{"id":4582,"date":"2017-10-11T00:00:00","date_gmt":"2017-10-11T00:00:00","guid":{"rendered":"https:\/\/amabhungane.org\/amabhungane\/stories\/the-mckinsey-dossier-part-4-bending-over-backwards-for-trillian\/"},"modified":"2024-09-22T15:28:43","modified_gmt":"2024-09-22T15:28:43","slug":"the-mckinsey-dossier-part-4-bending-over-backwards-for-trillian","status":"publish","type":"post","link":"https:\/\/further.co.za\/amabwp\/the-mckinsey-dossier-part-4-bending-over-backwards-for-trillian\/","title":{"rendered":"The McKinsey dossier part 4 \u2013 bending over backwards for Trillian"},"content":{"rendered":"

Eskom paid Trillian R595-million without a valid contract while lying to the public about doing so. This is well established by now. But how the Gupta-linked company was sneaked onto Eskom\u2019s payment system \u2013 a system designed to prevent fraud \u2013 has always been a mystery. A series of interviews and leaked documents show that suspended chief financial officer Anoj Singh and his management team stand accused of bending over backwards to get Trillian their payday, sometimes bullying mid-level officials into fabricating documents. <\/em><\/p>\n

On 19 July 2017 Anoj Singh shared the stage with acting Eskom chair Zethemba Khoza for the public release of Eskom\u2019s annual financial statements.<\/p>\n

Singh watched him flounder in response to media questions.<\/p>\n

Khoza couldn\u2019t explain who authorised direct payments to Trillian, how the company was sneaked onto the Eskom payment system and to whom Trillian was actually contracted; an astounding admission, seeing that Khoza was member of the Eskom board tender committee at the time the Trillian agreements and invoices were authorised.<\/p>\n

Khoza did however promise an investigation into Eskom\u2019s \u201crelationship\u201d with Trillian.<\/p>\n

He need not have looked far for answers. Singh seems to have had them all.<\/p>\n

Singh and his senior management team \u2013 Edwin Mabelane, Prish Govender and Charles Kalima \u2013 have been identified as key players in the Trillian debacle, which has also ensnared global consulting firm McKinsey.<\/p>\n

This emerges from Eskom\u2019s own report, the explosive G9 Forensic interim report, and also from 10 draft charges<\/a> in the disciplinary process against Singh.<\/p>\n

Singh was suspended on Friday 29 September and Eskom confirmed on Monday 2 October that Singh\u2019s colleagues, Govender, Mabelane and Kalima, also face suspension.<\/p>\n

Draft charges against Singh detail how Singh, Mabelane and Govender allegedly acted together over a period of months in order to ensure Trillian\u2019s payday.<\/p>\n

Singh, Mabelane, Govender and Kalima now face disciplinary charges for allegedly misleading the board tender committee, breaching their fiduciary duties, unauthorised and irregular expenditure and financial misconduct.<\/p>\n

G9 Forensic also recommended criminal investigations be launched.<\/p>\n

The report is stinging in its criticism of Singh, saying he has a \u201ccase to answer\u201d.<\/p>\n

Singh and his team \u201cdid not apply their minds\u201d, \u201cwere hasty, ignored the better judgement of the [internal Eskom] legal team\u201d and, considering the risks Eskom found itself in, \u201cdid not act decisively in the best interests of Eskom\u201d, G9 Forensic said in its interim findings.<\/p>\n

\u201cWhether by design, circumstance or other nefarious reasons, these Eskom officials continued to do business and deliberately and consciously allowed Trillian to provide services which it had not been contracted to do,\u201d they allege.<\/p>\n

Singh did not answer specific questions put to him, but said he had not been interviewed by G9 Forensic investigators, nor had he seen their interim report.<\/p>\n

Scorpio showed Singh excerpts of the report, to which he responded that he had \u201calways acted in good faith, in accordance with my delegation of authority and in terms of Eskom\u2019s various charters and policies… all of which are subject to stakeholders\u2019 scrutiny\u2026\u201d<\/p>\n

He did not respond in detail, but said: \u201cWith respect to allegations levelled against me\u2026 I do not believe it serves anyone\u2019s interests to respond to myopic, cherry-picked bits of information peddled to the media to serve narrow interests.<\/p>\n

“<\/em>I think it\u2019s important for everyone in SA that all allegations be tested in an appropriate platform and not in the court of public opinion.”<\/p>\n

How to dodge a payment system<\/h5>\n

The G9 Forensic investigation was triggered when a whistle-blower, most probably an Eskom official, reported the irregular payment of an invoice for R152.76-million submitted by Trillian in December 2016.<\/p>\n

Eskom\u2019s rush to effect payment \u2013 within one day \u2013 was described by the whistle-blower as extraordinary and unprocedural.<\/p>\n

