Nine people have been arrested in connection with alleged yellow fleet fraud, corruption and money laundering related to a lucrative tender awarded at a rural Eastern Cape municipality.
Investigations have revealed that R75m was paid to the implicated business entity between 2015 and 2018.
The Hawks’ serious corruption investigation and serious commercial crime investigation units, the tactical response team (TRT) and the national intervention unit (NIU) nabbed the suspects, aged between 43 and 73, in the Eastern Cape, Gauteng and KwaZulu-Natal on Wednesday.
They include former Alfred Nzo District Municipality (ANDM) officials and two corporate entities.
According to Hawks spokesperson Warrant Officer Ndiphiwe Mhlakuvana, the case emanated from the alleged unlawful awarding and execution of a municipal contract by the Alfred Nzo District Municipality between 2015 and 2018.
“The suspects are former ANDM senior officials, Avis employees and businessmen,” Mhlakuvana said.
“The investigation was initiated following information received from a whistleblower, who alerted authorities about irregularities in the procurement processes relating to the appointment of a particular service provider at a municipality.
“It is alleged that the appointed company did not possess the requisite yellow plant machinery and equipment at the time the contract was awarded, instead relying on hired or leased assets from third-party service providers.
“Further probing revealed that similar procurement irregularities were replicated across several municipalities, including ANDM, prompting a comprehensive investigation by the Hawks.”
Investigations started in December 2014 found that one of the suspects, acting on behalf of his company, allegedly approached the district municipality with a proposal to procure yellow plant machinery through a hire-purchase arrangement.
Mhlakuvana said the proposal was allegedly advanced without adherence to prescribed supply chain management processes and facilitated through the improper application of regulations under the Municipal Finance Management Act (MFMA), by exploiting an existing contract between the said company and a local municipality.
“According to the reports, the company had entered into a full maintenance lease agreement with Zeda Car Leasing (Pty) Ltd, trading as Avis Fleet Services, which was concluded on June 13 2014,” he said.
“In terms of the agreement, fleet and machinery remained the property of Avis with explicit provisions stipulating that ownership would never vest in the company.
“Therefore, the equipment would be returned upon termination of the lease agreement.
“In January 2015, ANDM ostensibly entered into a hire-purchase agreement with the intention of acquiring ownership of the same fleet upon final payment.
“Probing revealed that the service provider allegedly misrepresented its ownership of the equipment, thereby creating a false impression that lawful transfer of ownership to the municipality would occur.”
Evidence points to collusion between certain municipal officials, service providers and third-party beneficiaries, resulting in the fraudulent approval of invoices and misappropriation of public funds
— Hawks spokesperson Warrant Officer Ndiphiwe Mhlakuvana
Between January 2015 and April 2018, the district municipality allegedly paid about R75m to the implicated business entity in respect of purported hire-purchase instalments.
“The payments were allegedly approved by municipal officials and electronically transferred into the business accounts of the service provider,” Mhlakuvana said.
“Subsequent financial analysis revealed that the funds were systematically channelled through various bank accounts belonging to individuals and entities, involving a bulk of cash withdrawals and layered transactions indicative of money-laundering activities and inconsistent with legitimate business operations.
“The investigation further uncovered significant irregularities within the procurement process, including the abuse of MFMA regulations to unlawfully favour the service provider, despite the entity failing to meet the prescribed qualifying criteria.
“Evidence points to collusion between certain municipal officials, service providers and third-party beneficiaries, resulting in the fraudulent approval of invoices and misappropriation of public funds.”
Implicated officials from the district municipality allegedly directly and indirectly benefited from the scheme, “believed to have operated as a criminal syndicate entrenched within municipal structures”.
“As a result of evidence gathered, several individuals and corporate entities have been formally identified as suspects in relation to offences of fraud, corruption and money laundering,” Mhlakuvana said.
The suspects are due to appear in the eMaxesibeni magistrate’s court on Thursday.
Hawks provincial head Major-General Mboiki Obed Ngwenya praised the investigating team for ensuring the suspects were brought to book.
Daily Dispatch
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