{"id":6521,"date":"2018-08-15T03:54:29","date_gmt":"2018-08-15T03:54:29","guid":{"rendered":"https:\/\/amabhungane.org\/amabhungane\/?post_type=stories&p=6521"},"modified":"2024-09-21T18:26:37","modified_gmt":"2024-09-21T18:26:37","slug":"the-trojan-horse-that-wheeled-r600m-out-of-state-owned-entities","status":"publish","type":"post","link":"https:\/\/further.co.za\/amabwp\/the-trojan-horse-that-wheeled-r600m-out-of-state-owned-entities\/","title":{"rendered":"The Trojan horse that wheeled R600m out of state-owned entities"},"content":{"rendered":"\n

In 2013 Regiments Capital got a foot in the door at Transnet. A year later the firm was earning more than R400-million a year in consulting fees as one of the few black-owned firms challenging the well-guarded territory of titans like McKinsey.<\/em><\/p>\n\n\n\n

But amaBhungane\u2019s latest investigation shows that, far from being a shining example of black success, Regiments\u2019 goldrush was largely orchestrated by the Guptas and their business partner Salim Essa, who laid claim to roughly half of Regiments\u2019 income.<\/em><\/p>\n\n\n\n

Although incomplete, records suggest that at least R600-million was siphoned from consulting contracts with Transnet, a Transnet pension fund, South African Airways, SA Express and Denel before being laundered out through a network of anonymous \u201cletterbox\u201d companies.<\/em><\/p>\n\n\n\n

\u201cI built Regiments,\u201d Essa is said to have boasted when telling a prospective business partner how he could open doors.<\/em><\/p>\n\n\n\n

For three years, Regiments was the Trojan horse that carried Essa and the Guptas into the cash vaults of state-owned entities.<\/em><\/p>\n\n\n\n

In exchange, Regiments was supposed to get rich. But as Essa and the Guptas\u2019 influence and power grew, the state capturers began to cannibalise the firm they had helped to enrich.<\/em><\/p>\n\n\n\n

When Regiments\u2019 principals refused in 2015 to sell Essa and the Guptas a stake, Essa shut down their pipeline of deals and started the competing Trillian Capital Partners.<\/em><\/p>\n\n\n\n

What follows is the story thus far, told through detailed financial records and the emails exchanged between the people involved.<\/em><\/p>\n\n\n\n

Both Regiments and its former director, Eric Wood, denied impropriety. Regiments said: \u201cWe urge you to refrain from connecting dots that are not there,\u201d while Wood told us he would not comment on \u201cwhat appears to be incorrect research from unreliable sources to reach untenable conclusions\u201d. (Read Regiments\u2019 full statement here<\/a> and Wood\u2019s comment here<\/a>.)<\/em><\/p>\n\n\n\n

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\u201cPut me on record, I don\u2019t give a fuck. Put me in your fucking article,\u201d Kuben Moodley screamed over the phone<\/a>.<\/p>\n\n\n\n

\u201cWhen the MD of [name withheld] \u2026 flies every businessman, every politician \u2013 I hope you\u2019re recording this \u2013 to Durban to Zimbali, paid for \u2013 chicks, alcohol, clothes, whatever \u2013 you know what that\u2019s called? \u2026 That\u2019s called business development.<\/p>\n\n\n\n

\u201cWhen a black person does business development it\u2019s called corruption!\u201d<\/p>\n\n\n\n

Moodley is a fixer, although he prefers \u201cbusiness development partner\u201d. For a fee, he makes the connections that help companies land lucrative contracts with state-owned enterprises like Transnet and Eskom.<\/p>\n\n\n\n

In 2012, Moodley introduced the chief executive of Regiments Capital, a then up-and-coming black-owned financial and advisory group, to an as-yet-unknown hustler: Salim Essa.<\/p>\n\n\n\n

Over the next three years, Essa was Regiments\u2019 rainmaker, opening doors at Transnet and other state-owned entities, where Regiments landed deals worth roughly R1-billion.<\/p>\n\n\n\n

For simply making the introduction, allegedly over a round of golf, Regiments agreed to pay Moodley\u2019s company Albatime up to five percent of every Essa-orchestrated deal.<\/p>\n\n\n\n

\u201cI had a business development contract; I introduced [Regiments CEO Niven Pillay] to Salim Essa, finished and klaar,\u201d Moodley told amaBhungane last year.<\/p>\n\n\n\n

Moodley\u2019s expected windfall \u2013 detailed more than a hundred invoices and ledger entries \u2013 was in the region of R50-million over the three-year period.<\/p>\n\n\n\n

But the real money was reserved for Essa and the Guptas, who claimed in excess of R400-million, siphoned from Regiments\u2019 contracts with state-owned entities.<\/p>\n\n\n\n

On the evidence available to us, it appears another two Albatime invoices, approaching R200-million in total, were simply used to launder \u201cbusiness development\u201d payments to Essa and the Guptas.<\/p>\n\n\n\n

Altogether, R644-million appears to have been paid or at least earmarked for Regiments\u2019 fixers.<\/p>\n\n\n\n

Regiments’ Faustian pacts were sealed in a series of lobbying agreements with letterbox companies \u2013 firms usually of little substance, set up to obscure their true owners\u2019 identities.<\/p>\n\n\n\n

These agreements and the people behind them were supposed to remain secret, but records obtained by amaBhungane have exposed the Gupta-Essa hand, and with it the rotten foundations of Regiments\u2019 growth.<\/p>\n\n\n\n

