Since the release of the Public Protector’s report on 19 June this week on instructions that relate to the recovery of ABSA Lifeboat funds, and public comments made about her report since its release, we present the following statement by former CIEX Chairman, Mr Michael Oatley, to clarify any misconceptions as to the tasks and purposes for which CIEX was engaged by the Government and its performance in that regard.
See attachments herewith of correspondence in 2002 between Messrs Oatley and Tito Mboweni.
STATEMENT BY MR MICHAEL OATLEY ON 23 JUNE 2017:
“The disingenuous nature of Tito Mboweni’s account posted on Facebook from his London hotel, accompanied as it was by an unpleasant suggestion of racial condescension, prompts me to offer the following more accurate history which may be fully verified from documents in the possession of the Public Protector.
In 1996 and 1997 whilst pursuing enquiries on behalf of a commercial client my then consultancy company, CIEX Limited, gained insights into ways in which during the last years of Apartheid South Africa had been pillaged by individuals and entities associated with the Broederbond-controlled Government, and also gained evidence which might support very substantial claims for restitution against mainly but not exclusively European governments, banks and companies which had benefited from involvement in sanctions breaking and other matters to the lasting detriment of the South African treasury and economy.
At a meeting with the then Deputy President Thabo Mbeki on 22 August 1997 I described the opportunities for restitution and recovery afforded by information which was already to hand and by leads to further detailed information which were available to be followed up. I also suggested that a government many of whose members had not until relatively recently lived in the country which they were governing, and which was dependent on a civil service whose senior members had all been promoted to their positions as enthusiastic supporters of Apartheid, were unlikely to understand or be told what had been going on in the financial sector. They would therefore also not be in a position to influence its future behaviour without the kind of information we would expect to develop.
I offered a list of targets for investigation. The criminal conspiracy and fraud represented by the so-called ABSA “Lifeboat” was at the head of the list because it offered an early opportunity for the State to make a substantial recovery.
At a second meeting on 26 August 1997, at which the Deputy President was accompanied by the Deputy Minister for Intelligence in the Ministry of Justice, Joe Nhlanhla, the Deputy President decided that CIEX should be employed to pursue this agenda. A budget to cover operational expenses was agreed, the project was to be kept secret, CIEX was to be contracted by SASS, on behalf of the Government, and it was understood and accepted that the project would rapidly become self-funding, and cost-free to the tax-payer once the anticipated recovery from ABSA was obtained. After that other targets would be pursued.
And, yes, as Tito Mboweni has pointed out, there was agreement that CIEX should be incentivised to devote its resources to this task almost to the exclusion of other commitments by the promise of a commission commencing at 10% of the value of actual recoveries less costs diminishing to 7.5%. Mr Mboweni thinks this was greedy. Commercial entities exist to make a profit for their shareholders. The normal commission charged by international debt-recovery agencies is not 7.5% or 10% but 33%. Had the project been pursued in accordance with what was agreed between the South African Government and CIEX all the costs of the operation would have been recovered and the Treasury would have enjoyed a very substantial benefit, the first of potentially much larger sums had matters progressed as was then envisaged.
Since there have been inaccurate statements on the matter I should like to make it clear, and the contract is available to support me, that CIEX was not employed to make actual recoveries, that would be a matter for Government itself , but to provide intelligence and evidence which would enable such recoveries to be made by the appropriate authorities. This is precisely what CIEX did in relation to ABSA. In later writing to terminate CIEX’s contract – at the time it was suggested that this was a temporary measure and the contract was likely to be renewed to pursue other targets and opportunities – the Director General of SASS warmly expressed the Government’s satisfaction with CIEX’s performance and confirmed that CIEX’s commission entitlement would continue to be recognised. Action against ABSA was apparently still contemplated.
