The Department of Trade and Industry's (DTI's) ministerial investigation team this week seized further evidence from the Companies and Intellectual Property Registration Office (Cipro), as the probe into a R153 million IT tender deepens.
Last Friday, Cipro CIO Michael Twum-Darko was placed on special leave, amid allegations of tender rigging. Well-placed sources also claim the investigation could reveal details of another scam at Cipro, which involves the creation of false companies in the Cipro database, to defraud the South African Revenue Service (SARS) of VAT.
The latter could potentially have widespread negative implications for SA's economy, as records of active companies are used as a measure of economic growth and performance.
It appears the police were not involved in the seizure of Cipro's records; however, it is likely the SARS investigation team was involved. The revenue service could not confirm its involvement at the time of publication.
Court action
The controversial electronic content management (ECM) tender was awarded to ValorIT, in March last year, and was shortly thereafter challenged in court by Mantra Consulting, which charged that ValorIT had failed to hand over R10 million in consultancy fees. Mantra Consulting was earlier contracted by ValorIT to provide consulting services and ensure ValorIT won the tender bid.
Speculation that confidential Cipro information, relating to bid specifications and pricing, had been handed over to ValorIT, to give it an advantage over rival bidders, dogged the tender from the start. Cipro previously steadfastly refused Mantra Consulting's request to scrap the tender.
Cipro head of communications Elsabe Conradie denied the police raided the organisation's office on Wednesday, as claimed by some sources. This is despite telephones going unanswered at Cipro's Pretoria office on Wednesday afternoon.
Instead, Conradie says the investigating team requested access to Cipro's database and e-mail systems. “Cipro did not stop doing business or close offices. We are running the business as usual,” she states.
Conradie confirms the DTI-appointed investigation team, which includes members from an independent specialist investigation firm, is probing “possible fraud, which might be happening at Cipro”. She could give no further details regarding the investigation at this stage.
The DTI has declined to comment on the matter, dodging queries from ITWeb.
Fraud at the registration office - specifically the creation of fake and duplicate companies - could have far-reaching consequences for SA's economic standing.
Industry analyst with Absa Investments Chris Gilmour says it creates a false impression of the South African business environment. “This [the allegation of potential fraud] could be the tip of the iceberg,” he points out.
Unknown scale
Until the investigation is completed, there is no way of knowing how widespread fraud is at Cipro. However, if the organisation is involved in the duplication of companies in the database, figures directing the local economy could be skewed.
However, Gilmour says that, to really make a significant impact on the economy, the duplication in the Cipro database would have to be extensive. “We have highly-concentrated industries, dominated by large companies. It is unlikely the culprits would have duplicated large businesses, since it would not go unnoticed,” he explains.
He notes that the fraud would likely have been committed using small businesses as a front and, because the large organisations across all sectors account for the majority of the country's economy, fraud would have to have been conducted on a large scale.
Evidence came to light last year that the duplication scam involved creating clones of well-known companies on the Cipro system. It is understood that bank accounts were then set up in the duplicates' names by individuals using fraudulent company and identity documents. Tax refunds were then diverted to the fake bank accounts.
It emerged that a duplicate of SBC International Management Services was registered on 10 July 2008. In October 2008, R31.6 million was paid into its bank account. A duplicate of Sun Microsystems SA was registered on 5 November 2008, with R19.3 million being paid into that bank account in December.
According to Gilmour, there are other implications, which may also affect the alternative exchange on the JSE, and also to people looking for reliable information on companies in SA.
Attempts to contact JSE senior GM of marketing Noah Greenhill were unsuccessful.
Cipro's Web site has been consistently unavailable for the majority of last weekend and this week, and has been up and down since late last year. Cipro says the downtime is the result of a server upgrade. The site was supposed to be up and running on Tuesday; however, it is still inaccessible.
Related story:
Cipro CIO on 'special leave'
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