Leaked records from the heart of the Gupta business empire help solve the mystery behind Denel Asia, the controversial arms marketing partnership that national treasury has tried to block.
The #GuptaLeaks show:
- The Guptas tried to sell Denel's intellectual property to India, while watering the state arms company's stake down by half.
- Acting as middlemen, they took the biggest stake for themselves and cut in a powerful Indian tycoon – close to Prime Minister Narendra Modi – for his "influence".
- They primed, wined and dined Denel's then new chair, Dan Mantsha, who sent them confidential government documents.
The Gupta family set themselves up to sell state arms manufacturer Denel's weapons to India in a deal involving a shady Indian fixer and a powerful tycoon close to prime minister Narendra Modi.
The Guptas arranged to sideline Denel and take the biggest share for themselves even though it was Denel's proprietary technology that was to be sold.
These details are revealed in the #GuptaLeaks, a trove of electronic data sourced from the heart of the Guptas' business empire.
In January 2016, Denel announced the formation of Denel Asia, a Hong Kong-based joint venture that it controlled, holding 51%. The rest belonged to a company registered to Gupta lieutenant Salim Essa.
Defending themselves against criticism at the time, Denel and the Guptas claimed that the Gupta family had no interest in the Essa company, VR Laser Asia, and by implication in Denel Asia.
The #GuptaLeaks show they were misleading South Africans.
Emails in the trove show Denel officials knew the overriding purpose of setting up Denel Asia was to sell arms to India - targeting more than $8bn in deals there - via a second joint venture called Denel India.
In Denel India, Denel's participation was watered down to just 25%.
The Guptas, who brought little to the table besides their political connectivity in SA and India, planned to wield a controlling 42% stake - exercised via Essa and their brother-in-law, Anil Gupta.
Anil, a former minister in the Indian state of Uttarakhand, is married to Achla, the Gupta brothers' sister. The controversial Gupta wedding at Sun City celebrated the marriage of Anil and Achla's daughter, Vega.
The files contain emails and draft contracts that show that as Denel Asia was being established in Hong Kong, the Guptas were putting together a second-tier company in India called Denel India, in which their Indian brother-in-law would hold a significant stake.
They also show the Guptas had a direct involvement in the establishment of Denel Asia, suggesting Essa was little more than their proxy.
Denel India was to be owned by Denel (25%) and Essa (24%) via Denel Asia, as well as Anil Gupta (18%) and the Indian multinational Adani Enterprises (33%).
Thus, Denel's participation was to be diluted significantly - and the emails show Denel executives were well aware the company would enjoy only a minority stake in the Indian venture.
Adani was key to the plan, the emails suggest.
Its billionaire founder and chairman, Gautam Adani, is often reported to be close to Narendra Modi, the Indian prime minister.
Much like the Guptas and President Jacob Zuma in SA, commentators link the rise of Adani's business empire to the political rise of Modi, starting in the early 2000s when Adani supported Modi when he was politically weak.
In one 2016 email, the CEO of the Gupta-owned VR Laser in SA, Pieter van der Merwe, objected to a draft contract in which Adani suggested it use nominee shareholders.
Van der Merwe made Adani's role clear:
"We are entering into an agreement with [Adani] as a result of their name, history and connections. If it means they are going to appoint an affiliate who doesn't have any know-how or influence, we do not need a partnership."
Companies in the Adani group have been accused by Indian authorities of money laundering and tax avoidance to the tune of about $750m.
Adani did not respond to an emailed request for comment.
But it was another controversial Indian businessman who appeared to introduce the Guptas to Adani: Kolkata businessman Parasmal Lodha.
Indian authorities recently arrested Lodha for money laundering. He was released on bail last week.
Lodha is very close to the Guptas, the #GuptaLeaks show.
They attend each other's family weddings and holidays and a senior Gupta manager once used contacts in the department of home affairs to arrange a South African visa for Lodha.
It was Lodha who in 2013 emailed Tony Gupta, asking him to invite Gautam Adani, among "a few friends", to another Gupta wedding, this time of Anil Gupta's son.
In 2015, as the Guptas were assembling their partnership with Denel and Adani, Lodha reviewed an Adani Enterprises contract within the Denel India structure and emailed comments to Tony Gupta.