It was enough to prompt Eskom’s assurance and forensic department to commission a preliminary investigation. G9 Forensic came in \u2013 and uncovered a hornet\u2019s nest.<\/p>\n

To understand why, we need to take a step back and look at Eskom\u2019s payment system.<\/p>\n

In order for any company to get paid, designated Eskom officials have to create a contract and upload valid, signed documentation as motivation. The documentation includes board authorisations and a contract between Eskom and its service provider.<\/p>\n

All invoices served under a designated contract must be linked to a purchase order, issued by Eskom before any work is done. The purchase order describes the services required in terms of the contract.<\/p>\n

It needs to correspond with the invoice issued by the supplier, normally done after the service is concluded.<\/p>\n

The system and policy procedures will not allow Eskom to pay a service provider in the absence of a purchase order.<\/p>\n

The payment system is designed to keep track of work done and payments made under designated contracts \u2013 in effect, to curb fraud and corruption.<\/p>\n

In Trillian\u2019s case, the payment system was breached in totality. At least four Eskom officials admitted to feeling pressurised or manipulated to circumvent policy procedures at the behest of their superiors in favour of Trillian, including by allegedly fabricating purchase orders.<\/p>\n

In each case, the key role players were Singh and his management team of Mabelane, Govender and Kalima.<\/p>\n

Neither Mabelane, Govender, Kalima nor Eskom commented on specific questions relating to the allegations.<\/p>\n

Here\u2019s how it happened.<\/p>\n

The buddy in the \u2018big fish tank\u2019<\/h5>\n

Three independent Eskom sources have claimed that Singh conveyed the message to his management team that Trillian should enjoy special treatment.<\/p>\n

The first hint, a well placed senior Eskom source said, was when, towards the end of 2015, Trillian boss Eric Wood started to frequent the \u201cbig fish tank\u201d on the third floor that housed the executive suites at Eskom\u2019s Megawatt Park building in Midrand.<\/p>\n

The \u201cbig fish tank\u201d (as some Eskom insiders call it) is a glass structure that was erected in an already well-secured area after former Eskom CEO Brian Molefe arrived. It housed the offices of Molefe and Singh as well as those of their assistants.<\/p>\n

The second hint was when a manager was instructed to provide key information to Singh on a treasury file that \u201cWood\u2019s team was suddenly working on\u201d, according to an Eskom source directly acquainted with the matter.<\/p>\n

Said the source: \u201cThis is when we realised Wood was brought in through the back door to partner with McKinsey, without our knowledge.\u201d<\/p>\n

Singh did not answer questions in this regard.<\/p>\n

The first invoice<\/h5>\n

The head of Trillian\u2019s management consulting division, Bianca Goodson, purportedly addressed a pleading letter to Singh dated 29 January 2016, asking Eskom to pay Trillian directly, rather than via their big consulting partner, McKinsey.<\/p>\n

In anticipation of Singh\u2019s favourable response, Trillian attached an invoice for R30.7-million for its 30% share of payment for preparing the Eskom \u201ccorporate plan\u201d, a smaller contract that McKinsey had been awarded in September 2015.<\/p>\n

Trillian\u2019s R30.7-million invoice seems to have bounced around Eskom for a while.<\/p>\n

In the meantime, McKinsey concluded its due diligence on Trillian and on 30 March 2016 informed Singh that the relationship would be terminated following a decision by McKinsey\u2019s global risk committee.<\/p>\n

The absence of a contract between Eskom and Trillian, and with McKinsey pulling out of the deal, meant Trillian should have been out in the cold.<\/p>\n

Except it was not. Instead, Trillian was lining up its first payday.<\/p>\n

On 14 April, two weeks after McKinsey\u2019s letter to Singh, Trillian\u2019s R30.7-million invoice again landed in Singh\u2019s inbox, according to an earlier report on Trillian<\/a> by Advocate Geoff Budlender.<\/p>\n

Mabelane and Govender authorised payment in record time and on the same day the invoice was stamped as \u201cpaid\u201d.<\/p>\n

The draft charge sheet compiled in Singh\u2019s disciplinary procedure was, again, withering about the incident: \u201c\u2026 You directly received an invoice from Trillian for work done for your office\u2026 which you subsequently allowed to be paid by persons under your direct management control\u2026 notwithstanding the fact that there was no contractual relationship between Eskom and Trillian\u2026 This caused direct loss to Eskom and amounted to unauthorised expenditure and fruitless and wasteful expenditure and your role amounts to financial misconduct.\u201d<\/p>\n

One last fling<\/h5>\n

By December 2016, the \u201ccontract finalisation process\u201d between McKinsey and Eskom had already been terminated.<\/p>\n

