Ajay, front, and Atul Gupta. Picture: MARTIN RHODES
Ajay, front, and Atul Gupta. Picture: MARTIN RHODES

The trail of destruction left by the Guptas has brought down several prestigious giants. Accounting firm KPMG and management consultancy McKinsey had their reputations badly tarnished when it was revealed that both held lucrative contracts with the notorious business family.

But as SA’s parastatals drown in debt partly thanks to the Guptas, little accountability has, so far, come the way of law firms that facilitated the family’s shenanigans.

When SA’s banks were closing the Guptas’ accounts, the family tried to buy the SA arm (owned via Luxembourg) of Habib Bank, Pakistan’s largest lender by assets.

It was a perfect fit, with one foot in the European tax haven of Luxembourg and another in Pakistan. The Guptas’ money would have had an opaque but global circuit.

Habib already had a reputation for playing dirty: it was fined R1m by SA’s Reserve Bank in 2016 after the regulator found weaknesses in its control measures.

In putting together the Habib deal, the Guptas turned to US law firm Jones Day for help. The role that Jones Day played here is detailed in invoices obtained by the authors. The lawyers are alleged to have made several visits to SA to provide advice, including about correspondence with the Reserve Bank.

It helped that Jones Day already had a relationship with Hamza Farooqui, an associate of the Guptas, according to a source with direct knowledge of the matter. Farooqui’s father, Javaid, had been a long-time relationship manager at the bank.

The way it was meant to work, Farooqui would partner with Salim Essa (co-founder of Gupta-linked investment company Trillian) to buy Habib.

An internal presentation by Trillian, which outlined the potential acquisition of Habib Bank through companies co-owned by Essa and Farooqui, urged employees to be secretive about the deal. Staff were told to secure nondisclosure agreements with third parties and use code names for projects.

Staff were told to secure nondisclosure agreements with third parties and use code names

"Confidentiality is the number one rule," they were told.

Throughout the acquisition, the men relied on legal counsel from Jones Day’s senior lawyers, including Javade Chaudhri, a partner at the firm’s Washington DC office. (Jones Day and Chaudhri did not respond to requests for comment.)

In the end, Jones Day received at least R13.6m in January 2017 for its work with the Guptas, which included advising on the Habib deal. The payment was made through another SA law firm.

Importantly, this may open up Jones Day to punitive action from the US government, which has already taken steps to sanction officials and freeze accounts related to the Guptas.

After the US imposed sanctions on Habib, Pakistan’s central bank launched an investigation into the bank, which found "significant irregularities" in its dealings with politically exposed clients, according to Bloomberg. For example, Duduzane Zuma, son of former president Jacob Zuma, had held an account at the bank since 2016 and was given a "waiver" on proof of income, the report said.

It seems Jones Day had as little interest in the source of income as the Guptas did, yet it was willing to court the bank anyway.

Jones Day was not the only global professional services firm used by the Guptas. The family also worked with SA-based Norton Rose Fulbright, which advised Farooqui’s company, Pearl Capital Holdings, on the best offshore structure for the purchase of Habib, according to a transaction structure memo obtained by the authors.

Norton Rose Fulbright warned Farooqui against holding shares in the bank indirectly through a foreign trust, saying it would be "a serious contravention" of SA’s exchange control measures.

The bread and butter for some law firms lies in advising about legal structures for otherwise illicit activities. They argue that everyone deserves good legal counsel.

In the case of the Guptas, however, this sort of argument falls flat — given how the family was able to profit from its chicanery, even as SA’s public was impoverished.

  • The writer’s views do not necessarily reflect those of OCCRP, where she is employed. Sharife wrote this in conjunction with Mark Anderson

 

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