Around the same time, Lodha twice helped to arrange for Gautam Adani to visit SA.
Lodha did not respond to questions.
The involvement of tainted figures such as Lodha and politically exposed persons such as Adani - along with Essa and the Gupta family - suggest Denel was willing to pursue a recklessly high-risk strategy.
Denel was previously blacklisted from selling arms to India because it had used commissioned agents, a banned practice there.
However, the Denel Asia and Denel India structures circumvented this by including the Guptas – effectively Denel's agents – within the company structures.
After amaBhungane first wrote about Denel Asia in early 2016, the national treasury confirmed that it viewed the partnership to be illegal.
It said it had not approved the deal under the Public Finance Management Act (PFMA).
Denel publicly disagreed and is now suing treasury and the finance minister.
In a court affidavit, former treasury head Lungisa Fuzile said that in its PFMA application, Denel "discusses two potential partners in India: Adani Group and PIPAVAV, both of which are leading Indian conglomerates expanding into the defence industry. It is not clear why these companies were overlooked by [Denel] in their review of the market and what led [Denel] to the conclusion that VR Laser Asia was the most suitable partner."
The implication seems to be that he too was concerned that the Guptas were simply inserted as agents - although it was via taking a stake in a Denel subsidiary, rather than receiving a fee.
A Denel spokesperson said: "We have been advised that the Hawks are carrying out an investigation on the matters pertaining to the #GuptaLeaks emails. We would rather give space to the Hawks to undertake their investigations on all these matters fully before making any comments."
Gupta lawyer and regular spokesperson Gert van der Merwe has refused to comment on #GuptaLeaks claims, saying: "I have no documents or context or instructions. It is inappropriate."
The #GuptaLeaks suggest the Guptas pursued an intricate plan to push their Denel project through, involving inside information and the positioning of sympathetic decision-makers, including four-day finance minister Des van Rooyen.
They contain a number of email threads in which intricate details of the Denel Asia joint-venture are discussed between October 2015 and February 2016.
Inevitably, these lines of correspondence ended up on Tony Gupta's or Gupta managers' desks.
For example, the PFMA required Denel to get permission from the ministers of public enterprises and finance before it can strike up a public-private partnership like Denel Asia, which consisted of state-owned Denel on the one hand, and privately owned VR Laser on the other.
One day after Denel submitted its PFMA application to treasury on 30 October 2015, Denel chair Dan Mantsha forwarded the confidential document to Ashu Chawla, a senior Gupta executive.
The #GuptaLeaks have already exposed how the Guptas hosted Mantsha on lavish trips to Dubai.
But the timing of his meetings and communications with the family and their factotums adds to the impression he was their cats-paw.
On 24 July 2015, Public Enterprises Minister Lynne Brown announced sweeping changes to Denel's non-executive board, leaving only Gupta beneficiary Nkopane "Sparks" Motseki in place and removing experienced directors in favour of relative unknowns.
Key among them was Mantsha, appointed as the new chair of Denel, despite that fact he was struck off as an attorney in 2007 and only re-admitted in 2011.
Just days after his appointment, on August 3, Mantsha forwarded a copy of his outstanding municipal account for R14 238 to Gupta lieutenant Ashu Chawla.
The same account was again forwarded to Chawla in October. Both were marked "for your urgent attention".
By August 5, the emails show Mantsha was listed to join Tony Gupta and others on a flight from Johannesburg to Mumbai aboard the Guptas' private jet ZS-OAK.
It is not clear if he was aboard, but he was booked a room with the family at the ITC hotel in Mumbai for August 6 and 7 and he was listed as a passenger for the subsequent Mumbai-Delhi and Delhi-Johannesburg legs.
A few weeks after his return from this jaunt, the new Denel board moved against the existing Denel executive.
On September 24, the board suspended chief executive Riaz Saloojee, financial director Fikile Mkhontlo, and company secretary Elizabeth Africa.
(Since then, their supposed disciplinary infractions have all melted away and they have been paid severance packages.)
By September 29, Chawla was handling the application for a Dubai visa for Mantsha and by the next day the Guptas' travel agent had booked a business class ticket from Dubai to Johannesburg for him, invoiced to a Gupta company for R33 280.
