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Discovery of syndicates targeting the Eastern Cape Provincial Government Electronic Funds Transfer payment method
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Speeches and Media Release
 Provincial Treasury, Economic Affairs, Environment & Tourism

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EASTERN CAPE PROVINCIAL GOVERNMENT
 SPEECH BY  MEC GODONGWANA
ON THE DISCOVERY OF SYNDICATES TARGETING THE EASTERN CAPE PROVINCIAL GOVERNMENT ELECTRONIC FUNDS TRANSFERS PAYMENT METHOD
 29 MAY 2001




Ladies and Gentleman, Good Morning and Welcome,

Introduction:

We would like to inform the public on our discovery of several criminal syndicates, all connected with each other and consisting of corrupt 
government officials and government suppliers, that over the past few years fraudulently generated payments to our creditors, laundering 
millions of government funds through the accounts of unscrupulous businesses.

We, in a joint effort between Provincial Treasury, provincial government and the South African Police Services, detected 315 suspected 
fraudulent transactions involving 29 officials and 41 suppliers, amount to R45,836,66.91, where a loss of R3,255,245.91 was either 
recovered or prevented. It is expected that the numbers will grow as the investigation progresses.

South African Police Services arrested 6 government officials in two supplier matters. Further arrests will follow shortly, as soon as the 
investigation into the other identified suppliers is completed. The police also arrested a suspect who is believed to be responsible for 
the assassination of one of the syndicate members, where a motive that the deceased was about to spill the beans after she was accused of 
ripping the syndicates off, are investigated.

Successes:

The police effected the following arrests were it is alleged that they were responsible for laundering R1,347,154.17 through the accounts 
of a supplier (Police Ref.:Bisho CAS 54/03/2001):

(i)Mr Doran Delius Kakuhle Landzela (39 year old State Accountant from the Department of Finance, Bisho)

(ii)Mrs Sindisiwe Nomusa Poppie Madide (38 year old clerk from the Department of Education, Bisho)

(iii)Mrs Agnes Ntombomzi Matyolo (44 year old Chief Admin clerk from the Department of housing and Local Government, Bisho)

(iv)Mrs Pumeza, Bictoria Manengela (33 year old Clerk from the Department of Public Works, Bisho)

(v)Mr Joyce Nobomvu Ngcukana (43 year old Senior State Accountant from the Department of Education, Bisho)

(vi)Lindiwe Gertrude Mboto (35 year old Accountant Clerk from the Department of Finance, Bisho)

So far an amount of R58, 000.00 was recovered from the supplier. All the accused were granted between R5,00.00 and R20,000.00 bail. The 
mater was postponed to the 29th of May 2001 (Zwelitsha Regional Court). Some of the government officials paid their R20,00.00 bail that 
same day. The state testified during the bail application, that:

(i) the police seized the diaries of some of the officials, where details of suppliers and certain government transaction were found,

(ii) Our Directorate Forensic Audit testified that they could not trace about 90% of the documentary evidence in these matters.

(iii) In an effort of convincing one of the suppliers that there would be no evidence, one of the suspects allegedly destroyed government 
payment advice forms by tearing it up before one of the suppliers. However, adequate evidence is available indicating the transfer of funds 
to the accounts of suppliers who did not render a service or products to government.

(iv) One of the suspects allegedly received about R820,000.00 in cash from a supplier, after laundering the funds through it accounts.

The police re-arrested the following official where it is alleged that she was also responsible for laundering R1,125,083.00 through the 
account of another supplier (Police Ref.: Bisho CAS64/05/2001):

(i) Mrs Agnes Ntombomzi Matyolo (44 year old Chief Admin Clerk from the Department of Housing and Local Government, Bisho)

An amount of R176,081.91 was recovered from the supplier concerned. This case was also remanded to the 29th of May 2001 (Zwelitsha Regional 
Court), where no bail was set.

The police arrested the following suspect where it is alleged that he was responsible for the assassination of Mrs Nonkululeko Theodora 
Qana (42 year old Chief State Accountant from the Department public Works,Bisho):

(ii) Mr Mkhululi Makalima (31 year old from Zwelitsha)

The case was remanded to the 31st of May 2001 (Zwelitsha Regional Court),where no bail was set.

The deceased, Mrs Qana was arrested in 1998 for the same scam, where it was alleged that she and other officials from the Department of 
Public Works laundered about R1,800,000.00 through the accounts of an East London businessman

In another two related matters, our Directorate Forensic Audit managed to timeously freeze the bank accounts of two other corrupt 
suppliers, recovering a total of R491, 925.00. The criminal investigation in respect of these suppliers are in an advanced stage, where 
arrested are expected soon.

Modus Operandi:

In an effort of preventing cheque-related fraud, the province thought it good to result only to electronic funds transfer (EFTs) as method 
of payment.

Creditors, when taken onto our system, would not get paid unless we had their bank details on record.

Corrupt government officials whose function it is to deal with our creditors in processing invoices, making out order, and generating 
payments would identify businesses usually in financial difficulties, and then either recruit such or instruct external fraudsters to 
recruit them. Their consent would then be obtained to make use of their bank account to launder millions through it. Such business are 
carefully recruited, for many many businesses knocked the syndicates in that, as soon as funds were transferred and cleared, they refuse 
to pay the agreed upon cut over. Syndicate members are also closely monitored for many in the past stole from the proceeds, where they 
also did amongst the syndicated, resulting in many unhappy clients now coming forward with information on the identity and activities of 
these corrupt officials.

How was it discovered

In December 2000, our Directorate Forensic Audit received a tip-off leading them to some fraudulent transactions where no service or 
products were allegedly rendered by supplies to justify certain payments.

A pattern was identified, whereby our data on supplies and financial transactions were interrogated for fraud indicators. Although evidence 
of the funds transfers are available, most of the supplies confronted so far could not prove the delivery of any service or products to 
provincial government departments. Some officials and supplies involved in the scam, when confronted came forward implicating their 
accomplices and revealing their activities.

What are we doing about it:

On discovery of the scam, we immediately reported it to the authorities, and as soon as we collected sufficient evidence, we suspended all 
the officials concerned. In doing so, we are preventing further losses.

We implanted a new policy and procedure when taking new supplies onto our financial systems. In the future, no new supplies will be taken 
on or details updated without being screened by our Directorate Forensic Audit. The province will not do business with any supplier unless 
they undertook to adhere to our Supplier Code of Conduct. Corrupt businesses and their directors will be blacklisted, and prevented from 
doing business with the province.

CLOSURE

Ladies and gentleman, as you can see the province is serious about fraud and corruption, where we will leave no stone unturned. We will 
vigorously hunt those officials and supplies stealing public assets, in securing criminal and departmental convictions, recovering our 
losses.

We invite anyone with information to come forward, where Capt. Lionel Hughes and Insp. Theo Tessendorf at 0827797156 and 0834552028 
respectively. Our Forensic Audit Directorate can also be contacted at 040- 609 5006 or 083 3205238.

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