influence over Worlds Window’s business relationship with the Guptas, the apparent laundering of kickbacks via JJ and Century General and whether it condoned other suspicious money flows, outlined in our investigation.

• Scorpio is the Daily Maverick’s new investigative unit. If you’d like to support its work, click here.

• The amaBhungane Centre for Investigative Journalism is an independent non-profit. Be an amaB supporter to help it do more. Sign up for its newsletter to get more.

amaBhungane and Scorpio

It must have been good news for Piyoosh Goyal when the State Bank of India approved his Rs750m (R120m then) loan.

So good that he then sent his agent to a senior banker’s Mumbai home on a Sunday with two expensive watches and a fistful of cash. At least, this is what the Mumbai branch of the Central Bureau of Investigation (CBI) later claimed.

Their anti-corruption investigators had lain in wait, that November 2013, and they arrested Goyal’s alleged agent when he emerged from the banker’s home.

Then they raided the home where they said they found the two watches and the cash. Simultaneously, they raided Goyal’s premises, where they claimed to have found “incriminating documents”.

The investigators laid charges of bribery and collusion against Goyal, his alleged agent and the banker.

Find all you need to know about #GuptaLeaks here

According to Indian journalists, the investigators’ evidence included more than 70 hours of recorded conversations. They also interrogated Goyal’s agent for half a day.

Goyal’s Delhi-based scrap metal company, Worlds Window Impex India, issued a statement the next day denying the allegations.

The bank got two senior staffers to investigate. Within days, they cleared their colleague of wrongdoing.

But the CBI continued to investigate and, in January 2015, it filed a charge sheet with a Mumbai judge, a spokesperson told us.

“The matter is sub judice,” he said, meaning CBI would not comment as the case was still before court.

Goyal’s questionable Indian bank loan was just the tip of an iceberg.

In this article, we reveal that by the time CBI charged Goyal, he and Worlds Window had for four years helped the South African Guptas to move the equivalent of hundreds of millions of rand between China, India, SA and the UAE, using hundreds of suspicious transactions.

Devotee, entrepreneur

Goyal founded Worlds Window in Delhi in the 1990s. He was in his early 20s. Business people described him as a “first generation entrepreneur” and a “young and dynamic businessman”.

He started by importing and trading scrap metal. Then he expanded the group into logistics, manufacturing and – after he met the Guptas in 2010 – coal mining in SA.

In 2008, Britain’s biggest metal recycler, European Metal Recycling (EMR), bought a 49% Worlds Window stake from Goyal and other shareholders. EMR holds the stake to this day, and has regularly injected cash into the business (see story below: #GuptaLeaks: Liverpool company owns 49% of Indian firm implicated in kickback scheme).

EMR told us: “EMR is disturbed to hear press reports of the alleged involvement of Worlds Windows in money laundering, which we became aware of late last year through #GuptaLeaks. We are currently carefully looking at this investment as a consequence.”

SEE: The Guptas’ bogus Dubai businesses

Worlds Window has claimed to be one of India’s largest scrap importers; however its financials suggest it was a relatively modest operation.

In the financial year ending in March 2011, the group’s holding company, Worlds Window Impex India, bought scrap worth R1.7bn. This was about 5% of the total Indian imports at the time. It said it sold a little more than this and, after operating costs, was left with R57m.

We note these numbers because, as we shall see, they were small compared to the tide of money then washing between Goyal-linked companies and the Guptas.

Before the CBI bust, Goyal had kept a modest profile. He appeared on podiums and in a few puffy news pieces as the esteemed company executive. Otherwise, he occasionally graced the pages of International Society for Krishna Consciousness newsletters.

The society described him as a donor, “senior devotee” and the “midday meal director” for Sri Sri Radha Parthasarathi Temple’s feeding programme, in south Delhi.

^{Piyoosh Goyal, right.}

He told us that because he had resigned, he could not answer our questions on Worlds Window’s behalf.

Yet, analysts at an Indian credit agency still describe Goyal as Worlds Window’s promoter. His father stayed on after 2013 as “group mentor” and a “key person”, according to its website. And at least 41 Worlds Window companies remain registered to the address Goyal declared on his 2012 tax return.

Goyal gave us limited written comment for this article, and Worlds Window ignored us despite repeated attempts to elicit a response.

However, one man came forward to offer a spirited and detailed defence for them. He did not want to be named, so we shall call him Mr Patel.

Meeting the Zuptas

Mr Patel is a senior figure in Worlds Window.

He said Goyal first met the South African Guptas through a common friend in India in 2010. The Guptas then introduced Goyal to their business partner Duduzane Zuma, the president’s son.

They encouraged Goyal to invest in SA, telling him: “We have lots of mines, and you will not face any problem. We know everybody.”

Worlds Window quickly joined the “Zupta” party, it appeared.

An August 2010 accounting record from the #GuptaLeaks described that someone from Worlds Window spent more than Rs700 000 (about R100 000 then) on “SA… President’s Clothes (Cash)… India”. The Guptas later paid them back. Jacob Zuma had officially visited India two months earlier.

We asked Mr Patel if they had bought clothes for Zuma. He said: “I can remember cloth has been purchased for Zuma and his wife. There is chances payment made by us [sic]. Don’t remember exactly. It was more than eight or 10 sets for each.”

He added: “As I remember, president used Indian cloth in India, so assuming paid by Gupta as we never met president in India [sic].”

Jacob and Duduzane Zuma and the Guptas failed to reply to our questions. South African brother Atul Gupta previously told the BBC the #GuptaLeaks were fake.

That same month in 2010, Goyal and the Guptas did one of their first big deals.

WATCH: Inside the controversial Gupta Free State dairy farm

It was dressed up as Worlds Window investing in two South African coal mines, but it appeared to be a sham, as we previously reported.

In the deal, a subsidiary of Worlds Window Impex India, the group’s flagship, transferred $4.43m (R31.5m then) to the Guptas’ Oakbay Investments in SA.

That was a lot of money for Worlds Window Impex; in fact, it was more than half of its operating profit for that year, so you would expect its subsidiary would have placed a reasonably sure bet.

Apparently not.

Worlds Window had paid for minority shares in two dormant companies that owned two questionable coal prospecting rights in SA – worse, share registers show the Guptas did not transfer the shares to Worlds Window.

Even worse, it appeared that there was no coal and the project was abandoned two years later.

Oakbay got money for nothing.

^{A purported coal deal in 2010, in which Worlds Window gave the Guptas money for nothing and never got it back.}

Our recent report compared this to two nearly identical Gupta deals in which they appeared to launder stolen Transnet and Free State provincial government money back home. It appeared to be a modus operandi.

But Mr Patel denied Worlds Window was party to a sham. He said the R31.5m was “for profitable mining”. He said: “They issued the share to us, but they might have done a fraud [sic].” He sent us a copy of Worlds Window’s purported share certificates.

