A South African investment firm linked to the infamous Gupta family of businessmen charged a major state-owned company US$2.8 million for property management services that it never provided, OCCRP has discovered.
The services were part of an intentionally elaborate proposal by the investment firm to have South Africa’s state transport company, Transnet, shift some of its properties into private management. Despite many red flags and warnings from experts, Transnet began paying out millions before the scheme was ever approved.
The firm that charged the fees, Trillian, was one of a group of companies with ties to the Gupta family that systematically targeted South Africa’s state-owned entities during the rule of the country’s former President Jacob Zuma.
Tens of thousands of internal emails obtained by OCCRP reveal how Trillian frequently submitted unsolicited bids to provide dubious financial products to state companies holding vast assets.
Trillian was founded by Eric Wood, a corporate trader, and Salim Essa, a close associate of the Guptas. Both men are subjects of ongoing government investigations into corrupt deals under Zuma, known as “state capture.”
The property management deal with Transnet exemplifies the predatory model used by Trillian and a closely linked firm called Regiments Capital to extract a fortune from state institutions.
Both drew on political connections to make unsolicited, often secretive bids to provide dubious services to the government, touting the advantages that private sector experts would supposedly have over corrupt and inefficient state firms.
OCCRP has already reported on how the investment firms raked in over $40 million by sending inflated invoices to state electricity firm Eskom, and siphoned funds from another state firm through opaque swaps and insider trading of government bonds.
“Trillian was a key beneficiary of state capture,” said Hennie Van Vuuren, a South African anti-corruption activist and founder of the transparency group Open Secrets. “With the help of auditors, lawyers, and bankers ... the company traded on political connections and inserted themselves where they added no value.”
In several cases, including this one, Trillian also started billing for work as soon as possible, before the legality of its deals was even established, and issued invoices through supposedly independent suppliers that were actually shell companies controlled by a cadre of proxies and associates.
From Pennies to Millions
Transnet, the state firm that Trillian targeted in this case, is charged with constructing railroads, ports, and other transportation infrastructure. The company also controls a property empire worth some 30 billion rand (US$2.1 billion) stretching across the country, from Schoeman Park, a century-old golf club favored by South Africa’s colonial elite, to Johannesburg’s historic Carlton Hotel, where Nelson Mandela declared victory against apartheid in 1994.
Wood first tried to buy the now-abandoned hotel in 2010, when he was still working for the investment firm Regiments Capital, the leaked emails show. That attempt failed, but he spent the next few years forging an alliance with Essa, another Regiments employee who was also a key Gupta proxy, representing the family in business deals.
Eventually, the pair broke off and started their own firm, Trillian, which they would turn into a platform to continue leveraging their political connections to win contracts from South Africa’s largest state-owned companies.
In October 2015, Trillian and two front companies, Avren and Fuel Property Group, began to send unsolicited bids to manage Transnet’s properties — including the coveted Carlton Hotel — using a supposedly innovative financial model they claimed Avren had developed. But Avren was not even registered as a company until the following month.
According to internal correspondence obtained by OCCRP, at one point Trillian offered to sell the model to Fuel Property Group for just one South African rand ($0.07), demonstrating how little they valued it.
The idea pitched to Transnet was so complicated that even the top-tier lawyers and accountants hired by Trillian struggled to navigate its legal complexities. In essence, it involved shifting Transnet’s most valuable properties into a new trust and allowing them to be privately managed.
Calling their plan “Project Navigator,” the companies assured Transnet that they could find a way to bring in an additional 1.1 billion rand ($75.5 million) from Transnet’s property assets, above what the firm could make on its own.
However, their real motivation appears to have been to create an opportunity to charge Transnet exorbitant fees for little or no work — all for a plan that would also stand to enrich them hugely if it were implemented. In total, the Project Navigator “model” would allow Transnet to keep just 75 percent of the profits generated from the properties it used to own and manage itself. The remaining 25 percent would go to the properties’ new managers — a group of executives from Trillian and the two front companies.
Trillian’s Convoluted Plan to Gain Control of Millions in Properties
Trillian proposed that almost 150 of Transnet’s properties, worth more than 4 billion rand ($275 million) and generating 610 million rand ($41.8 million) in annual revenues, be placed in a new trust, with Transnet completely waiving its right to use them.
Transnet already had an in-house property management division, but Trillian’s two front companies argued that the state firm’s valuable portfolio was underperforming and would be better served under private management, according to a pitch drafted by Michail Shapiro, the head of Avren, which was found by journalists amid the leaked emails.
The proposal argued that “allegations of corruption and political unrest,” internal conflicts, and a lack of technological expertise were impeding Transnet’s work. Outsourcing the management of Transnet’s properties would help alleviate all these problems, it claimed.
