Prologue

For those in the vicinity of the crumbling Gupta empire, 2016 was a rough year. The phrase ‘State Capture’ began to sink into the mind of every South African, especially once the country’s major banks shut the Gupta company accounts.

Once the #GuptaLeaks came around, international firms like Bell Pottinger, SAP, McKinsey and KPMG found themselves engulfed by one of the country’s biggest post-apartheid scandals. Their loot safely stashed in Dubai, the Guptas and their cronies had to lawyer up, using global expertise from Sandton to New York.

Curious, though, is that while the Guptas’ accountants and consultants have had to deal with multiple State Capture unpleasantries, there has been an eerie silence over the role of the legal profession in the Gupta debacle.

On Monday the Asset Forfeiture Unit confirmed being in possession of a new High Court Restraint Order in respect of a criminal case emanating from the Guptas’ State Capture antics in the Vrede Dairy farm scandal. Remarkably, the order provides for any moneys sought by the state and which may be held by third parties, including lawyers, to be surrendered.

Under South Africa’s Constitution every man is entitled to legal representation and, if you have deep pockets, that usually buys you the very best in town.

Today Daily Maverick kicks off a new series, Gupta Inc: The Lawyers.

Meet Stein Scop, a law firm that boasts of its work for “financial institutions, major industrial and commercial operations (both listed and unlisted) and a range of high net worth individuals. This was one of the firms representing Trillian, a company linked to the Guptas via its main shareholder, Salim Essa. Daily Maverick has established that Trillian moved in excess of R80-million through the firm’s trust account. Now investigators want to know where it went from there and for what purpose.

Caught in the crosshairs of a hunt for Trillian assets

The 23 February 2018 edition of the Government Gazette includes a notice to interested parties that the state had obtained a High Court order and intends to bring forfeiture proceedings in respect of ABSA bank account No 4088410495.

This is an account belonging to Trillian Management Consulting, a division of the Gupta-linked company that had received R595-million in alleged unlawful payments from Eskom following a dubious deal involving global consulting firm, McKinsey & Co.

Slight snag: The account has been closed, suggesting a dead-end for investigators from the Asset Forfeiture Unit set on recovering that money as the alleged proceeds of crime.

This cash is part of just under R1.6-billion allegedly unlawfully paid to Trillian and McKinsey, which the state seeks to get back and, more important, part of an estimated R50-billion that the National Prosecuting Authority has in its sights.

Now investigators will have to extend their search for the Trillian loot to others who benefited from their dealings with the company, and indications are that some of them may have to account for that cash.

The 14 December order obtained by the AFU of the prosecuting authority has thus far provided for nearly four months of available Trillian financials linked to the now closed bank account.

Daily Maverick established the status of the account when attempting to make a R595 deposit into it. A teller said it was closed in September, three months before the AFU pounced – more noteworthy, a month after a final payment from Eskom went in there.

Unless there is a secret Trillian stash somewhere to cover the R600-million, any person or entity, including lawyers in South Africa and abroad who have received money from Trillian, may find themselves having to account for such payments.

Leaked records and several well-placed sources have provided Daily Maverick with information showing how, as the Eskom millions flowed to Trillian between 2016 and 2017, large sums of cash moved to the attorney firm’s trust account, some of that to pay service providers, including other local lawyers and international law firms..

While Stein Scop is by no means the only firm that worked for Trillian during the period in question – in fact, it could even be said that the firm really came in at the back end – some of its Trillian files make for an important first port in the hunt for assets.

Stein Scop has confirmed that it is currently “interacting” with a court-appointed curator insofar as his mandate extends to Trillian legal work they previously performed.

(Read part 1 of Stein Scop’s full response here)

In summary, the firm said that it no longer acts for Trillian or the Gupta companies, and:

• That the firm only did normal legal and commercial work those companies;
• It has no concerns about the integrity of its work for those companies; and
• That it would be comfortable co-operating with investigators tracing Trillian assets within the confines of the law.

While communication between lawyers and their clients is a no-go zone covered by legal privilege and client confidentiality, Daily Maverick has reliably learnt that the money trail between Stein Scop and some of Trillian’s service providers will be up for scrutiny.

The law firm provided a basket of legal services to Trillian. Most notably it was responsible for executing the company’s devastating legal strategy against Mosilo Mothepu, one of the country’s key State Capture whistle-blowers.

