On trial: Laundering gold-smuggling cash


S. African Free State: Gold smuggling and money laundering case closes

The State has closed its case in the Free State High Court in a matter relating to 133 charges of racketeering, gold smuggling, the unlawful processing of gold and money-laundering of nearly approximately R10 billion.

The State lead its case for nearly 100 court days and put forward 82 witnesses during that time. The investigating officer spent 15 days completing his testimony.  The underlying “gold syndicate” allegedly operated between 1999 and 2008 when its members were arrested.

Some of the accused have apparently implicated the Msimango brothers (one of whom was killed pending trial in 2012), who, allegedly, managed the syndicate, as well as at least 10 other suspects. The Msimango brothers have plead not guilty to all charges.


FCPA investigation hits FedEx in Kenya


Kenya and FedEx: Possible breach of FCPA anti-bribery provision

According to Wall Street Journal and Law360 reports, two powerhouses (one country, one company) are involved in a recent self-reported FCPA violation: FedEx Corporation has reported possible infractions of the foreign anti-bribery law in Kenya to the United States Department of Justice.

According to the articles, “FedEx says it told the authorities at the DOJ and the SEC that it had received an email in December outlining allegations of potential bribery in the Republic of Kenya and possible violations of the FCPA. The shipping giant has been investigating the matter since 2013 but has been unable to substantiate the reported claims, the company said.”

“FedEx informed the DOJ and SEC of these allegations shortly after their receipt and have been engaged in a cooperative dialogue with both agencies since that time,” a FedEx spokesperson told Law360 late Tuesday night. “To date, FedEx has not found anything to substantiate the allegations, but the investigation is ongoing.”

The company was allegedly tipped off anonymously late last year, involving claims made in an e-mail (which the sender also threatened to send to the DOJ and Securities and Exchange Commission) that its on-the-ground agent, Pan Africa Express, was implicated in bribing Kenyan government officials in return for favorable conduct, such as “customs officials to clear shipments without inspection, as well as to government vehicle inspectors and others, the person alleged,” according to the WSJ article.

Survey shows perception gap and increased corruption

Survey shows that perception of corruption & bribery on the rise

As also reported by BDLive’s Evan Pickworth, a recent Ernst & Young survey shows that the perception of widespread bribery and corruption by South African executives has increased climbed by 16% to an overall 78% response.

The article mentions the “high-profile regulatory enforcement [that] has been taking place since the 2009 crisis highlighted gaping holes in the system, but most of this action has centred on banks and insurers. The challenge remains closing loopholes across all business sectors before they lead to another crisis.”

The EY survey – entitled “Navigating today’s complex business risks Europe, Middle East, India and Africa Fraud Survey 2013” – placed South Africa third on the overall perceptions of bribery and corruption, behind Nigeria (88%) and Kenya (87%) and just before Greece at 72%. Namibia closed the top five with a reading of 72%.

While approximately 7% of global executives were reported to have been asked to pay bribes, the South African figure is 43% higher, at 10%.

The report also shows a “perception gap” of dramatic proportions in Kenya, where 94% of respondents said they feel that corrupt practices are commonplace in their country, yet only 26% perceived it was common to use bribes to win contracts in their particular industry sector.

Finally, there is the question of discriminatory application of anti-bribery laws: 3 African nations made the top-10 list in this category, including South Africa (29% agreed that their authorities regulated foreign companies more heavily than local businesses), Nigeria (26%) and the 4th-ranked overall, Kenya (36%).


Housing tender fraud in eThekwini (RDP / South Africa)

South Africa: RDP housing tender fraud in eThekwini

In order to cease complaints and reports of corruption, the eThekwini municipality will stop using section 36 of the Municipal Finance Management Act to award emergency tenders.

The municipality has tabled a budget of R35.8 billion for the new financial year, of which R3.7 billion will be used to address infrastructure backlogs and issues and R2.3 billion will be used to build to low-cost housing.

The Public Protector, Thuli Mandosela, was recently requested by the Democratic Alliance’s caucus leader, Zwakele Mncwango, to probe a R255m tender to build low-cost houses in Umlazi, Kwa-Zulu Natal. It was awarded to the politically-connected businesswoman Shauwn Mpisane’s company, Zikhulise Cleaning, Maintenance and Transport, without following proper tender procedures, given that it had allegedly become the norm within the municipality to bypass official tender procedures and approved in terms of an emergency
tender process whenever Ms Mpisane’s company was involved.

The mayor, Mr Nxumalo, has indicated that they have warned their officials not to use section 36 of the Municipal Finance Management Act to award tenders, which provides that “the accounting officer of a national or provincial department and the accounting authority of a national or provincial public entity responsible for the transfer of any proposed allocations to a municipality, must by no later than 20 January of each year notify the National Treasury or the relevant provincial treasury, as may be appropriate, of all proposed allocations, and the projected amounts of those allocations, to be transferred to each municipality during each of the next three financial years.”

This follows on the various protests, demonstrations and legal action against the eThekwini metropolitan municipality due to slow delivery of houses and services which led the municipality to bypass the standard tender procedures and award a R224 million tender to Durban businesswoman Shauwn Mpisane’s Zikhulise Cleaning, Maintenance and Transport company. The R255 million housing contract in Durban’s Umlazi area in March.

Mpisane and her husband S’bu have attracted media attention over the past years due to their lavish lifestyle and numerous court appearances. Mpisane was facing charges ranging from fraud and corruption to interfering with a witness. However, none of the cases materialised and by the end of January 2014 charges were withdrawn.

Fraud in the medical schemes industry


South Africa: Fraud in the medical schemes industry

Discovery Health’s CEO, Dr Jonathan Broomberg, has estimated that fraud in the medical schemes industry will cost South Africa between R8.22 billion and R43.2 billion.

Various types of fraud have been flagged recently, such as “card farming”, in which medical members allowed other non-members to be treated on their card, buying general merchandise such as nappies and perfume from a pharmacy and subsequently submitting a claim to cover the cost from the medical aid.

Per a BDLive report, the most recent scam to hit Discovery involves lump sums which are paid out by hospital cash plans. Such hospital plans are sold by insurance companies and provide beneficiaries with a lump sum of money in the event that they are hospitalised. These cash plans are intended to help cover the shortfall which a patient might experience if the hospital costs are not fully covered by their medical scheme.

Dr Broomberg said that, especially in Kwa-Zulu Natal, doctors have been admitting patients to hospital who were not ill and then submitting false claims on their behalf to both the relevant medical aid scheme, as well as their cash plan provider. The “patient” would then split the lump sum paid out by the insurer with the doctors and the syndicate in question, which fraudulently enriches them unduly, thereby leaving both the medical scheme and the cash plan provider out of pocket.

Discovery recently busted a syndicate which involved the admission of a 12-year-old child who was admitted to hospital for six days with a “diagnosis” of haematemesis, which entails the vomiting of blood. The child in question had been admitted to hospital six times over the past two years. However, the child was not attended to by a doctor, but by a psychologist and was discharged without any of the usual investigations associated with haematemesis.

As a result, Discovery Health is working closely with insurance companies to crack down on this kind of fraud, by sharing data and scrutinising the claims submitted by medical scheme members who also had cash plans much more closely.

Medical schemes terminate the memberships of patients involved in this kind of scam and report doctors to the Health Professions Council of South Africa, which is the statutory body charged with overseeing doctors’ conduct and issuing their licences.