Special Hearings — Chemical And Biological Warfare Hearings — 1998-07-08

MR KNOBEL: No, sir, I know that at the '89 meeting a declaration - or rather a document was made available about the so-called chemical weapon capable countries and the industrial countries that possibly had that capability, and South Africa was part of that.

MR VALLY: Alright, going on with this document, paragraph 13, it talks about when the project officer, and I assume we're still talking about Brigadier Basson at this stage?

MR KNOBEL: Yes.  This is a chronological layout of what had happened prior to the Croatian ...(intervention)

MR VALLY: Right, what I understand - arranged in certain aspects which are of interest.  He went to Moscow where he met people involved the area of chemical warfare and he met amongst others a group of Croatians.

MR KNOBEL: This is what he says here.

MR VALLY: Alright.  Sorry this - is this his document or your document?

MR KNOBEL: Mr Vally, I testified to you before and in my affidavit I indicated to you that I had spoken to them - I had insisted to brief the Minister immediately about the programme when I learned that the money in Croatia had been lost or there was a problem.

MR VALLY: Right.

MR KNOBEL: And I indicated to you that I then had a meeting with the Minister and he said, I want a document which sets out the chronology of what had occurred.

MR VALLY: Right.

MR KNOBEL: And Brigadier Basson was asked to draw up such a document, and this is the document that you have in front of you.

MR VALLY: Fine.  Well let's go on.  Paragraph 14, it says with the acceleration of the project and the budget cuts it wasn't possible for the project management to manufacture all the chemical products locally and they had to look for sources outside South Africa.

MR KNOBEL: That's correct.

MR VALLY: From what I understood, you were worried about the quality of the methaqualone rather than the fact that you couldn't access it internally or manufacture it internally.

MR KNOBEL: Certainly quality was also a factor, but these factors were organised.

MR VALLY: But that's not a issue for Dr Basson, his ...(intervention)

MR KNOBEL: He's not mentioning it here, Mr Vally.

MR VALLY: That's right.

MR KNOBEL: I'm telling you the quality was one of the issues.

MR VALLY: I see, fair enough, but the point to note is, Dr Basson hasn't said that.

MR KNOBEL: Fine.

MR VALLY: In September 1992 he says there was already dealings with a group of Croatians in ...(intervention)

MR KNOBEL: Can I just - sorry, Mr Vally.

MR VALLY: Sure.

MR KNOBEL: With regards to your remark just now, if you look at paragraph 16 you will see that he says there the 500 kilograms of substance M, he did sampling of it, he did an analysis of he then said if the analysis is satisfactory he would then pay for it.  That deals with quality.

MR VALLY: Sure, I've got not problems with that.

MR KNOBEL: I'm just trying to say that he does mention it.

MR VALLY: We'll come back to that paragraph.  So he meets with a group of Croatians and he says the leader of this group of Croatians was a Minister of Energy Affairs of Croatia, a Mr Kagfeg and it also had representatives from the Croatian Military the Croatian Boarder Guard and the Croatian Security Police and a Special Forces Unit of Croatia.

MR KNOBEL: That's correct.

MR VALLY: There's an agreement to buy 500 kilograms of substance M, and we now know that's Methaqualone.

MR KNOBEL: Yes.

MR VALLY: And which would be supplied on the following conditions,
(a) there'll be a sample of the substance given to the project officer, Dr Basson, and thereafter the containers would be sealed;
 (b) that he would test the substance in Switzerland; and
 (c) that if he's happy with the test he would pay for the substance in the sum of 4600 US Dollars per kilogram or - between 4600 and 5000 US Dollars per kilogram and then he would arrange delivery either by air from Zagreb, which he would arrange himself, or by road from a safe area, either an Austrian or Slovakian border.  
This is all done by Brigadier Basson.

MR KNOBEL: Yes, sir.

MR VALLY: You have no personal knowledge of it other than what Brigadier Basson told you?

MR KNOBEL: That's correct.

MR VALLY: It may be fantasy, it may be fact.

MR KNOBEL: Do you want me to speculate?

MR VALLY: No, I'm putting to you.  Do you have independent evidence that this happened?

MR KNOBEL: No, apart from the fact that you read earlier on that I had a meeting with Mr Reggley who was the Intelligence Head of the Swiss Defence Force, and you also have the two communications that I received from Jacomet, who was the agent.

MR VALLY: We're going to come to those.  In any event, there was a problem regarding the payment guarantees, for want of a better phrase, "betalingvoorwaardes".  The four parties involved, and I assume that's the people referred to above, all the various elements of the Croatian Armed Forces and Security Branch, etc, allegedly did not trust each other and therefor there were no normal exchange of letters of credit I assume, which could be used for the payment of these substances.

MR KNOBEL: That's correct.

MR VALLY: Was this an illegal transaction in Croatia?

MR KNOBEL: I have not idea.

MR VALLY: I mean we had the Minister of Energy Affairs involved, why weren't normal channels used to pay?

MR KNOBEL: Mr Vally, I have no idea.

MR VALLY: Okay.

MR KNOBEL: I think from what you have in front of you, those parties that took part in this clearly didn't want to have it being done in the open or through normal channels as you suggest, according to this document.

MR VALLY: So he then says that arrangements would be made with bank Indoswiss in Geneva to provide letters of guarantee.  Is that correct?

MR KNOBEL: That's what he says, yes.

MR VALLY: Well, was this done?

MR KNOBEL: Yes, sir.

MR VALLY: Did we put money in the bank in Geneva to cover the guarantees?

MR KNOBEL: Yes.

MR VALLY: And thereafter, after the successful delivery and payment you would arrange with the bank in Geneva to cancel the guarantees?

MR KNOBEL: Correct, and that money would then be refunded to South Africa.

MR VALLY: That's correct.  So we're talking about potentially two large amounts of money.

MR KNOBEL: Yes.

MR VALLY: One would be cash to be paid to them and the other one to be paid in a bank to cover the guarantees.

MR KNOBEL: Correct.

MR VALLY: And payments would be made through an agent.

MR KNOBEL: That's right.

MR VALLY: And I assume that is Dr Jacomet?

MR KNOBEL: That's the other man, yes.

MR VALLY: Alright.  He goes on to say he was happy with the quality and because the Airport in Zagreb was closed it was taken to Austria and from there I assume it was flown into South Africa.  He doesn't say further about what happened to the items, the 500 kilograms.

MR KNOBEL: Yes, to the best of my knowledge that did come to South Africa.

MR VALLY: Fine.  Then he talked about the transfer of the funds to a Captain Jurg Jacomet, who he says is also involved in Swiss Intelligence.

MR KNOBEL: Yes.

MR VALLY: And this happened on the 6th of November 1992.

MR KNOBEL: Yes, according to ...(intervention)

MR VALLY: Any idea how these funds were transferred?

MR KNOBEL: No idea.

MR VALLY: Any idea where he got the money from, this is now Brigadier Basson?  We're talking, and it says so, a sum of 2 million 300 000 US Dollars.

MR KNOBEL: Yes, this was project funds that had been transferred from D Johan Truter to the bank in Switzerland for use by Basson.

MR VALLY: So what we're in fact talking is double this amount, we're talking 4 million 600 000 Dollars.

MR KNOBEL: No I don't follow that.

MR VALLY: And I'll tell you why.  We're talking about the funds which had to be deposited in the bank in Geneva to cover the letters of guarantee.

MR KNOBEL: That's correct.

MR VALLY: And we're talking about the money which went to the agent, who was Dr Jacomet.

MR KNOBEL: Which was the cash payment of 2,3.