Compared to giants like Werksmans or Webber Wentzel, Stein Scop Attorneys is not one of the country’s better known law firms. Its offices are a stone’s throw away from the now vacant premises of Trillian Capital Partners. The firm markets itself on the ability to provide the “quintessential big law firm experience while being flexible enough to accommodate each client’s particular sensitivities”.

It started formally operating in January 2016 when a crew of solid and experienced lawyers moved into snazzy new office space along Melrose Boulevard.

Within the first few months, Stein Scop landed the well-connected Trillian as a client – and, at some point, also the Gupta-owned Sahara.

And boy, was 2016/2017 a busy time for Stein Scop: The Trillian portfolio grew wildly and, at some point, the Gupta-linked companies represented up to 50% of the new firm’s work, not all that unusual in view of their growing legal woes.

But, says Stein Scop:

“It is important to distinguish the role the legal profession plays as distinct from other service providers such as accountants and consultants. We do act for unpopular clients from time to time. Our job, as attorneys, is to ensure that even these clients are entitled to protect or enforce their rights under law (as guaranteed in the Constitution).”

The firm has comprehensive FIC (Financial Intelligence Centre) and KYC (Know Your Client) process in place, one followed for all clients without exception.

Stein Scop withdrew from the various Trillian and Sahara matters some time after mid-2017. Attorney-client privilege prevents it from explaining more, it says.

In the year preceding the firm’s withdrawal as Trillian’s lawyers, they had had more than just the odd unsavoury mention in the press:

It first featured in a Sunday Times article in May 2016. Another followed in the Mail & Guardian when AmaBhungane produced a piece headlined “How to eat a parastatal like Transnet – chunk by R600m chunk”.

By October 2016, when a statement by former Trillian executive Mosilo Mothepu surfaced in public, the rest of South Africa took note of this little-known but powerful financial advisory firm whose deals at Eskom and Transnet had raised an abundance of red flags.

Mothepu’s statement to Public Protector Thuli Madonsela not only revealed that Trillian executives had had prior knowledge that former President Jacob Zuma was going to fire Nhlanhla Nene (during his first term as finance minister), it also provided the first concrete pointers to staggering of payments from Eskom in cases where no work had been done; similarly at Transnet.

Mothepu resigned from Trillian in June 2016 and filed a claim for constructive dismissal at the Commission for Conciliation Mediation and Arbitration (CCMA). All she wanted was a year’s salary.

But she then had to face Stein Scop, who had been hired by Trillian to defend their position against Mothepu’s CCMA claim. Her little labour matter, improbably, soon exploded into a full-blown criminal investigation against her by the Hawks as she faced threats of jail time for alleged crimes such as theft of confidential company information and breaches of the Electronic and Communications Transmission Act (Ecta). This, coupled with a demand that she repays a R500,000 sign-on bonus, effectively boxed her into a costly legal corner.

Leaked information perused by Daily Maverick suggests that Trillian routed payments of more than R10-million through Stein Scop for fees and other expenses emanating from the Mothepu case.

The firm denied that it had raked in that much, emphasising that large litigation matters are run as teams between attorneys and counsel, often including other experts.

“A legal bill is the agglomeration of all of the fees of these respective parties. It is therefore incorrect and unfair to refer to the attorneys in a matter as being the sole recipient of legal fees paid by a client in a particular matter.”

That Trillian will have coughed up millions in legal fees for the Mothepu battle makes sense – it was an important fight. After all, her revelations essentially served to shut the State Capture taps that had been flowing to Trillian; for all intents and purposes, it was the killer blow.

But, while the rest of South Africa regards Mothepu as a whistle-blower – she has provided testimony for the Budlender investigation, a parliamentary enquiry and is scheduled to assist Eskom in an upcoming legal review of the McKinsey/Trillian contract – Stein Scop disagrees.

“Ms Mothepu did not enjoy protection under the Protected Disclosures Act.”

The firm says it never acted against her in that capacity, emphasising that it merely acted as Trillian’s labour lawyers in this regard.

Also, says Stein Scop, Mothepu had briefed Werksmans Attorneys and senior counsel to represent her in the various labour-related matters.

The financial implications of Mothepu’s plight have been well documented. Pplaaf, an international whistle-blower organisation headed by William Bourdon and who has acted for Edward Snowden, stepped in in 2017 to pick up her legal bills because the deck was so heavily stacked against her.