Letterbox 1: Gateway \u2013 the PO box in the desert<\/h5>\n\n\n\n

For a deal with the devil, the 12-page \u201cco-operation agreement\u201d between Regiments Capital and Gateway Limited, signed in November 2012, was surprisingly light on detail.<\/p>\n\n\n\n

[highlightList ]<\/p>\n\n\n\n

Side note<\/h5>\n\n\n\n

McKinsey partner David Fine told Parliament last year that the firm selected Regiments as its so-called supplier-development partner after Singh told McKinsey that its long-time partner, black-owned consulting firm Letsema, was conflicted. \u201c[I]t was a suggestion not an instruction,\u201d a former McKinsey partner insisted, speaking on condition of anonymity.<\/p>\n\n\n\n

Gateway was little more than a PO box in the desert of Ras Al Khaimah, an outpost of the United Arab Emirates. But despite its remote setting, Gateway had global connections: Sanjay Grover, the man who signed on Gateway\u2019s behalf, was the Gupta family\u2019s fixer in Dubai. More importantly, Gateway was quickly becoming an important stopover<\/a> in the Guptas\u2019 money laundering network.<\/p>\n\n\n\n

Six weeks before, McKinsey and Regiments had submitted a joint bid to Transnet for consulting work on a new R300-billion growth plan called the Market Demand Strategy and were now waiting for the tender results.<\/p>\n\n\n\n

Gateway, the contract promised, would \u201cutilise its global network of partnerships, joint ventures and strategic alliances \u2026 to realise business opportunities introduced by Regiments\u201d. In exchange, Gateway would receive an unspecified cut of any contract it delivered to Regiments.<\/p>\n\n\n\n

By signing, then-Regiments director Eric Wood had entered into a pact with a company in one most secretive banking jurisdictions in the world.<\/p>\n\n\n\n

Wood must have known the Guptas were behind Gateway. And that in exchange for splitting the spoils with them, they would use their political connectivity \u2013 or worse \u2013 to ensure lucrative government contracts started flowing to Regiments.<\/p>\n\n\n\n

Letterbox 2: Chivita \u2013 the local substitute<\/h5>\n\n\n\n

Two weeks later, Transnet chief financial officer Anoj Singh delivered the good news: Regiments had won part of the coveted consulting contract and would partner with global consulting firm McKinsey to oversee Transnet\u2019s ambitious growth strategy and train managers for the project.<\/p>\n\n\n\n

Regiments would get a third of the fees \u2013 roughly R26-million over nine months \u2013 for establishing a \u201cresults management office\u201d at Transnet. Considering Regiments Capital\u2019s turnover for the previous year was just over R27-million, the news from Singh effectively doubled its business.<\/p>\n\n\n\n

Did Regiments\u2019 sudden good fortune have anything to do with the freshly-inked deal with the Gupta letterbox in Dubai?<\/p>\n\n\n\n

New evidence shows that every time Regiments invoiced Transnet, a shadow invoice soon appeared from Salim Essa, claiming 35 percent of Regiments\u2019 fees.<\/p>\n\n\n\n

Emails exchanged between Essa and Regiments indicate that the invoices were supposed to be issued by Gateway in terms of the November 2012 \u201cco-operation agreement\u201d.<\/p>\n\n\n\n

In other words, the letterbox had delivered the business to Regiments, and was now demanding its 35 percent cut.<\/p>\n\n\n\n

But perhaps sensing that millions flowing to an offshore tax-haven would attract unwanted attention from the South African Reserve Bank, Essa switched the letterboxes.<\/p>\n\n\n\n

Chivita Trading, a local letterbox, was registered to a misspelled address in Moreleta Park.<\/p>\n\n\n\n

There is no evidence that Chivita\u2019s sole director, Salim Patel, performed any \u201cBusiness Development & Strategic Technical Advisory\u201d services on the Transnet project as the Chivita invoices claimed.<\/p>\n\n\n\n

Like the other letterbox front men, Patel is virtually a ghost. Earlier exhaustive attempts to trace him yielded no results, and it seems likely that he and others were picked by Essa for their anonymity.<\/p>\n\n\n\n

Despite this, Chivita would issue invoices for at least R5.3-million from the joint McKinsey-Regiments project at Transnet over the next year.<\/p>\n\n\n\n

Soon, Essa was issuing other invoices for Chivita\u2019s \u201cBusiness Development & Quality Assurance\u201d services too: R2-million in respect of a Regiments contract to secure funding for Denel; and another R2-million in respect of Regiments review of two Transnet pension funds.<\/p>\n\n\n\n

Denel told us this week that it was \u201cnot aware that persons or companies other than Regiments were paid\u201d, adding that Regiments\u2019 fee was \u201cnot outside the norm\u201d. (Read Denel\u2019s full statement here<\/a>.)<\/p>\n\n\n\n

In these early days Essa\u2019s emails to Regiments said little. Those that did were brief:<\/p>\n\n\n\n

\u201cHi. A reminder for the master agreement copy and for the Denel annex urge. Thx Salim\u201d.<\/p>\n\n\n\n

Who Essa was connected to apart from the Guptas, and what strings he pulled to get Regiments their contracts, is not entirely clear. Essa would also ask for information, or get Regiments to send it to his next-in-command, Ashok Narayan (aka \u201cA\u201d). But where the information ended up we can only guess.<\/p>\n\n\n

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<\/p>\n\n\n\n

\u201cNeed you guys to write a motivation on y you should get fund management,\u201d Essa told Wood and Regiments director Niven Pillay in a November 2013 email.<\/p>\n\n\n\n

