“South Africa risks gaining a reputation as one of the most corrupt countries in the world if we do not nip the scourge in the bud. In the midst of abject poverty and hunger, greed and the speedy accumulation of wealth have become the most defining characteristics of South Africa's post-apartheid democracy.” -- Sunday Times Editorial, Nov 22, 2009
“Corruption in the public service is so rife, so endemic, so all-pervasive, that ordinary South Africans regard it as the normal way of doing things. In the municipalities, virtually no tender is awarded without some politician’s or official’s relative, friend or business associate being in on the game. If they are not, a bribe is paid. In queues for government services, even when dealing with the police, bribes change hands as a matter of course.”
“That culture starts at the top and permeates the whole system. Morality, values, have all disappeared. It is everyone for himself. That is why ministers believe they have a “right” to put extras in their official cars, such as television sets. It is the culture.”
“This is how the failed states of Nigeria, the DR Congo and others were born. The culture of bribery, lack of service delivery and impunity of public officials took hold. That is where we are headed unless something is done — soon.”
-- -- Justice Malala, Black Politicians Fiddle as SA Burns
The hijacking of the state
Jul 4, 2010 12:00 AM
By Stephan Hofstatter & Rob Rose, Sunday Times
 PricewaterhouseCoopers' Confronting Corruption* report examines what companies are currently doing to manage the risk of corruption and the steps they can consider to better protect themselves in the future. |
Today we publish the results of a special investigation into how organised crime syndicates are hijacking the state by infiltrating key strategic entities to steal hundreds of millions of rands.
The syndicates are threatening to tarnish South Africa's reputation as a country boasting a stable, well-regulated and policed financial system.
The Sunday Times has established that:
- With just R500, anyone can clone a multibillion-rand company using false IDs and addresses - and without submitting any paperwork. This week the Sunday Times became the proud owner of FirstRand Investments CC, which is almost identical to FirstRand Investment Holdings, which is owned by the R104-billion JSE-listed banking group FirstRand;
- With the right connections, you can use your cloned company to commit massive fraud. With our documents, it is possible for us to open a company bank account and divert tens of millions of rands in tax refunds due to the real FirstRand;
- The Companies and Intellectual Property Registration Office (Cipro), which protects the integrity of all SA's corporate records and is vital to South Africa's economic success, remains vulnerable to attack by criminal gangs with terror links - despite official claims that security gaps have been plugged;
- Crime syndicates have infiltrated Cipro, the SA Revenue Service and the Department of Home Affairs to commit fraud against major banks, life insurance companies, SARS, and the Gautrain project;
- Suspected syndicate kingpins go on trial next month after SARS and crime-fighting unit the Hawks concluded a year-long investigation recently. They include alleged syndicate boss Aliraza Syed Naqvi, SARS auditor Audeya Makhubu and a former employee of controversial IT company Gijima, Samuel Gouwe;
- Police cracked the case - which they describe as the "tip of the iceberg" - while investigating the murder of Naqvi's brother Assad Abbas Naqvi, who is described as "a very dangerous terrorist" on Pakistan's terror watch list;
- The Pakistani government is co-operating; and
- Alleged kingpins still at large in South Africa include Taseer Haider, owner of Serva Engineering, a company allegedly used to launder the stolen money, and his alleged accomplices Zia Siddique and a man known only as Amsha.
» » » » [Sunday Times]
 Transparency International: Bribe Payers Index 2008: Highlights of the 2008 Bribe Payers Survey: Details the sources of corruption in the international marketplace, both in terms of where the bribes are paid and by which businesses. |
SARS insiders helped fraudsters
Jul 4, 2010 12:00 AM
Sunday Times Special Investigation
 MONEY LAUNDERING: The luxury home worth R1.6-million that SARS official Audeya Makhubu bought cash [Sunday Times] |
A Sunday Times investigation has uncovered details of how a syndicate infiltrated the SA Revenue Service, the Companies and Intellectual Property Rights Office and the Department of Home Affairs to commit fraud on a massive scale
Investigators believe a Pakistani syndicate with alleged terror links has looted hundreds of millions of rands from state and private sector coffers, sending some cash to foreign accounts and using the rest to fund lavish lifestyles in South Africa.
A key component of their fraud was registering fake companies at the Companies and Intellectual Property Rights Office (Cipro) to divert vast sums in tax refunds.
Cipro is charged with protecting the integrity of all corporate records in the country.
But controls at Cipro are so poor that the Sunday Times easily cloned a multibillion-rand bank listed on the JSE. With our Cipro registration certificate, we could theoretically open a company bank account and siphon off tens of millions in tax.
This would require the collusion of a bank and SA Revenue Service official but, as court papers related to Pakistani syndicate members on trial next month show, if you're dishing out millions in bribes, accomplices are not hard to find.
