SIU Presentation to Portfolio Committee: - PowerPoint Presentation

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SIU Presentation to Portfolio Committee: Telecommunications and Postal Services 08 November 2016

Outline The SIU mandate and legal scopeMatters investigated by SIUSouth African Post Office (SAPO)Media CornerState Information Technology Agency (SITA)The Department of Communications (Communications)Universal Service and Access Agency of South Africa (USAASA)2SIU presentation to PC on Telecommunications and Postal Services, 08 November 2016

Established: in terms of the Special Investigating Units and Special Tribunals Act, 1996 (Act No. 74 of 1996) (“SIU Act”) current Special Investigating Unit (“SIU”) established by Proclamation No. R. 118 of 2001Investigations mandated: by a Proclamation from the PresidentPowers: Can subpoena, search and seize evidence, and interrogate witnesses under oath Can institute civil litigation to recover state funds lost or to prevent future lossesIt does not have power of arrest or prosecutionIt does not have the power to take disciplinary actionsIt however, works closely with other relevant agencies where its powers fall shortMajor functions:investigate corruption and maladministration institute civil proceedings resulting from its investigations to correct any wrongdoing, where causes of action can be found in lawTHE SIU MANDATE AND LEGAL SCOPESIU presentation to PC on Telecommunications and Postal Services, 08 November 2016

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BackgroundThe South African Post Office (“SAPO”) investigation was mandated by Proclamation No. R. 5 of 2014 (dated 6 February 2014), as amended or supplemented by Proclamation No. R. 56 of 2014 (dated 1 August 2014).Proclamation No. R. 5 of 2014 required the SIU to investigate 16 areas of concern, as identified in an Audit Report provided by the SAPO. Proclamation No. R. 56 of 2014, which extended the scope of Proclamation No. R. 5 of 2014, required the SIU to investigate irregular conduct by Board members of the SAPO in relation to allegations of Supply Chain Management (“SCM”) and Recruitment related irregularities. In this regard, the SIU investigated the tender process for Multi-Functional Devices (for example, copiers) and the recruitment process to fill the vacant position of a Chief Information Officer at the SAPO.During the final stages of the investigation, the SIU received allegations pertaining to alleged fraud and/or corruption in respect of the lease of the Eco Point Building (the SAPO Head office). 4SAPOSIU presentation to PC on Telecommunications and Postal Services, 08 November 2016

ProgressThe Presidential Report has been finalised and was submitted to the Presidency during June 2015.Referrals made to dateThe SIU has referred one matter in respect of the Access Control Systems related tender to the National Prosecuting Authority (“NPA”) for purposes of criminal prosecution. This matter has also been referred to the the Authority established in terms of the Private Security Industry Regulation Act No. 56 of 2001 (“PSIRA Act”) for purposes of administrative action and to the SAPO for purposes of disciplinary action. On 8 March 2016, the relevant company was found guilty in a criminal court of law of contravening provisions of the PSIRA Act and the company was sentenced to pay a fine of R100,000 of which R50,000 was suspended for 4 years.A further NPA referral was made in respect of a SAPO employee for the contravention of section 17 of the Prevention and Combating of Corrupt Activities Act No. 12 of 2004.Further ReferralsA further 7 referrals for the institution of disciplinary proceedings were made in respect of misconduct committed by SAPO employees.SAPO5SIU presentation to PC on Telecommunications and Postal Services, 08 November 2016

Civil Proceedings Eco Point Lease – On 20 May 2016, the SIU (joined by the SAPO and the Minister of Telecommunications and Postal Services) launched a High Court Application in the Gauteng Division in Pretoria under Case No. 40537/2016 to set aside the Eco Point Lease Agreement (a 10 year lease with a value of R484,892,452.66) based on SCM non-compliance and allegations of fraud and corruption, together with a request for a just and equitable order by the court. Under the just and equitable relief claimed, the SIU is requesting the Court to order the Landlord of the Eco Point Building (“Landlord”) to repay everything the Landlord received from the SAPO, which is currently estimated at R250 million, or to at least repay all profit the Landlord enjoyed or may still enjoy in terms of the Lease Agreement until it is set aside.The matter is being defended by the Landlord. The SIU replied to a Notice in terms of Rule 35(12) in which the SIU provided the Landlord with copies of certain relevant document. The period for the filing of the Answering Affidavit by the Landlord has expired, but the Landlord is continuing to try to compel the SAPO (the Second Applicant) to provide to the Landlord further documents that the Landlord submits are available and relevant. Interlocutory proceedings are delaying the civil proceedings. Civil proceedings are on-going.In the mean time, the Landlord also instituted High Court proceedings in the Gauteng Division in Pretoria under Case No. 55542/2016 to review and set aside a Report or portions of a Report that was issued by the Public Protector in respect of the Eco Point lease. The Public Protector, the SAPO and the SIU is opposing this application and the civil proceedings are on-going. The Public Protector must now file the record of the administrative action taken by the Public Protector that resulted in the Report.Criminal Proceedings Eco Point LeaseThe matter has been with the SAPS for some time (since approximately March 2012), but no arrests have been made to date. The SIU is liaising with the SAPS and the NPA to try to expedite the matter. AFU has an interim attachment order of approximately R2 million against a former employee of the SAPO.SAPO6SIU presentation to PC on Telecommunications and Postal Services, 08 November 2016