At the time, Regiments and Gateway were trying to secure the contract to implement a liability-driven investment (LDI) strategy for the R15.3-billion Transnet Second Defined Benefit Fund.<\/p>\n\n\n\n

\u201cSo if someone chose ldi as a strategy what makes u best\/most efficient \/ historic performance etc. Please give copy to A. Thx.\u201d<\/p>\n\n\n\n

It would take another two years for Essa and Regiments to get access to Transnet pensioners\u2019 money, but for now, with a multi-billion procurement contract on the horizon, it was Transnet itself that would be their next target.<\/p>\n\n\n\n

Meanwhile in Hong Kong<\/h5>\n\n\n\n

The centerpiece of Transnet\u2019s ambitious growth strategy was 1 064 new locomotives that would make rail transport faster, more reliable and cheaper, driving freight business back from road to the railways.<\/p>\n\n\n\n

But at an initial estimate of R38-billion \u2013 eventually R54-billion \u2013 the plan was an unprecedented gamble. If Transnet could not increase revenue from increased traffic, repayments on the locomotives would put the entire company at risk.<\/p>\n\n\n\n

From our #GuptaLeaks reporting<\/a> we know that one of the companies contracted to supply locomotives, China South Rail (CSR), agreed to pay R3.8-billion to Tequesta, an Essa letterbox company in Hong Kong, in exchange for Essa and the Guptas\u2019 help to securing the largest part of the locomotive deal.<\/p>\n\n\n\n

Tequesta, the \u201cbusiness development\u201d contract claimed, had \u201ca familiarity with [the] regulatory, social, cultural and political framework\u201d in South Africa and would use that to convert opportunities into contracts for CSR.<\/p>\n\n\n\n

Side note<\/h5>\n\n\n\n

In total, Gupta-controlled or Gupta-linked letterbox companies were promised R5.3-billion in commissions by CSR for helping to secure three deals for 554 locomotives. Read our original report on the Tequesta kickback here<\/a><\/span>.<\/p>\n\n\n\n

But Tequesta was not the only Gupta-Essa letterbox being enriched from the locomotive procurements.<\/p>\n\n\n\n

In January 2013, Transnet had tapped McKinsey for a second contract: acting as Transnet\u2019s advisors on the tender process for the 1064 locomotive deal. The consultants were promised R35.2-million in fees.<\/p>\n\n\n\n

As Transnet entered final negotiations with the shortlisted locomotive bidders a year later, it asked McKinsey to step in and provide additional advisory services. But McKinsey pulled out of this leg of the contract just four days after signing it.<\/p>\n\n\n\n

Although McKinsey had stood to earn an additional R10-million, it told Transnet it \u201cwould not be able to add significant value \u2026 at this stage in the process\u201d.<\/p>\n\n\n\n

When McKinsey bowed out, Regiments stepped in. On CFO Singh\u2019s recommendation, the original R10-million earmarked for McKinsey for this two-month leg swelled to R78-million for Regiments.<\/p>\n\n\n\n

With only limited records and no invoices for these dates it is difficult for us to pair the money coming into Regiments with the money leaving to Essa-controlled letterboxes. But it appears that a chunk of Regiments\u2019 fees was channeled to one of two Essa letterboxes: Chivita and Homix.<\/p>\n\n\n\n

Letterbox 3 \u2013 Homix: The blue door in Wierda Park<\/h5>\n\n\n\n

Having committed more than R50-billion on locomotives, Transnet urgently needed to grow rail traffic on its major lines: coal, manganese and general freight business (GFB).<\/p>\n\n\n\n

Transnet\u2019s solution was to bring in an army of consultants. McKinsey, with Regiments as its now de facto<\/em> partner, were once again tapped for the job.<\/p>\n\n\n\n

On a single day in April 2014, Transnet handed McKinsey and Regiments five consulting contracts worth a staggering combined R835-million: improving efficiencies and increasing traffic on the coal line (R216.7-million), ditto with the manganese line (R179.9-million), renegotiating tariffs with Kumba Iron Ore (R239-million), managing the construction of the New Multi-Product Pipeline project (R190-million), and the Capital Optimisation and Implementation Support Services contract (R225-million).<\/p>\n\n\n\n

In May 2015, a further contract (R375-million) to increase sales for Transnet\u2019s general freight business (GFB) was also handed to McKinsey and Regiments.<\/p>\n\n\n\n

Side note<\/h5>\n\n\n\n

The recently-leaked draft National Treasury report into Transnet provides a revealing anecdote. In 2012, then-Transnet chief executive Brian Molefe rebuffed an attempt to increase a McKinsey\/PwC contract from R25-million to R49-million, saying in an email: \u201cI don\u2019t understand how a six months consulting project can cost R49 million. I.E R8,5m per month! What needs to be done and what resources will be deployed? Work programme? Break down of cost? Please!\u201d<\/em>  Transnet handed McKinsey and Regiments contracts potentially worth in excess of R40-million a month, averaged out.<\/p>\n\n\n\n

No other consulting firms were given an opportunity to bid on any of these contracts.<\/p>\n\n\n\n

During 2014 and 2015 about 12 invoices arrived each month from the letterboxes demanding their cut of Regiments\u2019 fees from Transnet: 50 percent for Chivita or Homix, and five percent for Moodley, the man who had introduced Essa and Regiments.<\/p>\n\n\n\n