 SARS Official Audeya Makhubu, who purchased the luxury home worth R1.6-million in Floracliffe, registered in the name of her 16-year-old son, on a salary of R8,338 per month. She paid in cash. [Sunday Times] |
The ease with which we were able to penetrate Cipro contradicts its assurances that security gaps have been plugged.
Asked for comment this week, minister of trade and industry Rob Davies said his department would "energetically pursue any incident that comes to our attention, whatever its motive or 'justification', and will seek the maximum penalty allowable under the law".
Court papers allege that the same modus operandi was used by the Pakistani syndicate members. The seven suspects are accused of defrauding SARS of tax refunds worth R78-million.
SARS is focusing on only five fraudulent refunds in this case but investigators expect to link many more to the syndicate. "This is something much bigger. I don't even want to speculate how much money is involved," said an investigator.
He said the SARS scam was rife, perpetrated either by crime syndicates or individuals with inside accomplices.
SARS has confirmed the syndicate has government and private sector accomplices.
"Collusion between Cipro and SARS is very important (in accomplishing this fraud)," SARS said. "We expect at least one Cipro official to be arrested."
A recent forensic report, seen by the Sunday Times, points out various frauds that corruption at Cipro facilitates - VAT fraud, cross-border smuggling, money laundering and tender manipulation, where rival companies are temporarily deregistered.
Police cracked open the syndicate while investigating the murder of Asad Abbas Naqvi, who the Pakistan government calls "a very dangerous terrorist".
Naqvi is suspected of benefiting from a macabre insurance scam whereby illegal immigrants were provided with false papers, issued life insurance in a syndicate member's name, then murdered. Naqvi benefitted from a R15-million payout in life assurance for one of the murdered immigrants, police believe.
THE SYNDICATE
Among the seven syndicate members arrested in the past year are Naqvi's brother, Aliraza Naqvi, the alleged syndicate leader.
He was picked up at OR Tambo airport carrying three cellphones, five SIM cards and a notebook with PINs, passwords and numbers of 11 bank accounts linked to the fraud.
His lawyer, Hugo van der Westhuizen, declined to comment, saying the case was "profoundly sub judice".
Others arrested include SARS auditor Audeya Makhubu; Samuel Gouwe from JSE-listed Gijima AST; and Mazhar Raza Sayed - who also goes on trial in September for allegedly buying land along Gautrain's route and reselling it to the provincial Department of Transport by falsifying property descriptions and payment authorisations.
According to an affidavit in the SARS case, the suspects "fraudulently registered" a company called SBC International Management Services CC - a name almost identical to the real SBC International Services Incorporated that was due for a large tax refund.
The fake company then opened an Absa bank account, which received a tax refund of R31-million on October 13, 2008. The same procedure was followed with IT company Sun Microsystems, which had a R19-million refund diverted to the syndicate's accounts.
The scam was only possible through collusion with corrupt officials.
The papers allege Makhubu gave the syndicate a digital certificate which allowed them to "unlock" the SARS system and swap the real SBC's account for the fake one.
This money was laundered through at least nine different shelf companies using fake invoices for anything from 300 leather armchairs worth R570000 to a consultancy fee of R3.2-million for a bogus company called Serva Engineering.
On other occasions, money was paid directly from the fake SBC's account into accounts controlled by syndicate members, who made regular and large cash withdrawals.
LIVING LARGER
Syndicate members used the cash to live large.
Though Makhubu's salary slip shows her taking home R8338 per month, she paid R1.6-million in cash for a luxury home in Floracliffe last year, registered in the name of her 16-year-old son.
The Sunday Times visited the premises, boasting sweeping vistas over the West Rand and an entrance guarded by Greek statues.
THE CRACKDOWN
The extent of the hijacking has alarmed authorities, who put together a task team led by the Hawks to target the syndicate.
Hawks spokesman Musa Zondi confirmed the police's commercial crimes and crime intelligence units, SARS and the Department of Home Affairs were investigating how the syndicate managed to infiltrate SARS, Home Affairs and Cipro. "We haven't touched the tip of this whole thing," he said.
Further crackdowns resulted in the arrest of nine Home Affairs officials and a raid in Brits that uncovered a passport-and ID-forging facility and led to the arrest of six Pakistanis.
The Pakistani government had extended "full co-operation to the South African authorities", spokesman Tajammal Aftab told the Sunday Times this week.
Corruption in the Department of Home Affairs has been crucial to the syndicate's success. Aliraza Naqvi already has a conviction for owning a false passport, while suspected syndicate member Mohammed Ansar is being investigated for "human trafficking, (which) is clearly indicative that the syndicate has easy access to fraudulent passports", an investigator's affidavit said.
Home Affairs spokesman Ronnie Mamoepa said his department had beefed up its anti-corruption unit.