BackgroundThe SIU investigation was mandated by Proclamation No. R. 10 of 2014 (dated 24 February 2014).This Proclamation required the SIU to investigate a tender for a public awareness campaign on the broadcasting digital migration process project (DOC/21/2011/12/C) that was awarded to Media Corner (Pty) Ltd (“Media Corner”) by the Department of Telecommunications and Postal Services (formerly known as the Department of Communications) (“Department”), the validity of the resulting contract and the regularity of all payments made in respect thereof. Media Corner’s bid proposal envisaged an estimated project budget of R752 million. To date, the Department paid approximately R45,473,311.31 to Media Corner.ProgressThe investigation (excluding the ascertainment of “value for money” that was received by the Department) has been finalised. A presidential report is due for submission end of January 2017The “value for money” portion of the investigation was delayed until 20 September 2016, when the High Court ordered Media Corner to produce relevant accounting records, which are required to investigate the value for money the Department truly received.7MEDIA CORNERSIU presentation to PC on Telecommunications and Postal Services, 08 November 2016

Referrals made to dateThe SIU has referred 7 matters to the Department for purposes of disciplinary action. Disciplinary processes were started, however there have been some challenges within the Department with respect to the finalisation of these processes.Further referralsThe SIU intends to refer 2 corruption related matters to the NPA for criminal prosecution.Civil Proceedings On 5 September 2014, the SIU (joined by the Department) launched a High Court Application in the Gauteng Division in Pretoria under Case No. 66037/2014 to review and set aside the award of the tender to Media Corner and the resulting contract, which has an estimated value of R752 million – if the proposed media buying, as set out in the tender, is also undertaken. The review application is primarily based on SCM non-compliance and calculation errors made during bid evaluation and adjudication. In addition, the court is requested to order Media Corner to repay R12,783,368 to the Department, to make full discovery to the SIU/Department of all supporting documentation in respect of payments totalling R45,473,311.31 and to order Media Corner to repay all discounts, commission and profits taken by Media Corner, which will be quantified through an examination of the documents to be discovered by Media Corner.The case was defended by Media Corner and a number of documents were provided to Media Corner in terms of Rule 35(12).8MEDIA CORNERSIU presentation to PC on Telecommunications and Postal Services, 08 November 2016

The finalisation of the civil proceedings were delayed by settlement negotiations and a number of interlocutory matters.On 16 September 2016, Media Corner belatedly served its Answering Affidavit.The matter was enrolled for hearing on 20 September 2016, where the Applicants (i.e. the SIU and the Department) obtained a partial court order. The Court made the following order:the Application by the Applicants for Condonation for the late filing of the Review Application, in as far as that may have been necessary) was granted by the court;the decision(s) of the Department on or about 14 August 2012 and 22 October 2012 to award the tender to Media Corner is reviewed and set aside; Media Corner is ordered to deliver to the Applicants all invoices and statements of accounts issued to Media Corner by all publishers, broadcasters and other media of whatsoever nature (hereinafter collectively referred to as "the publishers") of advertisements and to which Media Corner’s invoices amounting to R45,473,311.31 related, including all further accounting records thus issued, and which will disclose all discounts, commissions, profits or similar amounts afforded by publishers to Media Corner;Media Corner is granted condonation for the late filing of its Answering Affidavit;the remaining matters, as set out in the Notice of Motion, are postponed sine die; andMedia Corner is ordered to pay all the wasted costs occasioned by this postponement, including the cost of senior counsel that appeared.The Department and the SIU filed Replying Affidavits to Media Corner’s Answering Affidavit and the matter is ready for hearing. The SIU and the Department have applied for a court date, but it is still awaited.9MEDIA CORNER

SIU presentation to PC on Telecommunications and Postal Services, 08 November 2016

Background:The State Information Technology Agency (SITA) investigation was mandated by Proclamation R53 of 2014 as amended by Proclamation R15 of 2015. The proclamations required the SIU to investigate:The procurement of goods and services as well as irregular, unauthorised or fruitless and wasteful expenditure by SITA. Progress: The investigation into the two proclamations is in the process of being finalised and the Presidential report is due end of March 201710SITASIU presentation to PC on Telecommunications and Postal Services, 08 November 2016