Worlds Window sent its South African lawyers to investigate the fate of their money – but it only did this a full six years later, after the Gupta scandal blew up in SA. Mr Patel said the group was now considering taking legal action to recover the money.

Flying high

By early 2011, Worlds Window had registered two subsidiary companies here, and Goyal was a regular visitor.

The #GuptaLeaks show how Gupta employees made sure his travels were comfortable. They arranged his luxury airport pickups and Saxonwold meetings with South African Gupta brother Tony.

They hosted Goyal and his wife at their luxury Clifftop Lodge in Welgevonden Game Reserve in Limpopo. A helicopter was to transport the Goyals there, and the Guptas booked them into the lodge’s honeymoon suite, according to the leaks.

In 2011, Gupta staff chartered flights to carry the Gupta and Goyal families from Delhi to watch the Cricket World Cup final in Mumbai. They were joined by the family of a powerful Indian politician who was at the time a cabinet minister.

India beat Sri Lanka by six wickets.

Later that year, Goyal and the Guptas handled some travel arrangements for the politician’s adult son and the son’s wife when the couple visited Cape Town for Christmas and New Year. The Guptas paid for their stay at the luxurious Queen Victoria Hotel at the V&A Waterfront, the #GuptaLeaks show.

READ: Tegeta buyer ‘hid’ Gupta assets before

More recently, Worlds Window transferred ownership of one of its shell companies to the politician – who refused to explain the deal to us (see story below: #amaBhungane: Indian politician’s deal with Gupta partner).

In 2014, when Tony Gupta needed a helicopter for a 250km trip in the western Indian state of Gujarat, he called upon Goyal. Goyal wielded his apparently significant influence there: A senior Gupta staffer emailed him the travel details and Goyal forwarded this to billionaire industrialist Gautam Adani.

Adani and his global industrial group of the same name form a political and financial powerhouse in India. He is reported to be close to Indian Prime Minister Narendra Modi.

Goyal wrote to Adani to vouch for the Gupta staffer: “He is Ajay’s [one of the Guptas] brother can you help pls. Thx nd rgds.”

Adani quickly wrote back: “I don’t have helicopter, but if he require the plane let me know and will provide him… Gautam.”

Not two years later, the Guptas and Adani cobbled together a would-be weapons deal that, as we previously reported, was set up to enrich them at the expense of South African state arms manufacturer Denel.

Down to business

Worlds Window’s apparently pseudo mining investments and Goyal’s South African visits seem to have set the framework for a more lucrative business – money laundry.

Some time back, amaBhungane received an anonymous tipoff implicating Worlds Window and the Guptas in ports corruption in South Africa in 2011.

It said: “ZPMC has been inflating prices of their cranes at the ports, particularly the seven cranes purchased for port of Durban, by more than 15% to accommodate bribes that included many senior Transnet officials.”

ZPMC is the name commonly used by Chinese state-owned crane manufacturer Shanghai Zhenhua Heavy Industries.

Our anonymous tipster described the alleged role of “a representative of the Guptas” who arranged kickbacks through a Worlds Window account in the UAE.

This was Naveen Agrawal, a long-time director of the Worlds Window group. He did not respond to our questions.

We found one chain of correspondence in which a group of people discussed ZPMC’s crane bid. They named a “Naveen” who appeared to advise ZPMC on how to engage with Transnet on another crane tender.

We also found an “agent agreement” – often of a cover for bribes and kickbacks – between ZPMC and a UAE-registered company called JJ Trading. The contract and related documents explain how the cranes were only worth $81m (R570m then), but ZPMC inflated the price to $92m (R650m then) to make room for “commissions and fees” for JJ.

The person who signed on behalf of JJ was not identified.

At about the same time, a senior Gupta staffer emailed Goyal a confidential Transnet document, outlining a separate, upcoming crane tender.

The document metadata indicates it was drafted by an employee in Transnet’s Office of the Chairperson and Group CEO. Then Transnet chief executive Brian Molefe told us he did not know how the Guptas got it. For years, Molefe has been questioned for his proximity to the Guptas.

ZPMC denied it was party to corruption; Transnet said it was investigating, and Goyal did not explain the latter email exchange when we asked.

So, who was JJ Trading, the company that had signed the “agent” agreement with ZPMC? Was it controlled by Worlds Window as the tipoff suggested?

A desert mystery

Ram Ratan Jagati probably did not intend to become the public face of an international money laundromat.

His social media profiles identify him as “manager at JJ Trading”, but no-one answered his or JJ’s phones or emails. We were left to piece together his profile using snippets of information online and in the #GuptaLeaks.

JJ’s website advertises its experience as a trader of scrap metal, rice, beans and other commodities.

Jagati’s social media profiles show him to be balding, moustached, bespectacled and neatly dressed. He appears to live in Sharjah, in the UAE, but states that he comes from Ahmedabad in India.

                                               ^{Ram Ratan Jagati, JJ Trading “manager”.}

JJ is registered in the UAE’s Hamriyah Free Zone, a financial haven that keeps company owners’ identities a strict secret.

Jagati lists at least 41 Worlds Window staffers and directors as his Facebook friends – but emails in the #GuptaLeaks show he was more than just a “friend” to the group, particularly when moving money for the Guptas.

In one email to Jagati, a Worlds Window director said: “Dear Ram Ratan. Please provide [$1m] to Arctos.” The director copied in a Worlds Window administrative employee.

Arctos Trading is one of the two Worlds Window subsidiaries established in SA. It managed a Gupta mine in Mpumalanga.

Jagati replied with proof of a $1m wire transfer from the UAE-registered IMR General Trading to Arctos. He copied two Worlds Window staffers.

Goyal at least part owned IMR, the #GuptaLeaks show. One online UAE business list recorded “ramratanjati@yahoo.com” as IMR’s contact – a misspelling of Jagati’s actual email address. Another listed “admin@worldswindow.cc”.

Jagati’s proof of payment from IMR to Arctos claimed the money was for the “purchase of metal scrap”, but a Worlds Window staffer then forwarded this to a Gupta manager “for your reference”. A trailing email notes that it was “payment for [Bank of Baroda] instalment” – contradicting Jagati.

In other words, money had moved but the commercial explanation was a fiction. And the sequence of events reveals Jagati to have been a Worlds Window and Goyal factotum.

^{Another apparently fictional deal, handled by JJ Trading’s manager Jagati for Goyal and Worlds Window, evidencing Jagati’s place in their international network.}

More emails underscored this.

Shortly after Transnet gave ZPMC the crane contract, a #GuptaLeaks accounting document appears to record JJ’s receipt of $969 086 (R8m then). It is described as “Shanghai Zhenhua Heavy Industries”, ZPMC’s full name.

Shortly after this, a Gupta accountant emailed his colleagues instructions on how to distribute a larger sum – $3.3m, apparently including the ZPMC payment – to three Gupta-owned companies in India.