"Unless we nip crime and corruption in the bud, it will continue to pose a threat to the stability of our hard-won democracy," he said.
•hofstatters@sundaytimes.co.za; roser@sundaytimes.co.za
» » » » [Sunday Times]
 Transparency International: Bribe Payers Index 2008: Highlights of the 2008 Bribe Payers Survey: Details the sources of corruption in the international marketplace, both in terms of where the bribes are paid and by which businesses. |
How the Naqvi ring was smashed
Jul 4, 2010 12:00 AM
Sunday Times Investigation
In December 2008 a body is dumped in an open field outside a miners' hostel in the East Rand township Vosloorus. The detective who gets the call is Captain G de Filette.
The victim has been shot in the back of the head, execution style. His name, according to fingerprints taken from the body, is Assad Abbas Naqvi, whose name is on Pakistan's terror watch list.
De Filette's investigation would later open a massive can of worms that resulted in crack crime fighters the Hawks establishing a task team to hunt down a sophisticated Pakistani crime syndicate that has infiltrated key strategic state entities in South Africa. Some of the syndicate's members stand trial next month, accused of stealing tens of millions from SARS. But investigators believe this is the tip of the iceberg, and are probing the possibility vast sums were spirited out of the country to accounts in Pakistan and China from a front company in South Africa, whose name is known to the Sunday Times.
De Filette's investigation soon yielded several crucial leads. Witnesses at the mining hostels told police they'd seen the body dumped from a black BMW. A vehicle of the same description was found burned out in Kwa-Thema township near Springs.
Registration numbers embedded in its charred windows revealed the car was registered to Serva Engineering, a company that emerged as a key player in a company cloning scam.
Court papers claim the syndicate defrauded SARS of R78-million by cloning real companies, including Sun Microsystems and SBC, and diverting tax refunds to them. The money was then laundered through a series of front companies, including Serva Engineering, often by issuing fake invoices. Two major breakthroughs would crack the fraud case wide open.
A search warrant executed at a Naqvi associate's home yielded 35 company chequebooks, each linked to a bank account of millions. Each cheque had been signed, with only the amount left blank. Crucially, investigators were able to link them to eight real people.
The second break came in June 2009. A police inspector at OR Tambo airport's immigration offices noticed a man named Aliraza Syed Naqvi trying to enter the country - he had been red-flagged as a person of interest - and detained him. A search yielded a gold mine. When De Filette arrived on the scene 38 minutes later he was handed a notebook containing the names and banking details of syndicate members, the fake Sun Microsystems and SBC, and the shelf companies used to launder the cash, including Serva Engineering.
De Filette reported his findings to Pretoria, and a major crime-busting operation that netted several high-profile arrests, including a SARS official, was launched.
» » » » [Sunday Times]
 Transparency International: Bribe Payers Index 2008: Highlights of the 2008 Bribe Payers Survey: Details the sources of corruption in the international marketplace, both in terms of where the bribes are paid and by which businesses. |
How to register a fake firm - fast
Jul 4, 2010 12:00 AM
Sunday Times Investigation
 Transparency International: Bribe Payers Index 2008: Highlights of the 2008 Bribe Payers Survey: Details the sources of corruption in the international marketplace, both in terms of where the bribes are paid and by which businesses. |
Midian Hlabano's name popped up in a forensic report on massive fraud at Cipro.
As an accounting officer, he was flagged by investigators for having registered 94000 enterprises, holding 238 versions of his identity, and using the member numbers of at least six recognised accounting bodies.
The report links Hlabano to an "agent" - someone authorised by Cipro to register their own or a third party's company - suspected of being central to the Sun Microsystems scam.
In recent months, Cipro management had given assurances that the security lapses that enabled the Pakistani syndicate to perpetrate the Sun Microsystems fraud had been fixed.
We decided to put them to the test, and register a cloned company using fake ID numbers, false addresses and without producing any of the required identity documents.
Hlabano was an obvious choice to be our fake company's accounting officer.
After some small talk about Ghana's chances in the World Cup, we got down to business. "We need an urgent CC registration. It must be done during the World Cup. Is it okay?"
 PricewaterhouseCoopers' Confronting Corruption* report examines what companies are currently doing to manage the risk of corruption and the steps they can consider to better protect themselves in the future. |
Hlabano disappeared into another office, then informed us it would take about three days, even though Cipro's official processing time is 12 working days.
He also offered to open a bank account, and register us for tax. "We will make all the necessary arrangements."
After a payment of R500 cash, someone took down our fake details from a grimy scrap of paper we handed them, and Hlabano proudly showed us his trappings of success: a large villa built in his home town of Bulawayo, Zimbabwe, with a black luxury BMW, bearing the number plate "Hlabano GP" parked outside, and the White Lodge, his recently completed hotel at Beitbridge.
"I have invested there because it's a home to me."