During those two years, McKinsey and Regiments would earn a combined R1.5-billion in consulting fees from Transnet. The lion\u2019s share, R952-million, would go to Regiments. But in reality, Regiments would quickly be stripped of more than half by the Essa-Gupta laundry service.<\/p>\n\n\n\n

When payments were late, both Essa and Moodley were quick to remind Regiments of the deal they had struck.<\/p>\n\n\n\n

\u201cEric, I went through our contract last night and the following was agreed, as per splits: 50\/5, 40\/4,5, 30\/3,5, 20\/2,5 and 5\/1 percent to Albatime. So as per agreement, Albatime should receive 3 percent\u2026\u201d Moodley told Wood in an email.<\/p>\n\n\n\n

 \u201cAccept, a deal is a deal,\u201d Wood replied.<\/p>\n\n\n\n

One of the joint McKinsey-Regiments contracts was to oversee the construction of the New Multi-Product Pipeline, a 715km pipeline designed to move liquid fuel from Durban to Johannesburg. Excel spreadsheets compiled by Regiments suggest that of the estimated R190-million in consulting fees split between McKinsey and Regiments, R46.3-million was channeled to Chivita\/Homix, while another R5.3-million went to Albatime, a premium of almost 40 percent.<\/p>\n\n\n

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When Mosilo Mothepu was re-hired by Regiments in 2015, she found a very different company to the modest one she had left in 2010 \u2013 from 50 employees, Regiments had grown to 270 people servicing a host of what she described as \u201cblue chip public sector clients\u201d.<\/p>\n\n\n\n

Mothepu, who later moved from Regiments to Trillian and then blew the whistle on Trillian\u2019s role in state capture, told Parliament in October last year: \u201cDuring the time I had left, Regiments\u2019 fortunes had changed favourably\u2026 I asked the CFO what was happening, and he said it was a new model. They had these business development partners.\u201d<\/p>\n\n\n\n

\u201cI later found out that it was Mr Salim Essa and Kuben Moodley. They brought these contracts. I am not sure how they were awarded, and they would get a commission of 50c for every rand that was earned through these clients.\u201d<\/p>\n\n\n\n

Letterbox 4 \u2013 Forsure: The yellow house in Mayfair<\/h5>\n\n\n\n

Even as the money poured in from Transnet, the voracious state capture machinery that Essa and Regiments had built was looking for new feeding grounds. As with Transnet and Denel, almost all Essa\u2019s targets would be state-owned entities under the control of the department of public enterprises.<\/p>\n\n\n\n

\u201cThis is what [SA Express chairman Andile Mabizela] sent to Shareholder last week,\u201d Essa emailed Wood in March 2015, attaching the airline\u2019s \u201cprivate and confidential\u201d plea for a R567-million government guarantee, and a letter sent to government\u2019s then-shareholder representative, public enterprises minister Lynne Brown.<\/p>\n\n\n\n

Invoices show that R1.4-million of Regiments\u2019 fee from SA Express would be earmarked for an Essa letterbox.<\/p>\n\n\n\n

In May 2015, Regiments received another iteration of the Gateway \u201cco-operation agreement\u201d with a new letterbox company, Forsure Consultants, acting as rainmaker.<\/p>\n\n\n

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<\/p>\n\n\n\n

Attached to the unsigned contract was a R2.5-million invoice from Forsure, claiming 40 percent of Regiments\u2019 fee from a joint McKinsey-Regiments project for South African Airways. Although the goal was to find money for the struggling national airline, the consultants\u2019 fees included a substantial premium for Essa\u2019s letterboxes.<\/p>\n\n\n\n

\u201cAt no stage did SAA engage with any third parties on this project for services rendered and to the extent we are aware, there is no basis to conclude that the decision to award work which was ultimately performed by McKinsey, was in violation of [procurement prescripts],\u201d SAA spokesperson Tlali Tlali told us this week. Read SAA’s full statement here<\/a>.<\/p>\n\n\n\n

Soon, Forsure was holding out another prize for Regiments: the long-sought contract for the Transnet Second Defined Benefit Fund, a pension fund with almost 53 000 members and R15.3-billion under management.<\/p>\n\n\n\n

The fees demanded by Essa\u2019s new letterbox were so extraordinary \u2013 up to \u201c60% of Regiments Revenue\u201d \u2013 that Wood asked his co-director Niven Pillay to confirm they were accurate:<\/p>\n\n\n\n

\u201cHi Niven. Please can you confirm that the attached splits are as you agreed.\u201d<\/p>\n\n\n\n

Everything was going perfectly it would seem, until a Deloitte auditor stuck up his hand.<\/p>\n\n\n\n

Homix exposed<\/h5>\n\n\n\n

Regiments, it turned out, was not the only firm making use of the Essa laundry service. Leaked records of bank transfers show<\/a> that Essa\u2019s most prolific letterbox, Homix, had received R190-million from at least five companies between October 2014 and March 2015.<\/p>\n\n\n\n

Side note<\/h5>\n\n\n\n

In the investigation that followed it became apparent that Transnet CFO Anoj Singh\u2019s fingerprints were all over the deal. Investigators were told that Singh had inexplicably gone cold on a deal with Neotel just before it was due to be signed. But like Regiments, Neotel turned to a Gupta-linked letterbox for help. After Neotel agreed to pay a two percent \u201csuccess fee\u201d to Homix, Singh allegedly revived his interest in negotiating with Neotel. Singh has consistently denied impropriety.<\/p>\n\n\n\n

