HEATH SPECIAL INVESTIGATING UNIT
SUMMARY OF CASE RECOVERIES, SAVINGS AND PREVENTIONS AS AT 31 JANUARY 1999

TO: THE STANDING COMMITTEE ON JUSTICE

FUTURE PROGRAMME AND PLANNING

Past Year:
In the past year we received many more cases from various Provinces and on National level. Some of the cases had to be sub-divided into actual cases against each separate Defendant or a group of Defendants. One example of this is the House Subsidy Scheme case in Natal where 54 000 files were handed to us which then leads to 54 000 cases. In the Northern Cape we received approximately 12 000 files with the same result. I do not find it necessary to refer to other cases with the same result.

However the large number of cases had led to very extensive investigations and a lot of time has been spent of investigations and those cases have now reached the stage where many actions can be instituted before the Special Tribunal. Although numerous cases did enjoy the attention of the Special Tribunal, the majority of them have not gone to the Special Tribunal and therefore the amount recovered or protected during 1998 was not as high as anticipated but it still represents a very substantial amount. It is more than R800 million which does not take into account the savings brought about by the recovery of assets which could afterwards be used productively and which has brought about a variety of savings in addition to the value of the assets recovered.

With regard to the financial aspects, we went through a year of severe uncertainty after we had received information as to what the Budget for the 1998/99 year was and what the Budget for the following year was going to be. There were indications that it would either be decreased or increased or might even remain the same. Definitive action could therefore not be taken with regard to extensions, particularly as far as the Staff is concerned. Promises were made that by September 1998, certainty would be arrived at as to what the position of the Budget for that current year was going to be. That however did not materialise.

Notwithstanding the problems briefly summarised by me with regard to the Budget, I decided subsequent to September 1998 to advertise positions to extend the Staff in view of the large number of cases received by the Unit. This was a bold step in view of the existing uncertainty and also the disputes with regard to the Budget for the year 1999/2000. We decided that we should adopt a confident approach and that we should accept that money would become available and that therefore we could extend the Staff compliment.

The effect however of the delay in appointing the Staff which should have been appointed at the beginning of the Financial Year, has led to a situation where a balance of the Budget is left which could have been utilised effectively. The exact amount is not clear at this point in time and will be available at the end of March 1999. However the amount left will be used productively in the new Financial Year and we are still confident that we would be able to persuade the authorities and other institutions to make a contribution to our financial position in order to extend the staff extensively in the new Financial Year.

Future:
We are waiting at this point in time for a substantial number of Proclamations to be issued which includes Proclamations for the Gauteng Province. In the Gauteng Province the House Subsidy Scheme case is one of the first cases which have been referred to us and on the information at our disposal at this point in time we would have to investigate approximately 950 000 files. Such an investigation, which is exactly the same as the one which we had conducted in Natal, needs the opening of a file in each case, the collection of documents in each file, a study of the documents and then any further action which is required with regard to the investigation. This is a massive task, however looking at the results which we have achieved with the investigations in Natal and the shortcuts that have been developed, we are confident that the same procedure can be applied in Gauteng.

Taking into account the present number of actual Investigators which is 57 Investigators, on the present number of cases which is about 95 000 cases, it gives on average 1 666 cases per Investigator. If about 950 000 cases is added to that without taking into account any other cases in Gauteng then the number of cases per Investigator is 18 333.

It is of course true that the cases, especially the category of cases are not divided on such a basis but is left with a particular team which leads to a higher number of cases per team in some cases and a lower number per person in other cases.

In addition to the Investigators, the Unit employs one Senior Advocate and ten other
Lawyers, three Auditors and five Accountants and then the rest of the infra-structure.
As the number of Investigators increase, the Lawyers, Accountants and the rest of the staff would have to increase as well.

Any increase in the budget is in fact an actual investment which is recovered and multiplied several times by what is actually recovered or protected.

I am planning to appoint two to three times the number of people that we have at present in order to attempt to cope with the work. For that purpose I do of course need the Budget. However we are looking at other ways and means of supplementing the Budget supplied by the Government.

At this point in time the Staff are already working overtime virtually every week a number of days. First of all very often they leave for a Province on a Sunday for which they do not get paid extra and from time to time they only return on a Saturday. Apart from that they work long hours (more hours than eight hours per day) in order to try and cope with the work, to get to the witnesses, to trace documents, etc. The Legal Team work long hours over weekends to prepare cases as they are also actively involved in the investigations particularly with regard to questioning, advice and consultations with the Investigators.

I see a great future for the work of the Unit and there is no reason why the productive work rendered up to now will not be continued and many more cases will be going through the Tribunal this year. We have issued a large number of Rule 5 Notices (summonses) and these are being served by two persons appointed full time by the Unit to serve all the documents. This in itself is an indication of the extent of the work. We are considering the possibility to appoint a few temporary members to serve documents.