A few days later, we collected our company registration documents, proud owners of First Rand Investments CC, fake ID numbers and all.
The real First Rand Investment Holdings is a crucial cog in the JSE-listed banking giant FirstRand, which is now worth R104.9-billion.
With this certificate, we could open company bank accounts and, like the syndicate, potentially bribe SARS or bank officials to divert millions in tax refunds to our false company.
When we confessed our ruse to Hlabano, he insisted there was "nothing irregular whatsoever" in what he did. We were "just lucky" to get the name approved and in record time.
This, and being allowed to register our company with fake ID numbers, were all "mistakes of Cipro", he said.
 Transparency Intn'l: Business Principles for Countering Bribery: Provides a model for companies seeking to adopt a comprehensive anti-bribery programme. |
Hlabano flatly denied bribing Cipro officials. The forensic report's references to him could be explained by his unique "marketing strategy". This involved dishing out, at R10 a pop, tens of thousands of accountant's letters that agents needed to register companies.
He said he could not be held liable if agents or Cipro staff made clerical errors. That agents he had sold accountant's letters to were suspected of fraud was "just a coincidence".
"You need to look if I have any connection with these people committing these crimes."
Asked if his strategy may have backfired, given that it drew the interest of law-enforcement agencies, he said: "Yes. It was probably not the best strategy to have taken. But there's nothing fraudulent on my part."
Cipro spokesman Elsabe Conradie promised to investigate how we managed to register our fake company.
"If a staff member was involved in the process, we would like to take immediate action."
Institute of Administration and Commerce Listing:
HLABANO MIDIAN BRAAMFONTEIN GAUTENG AO505824 ACCOUNTING OFFICER
» » » » [Sunday Times] [Inst. of Admin & Commerce Listing]
» » [Dept. Trade & Ind.: CIPRO: Companies & Intellectual Property Registration Office]
 Transparency International: Bribe Payers Index 2008: Highlights of the 2008 Bribe Payers Survey: Details the sources of corruption in the international marketplace, both in terms of where the bribes are paid and by which businesses. |
Hijacking of Cipro scares banks
Jul 4, 2010 12:00 AM
Sunday Times
 Transparency Intn'l: Global Corruption Report 2009 Discusses the most promising tools to tackle corruption in business, identifies pressing areas for reform and outlines how companies, governments, investors, consumers and other stakeholders can contribute to raising corporate integrity. |
Banks are alarmed at the ease with which Companies and Intellectual Property Registration Office has been hijacked.
Investigators said next month's trial of Pakistani syndicate members accused of using Cipro to create cloned companies to steal millions in tax refunds was the tip of the iceberg. Companies the syndicate registered included SBC International Management Services, Sun Microsystems and AllPay Western Cape, a subsidiary of Absa.
In an affidavit submitted to court as part of Aliraza Syed Naqvi's impending case, commercial crimes investigator Thokozani Mahlangu said the fraudsters ''are changing bank details of legitimate companies by means of duplication of the companies at Cipro, and opening fictitious bank accounts".
Investigators said they were also probing allegations that syndicate members used fake IDs to commit other financial frauds, including buying houses on loan from one bank, and then ''selling" the house for a much higher amount to another syndicate member with a home loan from a different bank. The crooks pocket the difference and disappear.
Banking Association general manager Stuart Grobler said the implications for banks were particularly scary.
 Transparency Intn'l: The Integrity Pact - A powerful tool for clean bidding: A tool developed during the 1990s by Transparency International (TI) to help governments, businesses and civil society intent on fighting corruption in the field of public contracting. |
''Cipro is the source of verification for the banks when it comes to (implementing money-laundering laws) and Know-Your-Client laws. If that database can be easily penetrated, this carries over to other institutions like the banks who rely on that to be correct and secure," he said.
Grobler said the most concerning were cases where corrupt officials ''take legitimate data and manipulate it" at Cipro for existing companies - as happened with Tedelex.
In that case, legitimate company directors were simply removed and Emalahleni (Witbank) coal miner Jabu Sithole put in their place. Sithole believes his ID may have been used fraudulently. "I don't know nothing about this Tedelex - I'm a miner for 23 years now."
In another case, a Sharpeville man, who couldn't be traced, replaced the directors of Lion Match Company and tried to open an FNB account in the company's name. When this was corrected, he astoundingly did it again.
Absa's chief legal counsel, Marthinus van Rensburg, said deficiencies at Cipro do pose serious risks to the banks but claimed no Absa staff were involved in the fraud.
FNB also said accounts were opened for Naqvi because he presented what appeared to be ''legitimate documents".
» » » » [Sunday Times]
» » [Transparency Intn'l: Coalition Against Corruption Publications]
» » [PriceWaterhouse: Anti-Corruption Report]
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1 comment:
Yes, we have really a lot of imigrants....
Regards,
Cipro
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