NPA argues judge made mistakes in Nulane ruling

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The National Prosecuting Authority (NPA) has argued in its application for leave to appeal the Nulane Investment ruling that the acting judge assigned to the case made a litany of errors in law and in fact.

There is, the prosecution argued in a papers to the Bloemfontein high court, a reasonable prospect that another court would not agree with her conclusion that the state had failed to attain the minimum threshold to prove its case against the eight accused in the country’s first state capture trial.

Acting high court judge Nompumelelo Gusha granted section 174 discharges to two former Free State officials, Nulane Investments and its directors Iqbal Sharma and Dinesh Patel, the Gupta family’s Islandsite Investment and its treasurer Ronica Ragavan for lack of evidence, meaning they did not have to raise a defence. 

The eighth accused, former head of the Free State provincial departments of agriculture and rural development, Limakatso Moorosi, did not file a section 174 application but was also acquitted, with Gusha saying the state had failed to produce a shred of evidence against her.

“There are reasonable prospects that another court would find that the evidence presented before the court by the state called for a reply and that the accused ought to have been called upon to discharge their evidentiary burden,” the NPA argued in its 42-page application.

The case has raised doubts about the state’s ability to prosecute state capture corruption and justice minister Ronald Lamola has asked national director of public prosecutions Shamila Batohi for an explanation.

Publicly, she has called for the Investigating Directorate to be made a permanent body, with enhanced investigative capacity, as the president promised months ago. Privately, many have asked why the matter was assigned to an acting judge.

In the application, the NPA said Gusha had failed to consider financial records and to apply the proper test for a section 174 discharge. 

This did not turn on proof beyond reasonable doubt, the state said, as it was trite that the standard it had to meet to avoid discharge was lower than that required to secure conviction.

“The learned judge erred in forming an opinion, based on a mere cursory evaluation of the evidence given and its relevance to the essentials of the crimes the accused were charged with.”

The result was a miscarriage of justice, prosecutor Peter Serunye submitted, 

Crucially, he said, Gusha did not properly interpret and apply the doctrine of common purpose, on which the state relied to show that the accused, as well as Atul and Rajesh Gupta and their wives, colluded to commit fraud and launder millions of rand through companies in the fugitive family’s business empire.

Gusha said given the state’s failure to prove a prior agreement by the accused to commit fraud, it would take “a quantum leap” to find they acted with common purpose. 

“The learned judge required prior acquaintance and planning between the accused and it is respectfully submitted that she thus misapplied the doctrine of common purpose.”

She also erred in her application of the “best evidence” rule, which aims to avoid falsification and dictates that a copy of a document will not be deemed admissible if it were possible to obtain the original, the state said. 

Gusha said she was not convinced that the state had done a thorough search for original documents and that its witnesses pleaded ignorance as to what had happened to these or simply suggested they must have been lost when the agriculture department moved premises.

The prosecution said here, too, another court could hold differently, bearing in mind that the move happened in 2013, “almost a decade before the docket was opened”.

It charged that the judge had contradicted herself in rulings on the admissibility of evidence, notably regarding documents central to the testimony of Siphiwe Mahlangu, a forensic auditor from the treasury.

Despite ruling a letter motivating for a treasury deviation to give a tender for a feasibility study to Nulane Investments admissible evidence, Gusha later expected Mahlangu to authenticate this, as well as the eventual contract, although these were drafted and signed in his absence, the NPA said.

She concluded: “His evidence is based on copies of documents he was favoured with. His [evidence] does not take the state anywhere, save only to confirm that the amount of R24 948 240 somehow made its way [out] of the coffers of the department and into the banking accounts of Nulane Investments.”

According to the indictment, officials lied to secure the deviation in favour of Nulane.

The company outsourced the feasibility study to Deloitte, for a fee of R1.5 million, but subsequently changed the recommendation to pinpoint Paras as the most suitable implementing partner for setting up a milk-processing plant in Vrede, in the Free State, in what would become the Estina scandal.

Gusha found that the Deloitte report was inadmissible but the prosecution said this was contestable and her ruling on 23 February on evidence was riddled with contradictions.

“Said ruling went against the best evidence rule, the interests of justice and was highly prejudicial to the state’s case.”

The state’s case was that after Nulane paid Deloitte, the rest of the money was laundered, at a “bewildering” pace, through the bank accounts of Islandsite and other companies, including Pragat, Tegeta Resources and Oakbay Investments.

In July 2012, R19 million was transferred from Nulane’s Bank of Baroda account into the Standard Chartered Bank account of Gateway Limited. The company is incorporated in the United Arab Emirates and the account controlled by Sanjay Grover, an associate of the Guptas.

Eventually, that money would flow back to the family’s enterprises in South Africa. 

But since it was found that the state had failed to prove that the funds were effectively stolen from the Free State, it was hard-pressed to sustain the charge of money laundering in relation to the myriad transfers.

Gusha found that the case unravelled with the questioning of state witness Shadrack Cezula, a supply-chain manager in the agriculture department. He testified that he had typed the motivation for a deviation as dictated to him by accused number 3, Seipati Dhlamini.

His evidence was central to the contention that the three accused who worked for the province colluded to enable fraud.

Evasive witness 

But the judge said Cezula was an evasive witness, who was seemingly “hell-bent” on distancing himself from any crime, and gave no factual evidence setting out the essential elements of fraud.

Another court may well find that Cezula’s evidence did amount to admission of fraud, the NPA said.

Gusha’s assessment of it was problematic, and again contradictory, in that she accepted that he had potentially contravened the Public Finance Management Act, but failed to accept that there was then, by implication, also prima facie evidence that Moorosi, who approved the deviation, had contravened the act.

By saying in her ruling that, in order to qualify for indemnity, he needed to admit that he intended to defraud the department, the judge showed a fundamental misunderstanding of section 204 of the Criminal Procedure Act.

The court was not supposed to rely on a witness’s assessment of whether they had committed a crime but to reach its own conclusion after weighing the evidence and the established facts.

Finally on this point, the state said, the judge made a factual error by finding that, significantly, Cezula could not remember to whom he had handed the application for a deviation for signature or who he had dealt with at the treasury.

He had testified that he gave it to Dhlamini to sign and that they went to the treasury together and dealt with one Jimmy Moalosi. 

Regarding the money-laundering charge, Ragavan told the court that the suspect transfers were loans to companies experiencing shortfalls.

Lawyers who followed the case said it was not clear why the state was unable to formulate a convincing counter argument that the money could not have shored up entities in distress if it had barely landed in their accounts before being shifted elsewhere.

In the application for leave to appeal, the NPA said Gusha had erred in her analysis of the evidence of a financial investigator testifying for the state.

She noted that Thesele Rankuoatsana had testified that the funds had flowed at an alarming rate, in a manner contrary to the ordinary course of business. But under cross-examination, she said, he conceded that there might be nothing sinister about the stream of loans to companies in the Gupta stable.

“Considered in its totality, however, Rankuoatsana’s evidence fell far short of this concession,” the NPA said, arguing that the judge had misconstrued his response to mitigating propositions put to him.

“The witnesses’ answers, which appeared as categorical concession to the learned judge, presupposes that the transactions were indeed bona fide loans which was the version put by the accused.

“He did not concede that the payments were, in fact, to satisfy real debts.”

It further argued that she had failed to consider his evidence and that of other witnesses relating to bank records reflecting the financial transfers.

The charges in this case underpinned the state request for the extradition of the Gupta brothers from the United Arab Emirates, which was declined in February.