Mantsha failed to respond to detailed questions about his relationship with the Guptas.
But Mantsha was also not the only source the Guptas had providing top-level intelligence on the Denel project.
On 23 November, Public Enterprises Minister Lynne Brown provisionally approved Denel's negotiations with VR Laser Asia to form Denel Asia. One day later, the emails show, Chawla had a copy of her approval.
A few days later, Denel chair Mantsha sent the same confidential document to Chawla.
To its PFMA application to Minister Brown, Denel attached a spreadsheet of "opportunities that Denel feels confident will be secured jointly with VR Laser Asia". This detailed $9.3bn worth of potential weapons deals in the region. Of this, $8.2bn would be sourced from India.
From November 26 to 29, the Guptas' chosen Indian partner, Adani, was their guest in SA.
Mumbai fixer Lodha was instrumental in the arrangements and the emails show his assistant wrote to an Adani staffer noting: "Meeting with the [South African] President, Ministers and CEOs of mining, power and port has been arrange [sic] on 27th and 28th... Car and necessary security will be arrange [sic] by Mr Gupta."
By this time the Guptas were already shopping for a new finance minister, according to evidence provided to the public protector, and it seems they wanted the Denel Asia joint venture PFMA application to be on his desk when he landed.
Although Brown at public enterprises had given provisional approval, the law required the finance minister to approve the joint venture too.
The #GuptaLeaks show that on December 7, Chawla emailed a copy of Brown's in-principle approval and briefing document directly to the finance minister's personal assistant.
On that day, the minister was still Nhlanhla Nene, but three days later, on December 10, it was Des van Rooyen.
The very next day Denel submitted its formal PFMA application for Denel Asia to the new finance minister, according to an affidavit delivered in the High Court dispute between Denel and treasury over the establishment of the Hong Kong joint venture.
Van Rooyen was removed on December 13 before he could approve Denel Asia - and the status of the joint venture has been in dispute ever since.
That didn't stop the Guptas from trying to forge ahead.
After Van Rooyen's sacking, Mantsha joined a procession of influential figures in a pilgrimage to the Oberoi hotel in Dubai and an audience with the Guptas at their new R325m pad.
Invoices from the #GuptaLeaks show he stayed at the Oberoi between January 3 and 6, 2016 at the expense of the Guptas' Sahara Computers and was chauffeured to their home at L35 Emirates Hills.
Mantsha failed to respond to questions about the purpose of the visit, but presumably it was to regroup.
During this time VR Laser SA chief executive Van der Merwe, Tony Gupta and others continued to exchange thoughts on draft contracts with Adani Enterprises, the emails show.
In one instance, Van der Merwe forwarded to Tony Gupta a chain of correspondence between himself and Denel officials in which they debated whether or not Denel India, the Denel Asia joint venture with Adani, was separately subject to the PFMA.
He said Denel and VR Laser had previously agreed that when Denel applied to the ministers of finance and public enterprises for consent, their planned new Indian company should be disclosed so "as to play open cards with what the parties intend to do".
And to Tony Gupta, Van der Merwe complained: "They are missing the point and the reason why we entered into this transaction. In the private sector, time is of the essence. This is the basis on which we have decided to invest in a funding facility."
In a February 2016 email to colleagues - after they received questions from amaBhungane - VR Laser CEO Van der Merwe explained that the SA VR Laser was going to loan Denel Asia R20m a year for five years to cover certain costs.
The terms of this loan have never been explained, but it is clear from the #GuptaLeaks and court records that the plan was for Denel Asia to repay it.
On February 5 2016 amaBhungane broke the story of the Guptas' involvement in Denel Asia and treasury began issuing the first of a series of statements questioning the legality of the joint venture.
Denel appeared undaunted.
On 24 February Denel's acting chief executive Zwelakhe Ntshepe signed a board memorandum recording Denel's approval to negotiate the formation of Denel India, in which Denel Asia would have 49% and Adani Enterprises 51%.
Two days later he jetted off on another Gupta jet, ZS-AKG, bound for the Indian city of Goa, which was hosting the 2016 Defexpo, a defence trade show.
Denel's exhibition stand was confidently hosted under the banner of "Denel Asia" - a company that barely existed but promised a turnover of billions.
Now those dreams are shattered. -- News 24
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