The National Prosecuting Authority (NPA) has lost a major battle in its campaign to claw back the billions of rand estimated to have been lost to state capture corruption, after the high court in Johannesburg reversed the freezing of more than R1bn in assets allegedly linked to the looting of Transnet.
Judge Maletsatsi Mahalelo found that investigative directorate head Hermione Cronje had failed to disclose "material facts" when she successfully applied in November 2019 for the assets of Regiments Capital directors Niven Pillay, Litha Nyhonyha and Eric Wood to be frozen, on the basis they were the potential proceeds of crime.
The judge ordered the NPA to pay Pillay, Nyhonyha and Wood’s legal costs in their application to reverse the freezing of their assets.
The ruling is a setback for the NPA, coming at a time when law enforcement agencies have been making high-profile arrests relating to the siphoning off of public funds during the state capture project.
The ruling makes no findings about the strength of the state’s mooted fraud, corruption and money-laundering prosecution of Pillay, Nyhonyha and Wood for crimes linked to the unlawful advisory services deals Regiments secured with Transnet, primarily in relation to its purchase of 1,064 locomotives.
Instead, Mahalelo reversed the freezing of Pillay, Nyhonyha and Wood’s assets on the basis that Cronje had not informed the judge of another Regiments-linked court order and settlement agreement to the court that first heard the case.
The matter was initially decided on an ex-parte basis, meaning that none of the parties whose assets were frozen were notified of the proceedings against them.
Wood, Pillay and Nyhonyha contended that the NPA’s failure to disclose to the high court that Regiments agreed in 2019 to pay Transnet a R180m settlement in relation to the civil claims launched against it by the company was "material".
Mahalelo agreed.
"Surely if the court granting the ex-parte order was informed that the settlement agreement concluded between Transnet and Regiments was in full and final settlement of the claims by Transnet against Regiments, it might have wanted to know more about it and it may have influenced the court in coming to a decision," the judge said.
Cronje had previously argued that this settlement did not have any relevance to the state’s preservation proceedings against Regiments and its directors, who did not admit any liability when they agreed to that deal.
She maintained that the settlement deals concluded by Regiments with Transnet and its benefit fund could be considered if and when Regiments and its directors were convicted and their assets forfeited to the state as the proceeds of crime.
It is the state’s case that Regiments was unlawfully appointed as adviser to Transnet because it paid Salim Essa — a key Gupta family associate — 30% of the fees it was paid by the parastatal. The Guptas are friends of former president Jacob Zuma and are central to state capture allegations during his presidency.
Because Transnet then paid Regiments more than R1bn as an alleged consequence of this corruption, the NPA argues, "they are all liable to be confiscated in due course".
The state says forensic reports, evidence initially led at the state capture inquiry and witness testimony show that Pillay, Nyhonyha and Wood committed corruption, money laundering and fraud in relation to Transnet and the Transnet Second Defined Benefit Fund, and enriched the defendants as well as members of the Gupta family and their associates.
Regiments, Pillay and Nyhonyha paid back R639m to the Transnet Second Defined Benefit Fund after it launched legal action against them, accusing them of siphoning hundreds of millions of rand into a Gupta family bank account used to pay a deposit of the Optimum Coal Mine.
The state further maintains there is clear evidence that Regiments, as well as then Transnet bosses Anoj Singh and Brian Molefe, were involved in the "unjustified escalation" in the estimated total cost of that deal from R38.6bn to R54.6bn.
Investigating directorate spokesperson Sindisiwe Twala says the state is "still considering our options" in response to Mahalelo’s ruling.
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