Taking into account the amount of R848million for 1998 and if that is compared to the Budget, then the budget only forms about 2 - 2,5% of what we have recovered, protected or the loss of which we have avoided. This is the lowest possible input in any financial enterprise that one could imagine. A 5% of what was recovered or protected during 1998 would amount to R4Omillion which is in fact R7million more than Budget which we had filed with the authorities. Even 5% is a very nominal input taking into account the output rendered by the Unit.

I would therefore again strongly appeal to the Government to reconsider the Budget for the new Financial Year in order to increase the recoveries that the Unit can make or the losses to be stopped by the Unit.

JUDGE W H HEATH HEAD OF THE UNIT

SCHEDULE 1:
SUMMARY OF CASE RECOVERIES, SAVINGS & PREVENTIONS AS ON 28 FEBRUARY 1999

PMG NOTE: Graphic illustration of budget not included.

SYNOPSIS OF BIGGER CASES SUCCESSFULLY COMPLETED OR IN RESPECT OF WHICH ORDERS WERE GRANTED
(1) 204 farms to the value of approximately 20 million have been recovered in the former Transkei. These farms were leased to individuals more than ten years ago. In many cases the farms have been abandoned, the contracts have lapsed and/or the lessees have failed to pay rent.

(2) In an urgent application brought before the Tribunal 372 State owned vehicles were recovered on behalf of the Department of Transport, KwaZulu-Natal.
The estimated saving of the case is approximately R68,8million.
Case No's: EC 33/98 and KZN 1/98
Dates: 26/02/98

(3) An Order for the attachment of the assets of two Trustees of a NGO running the Daily Bread Feeding Scheme securing a claim of approximately R5 million was granted on the basis of an Urgent Application to the Tribunal. The assets attached include an aeroplane, a Mercedes Benz and a house worth approximately R2 million. This matter is also ready to proceed to the Special Tribunal.

(4) Information was obtained through an informer that a State cheque was to be presented at a Bank, unknown at that stage, for an unknown amount, in the town of Kokstad. It was alleged that the cheque was stolen and would have been presented fraudulently. An urgent Interdict was granted by the Special Tribunal to stop payment of the cheque and when the person presented the cheque for payment, payment was refused and the said person ran away. The amount of the cheque was R540 000.
Case No: EC 129/98
Date: 06/04/98

(5) A claim was dealt with by the Special Investigating Unit on behalf of the City Council of Durban in an amount of R625 000 arising from fraud committed with regard to Lease Agreements in respect of plant hired by the City Council. The Unit successfully obtained an Order before the Special Tribunal for payment of the said amount.
Case No: EC 257/97
Judgment awaited.

(6) In the town of Butterworth action is being instituted for the recovery of excessive payments of allowances to Councillors in the value of approximately Rl,3million. The arrear service levies and rates owing by these Councillors is in excess of an amount of R1 million. The total amount due in respect of rates and arrear service levies amounts to R31 million. Letters of Demand have been sent to businesses that are in arrears with the rates, taxes and/or levies on their business properties. Amount recovered to date - R66 000.
Case No's: EC 142/98 - 169/98

(7) In the Northern Cape cases are being investigated arising out of a Rental Agreement between the Government and a KIM Diamond Company. It is alleged that the requirements set by the Tender Board were not complied with and that the building was not suitable for the purpose for which it was rented. The value of the claim is approximately R2,3million. This matter is ready to proceed before the Tribunal. The application for confirmation of the contract by KIM Diamond in the High Court was not dealt with and the High Court referred it to the Tribunal.
Case No: NC 1/98

(8) A junior employee of the Northern Cape Provincial Government entered into numerous Lease Agreements with Banks in respect of photostat machines without complying with tender procedures and without having any authority to do so. This matter is ready to proceed before the Tribunal in August and the value involved is approximately RI7million. The Defendants have made certain settlement offers.
Case No: NC 2/98 Ref No: 89/2/98

(9) A blank warrant voucher was stolen from the Department of Justice in the Ekangala area in Mpumalanga. The warrant voucher drawn on the Department of State Expenditure to the value of R4,3 million was presented for payment in East London and was in fact paid into an account at Trust Bank in East London. In order to secure repayment of the claim, the Unit brought an urgent application to attach assets of a Close Corporation, the assets of members of the Close Corporation and the assets of another party. These assets consist inter alia, of a business property, a house and a block of flats. The matter was referred for oral evidence. The Tribunal subsequently granted Judgment in favour of the Unit for payment of R4,3 million.
Case No: EC 131/98
Date: 8/4/98

(10) In the Sarafina II case which was referred to the Unit by the National Department of Health, vehicles and equipment to the total value of R4mill ion have already been recovered and the investigation has been completed. Civil action will be instituted to recover the remaining R10 million.
Ref No: 91/2/98

