Chief justice Raymond Zondo, in a scathing report on the capture of Eskom by the Guptas, has recommended their acolytes, including the power utility’s disgraced former group executive Matshela Koko and CFO Anoj Singh, be charged with corruption and that Eskom recover lost monies from its former executives.

The state capture commission of inquiry’s chair delivered his fourth report on Friday.

The report lays bare how the Guptas, through government ministers and several of the utility’s senior executives, seized control of Eskom.

“It is recommended that the National Prosecuting Authority (NPA) should consider further investigation into determining whether the implicated parties have acted in breach of the following provisions of the Prevention and Combatting of Corrupt Activities Act [PRECCA] ... with a view to holding those responsible criminally liable.”

The recommendations stem from several plans put in place by Gupta allies and senior Eskom executives, including Koko, Singh, Salim Essa, Mark Permanskey, Eric Wood and Brian Molefe.

The plans included, among others, to commit Eskom to:

• a contract with Huarong Energy Africa for $21.8m to raise $24m before any money was allegedly raised to lend to Eskom; and
• hiring the consultancy trio of firms McKinsey-Regiments-Trillian for R1.6bn to design an 'internal consulting unit';
• put interventions in place to reduce expenditure on procurement;
• optimise the utility’s “balance sheet” to unlock cash and assist with “unlocking funding sources” to improve its financial position.

In his review of the Huarong Energy Africa contract, Zondo stated that “it seems clear on the evidence that certain Eskom officials conspired ... [with] certain individuals outside Eskom to bind Eskom to a transaction pursuant to which Eskom would pay out a very substantial sum of $21.8m as a raising fee before any money had been raised and paid to Eskom.

“The strong probability is that HEA had no ability to advance billions of US dollars to Eskom. If that happened, Eskom had no recourse and, if it had paid the raising fee, it would have been unlikely to recover any part of that sum.

“All those Eskom officials who pressed for the raising fee to be paid are prima facie guilty of fraud because they sought to induce Eskom to act to its enormous financial prejudice, representing that this transaction was regular and in Eskom's interests, and well knowing that such representation was false.”

He recommended the NPA consider the criminal prosecution of Koko and those executives implicated in the contract for their possible violation of the Public Financial Management Act in regards to the contract.

Zondo also blasted the Eskom’s executives for their involvement in the McKinsey-Regiments-Trillian contract, which he said was unsigned and lacked National Treasury approvals.

“Koko sought to deny his involvement in financial aspects of the Management Service Agreement (MSA) when confronted with ... emails but here he is shown to have been directly involved in discussions on such matters with McKinsey.

“The proposal from McKinsey shows ... so-called financial concerns emerged from the MSA negotiations ... This ... was contrived to facilitate a quick appointment for McKinsey, but to ultimately benefit Essa’s company, Trillian Capital.

“The SteerCo [steering committee] presentation also placed Koko at some of the finance-related matters that were specifically assigned to Regiments Capital, and later Trillian Capital, in respect of the MSA.

“As Koko conceded, it was wrong to seek to conclude the MSA, because of lack of National Treasury approval for the deviation ... the writing was on the wall that National Treasury approval was required and was not obtained.”

Zondo described a R30m payment to Trillian as “unconscionable and constituted corruption of the highest order.

“There was no justification for this payment, nor for the belief that Regiments or Trillian was a BBBEE partner to McKinsey. This was corruption, plain and simple.

“The officials at Eskom who pushed for payments to be made to Trillian knowing that Eskom had no contract with Trillian and McKinsey had not appointed Trillian ... should hang their heads in shame and need to face the full wrath of the law.

“Singh, Molefe and Koko were all central to the origin and furtherance of a scheme at Eskom, designed to exploit Eskom and benefit Trillian.”

Zondo said Molefe and Singh pursued “negotiations” with McKinsey and Trillian through secret, off-site meetings to agree to work on a range of issues together before any formal contracting processes even began.

“It is no surprise that the submission to the board tender committee was prepared by both Koko and Singh, as parties to the negotiations, and Koko signed off on the acceptance letter to McKinsey.

“Koko, Singh and Molefe were present at Eskom board meetings where the potential irregularities of the sole-sourced ‘at-risk’ contract and the need for National Treasury approvals was discussed, yet board approval to proceed with contracting process was requested and obtained nonetheless.”

He said Koko provided confidential information on Eskom’s negotiation position on the MSA to 'Business Man”, the alias of Essa and took instructions from external parties on additional items to be included under the scope of the MSA, so that the extent of contracting work would be expanded.

“Koko put pressure on Eskom managers not to hold up the finalisation of the MSA despite lack of Treasury approval. Koko’s denials that no state capture took place at Eskom, involving the Guptas and their associates, fall to be rejected as devoid of any truth. His denial that he was not a facilitator for Essa, the Guptas and their associates falls to be rejected as there is ample evidence to the contrary before the commission.

“In total, R14.7bn of Eskom’s contracts are calculated to have been afflicted by state capture according to the flow of funds’ investigation and, of this, McKinsey’s MSA and corporate plan contracts account for R1.1bn, and related payments to Trillian account for R595.2m from these two contracts.”

He said the Eskom executives used their positions of authority and power within Eskom to benefit Trillian; a corrupt activity under PRECCA.

“Molefe, Singh and Koko all benefited from the Guptas and Essa in various forms. This may constitute the criminal offence of corruption ... it is recommended the law enforcement agencies conduct such further investigation with a view to the possible criminal prosecution of the implicated parties by the NPA for their part in facilitating the fraud, corruption and financial misconduct against Eskom and the state.

“It is also recommended legal steps be taken by Eskom to recover from members of the 2014 board and the former Eskom officials for all losses that Eskom suffered as a result of their unlawful conduct.

“Criminal prosecution should be extended to the 2014 Eskom board which failed to exercise their fiduciary duties and prevent financial prejudice to Eskom.” 

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