One of the Gupta staffers then sent the email to Jagati and a senior Worlds Window accountant, and JJ promptly wired the funds from its account at HSBC to the three Gupta companies.

JJ and, again, Jagati appeared to answer to Worlds Window.

                     ^{Worlds Window and the Guptas used JJ Trading and Jagati to move kickbacks.}

It wasn’t me

No, answered Goyal. “I am not the director, promoter or even employee of JJ. We [Worlds Window] never received any money either from JJ or Gupta [or] ZPMC.

“I have neither met any officer/executive of ZPMC or Transnet, [and] we were never involved in any Transnet related business so I will be highly obliged if you don’t link my name.”

He added: “For your satisfaction, we may provide you even certificate from chartered accountant that whatever business Worlds Window did with Gupta, it was 100% as per law. Even we declare all investment in our account books or whenever required informed government authorities also [sic].”

For several weeks, he did not come up with the promised accountant’s certificate. Then, in response to final questions last week, he again promised to produce one, supposedly to clear Worlds Window.

He told us: “You are misusing your writing power. With all respect, I have doubt on your intention.”

He later appeared to accuse us of drafting fiction: “Let me appreciate you are good story maker.”

Transnet spending spree

The next year, 2012, the Chinese state-owned locomotive manufacturer China South Rail (CSR) was bidding to sell Transnet 95 new locomotives.

Goyal and the Guptas got involved, #GuptaLeaks emails show.

In January, a CSR deputy director emailed Transnet CEO Molefe and CSR’s vice president. He attached a letter requesting to visit Transnet sites in South Africa.

The CSR deputy director forwarded the email to a Worlds Window group director, Rupesh Bansal.

Bansal forwarded the email to a Worlds Window staffer, commenting in broken English: “Please provide this letter copy along with update on previous email as required by Piyoosh Ji.” Recall that this is Goyal’s first name. “Please suggest him that this is the letter is sent and the points mentioned in letter are practical and to be pursued by CSR.”

The Worlds Window staffer passed the email to Goyal’s assistant, who passed it on to a senior Gupta manager and to Ajay Gupta’s son.

Meanwhile, Molefe responded – politely and appropriately – to CSR. Someone also sent this email to Worlds Window and Goyal’s assistant. She passed it on to the Guptas.

Evidently, Goyal and the Guptas’ mutual interests extended well beyond mining.

Goyal failed to explain when we asked him too.

CRRC Corporation Limited, which absorbed CSR in 2015, has not answered our questions.

We could not reach Bansal for comment.

Kickbacks

In October 2012, Transnet awarded CSR the R2.7bn 95-locomotive contract.

And, as we previously reported, CSR then started kicking 20% of the contract back to JJ and a related company called Century General Trading.

Century General is also registered in a UAE financial secrecy haven. Like JJ, its website claims that it trades scrap metal, grains and beans. And Ramratan Jagati – the JJ “general manager” who takes orders from Worlds Window and spends Goyal’s company’s money – registered its website.

A joint Worlds Window-Gupta accounting document, discussed later, shows CSR made one of its first payments – $6m (R50m then) –  to Century General in December 2012. In the following weeks, JJ and Century General wired at least $2m (R17m then) from their accounts at HSBC in Dubai to the Guptas’ front companies.

Next, Transnet ordered another 100 locomotives from CSR. These ones cost Transnet R4.4bn, and CSR started paying 21% of this to Jagati’s JJ and Century General.

And in 2014, Transnet ordered another 359 locomotives for R18.1bn. CSR started funnelling a further 21% to JJ and Century General.

All in, these non-descript little UAE metal, rice and bean dealers stood to earn a whopping R5.3bn in CSR payments. By comparison, this was more than three times the R1.7bn annual turnover for Worlds Window Impex, at the time.

JJ and Century General were to keep a 15% fee (R795m) on the Chinese kickbacks, the leaks show, way outperforming Worlds Window’s 3% operating margins (R57m) on its scrap metal.

The laundromat appeared to dwarf the Worlds Window front office.

Corporate espionage?

But Mr Patel, the Worlds Window insider, tried to convince us there was nothing out of the ordinary here.

He said of JJ: “They are professional consultant. They are associated with CSR for the last 10 years.

“JJ is not involved with Transnet deal. JJ has nothing to do with Gupta or anybody, and I don’t think you will find any deal between JJ and Gupta.

“CSR used to take help of JJ. They used to take help in Europe, Africa, India, Pak…, everywhere JJ’s consulting for them.”

We thought JJ just traded metal, rice and beans.

Nevertheless, things went awry in South Africa, Mr Patel said: “In South Africa, CSR cancelled their agreement with JJ. They say we cannot go ahead with you in South Africa. In this case JJ did lot of hard work. They have lot of expenditure for CSR, before tender.”

What sort of work?

“They hired eight or 10 guys in South Africa also, and they selected, they interviewed four or five black partners for them.”

How would a UAE scrap metal trader or its non-descript manager Jagati qualify for that job?

“Because CSR used to tell them: ‘Can we hire this consultant?’ Because being a government company, CSR cannot pay any money before tender.

“So, before tender they were required to hire so many people to do the research and consultancy and internal information. So, they hire JJ to finance all this information.

“So they hire people for intelligence. So, how much Bombardier will quote? How much GE [General Electric] will quote? So, even for this type of information, they hire people.”

Bombardier and GE were competing bidders on the Transnet locomotive contracts.

“They [JJ] have some intelligence system, as per my knowledge. Definitely they use someone to spy on somebody. Definitely. As per my knowledge. So many services.”

So many.

It was unfortunate that Mr Patel did not want to be named or explain more clearly the source of his apparent knowledge about JJ, so we asked him if he could get us documents detailing the alleged dispute between JJ and CSR.

He chuckled nervously: “Awww, ha ha ha. Why you want to? I will prefer if you write all Gupta instead of JJ. I would rather not.”

How can we reach JJ?

“Let me check, because I don’t want there to be any harm to JJ. Because I know because of internal story, JJ is in loss because of this deal, because they have been cheated by [CSR].”

“Flying Money”

Intrigued, we dug deep into the #GuptaLeaks to try to understand Worlds Window and the Guptas’ dealings.

We found huge sums of money flowing between the two groups.

Some of it was for legitimate business, as Goyal claimed. For example, Worlds Window subsidiary Arctos formed coal mining partnerships with two Gupta companies and managed their coal mine in Mpumalanga.

But other money flows were suspicious.

For example, we found a spreadsheet in the #GuptaLeaks, titled “Worlds Window”. It was attached to an email from one Gupta executive to her senior colleague. In the email, the executive typed: “Is this what u looking for?” No further context was given.

The spreadsheet is a ledger, recording 251 transactions from January 2010 until February 2013.

It looks a lot like traditional “hawala” bookkeeping.

