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

MR VALLY: Well let's talk it through.  Let's look at TRC10 first, what you've just referred us to.  There was a person or is rather a person called John Truter, is there?

DR KNOBEL: That's correct.

MR VALLY: I believe he is presently in Canada or something.

DR KNOBEL: I beg your pardon?

MR VALLY: Is he presently in Canada or something?

DR KNOBEL: No, no, no, I don't know where John Truter is.

MR VALLY: Fine.

DR KNOBEL: Are you not confusing him with Erasmus?

MR VALLY: No, no.

DR KNOBEL: I may be wrong, maybe he is in Canada, I'm not sure.

MR VALLY: No, no, we're not talking about Mr and Mrs Erasmus or Doctor and Mrs Erasmus, no.  Did this company, John Truter Financial Consultants have besides being a channel of money, have responsibility for any auditing or accounting of any of the front companies?

DR KNOBEL: No, Mr Vally, as I understood it an auditor was appointed by the Auditor General, an external auditor which was Mr Theron of ...[intervention]

MR VALLY: Sorry General, maybe I'll just draw your attention to the third line under (a), 2(a), we're looking at TRC10
"Internal Audit Function and General Administration of the Project"

DR KNOBEL: Now the internal audit function referred to here is the auditing of funds that have been made available for the project and which was channelled from D John Truter to the various front companies and for that matter, to any other companies.

MR VALLY: Fine.  So the issue that I'm putting forward to you is, you had a need for an internal audit, you created a company?

DR KNOBEL: Correct.

MR VALLY: Which company was paid for its services?

DR KNOBEL: That's correct.

MR VALLY: Now as I understand it, similarly whenever the was a need Doctor Wouter Basson had to fly to various parts of the world in private aircraft because of substances he was carrying, so you'd get a friendly company or you'd form a new company, is that how it worked?

DR KNOBEL: No, Sir.  When you say: "you used a friendly company" ...[intervention]

MR VALLY: Defence Force, we're talking Defence Force.

DR KNOBEL: No, sorry, it didn't work that way.

MR VALLY: So why is it that most or all the companies I've mentioned to you had operatives or ex-employees who were directors of those companies, associated with Project Coast in some way or another?

DR KNOBEL: Mr Vally, I share your concern about this and this is why there is an investigation by the Office of Serious Economic Offences to this effect.  If you ask me why, I'm saying to you there were old boys nets that had existed and these members were working within the front companies, they had been privatised, they went and established their own companies which they made available and which were used.  There's another example which we'll come back to when ...[intervention]

MR VALLY: Fair enough.  I'm pleased that you talk about this old boys network because they certainly seemed to have done very well out of the deal and I'll tell you why I say so.  We've already heard Doctor Swanepoel saying that he made at least four million, possibly eight million rands from the privatisation of Roodeplaat Research Laboratories, and I want to come back to that but for me there's a couple of angles regarding the companies.  First of all, the linkages to the old boys network and this old boys network is the one arising around Project Coast and before that, 7th Battalion, you would agree that there was this kind of network?
  The second thing is, when there was a decision to terminate the project, the cancellation fees that were paid.  Now I don't have an amount for, the money that was paid to Protechnic, do you have a figure for me?

DR KNOBEL: I don't have that figure, once again I'm sorry.

MR VALLY: Well the same document, TRC10, if you look at the attachment to it which you've referred to just now, page 9 thereof ...[intervention]

DR KNOBEL: Sorry, are you referring to ...[intervention]

MR VALLY: This is now
"Uiters Geheim"
Letter dated 19th of August 1991, reference: Brigadier Basson, addressed to General M A Malan, Minister of Defence.

DR KNOBEL: Yes.

MR VALLY: Look at page 9, paragraph 44(b):  A cancellation amount of thirty seven million rands in terms the unilateral cancellation of the research agreements is paid to the Medchem Group.

DR KNOBEL: Yes.

MR VALLY: So General Magnus Malan paid to Mijburgh, his nephew, because it's Defence Force money, or was aware that he was paid thirty seven million rands for cancellation of contracts?

DR KNOBEL: Yes, that's correct.

MR VALLY: Was this the standard pattern?

DR KNOBEL: No Mr Vally, I don't understand what you mean by: "standard pattern".

MR VALLY: I'm saying that at some stage there was a decision to terminate large aspects of Project Coast.

DR KNOBEL: That's correct.

MR VALLY: In terms of that there were a number of companies with which Project Coast activities had contracts, either Defence Force or Delta G or Roodeplaat.  When you cancelled those contracts, were they all paid the cash value of the outstanding aspects of the contract?

DR KNOBEL: Only with regards to the Delta G and the Roodeplaat, those were the two main companies.

MR VALLY: Well here's Medchem getting thirty seven million rands.

DR KNOBEL: Yes, but I'm confirming what you're saying.  This only occurred with the privatisation of Delta G and  This is what this whole document is about.

MR VALLY: You see, Doctor Mijburgh very glibly told us he made money on the stock exchange.  Here is a document which says he got thirty seven million rands paid for by the Defence Force.

DR KNOBEL: Mr Vally, I think we're over simplifying this.  Clearly this is a highly complex process, so complex that the Joint Standing Committee on Public Accounts decided to ask the Auditor General to conduct a full investigation into the fairness of the privatisation process.
 To the best of my knowledge that investigation has not been completed and we're now into the second year since the Joint Standing Committee on Public Accounts gave that instruction.  The main role players in providing the information is the Chief of Staff Finance of the Defence Force, and I mentioned Brigadier Koertzen's name a few times already, and of course the investigation by the Office of Serious Economic Offences.  
 I don't know what the results of their investigation is but I think it is a bit premature now to simply deduct that Doctor Philip Mijburgh got thirty seven million.  The fact is it's taking the Auditor General more than a year now to complete this investigation and to give a report in this regard to the Joint Standing Committee.
   I'm certainly not in the position to give you a better explanation.  It's quite true what is written here in front of you and you can see it was approved, not only by the Minister of Defence but also by the Minister of Finance.

MR VALLY: I must make it absolutely clear that we're talking about the Minister of Defence in his official capacity but this document is signed by Head of the South African Defence Force, General Liebenberg, signed by Minister Magnus Malan and signed by Minister of Finance at that stage, Barend du Plessis.

DR KNOBEL: That's correct.

MR VALLY: And are you aware of whether this was the standard practice with other companies?

DR KNOBEL: I've already answered that question.  As far as ...[intervention]

MR VALLY: No, but personally, are you aware of whether it happened to any other companies?

DR KNOBEL: No, I'm not aware of any other companies, other than Delta G and Roodeplaat.

MR VALLY: Can I go further, that same document, the very last page, you'll see a diagram there, it says
"The Medchem Group Corporate Structure: Shareholding in long-term assets"
Let's look at the right, it says:
"D J Truter Financial Consultants"

DR KNOBEL: Yes?

MR VALLY: Now, every now and then there's a block which says
"Lening"
and I assume that's twelve million rand?  Do you see that?