In April 2015, Deloitte was conducting its annual audit of telecoms company Neotel, when auditors noticed two payments to Homix \u2013 one for R34.5-million and another for R41.4-million.<\/p>\n\n\n\n

When the auditors dug deeper, they discovered that Homix had been promised a \u201csuccess fee\u201d for helping Neotel to clinch deals worth R1.8-billion from Transnet.<\/p>\n\n\n\n

Neotel\u2019s investigators had already suspected a Gupta connection to Homix, but when amaBhungane learnt about the quietly unfolding scandal one name stuck out: Ashok Narayan, the supposed chief executive of Homix, whom we had already flagged in our Vrede dairy farm investigation<\/a>.<\/p>\n\n\n\n

Homix had problems on other fronts too \u2013 in May 2015, Mercantile Bank red-flagged a series of suspicious transfers from Homix\u2019s bank account in South Africa to two companies in Hong Kong. Homix claimed the transfer totaling R51-million was for imported goods but the paperwork appeared to be fake and the Reserve Bank froze and later confiscated the final R14-million.<\/p>\n\n\n\n

Pressure mounts inside Regiments<\/h5>\n\n\n\n

From emails, we can see how the news that Homix had become toxic rippled through the letterboxes and Regiments.<\/p>\n\n\n\n

\u201cHi Eric, I am doing an audit on all of our trade partners that we are paying fees to etc and I came across the name Homix, to which we have paid 200m+ in the last financial year. When I google the names mentioned I came across this recent story I read in the papers today which mentions Homix, Transnet and Anoj Singh,\u201d Regiments\u2019 head of legal and compliance Adriaan van Wyk wrote in an email to Wood.<\/p>\n\n\n

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<\/p>\n\n\n\n

Attached was a link to amaBhungane\u2019s front-page expos\u00e9<\/a> on the Neotel\/Homix kickback scandal.<\/p>\n\n\n\n

\u201cThis seems, on the face of it, parties that we have ties to. Can you tell me the nature of our relationship with Homix and if this is the same Homix that the papers are talking to?\u201d<\/p>\n\n\n\n

Previously, Wood\u2019s co-director Niven Pillay and Regiments chairman Litha Nyhonyha have repeatedly denied they knew of the millions channeled to Homix and the other Essa letterboxes, claiming that they were only aware of the five percent paid to Albatime but that the 50 percent payments to Essa\u2019s letterboxes were covertly authorised by Wood before he jumped ship with Essa to start rival consulting firm Trillian.<\/span><\/p>\n\n\n\n

\u201cWe were not party \u2013 either Litha nor I \u2013 to any of the payments to Homix. We found out after the fact and stopped it,\u201d Pillay told us during an interview<\/a> last year.<\/p>\n\n\n\n

But new evidence suggest Pillay was lying, because as soon as Wood received the email about Homix from Regiments\u2019 compliance head, he forwarded it to Pillay.<\/p>\n\n\n\n

Regiments told us this week that it had \u201cnever knowingly misled the media\u201d, adding: \u201c[O]ur answers have been consistent with our knowledge at that time.\u201d<\/p>\n\n\n\n

Whatever discussions followed between the two directors took place offline. An hour-and-a-half later, Wood sent the Regiments\u2019 compliance department an unsigned \u201cco-operation agreement\u201d between Regiments and Homix, almost identical to the one Regiments had signed with Gateway.<\/p>\n\n\n\n

\u201c\u2026I told [Wood] very directly that this is a major concern for me as this entity is in the papers for all the wrong reasons,\u201d Van Wyk told us this week. \u201cHis answer was something in the vein of it being for business facilitation, consultation and introduction. He basically played it down and said there was nothing to worry about and that it was perfectly normal in their line of business as the company actually rendered services as agreed on.<\/p>\n\n\n\n

\u201cI was not satisfied with his response\u2026 I did tell him that one would have to see the signed agreement as a blank agreement does not mean anything.\u201d<\/p>\n\n\n\n

The new letterboxes \u2013 Fortime, Medjoul, Birsaa, Hastauf and Maher<\/h5>\n\n\n\n

For more than a month the laundry service to Essa and the Guptas was put on hold while new letterboxes and new ghost directors were sourced.<\/p>\n\n\n\n

On 1 July 2015, Homix addressed a hurried letter CSR Shanike, a division of China South Rail, the locomotive manufacturer that agreed to pay R5.3-billion to Essa, the Guptas and their associates. From the letter, it appears CSR Shanike wanted help securing a Transnet Engineering tender to provide parts for the locomotive chassis, known as bogies.<\/p>\n\n\n\n

Not content with feeding off both the advisors and the locomotive suppliers, Homix agreed to help, for a fee.<\/p>\n\n\n\n

\u201cGentlemen: We refer to the Agreement signed between us dated May 28, 2014 for advisory services in respect of the Tender for the supply of Bogie components to Transnet Engineering Limited\u2026 [W]e wish to exercise our right to nominate another company to continue with and to be a beneficiary of this Agreement\u2026\u201d<\/p>\n\n\n\n

The company Homix nominated to take its place was Fortime Consultants, one of seven freshly-minted consulting companies registered to an address in Mthatha. The company\u2019s director, Sabbir Ahmed, had never opened a company until 9 June 2015 when he registered Fortime and Medjoul, another Essa letterbox.<\/p>\n\n\n\n

A week later he registered another five companies, then he disappeared. AmaBhungane has not been able to trace him for comment.<\/p>\n\n\n\n