DOWNLOAD: The Hawala alternative remittance system and its role in money laundering

Hawala is the name for an ancient form of money transfer developed in south Asia. It is still used today, often legitimately, as an alternative to formal banking systems. But because the money is not remitted through formal channels, it is a popular way to launder money.

The Chinese developed a similar system, known as “flying money”.

As a simple example, a man in the UAE wants to pay a woman in South Africa. He gives his money to an Emirati hawala broker, or “hawaladar”.

The Emirati broker will then send a message to a South African broker who will give the money to the woman there, minus a fee.

Both brokers will have many clients remitting money in both directions. Each broker will keep a running balance of how much he owes the other broker. Over time, the brokers will settle the difference.

The Gupta-Worlds Window “hawala” ledger describes a group of Worlds Windows-linked entities in one column. Other columns describe the transactions. Sometimes the explanations are cryptic, and sometimes they are clear. Overall, it appears as if the Worlds Window-linked “brokers” were transacting with Gupta-linked entities to remit money to and from South Africa, India and the UAE.

In some entries, it is easy to see how Gupta companies paid Worlds Windows companies in one country, and on the same day, the Worlds Window companies paid the Guptas the same amount in another country, and vice versa.

Thus, money was effectively “beamed” across borders.

Just like a traditional hawala ledger, this one keeps a dollar balance of how much the Guptas owed Worlds Window.

In total, $74m (R660m then) flowed into the account, and $74m flowed out, settling up the balance over time.

While the ultimate source and destination of the transactions is not always clear, some ZPMC and CSR payments can be traced from the Chinese companies, through JJ and Century General, for remittance to the Guptas in India, the UAE and South Africa.

^{The Worlds Window-Gupta “hawala” transactions, including remittances derived from Transnet contractors.}

A R76m roundabout

A number of transactions over six days in November and December 2011 were noteworthy. The transfers were recorded in the “hawala” ledger and are largely corroborated by other records in the #GuptaLeaks.

On November 30 and December 1, Gupta mining company Westdawn Investments transferred R44m to Worlds Window’s South African subsidiary Arctos. This was broken into four smaller amounts.

Immediately, Arctos transferred R44m to the Guptas’ Tegeta, broken into four differently apportioned amounts.

Tegeta kept R14.1m and immediately transferred R29.9m to the Guptas’ Oakbay Investments, which quickly parked R20m in an account at the Bank of Baroda in Sandton.

^{Over six days, the Guptas suspiciously roundtripped R76m through their group companies, routing all of it through a Worlds Window subsidiary.}

Four days later, Oakbay and a Gupta company described as “Islandsite” transferred R32m to Worlds Window’s Arctos. This was broken into five smaller amounts. Immediately, Arctos passed this on to Idwala Coal, a Gupta company, broken into three amounts.

Idwala immediately passed the R32m on to Oakbay, again broken into three amounts.

All in, the Guptas had routed R76m in a circle, through a number of their own companies, funnelling all of it through Arctos and back to their Tegeta and Oakbay.

The money flows appear to be artificial. We do not know their purpose, but in the process, the Guptas and Arctos employed three techniques common to illicit finance.

“Smurfing”: A money launderer breaks up and moves the money in small amounts to avoid detection.

“Layering”: Money is moved between numerous different accounts to obscure its source and destination.

“Roundtripping”: A series of transactions is made between companies serving to boost their revenues without real commercial benefit.

Middlemen

Gupta and Worlds Window companies often appeared to lend each other money, but the circumstances were suspicious, raising the concern that the loans could have been a fake cover for money movement.

If so, we again do not know the true motivation behind the flows.

In one example in 2013, Oakbay appeared to pay Arctos R86m. But the Guptas’ staff had a problem six months later: Their auditors needed documents to legitimately explain the payment, but there were none.

So, a Gupta executive emailed a Worlds Window manager a loan contract with non-descript terms. She said: “Please sign agreement as we did last year also.”

In at least two other cases, Worlds Window’s South African subsidiaries appeared to lend Gupta companies R16m and about $32.6m (R250m then).

In fact, the Worlds Window’s subsidiaries again appeared to act as unnecessary middlemen.

They channelled loans, originally from Bank of Baroda to the Worlds Window subsidiaries, straight on to the Gupta companies. The Gupta companies in turn repaid 9% interest to the Worlds Window companies, which passed this back to the bank.

In a 2014 email, a senior Gupta manager explained to Tony Gupta that, at times, Piyoosh Goyal had paid them “through [Baroda] loan”.

If so, it is possible Goyal or Worlds Window placed a fixed deposit with Baroda abroad. Baroda in South Africa then lent the money to the Worlds Window subsidiaries, which passed it on to the Guptas.

Indeed, Baroda described the $32.6m as a “loan against fixed deposit”.

If Worlds Window in South Africa failed to repay Baroda the underlying loan amount, the bank could simply claim the fixed deposit. Thus, money would have been moved from abroad to the Guptas under the guise of a loan, and Baroda would have earned itself a 9% fee.

We have found no evidence that the underlying loans were repaid to Baroda.

Loans from banks against fixed deposits are used for various legitimate reasons, but they tend to be between related companies, not unrelated parties in different countries.

The technique can also be abused to quietly move money across borders without detection, stymieing money laundering investigators who call this a “loan back”.

                      ^{Worlds Window appeared to use a “loan back” scheme to get money to the Guptas.}

The Guptas used Baroda loan backs to move money in other suspicious circumstances, the #GuptaLeaks show.

For instance, the Guptas at times placed hundreds of millions of rand sourced from JJ and the Transnet kickbacks into fixed-term deposits at Baroda in both Dubai and South Africa. Using these deposits as collateral, Baroda would typically lend 95% of the value of the fixed deposit to another Gupta company.

Without the #GuptaLeaks revealing the connections between the fixed deposit made by Gupta Company A to the loan made by Baroda to another Gupta Company B, it would be difficult for an investigator to follow the money trail from Company A to Company B as there would be no direct transfer.

Baroda’s intermediating the effective transfer between the two appears often to have served to obscure such money flows. Baroda did not respond to our questions.

Fallout

In the end, things did not work out for the Worlds Window launderers.

“Gupta’s have not just cheated South Africans but also cheated Indians,” Goyal told us.

“We went into partnership with the Gupta brothers for mining, and we were cheated by them in the business.”

Regarding one of their coal deals, he said: “After [them] receiving our payment, they have not allowed us to get any proceeds from the mine. We were not allowed to go on the property, and also they threatened us for not to even enter South Africa as they control things in the country [sic].”

He said the Guptas were now “illegally” selling Worlds Window’s coal.

“I have not even visited South Africa since last four years and we are now pursuing legal cases against Guptas.”

Worlds Window laid a criminal charge with the Hawks against a senior Gupta manager who allegedly stole R7.2m from one of its South African accounts in 2015. A Hawks officer confirmed he was investigating the charge.

