On Tuesday (August 31), Special Court Judge Lebogang Modiba handed down judgment against the former executive of the Transnet group for capital projects, Herbert Msagala, and found that while working for Transnet he had obtained illegal secret earnings of R26.4 million. of IGS Consulting Engineering Services and its sole member, Sipho Sithole.
The Special Court was established in terms of the Law of the Special Investigation Unit and the Courts in 2019 to recover public funds stolen from the Treasury through corruption, fraud and illicit money flows.
The Msagala matter was submitted to the Special Court in July 2020 after the Special Investigations Unit (SIU) investigated a series of contracts that had been awarded to IGS under the Transnet New Multiproduct Pipeline (NMPP).
The project involved the construction of a 715 km multi-product pipeline for the high-pressure transport of liquid petroleum products from Durban to Heidelberg in Gauteng. Sithole was the only member of IGS.
The NMPP was first investigated by Nexus, at the urging of Transnet, and the Nexus report of October 13, 2017 found that Msagala was “living an extravagant lifestyle and owning various properties.”
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Nexus lacked the legal powers to subpoena bank records.
The SIU conducted a lifestyle audit on Mgasala and found that he was living in excess of his pay on Transnet.
The SIU completed its investigation in May 2020. It found that between January 2015 and December 2016, Msagala, directly and through its Msagala Investment Trusts, received various cash payments worth R18.4 million from IGS and Sithole. This was modified to R26.4 million at trial (see below), based on further evidence collected by the SIU.
Transnet fired Msagala after disciplinary proceedings in May 2020.
In November 2020, the SIU was granted an order to freeze Msagala’s assets and prevent Transnet from paying his pension benefits, until a civil recovery proceeding against Msagala was initiated.
Msagala, which had established Msagala Investment Trust, Msagala Family Trust and Msagala Residence Trust, claimed that it had accumulated profits from its various business activities. However, he never presented evidence to substantiate this claim.
Five day trial
SIU and Transnet (the plaintiffs) initiated this action in August 2020, seeking to hold the relevant defendants – Herbert Msagala, Roberto Velosa, Loretta Msagala, Bonolo Msagala, IGS and Sithole – personally liable for the loss that Transnet suffered as result of Msagala disease. alleged dire relationship with IGS and Sithole.
In May 2021, a five-day trial was held. Msagala’s request to postpone the trial was not granted and he decided not to participate. His wife Loretta and daughter Bonolo also did not participate. The trial proceeded in his absence.
The plaintiffs alleged that IGS was paid more than R160 million for services provided under the project, and during that time IGS and Sithole made substantial payments to Msagala or its trust.
The SIU had conducted extensive investigations that resulted in damning evidence:
- SIU forensic investigators had traced the cash deposits made to the Msagala Investment Trust back to the cash checks that had been drawn against the IGS bank account. In most cases, Msagala had signed the back of the check and it contained his details, including his cell phone number. There were instances where the Msagala VIP protectors had cashed the checks on their behalf, which also reflected the Msagala details on the reverse, and had deposited these amounts into the Msagala Investment Trust. Thus, the SIU established beyond a reasonable doubt that the deposits made in the Msagala Investment Trust account came from IGS cash checks.
- Msagala had transferred money from the trust account to purchase various properties, all listed by the SIU.
- The evidence was conducted by crucial witnesses, including Msagala’s VIP protectors, SIU’s forensic investigators, Steyn City Real Estate employees who had sold property to Msagala, as well as the transfer attorney.
- SIU’s chief forensic investigator, Vervandhan Govender, was able to establish that “between November 2015 and September 2016, on each occasion, shortly after IGS cash checks were presented for payment at Standard Bank Sandton City, the cash it was deposited in the Msagala investment trust account ”. In other words, “whenever Transnet made payments to IGS, IGS made payments to Msagala.”
- The evidence presented by the SIU showed that it was unlikely that Msagala would have earned this money from his other businesses. Msagala had not presented any books of his business.
- The fact that on April 22, 2016, R2 million was deposited into the Msagala Investment Trust Account in 10,000 R200 notes, “makes your version that you won the funds from your businesses unlikely.”
- More than 20 of the IGS checks were cashed at the Standard Bank Sandton City branch, despite the IGS parent branch being in Polokwane. The parent branch of the Msagala Investment Trust Account is the Standard Bank Sandton City branch.
- When Msagala made ATM transfers or IGS funneled money to Msagala for his personal benefit, the payment was split into smaller transfers “to avoid scrutiny for the purposes of banking controls and the Financial Intelligence Center.”
Assets acquired during the period under review
Msagala purchased 36 cars that were registered with the Msagala Family Trust.
Msagala bought the following properties worth R15.2 million:
- Bedworth Park, acquired on September 16, 2015 for R1.46 million
- Dainfern, Steyn City, acquired on September 8, 2015 for R7 million
- A property of Rondheuwel, acquired on March 23, 2016 for R4.56 million
- A Harrismith property purchased on November 16, 2015 for R840,000, and
- A Phuthaditjaba property acquired on 8 October 2015 for 200,000 rand.
Two of the properties were registered in Bonolo’s name, and the court determined that it is “highly probable that Msagala paid for this transaction”, and that it is probable that she was unaware of Msagala’s “nefarious activities” and the source of the your funds. . No warrant was issued against Bonolo.
All properties were confiscated from the state.
Very briefly, the court determined the following:
- In fact, Msagala received secret earnings worth R26 423 028.77 from IGS and Sithole, and had not disclosed anything to Transnet.
- “IGS, Sithole and Msagala acted in concert, in an illegal conspiracy, for the benefit of Msagala, its family trusts and its relatives, to the detriment of Transnet.”
- IGS and Sithole are jointly and severally liable, with Herbert Msagala and Roberto Velosa, to Transnet, for the amount that represents the secret earnings received by Msagala from IGS and Sithole.
- The money recovered in terms of the confiscation order, as well as the Msagala pension fund preserved in terms of an order granted by Judge Billy Mothle, will be offset by Msagala’s liability to Transnet.
- A punitive cost order was issued against the defendants, with the exception of Loretta and Bonolo.
- The costs of the plaintiffs will be borne by the corresponding defendants “jointly and severally, one paying and the other acquitted, on the scale of lawyer and client.”
Msagala’s “flagrant dishonesty” and his “dishonest and illegal conduct”, IGS and Sithole justified the order of punitive costs against the relevant defendants.
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