Like all other lawyers who acted for Trillian or the Guptas, Stein Scop says it followed the letter of the law. But, it must be hugely uncomfortable that it may now be forced to provide explanations for payments via the Trillian Trust accounts to state investigators who are scouring a financial labyrinth for what they believe to be the proceeds of crime.

Among the payments made by Stein Scop that Daily Maverick has established which will be examined by investigators is one for $1-million to international law firm, Jones Day. Records suggest this was for work the firm had done on the declaratory order then sought by former finance minister Pravin Gordhan after the Guptas had tried to compel him to intervene in a decision of the country’s major banks to shut their bank accounts.

Curiously, Trillian was not a respondent in the case, although it appears to have provided some advisory work.

But, Trillian Holdings was 100% owned by Gupta lieutenant, Salim Essa, an entity which held a controlling 60% stake in Trillian Capital Partners until 2017.

Efforts to obtain comment from Jones Day, a firm with 53 offices around the world and which prides itself on its “one firm” philosophy on its website, were unsuccessful.

Daily Maverick made several attempts between 28 March and 16 April to obtain comment from Jones Day. Those efforts included calls and detailed email requests for comment, the reason pertinently noted in the subject line.

To date, there has been no acknowledgement of receipt of any of the emails sent to three senior administrative partners at the firm’s head office in Cleveland, Ohio, and Dubai, as well as two separate global communications individuals whose details were all listed on the firm’s website and who appear on current media statements.

None of the emails has bounced back. 

“To be clear, we hold no funds on behalf of Trillian or any of its shareholders,” Stein Scop said.

This is a key issue being emphasised by the firm. The NPA has obtained a restraint order in respect of assets belonging to the Gupta-linked accused in the Estina dairy farm case. That order, stemming from criminal forfeiture proceedings, makes provision for curators to seize any assets or moneys held by third parties, including lawyers.

“We have interacted with the curator to the extent that we could provide him with information required in terms of the court order,” said Stein Scop in response to questions about similar proceedings possibly being under way in the civil matter involving Trillian.

“Stein Scop has not been drawn into the State Capture scandal. Stein Scop acted as lawyer for clients in a number of matters as it was entitled to do as a number of other firms across the country at present.”

(Read part 2 of Stein Scop’s response here)

The NPA, asked about its response to the closed Trillian bank account, declined to comment. But spokesman Luvuyo Mfaku confirmed that any person who benefited from unlawful activities would be pursued in order to preserve the property the NPA seeks to recover. And, Mfaku said, recovery efforts will include third parties.

Trillian did not respond to questions but Stein Scop, who no longer act for the company, stressed that no court has thus far found any of the Trillian moneys to be the proceeds of crime and said it would be legally inaccurate and unfair to suggest that recipients of cash from Trillian had somehow been paid with the proceeds of crime.

The preservation order in respect of Trillian and McKinsey was obtained under Chapter 6 of the Prevention of Organised Crime Act, making it civil forfeiture proceedings.

Section 52 of the Act provides adequate defence for third-party recipients of alleged tainted cash, provided they are able to prove that they gave full value in return for the cash earned and that they did not have reasonable grounds to suspect that money formed part of the proceeds of crime.

Several experts have confirmed to Daily Maverick that curators, acting on behalf of the estate in question, may seek to impugn or question the validity of payments to third parties.

This, while possible, may involve a lot of work.

Last week Eskom made South Africa briefly sigh in relief when it said that Trillian, like McKinsey, was amenable to paying back taxpayers’ money. But by Friday morning, Business Day reported what appeared to be a “Hell, No!”.

Trillian is challenging both the AFU’s preservation order and a review application by Eskom to set aside all administrative decisions that led to the payment of R1.6-billion in total to Trillian and McKinsey.

The Gupta empire – including Trillian – were so lawyered up during the course of their “normal” business but never more than when the State Capture ship began sinking.

Not so long ago, Stein Scop were just another law firm, one that had top-end clients which back then boasted empowerment mogul Tokyo Sexwale as chairman. Now it may soon find itself having to account for its work for Trillian, the fees earned, and provide a massive amount of information to State Capture investigators. DM

Look out for part 2 in this series: Gupta Inc: The lawyers.

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