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Arms dealer dumped

Jul 03 2011 13:26 Adriaan Basson

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Johannesburg - Fana Hlongwane, the arms deal “playboy” and former adviser to the late defence minister Joe Modise, has been dumped by British arms company BAE Systems.

Hlongwane, who has been paid commission of more than R200m by BAE for assisting them in winning arms deal contracts and managing their offset projects in South Africa, is now claiming R36m from the multinational for unpaid fees.

City Press can reveal that:

- BAE dumped Hlongwane in April 2007 after Britain's Serious Fraud Office (SFO) initiated an investigation into the arms deal and "extremely negative" articles about their relationship appeared in the local and British press;

- BAE makes no reference in ­arbitration papers to allegations that it bribed Hlongwane, but rather refers to claims that Hlongwane "made corrupt payments to South African public officials"; and

- In a threatening counterclaim, BAE has warned Hlongwane if he or his companies are ever convicted of bribery or any related criminal offence, it will seek repayment of all money paid to him.

BAE was the biggest winner in the arms deal, scoring two multibillion rand contracts. With Swedish conglomerate Saab, BAE provided the airforce with 26 Gripen fighter jets at a cost of R30bn, while BAE also received the tender to produce 24 Hawk training planes for R11bn.

Hlongwane’s involvement in the arms deal - as adviser to Modise and to BAE/Saab - has never been properly explained and an investigation of his role, first by the Scorpions and then the Hawks, was shut down last year.

He has been living the high life since he got involved in the arms deal in the late 1990s, residing in luxury mansions in Hyde Park, Johannesburg, and at the upmarket Zimbali lodge outside Durban.

Apart from managing to escape investigation by the authorities, Hlongwane has successfully kept out of the media spotlight and is rarely seen at social events.

The revelations of a nasty arbitration case between Hlongwane and BAE come after Saab chief ­executive Håkan Buskhe said last month that BAE had paid Hlongwane R24m for consultancy fees without its knowledge.

Hlongwane has never denied receiving these payments and last year successfully argued to prosecutions boss Menzi Simelane that they were above board.

The vehicle used to pay the arms deal "playboy" is a private South African firm called South African National Industrial Participation (Sanip).

After the statements by Saab, the DA released further documents, showing Hlongwane received R51.3m from Sanip between 2003 and 2005.

Documents filed by Hlongwane in the arbitration matter in 2008 and 2009 reveal he received a further bonus of R11.3m in April 2006 after certain BAE offset programmes were signed off.

Documents filed by BAE show the company also had a marketing agreement with Hlongwane under which it paid him £1m a year since January 2002. When this agreement was cancelled in April 2007, Hlongwane would already have earned more than R60m in marketing fees.

Citing clauses that allow it to terminate agreements, BAE states it was entitled to end Hlongwane's services after he was implicated in corruption that negatively affected the company’s image.

"The criminal investigations into the activities of Ngwane (Aerospace, one of Hlongwane's companies) and Hlongwane, and the associated high profile in the media mean association with Ngwane adversely affected BAE’s reputation or was likely to do so," reads a defence statement prepared by BAE's London-based solicitors.

BAE spokesperson Leonie Foster says the documents in City Press' possession are confidential and were leaked "in breach of confidence".

She confirms the company has not had a contractual relationship with Hlongwane for more than three years.

"All documentation in the company's possession relating to the company’s historical relationship with Mr Hlongwane was examined by the SFO (UK’s Serious Fraud Office) in the course of its investigation (that) commenced in 2004. The SFO’s investigation, which among other things addressed allegations relating to South Africa, was concluded last year and formed part of the company’s 2010 court-approved settlement with the SFO," Foster said.

BAE paid a $400m (about R2.8bn) fine to the US last year after pleading guilty to one charge of conspiring to make false statements, and £30m (about R360m) to the UK after pleading guilty to one charge of breach of duty in keeping accounting records relating to payments made in Tanzania.

In May, BAE paid a further $79m (about R520m) to the US state department in settling a civil matter relating to covert payments made through BAE's "Red Diamond" system.

The Mail & Guardian reported last week that R54m was paid to a Hlongwane-linked entity through Red Diamond.

City Press sent questions to Hlongwane’s ­attorney, but received no response.

- City Press
bae systems  |  fana hlongwane  |  arms deal
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