Goyal told us: “You know very well I am in fighting with Gupta since approximately March/April 2013. But in your story, you are mentioning [payments in] 2014/2015. May I know the reason of that? I assume definitely 2013 is not fitting in your story so you prefer 2015.”

Indeed, records of Goyal’s trips to South Africa cease in the #GuptaLeaks from April 2013. But the leaks also suggest that, until late 2014, the money continued to flow between Oakbay and Arctos and JJ continued to pay into the Guptas’ UAE accounts.

But, nearly three years after the first Transnet kickbacks flowed to JJ’s accounts, HSBC shut down JJ and Century General’s accounts, according to a recent Wall Street Journal article.

HSBC told us: “To the best of our knowledge, HSBC previously exited, is in the process of exiting, or never had a banking relationship with JJ Trading [or] Century General Trading.”

But HSBC’s action seemed to be a minor inconvenience for the Guptas, who rerouted the kickback flow from JJ and Century General in Dubai to the HSBC accounts of a Gupta-related company, Tequesta, in Hong Kong.

By then, CSR had paid JJ and Century R1.6bn of the intended R5.3bn – and the #GuptaLeaks show substantial evidence of this flowing into the Guptas’ offshore accounts.

In a 2015 email, Worlds Window director Rupesh Bansal – the same one who received earlier CSR-Transnet correspondence and passed it on to Goyal – emailed CSR’s vice president. Bansal attached a spreadsheet that consolidated CSR’s payments to JJ and Century General.

The CSR man forwarded this spreadsheet to a Gupta email address.

Last week, Goyal said: “I repeat, Worlds Window neither control JJ nor Century General and never taken even a single penny from anybody on account of supply to Transnet.

“Apart from mining,” he added, “we had no areas of mutual interest with [the Guptas]”.

#GuptaLeaks: Liverpool company owns 49% of Indian firm implicated in kickback scheme

The Guptas used what looks like an international money laundering network to move their wealth. The network reaches back to the UK.

^{amaBhungane and Scorpio}

Britain’s biggest metal recycling firm holds a 49% stake in Indian firm Worlds Window, which moved hundreds of millions in kickbacks around the world for the Guptas.

The money flows are exposed in a new amaBhungane and Scorpio investigation (scroll up), based in large part on the #GuptaLeaks.

The British firm, European Metal Recycling (EMR), is a Liverpool-based business. It says its “heritage” reaches back to the 1940s. It turns over more than £2bn a year, and is largely owned and run by one family, the Sheppards.

EMR bought 49% of Worlds Window Impex India (the parent company) in 2008. EMR’s audited financials state that it “exercises significant influence over the operating and financial policies of” Worlds Window.

EMR has regularly injected capital into Worlds Window, EMR’s financials and other records show.

There is no evidence that EMR knowingly contributed to Worlds Window’s suspicious financial activity.

Between 2010 and 2015, Worlds Window directors and staff involved themselves in private bids for multibillion-rand crane and locomotive tenders at state-owned logistics company Transnet.

Offshore shell companies

The Worlds Window directors and staff then worked with offshore shell companies, which received “agent fees” – structured like kickbacks – and helped to disperse the money around the world, including to businesses associated with the Gupta family in South Africa and abroad.

Together, the Guptas and Worlds Window also moved more millions in many suspicious transactions, according to our investigation. These transactions bore multiple hallmarks of money laundering, although the source of the money was not always known.

The Guptas are friends with president Jacob Zuma and kept Zuma’s son on their payroll. They have been accused of grand corruption here.

This week, the Asset Forfeiture Unit moved to seize R1.6bn in assets linked to the Guptas and firms they did business with. It said it hoped to seize at least R50bn in 17 related cases under investigation.

ALSO READ: 14 Gupta linked companies and individuals to have their assets frozen

EMR responded to our initial questions. It said that before 2008, it had “a pretty long established trading relationship with Worlds Window who effectively acted as a sales agent into India”.

It said: “EMR is disturbed to hear press reports of the alleged involvement of Worlds Windows in money laundering, which we became aware of late last year through #GuptaLeaks. We are currently carefully looking at this investment as a consequence.”

We had asked EMR if it also had a business relationship with a number of offshore companies central to the laundering of Transnet kickbacks. These included JJ Trading, Century General Trading and IMR General Trading, all registered in UAE financial havens.

EMR’s response was confusing. It said: “EMR has no involvement with any of the companies mentioned, however a few companies have been counterparties in the legitimate trade of scrap metal.”

We asked it to explain, name its trading partners and provide evidence of legitimate business. It did not.

EMR spokesperson Olivia Healey sent us a general response, referring to a statement in EMR’s audited financials in which it classifies Worlds Window companies as “associate undertakings” because EMR “exercises significant influence over the operating and financial policies of the company”.

She said this statement “misrepresents the reality of this situation”.

She continued: “When consolidating our accounts, we work on standard assumptions as follows: ‘An associate is an entity in which the group has significant influence, but not control, over the operating and financial policies of the entity. Significant influence is presumed to exist when the investor holds between 20% and 50% of the equity voting rights.’ The important word in here is presumed. So, for the purpose of accounting, Worlds Windows is presumed to fall into this category as we have a significant minority interest.

“The reality of the situation is that [EMR] had no board representation and exercised no management control over the business. This financial investment was effectively managed by a post audit financial review which had not raised any red flags to date.

“So unfortunately we are simply unable to assist you any further with your enquiries.”

Among our questions, we had asked EMR whether it knew about or had influence over Worlds Window’s business relationship with the Guptas, the apparent laundering of kickbacks via JJ and Century General and whether it condoned other suspicious money flows, outlined in our investigation (scroll up).

#amaBhungane: Indian politician’s deal with Gupta partner

The Guptas chartered Cricket World Cup flights and bankrolled a luxury hotel stay for the family of Kapil Sibal.

^{amaBhungane and Scorpio}

Former Indian government minister and leading Congress Party politician Kapil Sibal has refused to explain a business deal with Worlds Window, a firm that apparently helped the South African Guptas to launder hundreds of millions around the world.

The suspicious money flows are explained in a new investigation (scroll up) by amaBhungane and Scorpio, based mainly on the #GuptaLeaks.

There is no evidence that Sibal was party to money laundering or corruption, but it is worth noting his refusal to explain a deal with Worlds Window, an Indian scrap metal and logistics conglomerate.

Sibal is also a top lawyer in India.

Between 2010 and 2015, hundreds of millions of rand flowed between companies linked to the Guptas and Worlds Window.

The money included Chinese kickbacks for Transnet crane and locomotive contracts. The transactions moved money between South Africa, China, UAE and India.

Lacking commercial substance

Many transactions appeared to lack commercial substance, although the source of the money was not always known.

Worlds Window was founded by Indian national Piyoosh Goyal.

