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Trillian’s tangle of secrets and lies

BUSINESS LIVE / 30 OCTOBER 2017 - 06:33 / STEPHAN HOFSTATTER AND KYLE COWAN
Documents show advisory firm bosses tried to hide Salim Essa’s majority shareholding from Eskom empowerment partner

Scandal-wracked financial advisory firm Trillian Capital Partners’ efforts to hide its links to the Guptas have left it vulnerable to fraud charges by Eskom.

Power fallout: Forensic investigators have recommended that Eskom charge financial advisory firm Trillian for fraudulently misrepresenting its black economic empowerment status to win contracts. Picture: REUTERS

New documents obtained by Business Day show Trillian CEO Eric Wood and former chief financial officer Tebogo Leballo sought to hide the majority shareholding of Gupta lieutenant Salim Essa from Eskom and McKinsey’s global risk committee.

Investigators probing the unlawful payment of R1.6bn in fees to Trillian and McKinsey for six months work discovered Trillian was registered on Eskom’s supplier database as wholly white owned when it was awarded contracts.

This led Eskom to conclude Trillian had invoiced and been paid “on a fraudulent basis” by claiming it was McKinsey’s black empowerment supplier development partner.

“However, at the time payment was claimed and made Trillian had no black ownership and was registered as such on Eskom’s supplier database based on its confirmation of shareholding provided on 11 April 2016,” Eskom said in its letter of demand sent to Trillian and McKinsey in October this year to pay back the money they had earned.

A copy of Eskom's letter of demand

By then Trillian had already invoiced Transnet R93m and Eskom R30.6m. McKinsey had also signed a contract with Eskom that resulted in Trillian being paid another R565m.

McKinsey was hoping to generate fees potentially worth R9.4bn at Eskom alone with Trillian as its black empowerment partner.

Trillian in its current form was created by Wood and Essa after a failed attempt by the Guptas in 2015 to buy Regiments. Wood was a director of Regiments and took the firm’s advisory division with him.

An investigation by the Financial Mail earlier this month showed that the marriage between Regiments and McKinsey was brokered by Essa and his golfing partner Kuben Moodley, and that both received a cut of the fees Regiments was paid as McKinsey’s supplier development partner on work for state entities, notably Transnet.

Investigators from G9 Forensics recommended Eskom should lay criminal charges against Trillian for fraudulently misrepresenting its black empowerment status to win contracts.

When Business Day put this to Trillian earlier this month the company insisted it “had at least 60% BEE at all times for the duration of the Eskom contracts. Salim Essa, a black South African, held 60% of the total issued share capital in Trillian from November 2015.”

The company stressed it had “made no fraudulent representations in regard to McKinsey and Eskom”.

Trillian’s share register supports the firm’s claim that it did not defraud Eskom, showing that Essa, as the sole owner of Trillian Holdings, became 60% owner of Trillian Capital Partners in November 2015.

A copy of Trillian’s share register:

Essa sold his stake earlier this year following a damning report into the firm by Advocate Geoff Budlender, who found its partnership with McKinsey was a “sham arrangement” to ensure the Eskom taps kept flowing. McKinsey denies this, insisting it “would only enter into a Supplier Development Partnership that would achieve impact and value for our clients, and build local capabilities in parallel”.

Budlender also concluded Trillian had been dishonest when it publicly claimed the company had no links to the Guptas.

However, an e-mail Wood sent to McKinsey’s then SA senior partner Vikas Sagar in March 14 2016 implies that Trillian had not transferred 60% of its shares to Essa yet, despite evidence to the contrary in its share register.

“I have been engaging with a number of potential BEE shareholders,” Wood said in the e-mail he sent to Sagar. “I wish to assure you of my commitment in this regard towards achieving at least 60% black ownership of Trillian.”

A month later, on April 11 2016, Leballo conveyed the same message in a letter e-mailed to Eskom’s chief financial officer, Anoj Singh.

“Trillian Capital Partners is in the process of transferring 60% shareholding to a black shareholder and will update CIPC records of this shareholding once transferred,” he said.

Leballo also made a sworn affidavit headed “B-BBEE exempted micro enterprises”.

“I hereby declare under oath that the enterprise is 0% black owned,” Leballo’s affidavit said.

Former chief financial officer Tebogo Leballo's letter to Eskom's Anoj Singh

However, testimony and evidence from former Trillian employees and Wood’s business associates suggest the real purpose of the e-mails was to mislead McKinsey’s global risk committee, who were at the time asking hard questions about the shareholding of Trillian.

A whistle-blower statement from Bianca Goodson, who headed Trillian’s management consultancy division, makes it clear Eskom and McKinsey officials in SA knew Essa was in charge.

She recounted attending meetings from December 2015 with Eskom and McKinsey officials at Essa’s Trillian offices in Melrose Arch, Johannesburg.

“On one occasion, I arrived at a meeting early. Essa, Shane, Angel and Chipkin were meeting with Sagar. They were discussing the work at Eskom and Transnet,” she recalls.

In February 2016 Essa arranged for Goodson to meet Eskom’s head of generation, Matshela Koko, to discuss Trillian’s work with the power utility.

Goodson said she had been informed Essa was a 60% shareholder soon after joining Trillian in November 2015 and that Essa was an additional signatory on her contract.

In March 2016, when McKinsey’s risk committee was demanding answers about the Trillian’s ownership structure, there were good reasons for hiding Essa’s involvement.

That month the country was plunged into a crisis of state capture when then deputy finance minister Mcebisi Jonas disclosed the Guptas had offered him a bribe to become finance minister. Any links with the Guptas and their close associates became a major liability.

This would also explain why Eskom denied making any payments to Trillian until it was forced by the media to concede this was a lie.

If Wood and Leballo’s e-mails are authentic — and Trillian has said nothing to suggest they are not — that leaves only two possibilities: either Trillian fraudulently backdated Essa’s share certificates, or the company failed to disclose Essa’s stake because he had become a “politically exposed person”.

This was in fact one of the reasons McKinsey gave for breaking up the marriage with Trillian after concluding its due diligence later in March 2016.

Asked this week to decide which version of events was true, Trillian dodged the question. “Trillian reiterates that McKinsey was well aware of Mr Essa’s shareholding in Trillian at all times,” was all the company was prepared to say.

Leballo did not reply to messages left with him over several days.

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LINK - https://www.businesslive.co.za/bd/companies/financial-services/2017-10-30-trillians-tangle-of-secrets-and-lies/

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