Audit firm to be investigated by regulator
This is the third in a series of articles on corruption and irregular money flows from PRASA's dealx6inef xgs with Swifambo Rail Leasing. It follows the auditors and lawyers who cashed in on corruption at the Passenger Rail Agency, neglecting their professional duties.
The Independent Regulatory Board for Auditors (IRBA) has launched an investigation into the activities of audit firm WKH Landgrebe, accused of playing a key role in corruption at the Passenger Rail Agency of South Africa (PRASA). WKH Landgrebe was fingered in two reports on PRASA's dodgy contract with Swifambo Rail Leasing. The first, commissioned by the Hawks, was written by forensic auditor Ryan Sacks; the second, commissioned by Swifambo's liquidators, was written by forensic auditor Jan Dekker.
Swifambo director Auswell Mashaba and businessman Makhensa Mabunda were among the main beneficiaries of the Swifambo contract. But they were not the only ones. Investigations by Sacks and Dekker demonstrate that audit firm WKH Landgrebe and law firm Nkosi Sabelo Attorneys played a key role in enabling Swifambo's corruption at PRASA.
The payments to WKH Landgrebe seemed "very excessive", just for audit fees, Sacks found.
This is a three part series
Part one: The European company that profited from corruption at PRASA
Part two: The looters living it up from PRASA millions
Part three: The lawyers and auditors who cashed in on corruption at PRASA
Open Secrets sent questions about the allegations against WKH Landgrebe to the Independent Regulatory Board for Auditors in February. Board CEO Imre Nagy responded: "Subsequent to your inquiry we have now opened a self-initiated investigation on WKH Landgrebe."
Swifambo made 26 payments to WKH Landgrebe, totalling R32.6-million, between April 2013 and May 2017, according to the Dekker report. The audit firm confirmed the receipt of the funds to the liquidators of Swifambo. At the time, WKH Landgrebe acted as the auditors for Swifambo Rail Leasing, but most of the payments came from Swifambo's holding company, Swifambo Rail Holding (renamed Railpro), which was audited by a different firm.
According to the Dekker report, WKH Landgrebe was paid R1.3-million to cover its fees, and an additional R6.7-million for legal services. The largest payment, however, was for R24.5-million which WKH Landgrebe used to secure a stake in Okapi Farming, worth R24-million, for the Mashaba family trust, the Mamoroko Makolele Trust. The Daily Maverick covered much of the detail surrounding this transaction in 2020.
Auswell Mashaba and his wife, Joyce, are the trustees of the trust, with their children listed as beneficiaries.
Swifambo's liquidators have instituted a civil claim against WKH Landgrebe to recover the funds it received from Swifambo.
Open Secrets has also found new information in the Sacks report that WKH Landgrebe received "large payments" from two companies linked to Makhensa Mabunda: Bahn Wheels and Enerwaste Solutions. There is no record of WKH Landgrebe acting as the auditor of these two companies in the Companies and Intellectual Property Commission (CIPC) database.
According to the Financial Advisory and Intermediary Services Act, a financial services provider must report non-compliance and consider activities related to money laundering which they must flag to the Financial Sector Conduct Authority. Auditors are also required to report serious irregularities to the Independent Regulatory Board for Auditors in terms of the Audit Profession Act. Auditors who fail to report irregularities may face imprisonment or fines up to R5-million for individual auditors and R15-million for audit firms.
But Nagy confirmed to Open Secrets that no irregularity was reported for any of the entities which received money from Swifambo.
Asked for comment, Wolf Landgrebe of WKH Landgrebe told Open Secrets that the firm had been advised by lawyers to withhold comment until a legal resolution had been reached.
While WKH Landgrebe attracted attention in the Dekker and Sacks investigations over the payments it received, other financial firms also did work for Swifambo.
Van Wyk Auditors provided various financial services to Swifambo Rail Holding from June 2015 to October 2016. When PRASA approached the Johannesburg High Court to have its contract with Swifambo set aside because of irregularities in the contract, Swifambo's group CEO Felice Massaro responded to allegations made by Popo Molefe, then head of the PRASA board.
He said that Van Wyk Auditors prepared the financial statements for Swifambo. Molefe responded that the financial statements were unreliable. Sacks said in his report that the financial disclosures "cannot be substantiated and [Massaro's] arguments were provided in support of the concealment of the true nature of disbursements of funds by Swifambo".