After entering business with the Guptas in 2010, Goyal visited South Africa often. The Guptas also visited India.

In 2011, Gupta staff chartered flights to ferry the families of Sibal, Goyal and the Guptas between Delhi and Mumbai, for a Cricket World Cup match.

Sibal had been a government minister since 2004 and was, at that time, in charge of two portfolios: communications and information technology and human resource development. He was also a member of parliament.

Sibal was joined by his wife and adult son Akhil, also a lawyer.

Sibal senior said: “I have never had any dealings financial or otherwise with the Guptas. I have met Mr Gupta in Delhi only once when my friend Piyoosh Goyal invited me to watch the Cricket World Cup.

No Gupta invite

“We did not travel on the invitation of Mr Gupta nor am I aware of any charter by him. My wife, Akhil and I went on the invitation of Piyoosh. Even while watching the match we did not sit with Mr Gupta nor go to the ground with him.”

Akhil also said he did not know the Guptas had chartered the flight.

Later that year, the Guptas paid for Akhil and his wife to stay at the luxurious Queen Victoria Hotel at Cape Town’s V&A Waterfront over Christmas and New Year, the #GuptaLeaks show.

Akhil said: “I had requested Mr Goyal to help with arranging a car in Cape Town, and offered to pay the charges… I have known him for several years, and he is my client.”

The leaks show Goyal passed the request on to Gupta staffers, who arranged the car.

Akhil said he tried to pay in full for the hotel accommodation.

But, he said: “At the time of checking out of the hotel in Cape Town, when we asked to settle the bill for incidental expenses at the hotel, apart from the room rate, which was already settled by us in advance, the hotel staff informed us that the incidentals had been settled at the instance of Mr Goyal.

“Subsequent to my return to India, I discovered the pre-paid charges for the accommodation were also reversed. None of this was done at my request. Despite my remonstrations with Mr Goyal, on his insistence, I accepted his generous gesture.”

The #GuptaLeaks show the Guptas’ company Sahara actually paid. Akhil said he had no knowledge of this.

In November 2013, India’s Central Bureau of Investigation (CBI) charged Goyal with allegedly bribing a senior state banker for a loan.

The CBI reports to a number of ministries, including law and justice. Kapil Sibal was law and justice minister from May 2013 to May 2014.

There is no evidence to suggest Sibal interfered in Goyal’s case. In fact, CBI told us that it filed a charge sheet with a Mumbai court in 2015.

The case is still outstanding.

The Grande Castello deal

Indian corporate records show that, in February 2017, Sibal became a director of Grande Castello. Until then, Grande Castello had been a 100% Worlds Window subsidiary. It appeared to be a shell company, without assets or revenues.

We asked Sibal to explain his directorship of “Worlds Window subsidiary Grande Castello”.

He was curt: “You don’t seem to have your facts right.”

We provided him with details from the corporate records and asked him which facts were incorrect.

He stonewalled again, saying: “I have never been a director of any subsidiary company of any company.”

We provided proof the corporate register listed him, not a different Kapil Sibal.

He did not respond.

On further investigation, we discovered that Worlds Window had transferred ownership of Grande Castello into Sibal’s name in November 2016.

We explained this to him asked him to explain in light of his previous responses. We also asked him to explain substantial new loans on Grande Castello’s balance sheet and name the lender.

He said: “From your last mail, it is apparent that your assertion regarding Grande Castello in your first mail was incorrect. You now abandon that position, assert a new fact, and still wrongfully accuse me of lying.

“Sans a relevant factual foundation, you nevertheless proceed from conjecture to wild speculation and deem it reasonable to ask unwarranted questions, entirely ignoring the categorical responses already provided to you, which sufficiently answer your queries.

“I am now convinced that your intent is mischievous and your approach less than objective. I don’t intend to correspond with you any further.”

• Scorpio is the Daily Maverick’s new investigative unit. If you’d like to support its work, click here.

• The amaBhungane Centre for Investigative Journalism is an independent non-profit. Be an amaB supporter to help it do more. Sign up for its newsletter to get more.

In addition, MultiChoice increased its annual payment to ANN7 from R50m to R141m.

The payments came after the family seemingly assisted former communications minister Faith Muthambi in getting President Jacob Zuma to transfer certain broadcasting powers to her, something MultiChoice was lobbying the minister for.

ALSO READ: #GuptaLeaks: How Ajay Gupta was trusted with crafting SA’s global image

Following the transfer of powers, Muthambi controversially pushed through a decision in favour of unencrypted set-top boxes, which benefitted MultiChoice.

Muthambi’s decision flouted her own party’s policy on the issue. The ANC supported encryption – required for pay-TV – to promote competition in the sector.

After a lengthy court battle, the Constitutional Court earlier this year ruled that it was within Muthambi’s right to make policy decisions affecting the broadcasting sector.

MultiChoice however deny that there is any relationship between the policy outcome in its favour and payments made to ANN7. In a statement, the company said: “MultiChoice rejects your insinuations in the strongest possible terms.”

CLICK HERE TO READ THE COMPANY’S FULL RESPONSE

The #GuptaLeaks reveal that: 

– MultiChoice executive Clarissa Mack (who had since resigned) sent policy documents directly to Muthambi, who shared them with Gupta lieutenant Ashu Chawla, setting out proposals for Zuma to transfer broadcasting powers back to Muthambi after he split the communications portfolio into two departments in 2014;

– In September 2015, six months after Muthambi confirmed there would be no encryption, MultiChoice increased its annual payment to the Guptas’ controversial ANN7 channel from R50m to R141m – at a time when the channel had failed to win a significant slice of DStv’s news audience, and whilst the channel received widespread criticism over the quality of its content;

– MultiChoice CEO Imtiaz Patel was once a director of a company with the youngest Gupta brother, Tony, and Zuma’s son Duduzane. Patel says his appointment was done without his permission, and CIPC records show that he resigned from the company on the same day he was appointed.

New ANN7 owner Mzwanele Manyi, who took over the station this year in a vendor-financed deal, said: “The so-called Gupta emails have NOT been authenticated. What if all this is part of a larger plot designed to undermine alternative voices as in ANN7?”

The Guptas did not respond to questions but have previously dismissed the #GuptaLeaks as “not authentic”.

Pay for Play

MultiChoice has been in the news this week for paying the Guptas R50m per annum for ANN7.

The pay-TV giant denied signing a “third channel amendment agreement” which would have taken ANN7’s annual income from MultiChoice to R150m, but neglected to disclose the existence of a “fourth channel amendment agreement”.

This document was unearthed in-between the more than 200 000 emails that have become known as the #GuptaLeaks.

The agreement was signed by MultiChoice’s Glen Marques and Nazeem Howa for Infinity Media Networks, ANN7’s holding company, on September 9, 2015.

