In a victory for taxpayers and the state against corruption the Pretoria High Court has ruled that a firm, which allegedly defrauded the Department of Water Affairs (DWA) for goods it was paid for but did not supply, repay the government the grand sum of R27,5 million.
Judge Norman Davis ordered that the Germiston firm, Metric Industrial Suppliers CC pay the sum to the department as well as its legal costs for the court application after Minister Lindiwe Sisulu filed the suit to recoup the losses. The sum relates to fraudulent invoices the firm’s employee Anand Pillay submitted to the department’s former Head of Supply Chain Management, Rick Nel between April 2006 and November 2009.
According to court papers the invoices were in respect of goods that were never purchased by the department from Metric Industrial Suppliers CC nor delivered by the firm.
Fraud perpetrated using fake documents
Rick Nel then created “fictitious purchase orders and delivery notes” for the invoices submitted to him.
“In submitting the invoices, accepting same and creating creating the fictitious or fraudulent purchase orders and delivery rotes, the defendant and Rick Nel colluded with each other and acted with the common intention to defraud the department of the amounts reflected in each invoice and submitted by the defendant. The invoices were paid by the department to the defendant despite the fact that no goods were delivered to the department,” court papers said.
Independent Auditor Kiwani and Associates produced a detailed report highlighted the alleged irregularities in the construction directorate of the department. The report, which also highlighted the importation of sub-standard shutter boards from China some of which were then sold to another party, was submitted as evidence before the court.
According to evidence filed in court the total paid for non-existent goods was allegedly R30 756 613,13. No credit notes were passed by Metric in favour of DWA for the inferior shutter boards. This caused an estimated loss to DWA of between 2120 and 33200 shutter boards – an amount between R900 000 and R1,36 million.
“Rick Nel failed to disclose that he benefitted from the disposal of the Chinese origin shutter boards,” the court papers said.
A forensic audit was then followed by a fraud investigation by the Special Investigations unit in terms of a Presidential Proclationation R54 of 2012.
Pillay argued in his defence that the goods had been delivered in the case of all transactions with the department. The judge noted that he had “attacked” the state’s witnesses during his defence argument.
Pillay told he court that the company had never stolen from the department and had always “helped them out” to source goods. He also disputed the allegation that R30 million had been defrauded saying that all the department sites that the firm had supplied did not tally to this sum in deliveries. He also produced documents purporting that they provided proof of delivery to specific sites.
Pillay also said he was only aware of one shipment of substandard shutter boards.
In summing up the matter the judge said in his ruling that none of the department’s four witnesses had contradicted one another in any material manner. However, he described Pillay as a “poor witness” and rejected his evidence.
“He was evasive and spoke on general terms. He displayed no intention to deal with the actual merits (or demerits) of the matter. His attitude of attacking witnesses without dealing with the substance of their evidence does not reflect an attempt to honestly deal with the accusations against the defendant and him personally,” Davis said in his ruling.
“I find that he had clearly colluded with Rick Nel to circumvent the department’s supply chain procedures.”
However, the judge found that some substandard Chinese shutter boards had indeed been delivered to the department altho in other cases the department had paid independent transporters for the goods as well as Metric Industrial Suppliers.
He said the state had proved its claim for recovery of R27 510 067,17 and ordered Metric Industrial Suppliers to pay the sum as well as the costs of the state’s application.