Outcomes to dateSaving: SITA was made aware of the SIU investigation and all payments were stopped in respect of a contract to the value of R302 million.Civil matter (iFirm): The R302 million contract was investigated and the matter is currently in court in order to declare the contract invalid and to set the contract aside. This may result in a saving of R302 million. Matter set down for trial on 15 May 2017Irregular or fruitless and wasteful expenditure to the value of R405 million have been identified.Disputed payments to the value of R83million were identified. These payments were stopped in September 2016 as a result of the SIU’s investigation. 11SITASIU presentation to PC on Telecommunications and Postal Services, 08 November 2016

Possible outcomes: (currently under investigation)A criminal referral to the NPA based on allegations of Fraud in respect of a false Tax Clearance Certificate (TCC). It was presented by or on behalf of an entity to be registered on the SITA supplier data base.A referral to the AFU in respect of a R10 million contract on which payment occurred. The entity was registered on the SITA supplier data base but a false TCC was presented for registration purposes.Two disciplinary referrals against the SITA officials who did not adhere to SITA procedure or SCM policy in that they failed to verify the validity of the invalid TCC with SARS.Four disciplinary referrals against SITA officials as result of allegations of unauthorised as well as fruitless and wasteful expenditure in respect of the approval of a R888 399 393.35 contract. 12SITASIU presentation to PC on Telecommunications and Postal Services, 08 November 2016

13COMMUNICATIONS BackgroundThe SIU investigation was mandated by Proclamation R62 of 2014 (dated 4 September 2014). This proclamation required the SIU to investigate the: Donation by the Department towards the hosting of the ICT Indaba.Travel and accommodation expenses or other benefits which were paid by the Department in respect of a person who does not qualify therefor.Recruitment, selection, and appointment of an employee to a position that did not exist.Improper or unlawful conduct by an official of the Department which resulted in the Department purportedly breaching a contract. Improper or unlawful conduct by employees, officials of the Department or third parties relating to the recruitment, selection and appointment of one SABC official. Procurement of goods, works or services and payments made in respect of –The Nkowankowa event The World Telecommunications and Information Society DaySIU presentation to PC on Telecommunications and Postal Services, 08 November 2016

Progress: The investigations are finalised.The final report was submitted to the Presidency in October 2016.The Department may request the report from Presidency.14COMMUNICATIONS SIU presentation to PC on Telecommunications and Postal Services, 08 November 2016

15Background:The SIU investigation was mandated by Proclamation No. R.20 of 2014 (dated 28 March 2014).In terms of the Proclamation, the SIU was authorised to investigate:Alleged irregularities in the recruitment process and in the appointment of a Chief Executive Officer (“CEO”) for the Universal Service and Access Agency of South Africa (“USAASA”) (hereinafter referred to as “the CEO Project”);

Alleged irregularities in the granting of a subsidy to construct and expand an electronic communications network for the Emalahleni Local Municipality (

hereinafter referred to as

“the ELM Project”

); and

Alleged irregularities in the procurement of goods or services in relation to the Rapid Deployment of Public Access Facilities Programme and payments made in relation thereto (

hereinafter referred to as

“the RDPAFP Project”

).

USAASA

SIU presentation to PC on Telecommunications and Postal Services, 08 November 2016

16USAASA (the CEO Project)ALLEGATION 1 (the CEO Project)The SIU investigation revealed evidence to support a submission that the appointment of Mr Zami Nkosi (“Mr Nkosi”) as the CEO of the USAASA was irregular and invalid; On 11 June 2014, the SIU launched a High Court Application in the Gauteng Division in Pretoria under Case No. 43250/2014 to review and set aside the appointment of Mr Nkosi as the CEO of the USAASA. Both the USAASA and Mr Nkosi opposed the Application.An Interlocutory Application was heard on 11 May 2015 and the matter was postponed to 25 May 2015 for judgement on the admissibility of the SIU’s supplementary replying affidavits. On the 25 May 2015, the judge ruled in favour of the SIU and allowed the supplementary replying affidavits.Court papers have closed and everything was ready to have the matter set down for hearing on the Opposed Roll. However, the delays in court processes resulted in the litigation being overtaken by events, when:the USAASA published a new advertisement in the media in which candidates were invited to apply for the position of CEO of the USAASA;the

USAASA allowed the CEO's fixed-term employment contract to expire; and

the

CEO left the employ of the USAASA on 31 March 2016.

The

SIU received advice from senior counsel that the SIU

should not enroll

the matter

since there were no prospects of consequential relief.

SIU presentation to PC on Telecommunications and Postal Services, 08 November 2016

ALLEGATION 2 & 3:Although the investigations into allegations 2 and 3 were completed in July 2015, the SIU withheld the Presidential report pending the outcome of civil proceedings in respect of allegation 1. Also, the SIU wanted to see what steps (if any) the newly appointed Board of the USAASA would take in respect of allegation 1.The Presidential report is due by end November 2016.The outcomes of these investigations will be contained in the Presidential report.17USAASA (the ELM & RDPAFP Projects)SIU presentation to PC on Telecommunications and Postal Services, 08 November 2016

THANK YOU Adv. JL Mothibi Head of Special Investigating Unit