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The agreement not only ensured that MultiChoice would fork out R141m a year for ANN7 from April 1, 2016, but also guaranteed the Gupta-controlled company a “once off amount” of R25m.

This had to be paid to Infinity within seven days of the contract being signed, according to the agreement.

Two broadcasting insiders who had previously been involved in MultiChoice’s negotiations with news channels say such a “once off amount” is unheard of in the industry.

“The once-off fee you refer to is a pro rata payment in terms of an amendment agreement. The amendment agreement was entered into in order to assist with improving production quality,” MultiChoice said about the payment.

ALSO READ: #GuptaLeaks: How the family encircled Lynne Brown

MultiChoice also maintains that its fee for ANN7 represented a “fair value” at the time of signing the fourth contract amendment, given the cost of running a 24-hour news channel.

“After several rounds of negotiations over a period of three years, during which we developed an understanding of the channel’s operating costs and the need for improvements in production quality over time, the final fee was set,” says MultiChoice.

MultiChoice admits that it made policy proposals to Muthambi, but the company says the majority of its suggestions were not taken up in later amendments to government legislation.

The company also denies that it was aware that Muthambi was forwarding MultiChoice’s suggestions to the Guptas.

“MultiChoice has absolutely no knowledge of the minister sending our proposals to any other person, and can in no way be held responsible for that,” says the company.

The issue at hand involves a long-running battle over whether government should favour either encrypted or unencrypted set-top boxes for the country’s digital migration process.

Critics of a policy supporting unencrypted set-top boxes argue that would-be rivals of MultiChoice can only compete with the latter’s DStv service if government enforces the roll-out of encrypted devices.

In December 2013, then-communications minister Yunus Carrim published proposed amendments to government’s digital migration policy that opened the door for encrypted set-top boxes.

But Carrim would not have the last say on the matter.

MultiChoice fingerprints in the #GuptaLeaks

After having created the separate departments of communications and telecommunications in May 2014, Zuma issued a presidential proclamation that transferred certain regulatory powers from Muthambi to Siyabonga Cwele, the then-telecommunications minister.

On July 18, 2014, only three days after the proclamation was published in the government gazette, Muthambi sent an email to known Gupta associate Ashu Chawla. She attached the government gazette containing the proclamation.

Minutes later, Muthambi again emailed Chawla, this time attaching a Microsoft Word document titled “Effect of presidential proclamation”. The document was forwarded by Chawla to Tony Gupta on the same day.

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The document’s metadata reveals that its creator was Clarissa Mack, MultiChoice’s then-group executive for regulatory and policy affairs. Mack created the document on July 17, the day before Muthambi forwarded it to Chawla. Mack was also the last person to have modified the file.

Mack wrote that when Zuma created the two departments, there was an “assumption … that broadcasting including digital migration would report to the Minister of Communications”.

“The proclamation published on 15 July 2014 did not give effect to this division,” complained Mack. She also made detailed suggestions with regards to how the relevant decision-making powers should be split between Muthambi’s and Cwele’s departments.

Mack’s letter made it clear that MultiChoice wanted key powers guaranteed by parts of the Electronic Communications Act to be transferred back to Muthambi.

“Broadcasting is regulated by the Electronic Communications Act, 2005 (Act No 36 of 2005). The ability to make broadcasting policy and issue broadcasting policy directions are set out in section 3 of this Act. These powers have been transferred from the Minister of Communications to the Minister of Telecommunications and Postal Services,” Mack stated.

“It is therefore the Minister of Telecommunications and Postal Service [Cwele] who will make policy and issue policy directives to Icasa for broadcasting, including public service broadcasting,” Mack added.

Muthambi lobbies the Guptas

Over the course of the next few months, Muthambi would send Chawla four other documents relating to broadcasting policy. Chawla forwarded most of these to Tony Gupta and Duduzane Zuma, the president’s son.

On July 25, Muthambi sent Chawla a Word document called “proclamtion [sic] new 18 July 2014”.

MultiChoice has admitted that this document was also penned by Mack.

Chawla forwarded the document to Tony Gupta and Duduzane Zuma on the same day. The document stipulated in detail which aspects of the Electronic Communications Act Muthambi wanted to be moved from Cwele back to her.

“These sections must be transferred to the Minister of Communications,” Muthambi wrote to Chawla.

The document specifically focused on the parts of the Act dealing with the Independent Communications Authority of South Africa (Icasa), one of the key government bodies involved in the digital television migration process.

ALSO READ: #GuptaLeaks: How the Guptas paid for Zuma home

Muthambi also sent Chawla a Word document called “Responsibility for Infraco and Sentech” on July 25, adding in her email that “Sentech’s signal distribution must rest with the Ministry of Communications”. Apart from Icasa, Sentech is a key role-player in the digital migration process, whilst Broadband Infraco is a state-owned telecommunications company.

This document was also created by Mack, according to MultiChoice.

Perhaps the most shocking aspect of Muthambi’s communications with Chawla came in the form of a document called “final proclamation 01 August”, sent by the minister to the Gupta associate on the date mentioned in the document’s title.

“See attached Proclamation that President must sign,” Muthambi wrote Chawla, who subsequently forwarded it to Tony Gupta.

The proposed proclamation stipulated that control over section 3 of the Electronic Communications Act needed to be transferred back to Muthambi, exactly as Mack had originally pleaded in her letter.

It also included the proposed changes to the Icasa Act that Muthambi had earlier sent to Chawla.

Asked whether Mack had also created this document, MultiChoice said: “As mentioned previously, MultiChoice, like other companies in the sector, regularly engages the industry regulator and government on matters that affect the broadcasting sector. This includes making proposals that may take a specific regulatory or legislative form. Yes, this document was sent to Ms Muthambi. The proposals were inserted in a legislative template we took from previous Proclamations in the Government Gazette. Again, many of our proposals were rejected.”

Muthambi uses her powers

On November 25, Zuma signed proclamation 79 of 2014. With the stroke of a pen, Zuma gave legislative effect to the transfer of some of the powers advocated for in Mack’s documents.

Muthambi wasted little time to make use of her newly-won policy powers. In March 2015, she stunned the broadcasting industry by issuing an amendment to government’s digital migration policy that went directly against her own party’s stance on the matter.

The new set-top boxes would “not have capabilities to encrypt broadcast signals,” declared a clause Muthambi inserted in the amendment.

Only two months before, at the ANC’s January lekgotla, the ruling party stated that it supported Carrim’s December 2013 policy, which had paved the way for encrypted set-top boxes.

In her response to News24, Muthambi admitted that she had received “submissions” from MultiChoice “sent … through Ms Mack”. But Muthambi says that she had “opened the door” for such submissions after the July 2014 proclamation caused “confusion and uncertainty” over which of the two departments would be responsible for broadcasting policy.

“The minister denies having been influenced by any person in the finalisation of the digital migration policy after consideration of all submissions by all interested parties…” Muthambi’s spokesperson said in a statement.