(11) Magwa Tea Corporation : Allegations of misappropriation, mismanagement and fraud are the basis for an action in this matter. The Corporation was liquidated and the matter was referred to the Special Investigating Unit to proceed with the claims. It was alleged, inter alia that before their dismissal some of the employees settled their own house subsidies, car loans and school fees with money belonging to the Corporation in liquidation. This matter is ready to proceed before the Special Tribunal and the amount claimed is approximately R10 million. The Unit succeeded in an Urgent Application to attach an amount of R254 000 due to be paid out to certain employees. An additional amount of R274 000 has been settled out of Court. The remaining amounts are due to be recovered.
Case No's: EC 371/97 and EC 48 - 128/98 Ref No: 02/02/98
Date: 29/3/97

(12) Numerous Motor Finance Scheme cases where allegations of inter alia fraud, have been made, are being investigated by the Unit. In many cases the Defendants have signed Acknowledgements of Debts. The total recovery to date is the sum of R435 000.
(Up to now 46 different cases)

(13) Transactions leading to the alienation of hotels, a holiday resort and other immovable property on the Transkei Coast were frozen. The value of these assets amounts to approximately R6million. The actual value thereof is probably much higher than stated due to the fact that in many cases the land has not been surveyed and is not registered at the Deeds Office. Allegations of corruption and transactions contrary to the interests of the public form the basis of this investigation. Loss of property was therefore prevented to the benefit of the State. These transactions were suspended.
Ref No: 01/02/98 EC 1/97 - EC 122/97

(14) Near Garies in the Northern Cape Province, on the West Coast, certain persons are occupying State land for holiday purposes and have erected structures thereon. The trial has been finalised before the Special Tribunal and judgment has been granted in favour of the Unit for the eviction of the people. The value of the land is approximately R4million.
Ref No: 97/2/98
Case No's: 168-206/97 & 208 - 225/97 & 239-247/97

(15) Recently it was discovered that an Attorney in Umtata had allegedly overcharged the State Attorney for fees in connection with a case which was delegated by the State Attorney to the private practitioner. An Order was granted for the repayment of approximately RI3 million to the Government. Further amounts are still under investigation.

(16) In the Eastern Cape Department of Education a 1 000 blank cheques were stolen and printed. The payment was stopped on 686 of these cheques. 314 cheques were cashed. R73 057-36 has been recovered. R1 232 209-77 is still to be recovered.
Case No: 88/02/98

(17) In the Eastern Cape Department of Public Works various employees and private pensions received bursaries. On receiving the bursary they had to sign contracts whereby they agree that if they do not perform satisfactorily they would repay the money. Amount recovered to date : R196 074-95.
Case No: 6/03/98

(18) In the Eastern Cape, the ex CDF (Ciskei Defence Force) made an overpayment to a private company to the amount of R58 000-00. The Defendant has signed an Acknowledgement of Debt. The total recovery at this stage is R22 000-00. Case No: 80/02/98

(19) Eastern Cape Department of Public Works - fraudulent quotations from non-existing companies. The payment was stopped and this led to a saving of
R130 000-00. Case No: 79/02/98

(20) Mpumalanga Parks Board - An order was granted to the effect that a Promissory Note dated 15 December 1997 made by the Mpumalanga Parks Board as well as three Guarantees dated 31st July 1997 shall not be negotiated, discounted or in any other way dealt with. The Promissory Note and Guarantees were contrary to Treasury regulations. This has led to a potential saving of R340 million to the Mpumalanga Provincial Government. Case No: MP/2198

(21) A State building project in Queenstown is being investigated arising out of allegations regarding the non-compliance with tender procedures. The value involved is approximately Rl2Smillion. This transaction was set aside and will go through the Tender Board again.
Ref No: EC 366/97

(22) In the Eastern Cape an amount of R22,6 million belonging to the provincial Government was discovered in the Bank Account of a private company. This money was earmarked in the Premier of the Eastern Cape's budget to go to a parastatal which in turn would make loans available to small businesses. As the money was therefore no longer under the control of the State or a State institution, an urgent application was brought to freeze the account and eventually through a settlement the money was recovered and returned to the Premier's control.
Case No: EC 248/97 Settled: 05/12/97

(23) The Unit is also involved in the investigation of maladministration regarding the liquidation of another former Transkei parastatal namely Tracor. Similar to the Magwa Tea Corporation this body was also liquidated and allegations have been received of widespread maladministration, fraud and theft regarding the assets of this Corporation before and after its liquidation. The Unit has again applied for an Interdict to freeze the assets of the parties involved and this Interdict has been granted. The value of the assets attached are R844 000. Two of the parties in this matter have also already come forward to repay the money involved. In this way an amount of R105 000 has already been recovered.

[PMG Ed. note: A further 9 pages of tables indicating Case Recoveries as of 31 January 1999 is still awaited from Heath SIU]