Recent Gupta Saga Developments: Asset Forfeiture Unit Keeping Up Pressure

By Charl van der Merwe

The South African National Prosecuting Authority’s Asset Forfeiture Unit (AFU) recently obtained a preservation order against various individuals and companies linked to the Gupta Family in respect of the controversial ‘Estina Diary Project’ in Vrede, Free State. According to the AFU, the project was established in partnership with a Gupta linked company, Estina, and was agreed to by the provincial government without a tender. In terms of the project, R220.2 million (US$18761040) which was intended for the development of emerging black farmers were deposited into bank accounts (including offshore accounts) of various individuals while only R2 million was actually spent on the project.

According the court papers, “[t]he respective parties worked jointly… with the ultimate purpose of forcing the department to make financial commitments in a business idea that was in clear failure from the outset”… In the circumstances, I submit that the entire project, including the land it was located on, were instrumentalities of the evident theft, fraud, and money laundering,”

As part of the preservation order, the Court ordered the freezing of R10 million (US$852000) in the personal bank accounts of Mr Atul Gupta (Atul) who allegedly personally benefitted from the ‘project’. Atul has, however, recently filed an urgent application seeking to prevent the AFU from freezing his accounts.

Under section 38 of the South African Prevention of Organised Crimes Act (121 of 1998) (POCA) a South Africa High Court may (on an ex parte application by the National Director) may make an order prohibiting any person from dealing with any property if it has reasonable grounds to believe that such property is the proceeds of unlawful activities.

POCA also makes specific provision for the rescission of such a preservation order in instances where a person so affected is deprived of the means to provide for his or her reasonable living expenses and where the order will cause undue hardship (and such hardship outweighs the risk that the property may be destroyed etc.). Interestingly, however, despite claiming to be a request for reconsideration by an affected person it appears that the urgent application brought by Atul is not a rescission application under section 47 of POCA but, instead, a legal challenge on the evidence. In this regard, the application avers that the “NDPP not only failed to make out a case for the relief sought, but also misled the court in respect of the evidence supporting the granting of the order” .

Despite the fact that the papers filed with by the AFU do contain some errors (as pointed out by Atul) in light of the widespread allegations of corruption and the larger public interest element to this case, it is unlikely that the High Court will overturn the original preservation order on the basis of legal technical grounds – especially when there is no averment of harm/hardship which outweighs the risk of the money being transferred out of Atul’s accounts.

Due to the fact that the preservation order has already been granted and the urgent rescission application has been brought by Atul, Atul bears the evidentiary burden of proving his case. This might require the production of evidence in the form of his bank statements or other similar documentary evidence to show that no money was transferred to him by Estina, as alleged.

Interestingly, Atul confirmed in his affidavit that he is currently out of the country and that he, therefore, has not had an opportunity to consider the documents pertaining to the preservation order and that he wished to file supplementary papers once he has had an opportunity to do so

Although there is not yet a warrant of arrest issued by the South African Police for Atul’s arrest, Atul’s brother Ajuy Gupta is already declared a fugitive of justice by the South African Police service for his involvement in the matter. It, therefore, appears unlikely that Atul would risk voluntarily returning to South Africa for the hearing of the matter.

The AFU has given notice that it will oppose the application and should it successfully do so, it may apply to the court for a forfeiture order under section 48 of POCA to have the R10 million (US$852000) forfeited to the state. The only difference between a preservation order and a forfeiture order is that a forfeiture order needs to be proven on a balance of probabilities which is a slightly higher evidentiary burden than the reasonable grounds required for a preservation order.