Picture: REUTERS
Picture: REUTERS

Eskom has demanded that Gupta-linked Trillian and global consultancy McKinsey pay back the R1.6bn they received from an unlawful consultancy contract by Tuesday and warned of possible charges.

The charges "against implicated parties" may include theft, fraud and corruption.

"To ensure that the money unlawfully paid to McKinsey and Trillian is safeguarded Eskom would like it to be returned to it as soon as possible, but by no later than October 10 2017," reads a letter of demand drafted by law firm Bowmans on behalf of Eskom, which has been seen by Business Day.

It was sent to Trillian and McKinsey on October 4.

The utility said it would seek a court order to set aside the contracts through which it paid the consulting firms.

"Eskom is prepared to entertain some form of escrow arrangement for this money pending the grant of the orders."

The letter sets out the legal grounds why it deems the contract and payments unlawful, including that Eskom had not received permission from the Treasury to deviate from its rules on fee calculations for consultants. A Treasury instruction stipulated Eskom that should have paid McKinsey and Trillian an hourly rate. Instead the companies were paid a percentage of savings achieved, allowing fees to grow astronomically.

This "risk-based" payment method was done without Treasury approval and the contract was therefore unlawful.

Eskom proposed that should Trillian and McKinsey want to claim any payments for the services they fairly rendered to Eskom, these claims should be adjudicated by an independent lawyer appointed by the court.

On Friday, however, Eskom suspended the head of its legal department, Suzanne Daniels, who had spearheaded the recovery action.

The Eskom board also replaced interim CEO Johnny Dladla with Sean Maritz, whois known to be close to suspended generation head Matshela Koko, who is also facing disciplinary and possible criminal charges related to the McKinsey/Trillian payments.

Maritz’s first act was to suspend Daniels in what sources said was an attempt to ensure Trillian and McKinsey never had to pay back any of the money.

Eskom said Maritz must be given a chance to do his job.

McKinsey and Trillian have requested a meeting with Eskom for Monday. The grounds for deeming the McKinsey contract and payments unlawful applied "with equal force to any payments to Trillian", the letter says.

Bowmans also informed the companies that "ongoing Eskom investigations may support criminal proceedings in due course against implicated parties". Evidence of possible criminal wrongdoing included that some payments were loaded onto Eskom’s electronic system "on the basis of fictitious contracts".

Trillian is also accused of fraudulently claiming it is McKinsey’s black empowerment partner, which Trillian denies.

"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 April 11 2016."

The letter also says Eskom’s interim investigations "have demonstrated unequivocally" that Eskom’s decision to contract McKinsey and payments made to Trillian and McKinsey "were unlawful".

It sets out a schedule of payments from August 2016 to February 2017 that Eskom deems unlawful and wants returned flowing from a Master Services Agreement contract signed with McKinsey on January 7 2016.

According to the demand letter McKinsey received two unlawful payments from this contract totalling R1.028bn and Trillian, "with the consent of both McKinsey and Trillian" received four payments totalling R564.6m. This excludes R30.6m that Eskom wants Trillian to repay flowing from another unlawful contract, bringing the total to R1.623bn. By signing the contract with McKinsey Eskom’s chief procurement officer, Edwin Mabelane, had acted unlawfully, irrationally and in breach of the Public Finance Management Act "and or acted based on a material mistake of law or fact in the face of knowledge by all parties of the illegal nature of the contract", the letter says.

Eskom sources told Business Day that McKinsey had been hard pressed to explain how it had calculated the savings achieved that were accepted by its chief financial officer Anoj Singh that led to the massive fee payments. Singh, Koko, acting head of group capital Prish Govender, senior procurement manager Charles Kalima and Mabelane were suspended for their role in the scandal.

Trillian said on Sunday it did not believe there was a legal basis for reclaiming the funds.

Trillian denied it had fraudulently misrepresented itself as empowered. "Trillian had at least 60% BEE at all times for the duration of the Eskom contracts. Mr Salim Essa, a black South African, held 60% of the total issued share capital in Trillian from November 2015." McKinsey said it was "reassured" by Eskom’s interim findings, which showed the company had not subcontracted Trillian or authorised any payments from Eskom to the firm.

Asked about its contract being unlawful as it violated Treasury rules, spokesman Steve John said on Sunday that McKinsey was "informed by Eskom on February 5 2016 that it had received National Treasury approval. Eskom’s own documentary records support this fact".

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