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Court victory but questions remain about Gupta mine's coal deal

Apr 13 2018 21:00
Jean le Roux and Angelique Serrao

The South Gauteng High Court in Johannesburg has dismissed an application by former directors of several Gupta-owned companies for the removal of the very same business rescue practitioners they appointed in February this year.

Pushpaveni Ugeshni Govender, a former director of several of these companies, requested the removal of the two business rescue practitioners, Louis Klopper and Robert Knoop, tasked with whipping the floundering Gupta-linked companies into shape.

The application also requested the court to nullify the appointment of another two business rescue practitioners, Juanito Damons and Christopher Monyela. Damons and Monyela were appointed to only the Optimum and Koornfontein mines earlier this month at the insistence of workers and creditors of the resource companies, and have since been busy with ensuring the mines remain productive. 

But Judge Jody Kollapen dismissed the application on Thursday, and handed down a punitive costs order against Govender.  

Business rescue practitioners 'receiving kickbacks'

The founding affidavit deposed by Reshma Moopanar, a legal adviser for the Oakbay Group of companies, made several allegations against Klopper and Knoop. Chief among these allegations were claims that the pair are receiving kickbacks from one of the companies engaged in an agreement to buy 400 000 tons of coal per month. 

"I have been informed by a source which I am not at liberty to disclose that a side agreement exists in terms of which part of the excess rebate will be paid by the purchaser of the coal to the BRP [business rescue practioners] in the form of a 'kickback'. Having regard to the quantities involved the value of the kickback will be of the order of USD 350 000 per month, to be divided between them."

The affidavit refers to a "report" published on the website Black Opinion, which apparently corroborates the kickback claims. But these claims only surfaced after the business practitioners started asking probing questions about the proposed sale of Tegeta to Charles King, a shady Swiss company with ties to the Guptas. The Black Opinion story was written by an anonymous "Staff Writer", and requests to the site's editorial staff regarding the identity of this "Staff Writer" were left unanswered.

Klopper in a media conference this week heatedly denied the accusations of receiving a bribe and said the accusation came about because the business practitioners had interrogated the Charles King transaction.

"Erstwhile managers are so desperate to withhold information from us, and probably criminal information away from us, that they are resorting to these tactics to remove us," Klopper said.

He said the accusations were a character assassination and slander of the highest order.

In February 2017, amaBhungane reported on links between Black Opinion and the Gupta family when it emerged that the website was registered by a former Gupta employee.

Burgh Group places Vitol in the spotlight

This week, at the offices of the Burgh Group in Sandton, Klopper announced that the business rescue practitioners had entered into a management agreement with Burgh to provide critical services to the Optimum and Koornfontein mines.

The Burgh Group in turn appointed their operations division Ezimbiwayo Consulting to assess the situation at the mines.

Klopper said what they found at the mines were smouldering stockpiles which were a fire and environmental hazard. They also found that critical suppliers were owed substantial amounts of money which hampered the running of the mine.

This included R700 000 owed to the Rail Safety Authority which resulted in the rail sliding at Optimum not being operational, R43m to Transnet Freight Rail and R17m owed to The Richards Bay Coal Terminal. The Guptas’ banking issue had also led to a shutdown of exports because the Reserve Bank would not allow the proceeds of exports to be deposited into the Bank of Baroda. 

Klopper said it was clear from this assessment that the mines were in desperate need of tender loving care, management and a significant cash injection which is what the management deal promised to bring in.

The management deal would open up the sale of 200 000 tonnes of coal exported to a company called Vitol which Klopper said would result in minimum revenue of R200m. Kloper said this would inject cash into the mines which would enable them to pay creditors and to reinvest money back into the operations. The Burgh Group also brings to the table a commercial bank account, which would allow the Reserve Bank to allow export purchases once again. 

Vitol is an international energy and commodities company that is the world’s biggest independent oil trader. In 2016, as part of a consortium with the Burgh Group, they had entered a deal to buy a stake in the Richards Bay Coal Terminal through Tegeta Exploration and Resources. The deal would have given the consortium a 7.61% stake in Richards Bay and the rights to ship about eight-million tons of coal from South Africa annually. But, in 2017 the consortium announced that they were pulling out of the deal.

Burgh Group director Quinton van der Bergh told News24 that the company and Vitol had no dealings with Optimum after pulling out of the deal last year.

Opaque archipelago agreements obfuscates ownership 

What isn’t clear about the coal contract however, despite the lack of substance in either the Black Opinion piece or the case made in court, is how a company called African Iron Ore Solutions Limited (AIOS) fits into the sale of coal agreements.

The court papers show that Knoop and Klopper entered into an agreement with AIOS, an entity registered in the Seychelles. The Seychelle islands are a well-known tax haven and a known “low-disclosure” jurisdiction, meaning company information is nearly impossible to obtain.

The business address for AIOS used in the agreement was that of Aarrow Corporate Services Ltd, a corporate services company also based on the island.

The agreement was signed by a Lucqman Issack, a Mauritian national formerly employed by audit firm KPMG on the island. But strangely he did not sign the agreement on behalf of AIOS: instead, Issack signed the contract on behalf of a company called Alexandrite Services LLC, a company registered in Delaware in the United States. Issack signed the agreement in Ebene, a suburb to the south of the Mauritian capital Port Louis.

The directorship of this company is held by a corporate trust, again making it impossible to determine who the eventual management and owner of this company is.

Considering that all of the companies involved in the AIOS agreement are registered in low disclosure jurisdictions, it appears that someone has gone to great lengths to hide whoever is behind the purchase of the coal.

Detailed questions on the ownership of these companies, as well as the relationship between Issack, AIOS and Alexandrite Services were not responded to by either Knoop, Klopper, or their attorney. 

Second costs order this week

Two punitive cost orders in as many days have been awarded against the former management of the Gupta-linked companies.

In a separate legal challenge, the former management of the Gupta-linked companies were ordered to allow Klopper and Knoop access to the business properties from which the companies are managed. The pair were forced to seek legal recourse after they were refused access to the properties, ostensibly because of questions about a suspicious transaction involving Tegeta Resources and Exploration.

Shortly after the business rescue practitioners raised queries regarding the sale of Tegeta to Charles King SA, a Swiss company with links to the Guptas, they were told that they were no longer welcome at the premises.

Judge Denise Fisher was critical in her judgment.

"I agree with counsel for the applicants that the application [for access to the property] should not have been necessary. That the respondents have opposed the application suggests a vexatiousness which is such that it should attract the court's censure in the form of punitive costs."

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