R1bn health contract claim seizedComment on this story
Johannesburg - Over R1 billion in contract claims upon the Gauteng health department has been seized, the National Prosecuting Authority said on Friday.
“The freezing order of R1.4bn is the biggest ever obtained by the NPA asset forfeiture unit (AFU),” spokesman Nathi Mncube said in a statement.
The seizures were related to two tenders awarded by the department in 2007.
The first tender was for the setting up of a project management unit (PMU).
“The tender was fraudulently rigged in favour of 3P Consulting (Pty) Ltd (3P) and 3P was a party to the rigging,” Mncube said.
He said 3P's CEO Richard Payne was a friend of Brian Hlongwa, the health MEC at the time.
The PMU procured goods and services for the department without competitive quotes or bidding, and beyond controls covered by the Public Finance Management Act (PFMA).
3P allegedly awarded contracts to friends and family, defrauding the department of R35m in the process, and allegedly provided Hlongwa R3 million in cash, Mncube said.
In January 2008, Payne, Hlongwa, plus 3P employees and department officials went on a holiday in Cuba paid for by 3P.
One of the contracts awarded by the PMU was to Regiments Healthcare (Pty), with the company's CEO being Niven Pillay, Mncube said.
The second tender was for a health information system and electronic health records (HIS-eHR). It was awarded to Baoki Consortium, who were party to the tender being rigged.
The CEO of one of the Baoki companies was Heinz Smidek.
During 2007 to 2008, Payne and Pillay paid a R3.3m deposit for a house for Hlongwa at 163 Eccleston Crescent, Bryanston, with the purchase price being R7.2m.
“The balance was to be made up by the sale of Mr Hlongwa's house at 26A College Drive, Bryanston,” Mncube said.
Smidek allegedly arranged the purchase of the College Drive house for R4.6m by a Cypriot company registered in South Africa, Kemsing Services (Pty) Ltd.
Both houses were refurbished by a company controlled by Payne, with the refurbishment paid for by 3P, Payne and Pillay.
“Kemsing Services let Mr Hlongwa stay in the College Drive house rent-free while the Eccleston Crescent house was refurbished,” Mncube said.
In late 2008, the value of the 3P tender was increased to around R221m, from the original two-year R60m agreement.
In 2009, the department then extended the contract for another three years, with Mncube stating Hlongwa influenced the decision in 3P's favour.
Regarding the HIS-eHR contract, in late 2008 Baoki were awarded the final contract worth R1.2bn for its roll-out over three years.
This was even though the department did not have the money, infrastructure or appropriately trained staff for the HIS-eHR.
Mncube said the contract was approved even though the finance MEC at the time refused to sign it.
The contract also required the department to pay Baoki every month, regardless of delivery, which did not take place, with Boaki receiving a total of around R460m.
Following the appointment of a new health MEC in 2009 after the elections, Hlongwa's replacement terminated both contracts, with 3P and Baoki suing for damages.
Allegations of fraud and corruption were then investigated by the Special Investigating Unit and the Hawks, Mncube said.
Based on the investigation, on Monday the NPA AFU obtained three preservation orders under the Prevention of Organised Crime Act, freezing the contractual rights of 3P and Baoki.
The contractual claims of the two tenders, 3P's being worth around R300m and Boaki's being worth around R1.1bn, were seized.
The property at Eccleston Crescent, now worth R1.5m with the house in the process of being rebuilt, was also frozen and preserved.
Should the NPA be successful with its final forfeiture application, the government would be saved from paying out the money.