Side note<\/h5>\n\n\n\n

Attached to the CSR Shanike letter was a Fortime invoice of R1.1-million \u201cadvisory services\u201d. Whether Fortime received additional payments from CSR Shanike remains unclear. CSR, it would appear, was later awarded a Transnet contract to manufacture components for bogies.<\/p>\n\n\n\n

Soon all the Homix invoices were being channeled to the new letterboxes \u2013 Fortime, Birsaa Projects and Medjoul. Internally at Regiments, there was some confusion about where the money should go.<\/p>\n\n\n\n

\u201cCan you be so kind and confirm with Ashok into which account or company should we process the rest of April invoices that still need to be paid as \u2026 we want to avoid confusion,\u201d a junior accountant at Regiments wrote to Wood.<\/p>\n\n\n

\n
\"\"<\/figure>\n<\/div>\n\n\n

<\/p>\n\n\n\n

\u201c[T]he April and March invoices are all Homix invoices. Please will you send (resend) those invoices in the new entities,\u201d Wood told Narayan.<\/p>\n\n\n\n

If it was not yet obvious to Regiments that the payments to the letterboxes were illicit, Narayan\u2019s secretive behaviour should have removed any doubt. When a new letterbox \u2013 Hastauf \u2013 was commissioned, Narayan tried to hide behind the company\u2019s ghost director, Waseem Essop, telling Wood:<\/p>\n\n\n\n

\u201c[Regiments] would have received the mail from waseem@hastauf.co.za. I didn\u2019t want it to come from me so have asked them to resend.\u201d<\/p>\n\n\n\n

Added to that was Narayan\u2019s dizzying payment schedule that split and staggered the millions pouring into the letterboxes \u2013 our best guess is that this was to avoid the bank\u2019s trip wire for money laundering.<\/p>\n\n\n\n

\u201cIf the 2 Invoices from yesterday were paid, then please release payment of the following 4 Invoices as enclosed TODAY: HOWEVER, IF YOU ARE PAYING THOSE 2 INVOICES TODAY, THEN PLEASE PAY THESE 4 INVOICES ON MONDAY NOT TODAY<\/span>,\u201d Narayan told Wood, adding the instruction in red capital letters to underscore how important it was to prevent money from pouring into the letterboxes\u2019 bank accounts.<\/p>\n\n\n\n

But having struck a deal with the devil, Regiments discovered that the devil now wanted more.<\/p>\n\n\n\n

The slow-moving trainwreck<\/h5>\n\n\n\n

For years, resentment about Transnet\u2019s army of high-priced consultants had been growing.<\/p>\n\n\n\n

As far back as November 2014, Herbert Msagala, the chief executive of Transnet Capital Projects had put McKinsey on terms over its dismal performance on the critical New Multi-Product Pipeline Project.<\/p>\n\n\n\n

\u201c[T]here is little to [no] McKinsey team on the ground to even understand what is going on. The team members that are there lack experience\/expertise to drive the schedule and cost down\u2026 Before we can engage on any way forward I would like to know what resources [consultants] and skills set can be provided by McKinsey and what they have delivered to date,\u201d Msagala wrote to McKinsey.<\/p>\n\n\n\n

By the time Msagala\u2019s furious letter arrived both McKinsey and Regiments had been on site for more than six months and had claimed an estimated R75.6-million in fees.<\/p>\n\n\n\n

Msagala could not have known that a large portion of the fees had been carved out and channeled to Chivita, Homix and Albatime, but his letter bristled with skepticism.<\/p>\n\n\n\n

\u201cMy view is that nothing has been done and there is no team that has been deployed,\u201d he wrote.<\/p>\n\n\n\n

From the emails exchanged between McKinsey partner Vikas Sagar and his colleagues it appears that Transnet had summonsed McKinsey senior partner Norbert D\u00f6rr to a meeting in April 2015 to ask why McKinsey was still failing to provide an adequate number of consultants on the project.<\/p>\n\n\n\n

\u201c[I]’m sure you’ve gotten an update from norbert [D\u00f6rr] on the meeting this morning – so will not dwell on this,\u201d Sagar wrote to two colleagues. \u201c[O]ne of the deliverable i personally committed to was to provide herbert [Msagala] and anoj [Singh] detailed feedback on the current status of the \u201810 resources [consultants] he has asked for from us 4 months ago\u2019 and a view on whether we will be able to get these.\u201d<\/p>\n\n\n

\n
\"\"<\/figure>\n<\/div>\n\n\n

<\/p>\n\n\n\n

In other areas, the wheels were coming off too.<\/p>\n\n\n\n

On the manganese line \u2013 where Essa\u2019s letterboxes had been happily feeding for almost a year, claiming at least R17.5-million as its cut \u2013 McKinsey acknowledged<\/a> that the \u201c[r]isk of this project \u201cfailing\u201d is significant\u201d, adding:<\/p>\n\n\n\n

\u201cDo we have the A team working on the project\u201d?<\/p>\n\n\n\n

\u201c[W]here we saw challenges we raised them to both Regiments and Transnet so they could be addressed,\u201d a McKinsey spokesperson told us this week<\/a>.<\/p>\n\n\n\n

\u201cIn 2015, when Regiments\u2019 performance weakened, we confronted Regiments about this and worked with them to improve their performance. Sometimes we had to commit extra McKinsey resources to ensure delivery for our client. In those cases we adjusted the fees billed to better represent the share of work performed by each party. In the end, because of concerns about Regiments\u2019s delivery and key personnel, we terminated our partnership with Regiments.\u201d<\/p>\n\n\n\n

