COMMISSION OF INQUIRY INTO ALLEGATIONS OF FRAUD, CORRUPTION, IMPROPRIETY OR IRREGULARITY IN THE STRATEGIC DEFENCE PROCUREMENT PACKAGE (ARMS PROCUREMENT COMMISSION) REPORT Volume 1 DECEMBER 2015 TO HIS EXCELLENCY MR JACOB GEDLEYIHLEKISA ZUMA, THE PRESIDENT OF THE REPUBLIC OF SOUTH AFRICA We are honoured to submit to you, in accordance with paragraph 4 of the Commission’s Terms of Reference that were published in Government Gazette No 34731 on 4 November 2011, the Commission’s final report on all its activities from 1 January 2012 to 30 June 2015. The report is divided into three volumes, each with its own table of contents, made up as follows: Volume 1: Chapters 1 (Introduction); 2 (Evidence and information gathering) and 3 (Debevoise & Plimpton Report) Volume 2: Chapter 4 (Summary of evidence) Volume 3: Chapter 5 (Findings and recommendations). There is also an Executive Summary that stands alone and is herewith presented as a separate document. This report concludes the inquiry of the Commission. ……………………………………………………………….. Justice LW Seriti, JA Chairperson: Arms Procurement Commission ……………………………………………………………….. Judge HMT Musi, retired Judge President Commissioner: Arms Procurement Commission DECEMBER 2015 CONTENTS VOLUME 1 CONTENTS ................................................................................................................... i ABBREVIATIONS/ACRONYMS FREQUENTLY USED .............................................. xi CHAPTER 1 ................................................................................................................. 1 INTRODUCTION .......................................................................................................... 1 A. ESTABLISHMENT OF THE COMMISSION ..........................................................1 B. OBJECTS OF THE COMMISSION........................................................................2 C. DURATION OF THE INQUIRY ..............................................................................3 D. POWERS OF THE COMMISSION ........................................................................4 E. EXPERTISE ..........................................................................................................5 F. APPROACH OF THE COMMISSION ....................................................................5 G. HISTORICAL BACKGROUND TO THE INVESTIGATION ....................................7 H. OVERHAUL OF ACQUISITION AND NIP POLICIES .......................................... 13 1. DEPARTMENT OF DEFENCE .................................................................. 13 2. DEPARTMENT OF TRADE AND INDUSTRY ........................................... 14 CHAPTER 2 ............................................................................................................... 15 EVIDENCE AND INFORMATION GATHERING AND ANALYSIS ............................. 15 A. INFORMATION AND EVIDENCE TENDERED BY ORGANS OF STATE AND OTHER PUBLIC AND PRIVATE INSTITUTIONS IN THE REPUBLIC OF SOUTH AFRICA.................................................................................................. 15 1. PARLIAMENT OF THE REPUBLIC OF SOUTH AFRICA.......................... 15 2. THE PRESIDENCY AND CABINET .......................................................... 17 3. THE DEPARTMENT OF DEFENCE AND ARMSCOR .............................. 19 4. DENEL ...................................................................................................... 21 5. THE DEPARTMENT OF TRADE AND INDUSTRY AND THE COMPANIES AND INTELLECTUAL PROPERTY COMMISSION ............. 21 5.1. NIP obligations .............................................................................. 21 5.2. Company information ..................................................................... 22 6. THE DEPARTMENT OF JUSTICE AND CONSTITUTIONAL DEVELOPMENT ....................................................................................... 23 6.1. Requests for mutual legal assistance (MLA) .................................. 23 6.2. Liquidation and distribution accounts ............................................. 24 7. COURT RECORDS................................................................................... 24 7.1. The Constitutional Court of South Africa ........................................ 24 7.2. The Supreme Court of Appeal ....................................................... 25 7.3. The Specialised Commercial Crimes Court and High Courts ......... 25 8. THE NATIONAL TREASURY .................................................................... 25 9. THE AUDITOR-GENERAL OF SOUTH AFRICA ....................................... 26 10. THE INVESTIGATING DIRECTORATE: SERIOUS ECONOMIC OFFENCES (IDSEO), THE DIRECTORATE OF SPECIAL OPERATIONS (DSO) AND THE DIRECTORATE FOR PRIORITY CRIME INVESTIGATION (DPCI) .............................................................. 28 11. BRIEFING BY CURRENT AND FORMER DSO/NPA OFFICIALS ............ 31 i 12. THE NATIONAL PROSECUTING AUTHORITY (NPA) ............................. 33 13. THE SPECIAL INVESTIGATING UNIT ..................................................... 34 14. THE DEPARTMENT OF STATE SECURITY ............................................ 34 15. THE PUBLIC PROTECTOR ...................................................................... 35 16. FINANCIAL INSTITUTIONS ...................................................................... 35 16.1. The South African Reserve Bank ................................................... 35 16.2. ABSA ............................................................................................. 36 16.3. First National Bank ........................................................................ 37 16.4. Nedbank of South Africa ................................................................ 37 16.5. Standard Bank ............................................................................... 38 B. INTERACTION WITH FOREIGN ENTITIES ........................................................ 38 1. UNITED KINGDOM ................................................................................... 38 1.1. Serious Fraud Office (SFO) ........................................................... 38 1.2. Financial Reporting Council/Accountancy and Actuarial Discipline Board ............................................................................................. 41 1.3. Campaign Against Arms Trade (CAAT) ......................................... 43 2. SWEDEN .................................................................................................. 43 2.1. National Anti-Corruption Unit (NACU) ............................................ 43 3. SWITZERLAND ........................................................................................ 45 4. LIECHTENSTEIN ...................................................................................... 46 5. UNITED STATES OF AMERICA ............................................................... 47 5.1. Fraud Section, Criminal Division: US Department of Justice .......... 47 5.2. Bell Helicopter Textron .................................................................. 48 6. GERMAN AUTHORITIES.......................................................................... 49 6.1. Kroll Ontrack .................................................................................. 53 7. FRANCE ................................................................................................... 54 C. OTHER JURISDICTIONS ................................................................................... 56 1. WEST INDIES AND LIBERIA .................................................................... 56 D. INTERACTION WITH DEFENCE COMPANIES .................................................. 56 1. SAAB AB ................................................................................................... 56 2. BAE SYSTEMS PLC ................................................................................. 60 3. THYSSENKRUPP ..................................................................................... 63 4. THALES .................................................................................................... 65 E. APPROACH TO DOCUMENTS .......................................................................... 65 CHAPTER 3 ............................................................................................................... 65 ADMISSIBILITY OF THE DEBEVOISE & PLIMPTON REPORT ............................... 65 VOLUME 2 ABBREVIATIONS/ACRONYMS FREQUENTLY USED……………………………… viii CHAPTER 4………………………………………………………………………………… 72 SUMMARY OF EVIDENCE....................................................................................... 72 A. INTRODUCTION ................................................................................................. 72 B. DEPARTMENT OF DEFENCE ............................................................................ 73 I. SA NAVY .................................................................................................. 73 1. Rear Admiral Alan Graham Green ................................................. 73 ii 2. Rear Admiral Robert William Higgs ................................................ 81 2.1. Project Optimum ................................................................ 84 2.2. Utilisation: frigates and submarines .................................... 88 2.2.1. Frigates .................................................................. 88 2.2.2. Submarines ...........................................................