Van Wyk Auditors told Open Secrets that while it handled Swifambo's VAT registration and payroll, it had never audited Swifambo's books. The company said it "attempted to assist in compiling financial statements" which could then be audited, but it never undertook any audits.
"We assisted with the figures, as far as it was available to us. This stems from the accounting we had been trying to do for the company. We cannot comment on whether any transaction was inflated or reliable as we only received the information from the directors," said Willem Schoeman, a senior partner at the audit firm.
The lawyers
According to the Sacks and Dekker reports, law firm Nkosi Sabelo was paid R28.5-million from proceeds linked to Swifambo's corrupt contract with PRASA. The payments were made in two tranches in April 2013.
During a private enquiry linked to Swifambo's insolvency proceedings, George Sabelo, a partner at the firm, said the money the law firm received was paid on to a company called Similex, where well-known ANC fundraiser Maria Gomes was a director. The Dekker report confirmed that Gomes received the funds from Nkosi Sabelo, and that a payment of R17-million was made from Similex to an account belonging to Gomes. The Dekker report also confirmed that Gomes paid R10-million of this amount to the ANC.
However, Mashaba has revealed that the payments to Nkosi Sabelo and Gomes were originally meant to be far higher. Mashaba made the disclosure in a company document laying out Swifambo's financial status during the liquidation proceedings, which was used as evidence in the Zondo Commission. According to Mashaba, he and Mabunda met with two ANC "fundraisers" shortly after the PRASA contract was awarded to Swifambo. One of these "fundraisers" was George Sabelo and the other was Maria Gomes.
"The two persons referred to... were Mrs Maria Gomes... [and] an attorney George Sabelo, at that stage a partner shareholder in a legal firm by the name of Nkosi Sabelo," Mashaba said in the document, which Sacks quoted in his testimony before the Zondo Commission.
According to Mashaba's evidence, the original amount Sabelo and Gomes had attempted to raise for the ANC was R80-million in funds diverted from PRASA through Swifambo. Sabelo and Gomes had offered to pay Mashaba an R8-million "handling fee" for the payments. Mashaba agreed.
However, the Dekker report contained no evidence that these payments were actually made, finding only that Nkosi Sabelo received the R28.5-million, of which Gomes' company Similex received R17-million, and paid R10-million to the ANC.
The Dekker report also found that Nkosi Sabelo Incorporated had spent R1.1-million at a luxury Cartier boutique store after the law firm received the Swifambo funds.
Nkosi Sabelo did not respond to questions concerning its conduct in relation to corruption at Swifambo, but George Sabelo denied being an ANC fundraiser during a private inquiry related to the liquidation proceedings.
The bankers
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Questions also arise about the role of the banks, which might have been expected to flag concerns about the Swifambo transactions. Four of the six Swifambo accounts investigated by Dekker are with Standard Bank. The remaining two are call accounts held by Swifambo with Bidvest Bank.
The Johannesburg High Court and Supreme Court of Appeal have both confirmed that Swifambo was a front company and had no significant funds or activities until it signed its illicit contract with PRASA in 2012.
Sacks told the Zondo Commission in 2021 that Standard Bank was aware that Swifambo's accounts had been inactive. Swifambo's auditors, he said, had told him that the company was a new company "and had never traded before. Their bank, Standard Bank, indicated that Swifambo had no financial history which the bank would use to evaluate its financial viability".
"It is evident that this was a company that had no operational history," said Sacks.
Yet this does not appear to have been a concern to the banks.
In terms of the Financial Intelligence Centre Act (FICA), Standard Bank had a duty to monitor the Swifambo accounts and report any irregularities or suspicious transactions to the Financial Intelligence Centre. Banks are also required to do Know Your Customer checks in order to detect corruption, and are legally empowered to close accounts to prevent corrupt transactions. Neither the Sacks nor Dekker reports mention any reporting by the banks to the FIC.
Asked for comment by Open Secrets, Standard Bank spokesperson Ross Linstrom said: , "Where any client is alleged to be involved in corruption or any other suspicious activities, the bank applies its policies and procedures in order to ensure that the clients adheres to the relevant laws when using the banking services provided to them by the bank."
He said he could not comment "on the specific allegations".
Additional reporting by Khwezi Matangana.