Regiments disputes this however. It told us: \u201cWe have at all times delivered on our mandates and are not aware of any reasonable complaint about the quality of service provided by Regiments.\u201d<\/p>\n\n\n\n

Although Regiments had earned R464.9-million from Transnet in the previous financial year, and was on track to earn even more in 2015\/6, records show that the firm was being bled dry.<\/p>\n\n\n\n

\u201cAttached is the cost revenue spreadsheet for the [GFB project]. It shows and overall loss of R58.7 m<\/strong> based on current splits in fees for McKinsey and BD Partners,\u201d Regiments\u2019 senior consultant John Rossouw told Wood in a September 2015 email, adding words in bold for extra emphasis.<\/p>\n\n\n\n

\u201cI also remain uneasy<\/strong> on this basis given that Transnet \u2026 has placed us on terms<\/strong> based on our current performance. On a personal level I am also feeling highly exposed and vulnerable<\/strong> given the increase in scope and deliverables.<\/p>\n\n\n\n

\u201cI remain the only Regiments leadership representative<\/strong> whereas McKinsey have Vikas, Lohini, David Fine, Arndt, David Entwistle, Kanan, Moorosi, Vania and Christina who are spread across the entire [Transnet freight rail] network\u2026 Regiments will need to provide additional senior leadership to address this<\/strong>.\u201d<\/p>\n\n\n\n

The spreadsheet Rossouw attached to his email included a proposal to cut Essa\u2019s \u201cbusiness development\u201d fixed fees to zero and instead offer the \u201cbusiness development partners\u201d 70 percent of any risk-based upside Regiments managed to achieved.<\/p>\n\n\n\n

\u201cI would also like for yourself<\/strong> as Partner Lead and Niven<\/strong> as Head of Advisory to both agree and sign off<\/strong> on the final revenue cost template for me to manage to achieve the required return,\u201d Rossouw concluded.<\/p>\n\n\n\n

Despite Rossouw\u2019s heartfelt plea, there is no indication that Regiments implemented any of his recommendations. Rossouw did not respond to our attempts to contact him.<\/p>\n\n\n\n

When McKinsey pulled out of the GFB project in early 2016, the international consulting giant delivered a R19-million bill to Regiments to compensate it for the additional staff it was forced to hire to make up for Regiments being AWOL on the project.<\/p>\n\n\n\n

\u201cThe resourcing supplied by Regiments \u2026 was well below the numbers contracted for the fee split agreed. In many instances the resources staffed on Regiments’ teams were unsuitable to deliver the work,\u201d McKinsey told Transnet in a letter announcing its withdrawal.<\/p>\n\n\n\n

Back in 2013, McKinsey had gleefully predicted that Transnet\u2019s GFB division would be railing 137 million tons of cargo a year by 2015\/6, an ambitious increase from the 82.6 million tons railed in 2012\/3 but a crucial one if the R54-billion acquisition of the new 1064 locomotives was ever going to make financial sense.<\/p>\n\n\n\n

When McKinsey and Regiments were brought in in 2015, Transnet CFO Anoj Singh was already calling GFB \u201ca disaster\u201d. At best the intervention of the consultants appears to have only prevented things from getting worse.<\/p>\n\n\n\n

When the final figures for 2015\/6 were counted, Transnet had achieved an increase of less than two million tons to just 84 million tons \u2013 53-million tons short of the promise Transnet had been sold.<\/p>\n\n\n\n

Essa at least was happy \u2013 the letterboxes had siphoned R42-million from the project.<\/p>\n\n\n\n

The divorce<\/h5>\n\n\n\n

The story Regiments\u2019 remaining directors like to tell is that the firm\u2019s bright future was cut short after it crossed paths and then swords with the Guptas.<\/p>\n\n\n\n

\u201cIt’s a hijack,\u201d BusinessLive quoted<\/em><\/a> CEO Niven Pillay as saying last year. \u201c[The Guptas] offered to make me a dollar billionaire. All I had to do is sell them the business and exit [chairman Litha Nyhonyha], because in their mind Litha was never going along for this ride with them, but I must stay on as the CEO…\u201d<\/p>\n\n\n\n

Although the #GuptaLeaks show the first attempt to buy Regiments happened in 2014, shortly after the 1064 locomotive deal was signed, Pillay told Business Day<\/em> that he was blindly led by Wood to the Guptas\u2019 Saxonwold compound in April 2015 where an offer to purchase Regiments was made.<\/p>\n\n\n\n

Pillay maintains that after he and Nyhonyha refused to sell, Regiments\u2019 business in the state-owned entity space was \u201cshut down\u201d.<\/p>\n\n\n\n

\u201cPost mid-2015 \u2026 we sort of understood we were not going to win any of that business anymore,\u201d Pillay told us<\/a>.<\/p>\n\n\n\n

Like some other Pillay stories, there is a thread of truth embroidered into a tapestry of fiction. In this particular tale, Regiments was destroyed because it refused to bend to the Guptas\u2019 will.<\/p>\n\n\n\n

Thus far, we have found no definitive answer to why Regiments and Essa parted ways in early 2016, with Wood and half the company\u2019s employees trailing behind him to form Trillian Capital Partners, the new consulting company.<\/p>\n\n\n\n

Trillian would, for a while, be Essa\u2019s revenge.<\/p>\n\n\n\n

While Essa\u2019s letterboxes had claimed more than R600-million from Transnet and other state-owned-entity contracts over three years, Trillian\u2019s new partnership with McKinsey at Eskom promised even more.<\/p>\n\n\n\n

