Revealed: How arms deal man made his millions

Time of article published Jul 18, 2011

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Former British Aerospace project manager Bernard Collier, the man at the centre of the alleged R24 million “bribe” that Swedish authorities admitted was paid to arms-deal entrepreneur Fana Hlongwane in 2003, also ensured he was paid R7m in just over a year as a consultant – to a company on whose board Hlongwane also served as chairman.

The windfall is detailed in a letter addressed to Hlongwane by retired SANDF Brigadier General Damian de Lange, a fellow director in the company, Ivema, from whose accounts the consultancy payments were made.

The eight-pagecommuniqué, a copy of which is in the possession of The Sunday Independent, questions the legality of the consultancy arrangement.

The payments to Hlongwane were effected in April 2007, at a time when BAE – under investigation by the UK’s Serious Fraud Office – distanced itself from Hlongwane and previously agreed “consultancy” fees were no longer forthcoming.

At stake for BAE was a September 2003 contract with Hlongwane whereby, in addition to other multi-million-rand emoluments and bonuses, he would be paid R1 875 000 a quarter – for furthering BAE’s interests in South Africa’s National Industrial Participation programme.

Today The Sunday Independent can reveal:

l While he was board chairman and majority shareholder of the defence manufacturer Ivema, Hlongwane was also paid as a consultant to the company.

l The “consultancy” agreement was not approved by the Ivema board, but instead effected by Ivema’s then chief executive – supposedly at the instruction of the chairman of the board, Hlongwane himself.

l Bernard Collier, CEO of Ivema at the time the arrangement was concluded, had earlier served as general manager of British Aerospace’s arms deal offset programme in South Africa.

l Collier was one of four signatories to the September 2003 consultancy agreement which would have netted Hlongwane R98m in the space of eight years.

l Collier has been identified in the Swedish media as the BAE executive who, in 2003, authorised an allegedly irregular payment of R24m to Hlongwane, who is currently under investigation by prosecuting authorities in Sweden.

l According to the Swedish authorities, Collier also failed to record the payout on the books of audit for the SAAB-owned but BAE operated offsets company Sanip (Pty) Ltd.

Money for what the Swedish authorities described as a seeming bribe was ultimately sourced to BAE, though paid by BAE through the account of Sanip to Hlongwane.

At the time he sent his letter to Hlongwane on 18 March last year, former Umkhonto we Sizwe stalwart De Lange had succeeded Collier was CEO of Ivema, having succeeded Collier in the position in 2009.

Questioning the probity of the transactions he found in the Ivema books, De Lange records the following payments from the account of Ivema to Ngwane Defence between April 2007 and July 2008.

The Sunday Independent established this week, through an inspection of the company’s share register, that 100 percent of the shares in Ngwane Defence are held by the entity Les Amis (Pty) Ltd, which in turn reflects a 100 percent shareholding by Hlongwane in his personal capacity.

l On 25 April 2007, a sum of R997 500 was paid. This is recorded as “service fees for services to be provided by Ngwane Defence from April 1 to June 30 2007”.

l On 6 June 2007, a round sum of R1m is paid under signature of Collier and fellow Ivema director Andre Mouton, without any description of services rendered.

l On April 22 2008, R997 500 is paid out for “services rendered” between April and June 2007”.

Though seemingly a duplication of the April 2007 payment, the money was in fact, according to De Lange, paid into Hlongwane’s account.

l On June 11 2008, another payment of R600 000 was effected under signature of Bernard Collier, with no explanation.

l On June 30 2008, R196 250 found its way from Ivema’s accounts to Ngwane Defence, signed off by Collier as “Services Fees for services provided during the period 1st July 2007 to 31st March 2008”.

l Then on July 31 2008, an identical amount of R1 196 2500 was again paid to Hlongwane, this time as “service fees for services from 1st July 2007 to 31st March 2008”. Though, again, a seeming duplication of an earlier payment, De Lange attests that the amount was in fact recorded as having been paid by Ivema.

l During the same period, without any given justification being given, another sum of R1 400 000 was paid to Hlongwane Consulting (which was also 100 percent owned by Hlongwane).

The Sunday Independent understands this particular sum was in repayment of a R900 000 cash flow loan taken by Ivema from Hlongwane in the previous year.

This could not be verified.

When De Lange queried the payments Collier said that, though the matter had never been addressed at any Ivema board meeting, “it had to be carried out due to the fact that it was an instruction by the chairman of Ivema and the chairman of Ngwane Defence”.

When De Lange persisted in querying the arrangement, Collier’s wife Jane – also in the employ of Ivema – was tasked by the Ivema board to draft a formal agreement on the issue.

Jane Collier then drew up a document on August 11 2009, specifying a “continuity of the service charges/fees payable by Ivema to Ngwane Defence for the provision of consultancy services and specialist advice and guidance”.

The proposed agreement committed Ivema to paying a sum the equivalent to 5 percent of turnover for 10 years in respect of such services.

By 2009, Ivema’s turnover was measured at around R230m a year.

Ivema – which manufactures the successor to the Casspir armoured troop carrier – was one of a group of six local defence manufacturers brought together under the umbrella of Hlongwane’s Ngwane Defence Group.

The other five were: systems engineering outfit IAD; light utility vehicle manfacturer Uri Vehicle Manufacturers; Sonoro, maker of grenade launchers; specialist rifle manufacturer Truvelo; and Rippel Effect, marketing entity for Sonoro and Truvelo.

At the time of the above events Hlongwane, as BEE partner, held 51 percent of shares in Ivema via his company Ngwane Defence Holdings – as well as a similar share in the other companies within the group although he had made no personal financial investment in the company

As per the original proposal for the Ngwane Defence Group in 2006,component companies would all contribute to its funding.

The Ngwane Defence Group was, however, never formally established, and finally dissolved in late 2007.

Contacted for comment this week, De Lange said he regretted the leak of his letter, but confirmed its authenticity.

“I didn’t want this in the public domain,” he said. “I was hoping it would be addressed in the civil and labour law environment.

“I am gearing myself up to fight it out in court.”

In the fallout from his confrontation with Hlongwane, De Lange is caught up in two sets of legal proceedings – one arises from a claim of hunfair dismissal from Ngwane Defence in late 2009 and is being, pursued in the CCMA.

The other is and a civil claim brought by Hlongwane in the North Gauteng High Court against alleged embezzlement and irregular payments of bonuses and salaries by De Lange.

Hlongwane was not available for comment. However his legal representative and fellow Ivema director Christo Stockenstrom said the matter was sub judice.

“De Lange was fired for good solid reasons and the matter will be pursued in the labour court.

“We will address it in the appropriate forums, and until then neither I nor my client will comment,” Stockenstrom said.

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