The board tender committee, of which chairman Khoza was a member, authorised Singh, Mabelane and Govender to reach a settlement with McKinsey. At this stage Eskom had already paid McKinsey and Trillian R800-million as an \u201cinterim settlement\u201d.<\/p>\n

The early termination of the McKinsey contract was a direct result of questions from Treasury.<\/p>\n

But on 13 December 2016 project leader Prish Govender and chief procurement officer Edwin Mabelane motivated another payment of R134-million to \u201cthe BBBEE partner\u201d. This was Trillian, although McKinsey had explicitly disavowed Trillian in March.<\/p>\n

Nevertheless, the Eskom board tender committee at the time irregularly agreed to Govender and Mabelane\u2019s request, according to an Eskom report to public enterprises minister Lynne Brown.<\/p>\n

On that same day Mabelane informed Trillian in a letter that a \u201ccontract review\u201d somehow illuminated another R134-million that \u201cis due to yourself\u201d.<\/p>\n

On cue, Trillian fired off an invoice for R152.76-million, after adding VAT.<\/p>\n

The description of the services rendered were incredibly vague and listed as \u201cprocurement\u201d, \u201cprimary energy\u201d, \u201cclaims\u201d and \u201cgeneration\u201d. This was the fourth invoice Trillian sent directly to Eskom.<\/p>\n

But Govender and Mabelane had a problem. Trillian wasn\u2019t contracted to Eskom, nor to McKinsey<\/a>.<\/p>\n

There was no valid contract loaded onto Eskom\u2019s payment system and Trillian hadn\u2019t been furnished with a purchase order.<\/p>\n

The conundrum: Eskom had an invoice from Trillian without a single supporting document to make a legal payment.<\/p>\n

The absence of proper documents should have been a huge red flag.<\/p>\n

Instead, Mabelane instructed acting general manager Masedi Skosana to fabricate a purchase order for the December 13 invoice.<\/p>\n

Not the first time<\/h5>\n

It wasn\u2019t the first time. Skosana admitted to G9 Forensic to have been involved in the fabrication of another two purchase orders in August 2016.<\/p>\n

Records show that Trillian sent these invoices, both dated 10 August, to Govender two days after the board authorised the payments. The invoices for R122.2-million and R113.2-million respectively were signed for payment by Govender and Mabelane.<\/p>\n

Skosana said she came \u201cunder intense pressure from Mr Edwin Mabelane\u201d and therefore instructed her direct reports to fabricate the purchase orders despite their protestations.<\/p>\n

\u201cI realised at the time that the creation of the purchase order was irregular and against policies and procedures,\u201d Skosana is quoted by G9 Forensic as saying.<\/p>\n

\u201cIt concerned me and afterwards I contacted Mr Govender as the Project Leader, in an effort to obtain further supporting documentation. He said it was a procurement matter and I should not be concerned\u2026 I also discussed it on more than one occasion with Mr Mabelane and aired my concerns. He said we have all the documentation and the transaction is above board.\u201d<\/p>\n

Four months later Mabelane came knocking on Skosana\u2019s door again with the 13 December invoice in hand, but this time she sent him packing.<\/p>\n

\u201cThis time I refused to do it\u2026 In hindsight, I wish I acted bolder on that day in August and refused to create the purchase order.\u201d<\/p>\n

A brief setback<\/h5>\n

But Skosana\u2019s refusal regarding the 13 December invoice seems to have been only a brief setback.<\/p>\n

Eskom senior adviser Nokwanda Gambushe told G9 Forensic in a sworn affidavit that she too was instructed to pave the way to Trillian\u2019s payday. She complied knowing that the request \u201cwas not consistent with procedure\u201d, G9 Forensic notes.<\/p>\n

\u201c\u2026On 19 December 2016 [acting commercial manager] Mr Charles Kalima approached me and requested to create a contract\u2026 Mr Kalima told me the supplier is Trillian and gave me the term(s) of the contract. I did not receive a contract document, but was given the approved board minutes and a submission\u2026,\u201d Gambushe said.<\/p>\n

Trillian\u2019s R152.76-million invoice was paid on 20 December, a day after Gambushe created the questionable contract on Eskom\u2019s payment system.<\/p>\n

G9 Forensic concluded that \u201cTrillian became the illegitimate beneficiary of funds on the back of the [turnaround project] which McKinsey was supposedly contracted to undertake.<\/p>\n

“It is our considered opinion that, irrespective of whether Trillian provided the services or not, Mr Anoj Singh was in direct contravention of several fundamental tenets of the Eskom procurement policy\u201d.<\/p>\n

Now, belatedly, Eskom is claiming its money back. Trillian, however, maintains it received only fair payment for work done.<\/p>\n

Time will tell.<\/p>\n