Between September 1997 and January 1998 CIEX worked to pin down and evaluate the details and illegality of the ABSA conspiracy fraud and theft. The Deputy President showed a positive and detailed interest in the project. A first report was submitted to him on 29 November 1997 at Oliver Thambo House, and a second report on 8 January 1998. Billy Masethla. Director General of SASS and one of his officers were present on each occasion as was Eberhard Bertelsmann SC, now Mr Justice Bertelsmann, as an adviser to CIEX. The two reports were circulated and discussed at a meeting at Oliver Tambo House on 12 January 1998 convened by the Deputy President and comprising the Ministers of Justice, Finance, Trade and Industry, Labour, the Deputy Minister of Intelligence, and the Director General of SASS. This meeting was preparatory to a meeting between the same group and representatives of CIEX on the following day at which Eberhard Bertelsmann SC was present to advise on points of law.
Questions raised by Ministers at the 13 January meeting were covered in a third report by CIEX which was presented to the Deputy President and the same ministerial group on 25 January. CIEX representatives were accompanied by Sir Kit McMahon, an internationally respected former central banker who explained that the so-called ‘Lifeboat’ did not in any respect conform to international practice by a central bank acting as a lender of last resort: the management remained unchanged, dividends continued to be paid, the subvention continued after Bankorp was absorbed into ABSA which had no possible need of it, and the money was not repaid. Sir Kit’s view was subsequently supported by a representative of the Bank for International Settlements in Basel, the recognised authority for central banking practice. Also present with the CIEX team as an adviser was a distinguished South African tax expert, Pierre Du Toit, formerly a member of the Katz Commission, who described the tax liability incurred by ABSA from its receipt of the secret subvention (a still-existing liability which the Public Protector has failed to recognise in her report) and Eberhard Bertelsmann SC, whose two Opinions analysed the illegality, indeed criminality, of what had taken place. His findings matched the findings in comparable situations of Mr Justice Nel in the Masterbond Enquiry and Mr Justice Rabie in the Tollgate 417 Enquiry, and the later conclusions with regard to ABSA of Mr Justice Heath and Mr Justice Davis. The scam has, in effect, been judged as such by no fewer than five justices of the High Court. The CIEX reports included draft specimen criminal charges against those principally concerned in promoting the scheme, drawn by Senior Counsel, and advice on measures for recovery of the money without disruption to the banking system, and accounts of relevant international precedents. The matter was exhaustively discussed. One or two Ministers showed a tacit lack of enthusiasm for taking action against ABSA and its shareholders but by the end of the meeting no one questioned that the money was owing and that the legal and practical opportunity for making recovery had been established beyond doubt. Which was what CIEX had been contracted to achieve. Tito Mboweni himself said in the closing moments of the meeting, “Well we now have enough information to make a decision”.
The opportunity was not pursued although discussions with CIEX about a modus operandi, and some preparatory work, continued over the following months. Rumours about the existence of such an opportunity led to a further investigation, by the Special Investigations Unit under Mr Justice Heath. Provided with the CIEX reports and given some further unofficial support by CIEX, with the knowledge of the Government, Heath reached precisely the same conclusions as to the illegality of the transaction as CIEX had done but decided, although it was not within his remit to do so, to take no action to recover the money ‘for fear of systemic risk to the banking system’. It is a matter for conjecture as to why he made this decision. The Public Protector has pointed out in her report that repayment in instalments could not have posed any risk whatever to ABSA let alone to the banking system as a whole. In point of fact the management of ABSA expected that Heath would require them to make repayment and calculated that they could do so in four annual payments of eight hundred million Rand without damage to the bank or its operations.
After an interval further public concern prompted Mr Mboweni, by now Governor of the SARB, to appoint his own panel of experts under Mr Justice Davis to review the matter and, so he evidently hoped, to put it finally to bed. They did their best to do so but with apparent reluctance joined their predecessors in concluding that what had been done was improper and, in fact, illegal. On reading their conclusions I wrote to Mr Mboweni on 6 March 2002 pointing out that the panel’s conclusions confirmed the opportunity to recover the funds from ABSA, and offering CIEX’s support in achieving this. In his reply to me dated 15 April 2002 Mr Mboweni did not dispute that the opportunity for recovery existed, as indeed it still does along with other opportunities for restitution, but thanked me and said that “the process has moved on to such an extent that we want to close this matter..”. My letter and Mr Mboweni’s reply were copied to Dr Frank Chikane, Director General of the Office of the President, President Mbeki.”