The proposal was apparently convincing. In June 2016, Transnet officials wrote to the Department of Public Enterprises, the South African ministry responsible for state firms, to seek formal approval for the unusual new property deal. In making their case to the head of the department, Lynne Brown, the state officials repeated Trillian’s talking points word for word.
But what Transnet didn’t tell Brown was that it had already embarked on the deal months earlier, without permission.
It turns out that Transnet officials had quietly tacked the agreement onto an already-approved $1.5-billion deal brokered by Essa to bring Chinese locomotives to South Africa. As the two proposals were unrelated, it is unclear how this was possible. But the maneuver allowed Transnet to begin paying Trillian management fees in April 2016, though no formal agreement was yet — or would ever be — in place.
In total, Transnet paid Trillian the equivalent of $2.8 million for property management services in 2016, according to confidential invoices, emails, and documents obtained by OCCRP. It is unclear whether the two firms did anything at all in exchange for these fees, but reporters have found no evidence that they managed Transnet’s properties.
The leaked emails do not make it clear whether the properties were ever transferred into the proposed trust. Representatives of Transnet did not respond to multiple requests for comment. Eric Wood, Salim Essa, and Avren director Michail Shapiro also did not respond.
Lynne Brown’s response to Transnet’s “Project Navigator” proposal is not recorded in the emails, and OCCRP was unable to confirm whether she approved it. In testimony before the State Capture Commission in 2017, Brown said she was “not aware of any Gupta-owned companies that operate in Transnet now under my watch.”
Transnet’s Chief Operations Officer Phuthego Dikgole, who was the head of its corporate property section at the time and a party to the arrangement, confirmed to reporters that he had received their questions, but did not otherwise respond.
Red Flags
Several red flags about “Project Navigator” stood out from the beginning — so vividly that Trillian’s financial and legal advisers warned that the deal would violate a number of laws, including the South African constitution, the Public Finance Management Act, and the Promotion of Administrative Justice Act.
First of all, the unsolicited bid should have been prohibited because it provided an exclusive option to only one client, while South African law states that bids for public services should be put up for public tender or comment.
Under the terms of the proposal at the time, Transnet would have no representation in the ownership structure or management of the new trust controlling its lucrative property portfolio. This would contravene laws on how state assets can be used.
Transnet also broke South African law by failing to advertise a tender for property management services at the time it started paying Trillian and Avren property management fees. More than a year passed before an advertisement appeared. When it finally did run, for eight weeks, no winner was ever publicly announced.
A Tangled Corporate Web
Avren presented itself to Transnet as an independent property management firm, though it was not even formally registered until the month after it joined with Trillian and started making unsolicited bids to Transnet. It often received funds from Trillian, but OCCRP could find no evidence that it engaged in any business other than the deal with Transnet.
Avren’s director, Michail Shapiro, was closely enmeshed with Trillian’s leadership. He was its key proxy in a number of deals the company made with state-owned enterprises, and even held an official Trillian email address from which he sent invoices for services that were never provided.
The emails show that Shapiro was involved in the “Project Navigator” scheme months before he was ever associated with Avren. He was also close to Trillian Chief Financial Officer Tebogo Leballo, sending him invoices for bogus property management fees that he would sign with a jovial “Thanks, mate!”
Unusually, although Shapiro nominally worked for Avren, he sent these invoices from an email address associated with an entirely different company: Fuel Property Group.
Fuel Property Group appears to have been yet another front company for Trillian, and was used interchangeably with Avren in the “Project Navigator” scheme, but it was controlled by a different person: Mark Pamensky, who has been named in South African media as a key proxy for the Gupta family.
Same Scheme, Different Parastatal
In addition to serving on the board of Oakbay, a key Gupta company, Mark Pamensky was a board member for South Africa’s state-run electric utility, Eskom. He has been accused of abusing that position to benefit the Guptas, including feeding them inside information that helped them purchase a coal mine.
South Africans associate the state capture scandal with the Gupta family. But the leaked emails on the Trillian server show that Eric Wood and Salim Essa were the financial wizards behind many of the state capture schemes, finding ways to siphon funds from the country’s parastatals alongside an assortment of other businessmen and front companies that enabled these thefts.
Trillian’s machinations appear to have contributed to Transnet’s lingering debt problems, which led ratings agency Moody's Investors Service to downgrade its credit rating to "negative" at the end of last year.
“Trillian’s intention was to strip the assets of the state with devastating consequences for millions trapped in poverty,” said Hennie Van Vuuren, the transparency advocate. “It's a criminal playbook.”