MultiChoice also said that it was one of “several stakeholders” who made submissions to the minister. Neither MultiChoice nor the minister indicated which other parties, apart from MultiChoice, made submissions to her office.

Muthambi also failed to address News24’s detailed queries about the emails she had sent to Chawla.

ANN7’s MultiChoice bonanza

On December 4, 2014, about a week after Zuma transferred the relevant broadcasting policy powers to Muthambi, Howa sent Tony Gupta a draft “third channel amendment agreement” for the deal between MultiChoice and Infinity.

This is the unsigned document that recently surfaced in the media.

The signed “fourth channel amendment agreement”, however, reveals that MultiChoice first agreed to increase the ANN7 fee to R100m per annum, before ultimately settling on an amount of R141m.

But it is the “once off” payment of R25m that has industry insiders most concerned.

“It is unheard of. I haven’t seen any once-off payments [in] any of the agreements with MultiChoice that I’d been privy to,” said one of the industry insiders.

The two sources, along with a third industry expert with direct knowledge of MultiChoice’s agreements with news channels, all agree that even R50m per year would constitute a bad investment for MultiChoice.

“What they pay ANN7 compared to what they get from it [the agreement] makes no commercial sense. It is such a bad channel and its viewership is so low that ANN7 actually needs to pay DStv to be on their platform,” said one of the sources.

Data obtained from the Broadcasting Research Council (BRC) shows that ANN7 secured only 8.93% of DStv’s news audience in 2014, and 10.98% in 2015. Its average daily viewership figures for 2014 and 2015 were 6 215 and 8 157 respectively.

SABC News held news audience shares of 19.90% (2014) and 22.46% (2015) and it drew 12 379 and 15 412 average daily viewers in those two years.

eNCA’s average daily viewership was 29 481 (2014) and 32 265 (2015) and it had a news audience share of 54.28% in 2014 and 52.71% in 2015.

Despite ANN7’s relatively low audience figures, MultiChoice maintains that it believed the fee increases were justified.

“We believe the fee represented fair value at the time, particularly considering that ANN7 was a start-up channel requiring significant initial investment to get off the ground – as opposed to others, who could leverage existing infrastructure and content,” said MultiChoice.

“We deny that there is any relationship between our submission on the proclamation, the channel supply agreement for ANN7, and any fees or increase in fees paid for that channel.”

Asked about his relationship with the Guptas, Patel said he couldn’t remember when he first met the Guptas.

“I did interact with them, in particular between approximately 2007-2010, and our relationship tapered off after that. I can’t recall attending any Gupta social functions after about 2010, except for the wedding in 2013,” said Patel.

• Do you have information for our investigative journalists? Send an email to tips@24.com 

• News24 is published by Media24. Both Media24 and MultiChoice are Naspers companies.

VIEW ALL THE RELATED DOCUMENTS: 

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The Gupta family and some of their associates have established an extensive network of front companies in and around Dubai that has been used to conceal and allegedly launder hundreds of millions of rands in dubious payments linked to government contracts in South Africa.

A News24 investigation has confirmed that at least six Gupta-linked companies registered in the United Arab Emirates (UAE) are shell companies that either list fraudulent addresses or whose business premises are rarely, if ever, manned by actual employees.

At least R760m in payments linked to contracts from South African state-owned companies and government departments were channelled through some of these companies, documents contained in the #GuptaLeaks have shown.

News24 travelled to Dubai to try and establish whether any of these companies at the centre of alleged money laundering linked to state capture actually exist.

– Dubai: The Guptas’ city of shells

Our investigation has confirmed what some South Africans with knowledge of the Guptas’ business dealings have long feared, namely that the Guptas and some of their associates are deliberately flushing alleged ill-gotten gains through their shell companies in the UAE because of the country’s strict financial secrecy laws and favourable tax provisions.

The Transnet millions

One of the companies News24 visited is JJ Trading, which, according to earlier #GuptaLeaks reports, received at least R760m in alleged kickbacks from large Chinese companies contracted to Transnet, South Africa’s state-owned rail and logistics operator.

Unlike most of the other Gupta-linked shells, JJ Trading actually has a website. It describes the company as a trader in “agro products” and scrap metal.

The website also lists an address for JJ Trading in the Hamriyah Free Zone in Sharjah, about 50km north of Dubai. Hamriyah is one of more than thirty free zones, or free-trade zones (FTZs), located in the UAE. These zones allow businesspeople from abroad to establish companies with 100% foreign ownership and also offer attractive tax perks.

However, when News24 visited the Hamriyah Free Zone’s main entrance, the guards on duty told us that no company by the name of JJ Trading has premises there.

The queries we sent to the email address and the cellphone number provided on the company’s website went unanswered.

Milking the Free State

We also tried to locate the offices of Global Corporation, Accurate Investments and Fidelity Enterprises.

These three Gupta shells were used to launder tens of millions of rands in proceeds from the Free State provincial government’s failed Vrede dairy project in order to ultimately help pay for the Guptas’ lavish wedding party at Sun City in 2013, according to an investigation by amaBhungane.

Payments from Accurate Investments to Brookfield Consultants, a US-based company linked to relatives of the Guptas, have also attracted the attention of the Federal Bureau of Investigation (FBI), the Financial Times recently reported.

According to documents in the #GuptaLeaks, Global Corporation and Accurate Investments supposedly share the same address in a building next to a lagoon in the Emirate of Sharjah, Dubai’s neighbouring emirate.

But the address led us to a residential tower, and the guard at the reception informed us that there are no companies operating out of the building.

Fidelity Enterprises, which processed more than R30m of taxpayers’ money milked from the Free State diary project, also turned out to be nothing but a front. Business owners in Al Quoz, an industrial area south of Dubai’s city centre where the company is supposed to be located, told us that Fidelity’s address is incorrect and that they’ve never heard of such a company in the area.

Nobody home…

When we did manage to find an actual office for one of the Gupta shells, Griffin Line General Trading, the door was locked and there was nobody inside.

The company is situated in an office tower in Dubai’s main business district and, if its website is to be believed, trades in rice, spices and other foodstuffs.

But judging by documents in the #GuptaLeaks, Griffin Line has mainly been used to settle some of the Guptas’ accounts with travel agents and hotels.

An office worker from another company on the same floor told us that they sometimes see a woman at Griffin Line. We sent the company queries through a portal on its website, but it went unanswered. The Guptas also did not respond to queries emailed to them.

News24 ultimately spent a week chasing from one Gupta-linked company to the next without encountering a single employee.

For a network of companies that has received nearly a billion rand in revenues linked to public expenditure in South Africa, the Guptas’ UAE-based businesses are eerily deserted.

*News24’s trip to the UAE was made possible by a grant from the Taco Kuiper Fund for Investigative Journalism, administered by Wits Journalism.