Ignoring Regiments\u2019 dismal performance at Transnet, McKinsey partners sat down with Wood in December 2015 to decide how McKinsey and Trillian would divvy up R9-billion in consulting fees that the two consulting firms believed they could extract from Eskom over the next three years.<\/p>\n\n\n\n

In the end, all three firms would be undone by their greed. McKinsey was forced to apologise for its work at Eskom and refund roughly R1-billion in fees, while both Regiments and Trillian have effectively closed their doors.<\/p>\n\n\n\n

Regiments now concedes it had a \u201cbusiness development\u201d contract with Salim Essa.<\/p>\n\n\n\n

\u201cWe have never denied starting a business relationship with Mr Salim Essa or Mr Kuben Moodley in October 2012, as regrettable as it may now be, given what has unfolded in our country\u2026\u201d Regiments told us this week.<\/p>\n\n\n\n

\u201cMoodley (for Regiments) and Essa (for McKinsey) facilitated the relationship between Regiments and McKinsey, in particular. For that, they received a share of the fees earned through the McKinsey introduction. This was normal business practice.<\/p>\n\n\n\n

\u201cThat the current directors got blind-sided in Mr Wood\u2019s web beyond that is a tragedy for all who were working so hard to make Regiments into a model financial services company.\u201d<\/p>\n\n\n\n

McKinsey has repeatedly denied it had any dealings with Essa.<\/p>\n\n\n\n

Wood, through a spokesperson, told us: \u201cThe factual allegations set out in your version of events are materially incorrect and the veracity and reliability of the source of your information are disputed by Dr Wood.\u201d<\/p>\n\n\n\n

Investigative journalism takes time and money. Help us do more. Be an amaB Supporter.<\/a><\/span><\/p>\n\n\n\n

As always, amaBhungane sent questions to Salim Essa and Ashok Narayan, seeking their response to the allegations against them, and as always our emails were received but met with silence. The Guptas have consistently refused to answer amaBhungane\u2019s questions.<\/p>\n\n\n\n

Kuben Moodley responded in the name of his company, Albatime, and asked us to publish this statement in full:<\/p>\n\n\n\n

\u201cKindly note that I have provided you on numerous occasions all information requested before, however you have ignored my version and wrote as you pleased and continue to harass me. Should you wish to mention me or my company in your articles kindly quote this response verbatim failing which I will advise the press ombudsman.<\/p>\n\n\n\n

\u201cKindly stop harassing me any further.”<\/p>\n\n\n\n

Reporting with daggers<\/h5>\n\n\n\n

Reporting on Regiments comes with daggers.<\/p>\n\n\n\n

Since amaBhungane started reporting on Regiments\u2019 uncomfortable connections with the Guptas\u2019 state capture network in 2016, we have repeatedly been accused of pursuing a racist agenda.<\/p>\n\n\n\n

\u201cI understand you\u2019re brainwashed\u2026 I\u2019m telling you the black people of this country are going to revolt\u2026 You are going to cause civil war in this country,\u201d Moodley told us last year when we sent him questions about the millions Albatime had received.<\/p>\n\n\n\n

This has become a familiar push-back from Regiments and those sympathetic to what they saw as a targeted attack on one of the few black-owned financial services firms.<\/p>\n\n\n\n

\u201cAs black people are baboons to Penny Sparrow, black companies are jackals to [the journalists] of amaBhungane,\u201d Regiments wrote<\/a> in response to our first expos\u00e9 in 2016.<\/p>\n\n\n\n

\u201cIt is not right that journalists are used to do a hatchet job by people with secret agendas\u2026 The theme is negative, attempting to link us to corruption or nefarious activities.\u201d<\/p>\n\n\n\n

But there was evidence of Regiments\u2019 involvement in an illicit pay-for-play scheme to access state contracts. First a trickle, then a flow, and now a deluge.<\/p>\n\n\n\n

When we implored Regiments last year to show us evidence (even off-the-record) to back up Pillay\u2019s claim that the other Regiments\u2019 directors had not known about payments to Gupta- and Essa-controlled letterbox companies, Regiments chairman Litha Nyhonyha responded with a statement<\/a>:<\/p>\n\n\n\n

\u201cYour line of questioning convinces us that you are not neutral in this matter. You have already taken a view that our company is corrupt or has engaged in some sort of illicit activities. We believe that nothing that we say will change your prejudicial attitude towards us\u2026 We refuse to be part of your hidden agenda, which you have persistently pursued since our first altercations many years ago.\u201d<\/p>\n\n\n\n

This week Regiments doubled down: \u201cIt is clear to us that your selective reporting indicates that you despise black excellence,\u201d Regiments said in another statement.<\/p>\n\n\n\n

But the evidence against Regiments is now overwhelming. In the interests of transparency, we will be making a number of emails and invoices publicly available in our evidence docket (see top right).<\/p>\n\n\n\n

\u201cIt is possible for a Black company to operate legitimately, develop and achieve success in the business arena,\u201d Nyhonyha wrote in that biting statement. \u201cBlack success can manifest purely as a result of professional capacity and capability, not only due to corruption or some nefarious means.\u201d<\/p>\n\n\n\n

Of course it can. And should. But for reasons only Nyhonyha, Pillay and Wood can explain, Regiments chose to follow a different path.<\/p>\n\n\n\n

Access our EVIDENCE FOLDER here<\/a>.<\/p>\n\n\n\n

*This article was changed after publication to correct the citation of BusinessLive.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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