How arms-deal man escaped with R200m

Explosive allegations in court documents- hidden from the public until now - contradict the reasons given by National Prosecutions boss Menzi Simelane for dropping the case against the man central to the decade-long arms deal scandal.

Simelane claimed this week that he had abandoned an attempt to freeze flamboyant playboy Fana Hlongwane's foreign bank accounts because of a lack of evidence against him.

But this is contradicted in 500 pages of elaborate documentation lodged in court - and kept under lock and key in the office of the court registrar until obtained by the Sunday Times on Friday.

As a former adviser to the late minister of defence, Joe Modise, Hlongwane - who lives a millionaire lifestyle in Johannesburg - is a central figure in allegations of corruption related to the arms deal.

Documents in the Sunday Times's possession show he was indirectly paid more than R200-million by British defence company BAE - cash suspected to have been used to bribe officials.

On March 5, Willie Hofmeyr's Asset Forfeiture Unit was granted a "preservation order" by Judge Willem van der Merwe in the High Court in Pretoria, freezing £437594 in the account of Hlongwane's Gamari Trust in Lichtenstein's Bank Pasche - money which had come from BAE's agent, Arstow.

The case was meant to go back to court on April 6, but was mystifyingly "abandoned" this week, apparently on Simelane's orders after he met with Hlongwane's lawyers.

On Friday, Simelane said the freezing order could not be continued "as there is no evidence of criminal conduct".

But not only do senior prosecutors disagree with their boss on this case, his statement is also contradicted by the exhaustive documentation.

The closely guarded court file includes a 106-page affidavit from deputy director of Public Prosecutions Billy Downer in which he details how Hlongwane was effectively paid £4.9-million between October 1999 and July 2001 by Arstow, a company set up by BAE to pay "commissions" for the arms deal.

Downer says "there are reasonable grounds to believe that (Hlongwane) has committed the offences of corruption, fraud, money-laundering and/or racketeering in the context of the arms deal", and that he "derived financial reward" from the arms deal.

Last month, BAE was slapped with nearly $450-million in criminal fines in the US and UK for failing to comply with global anti-bribery rules. The suspicion was that BAE used a similar practice in South Africa. As part of the notorious arms deal - and thanks to Modise's machinations - BAE leap-frogged better contenders to sign a deal to supply Hawk trainer aircraft and Gripen fighter jets to SA for $2.1-billion.

In the documents, Downer says the selection of BAE "was surprising because they did not offer the best value for money" and it followed a specific instruction by Modise that a new formula should be used to decide on the purchase of the Gripen and Hawk, ignoring the cost of the aircraft.

"Hlongwane was Modise's special adviser until April 1999, and consequently able to influence and/or pay off people who were able to influence the selection of BAE (who partnered with SAAB) as the preferred supplier of the aircraft, and the terms of the contract," he said.

BAE made payments through a series of "agents", including Arstow, which was run by Alexander Roberts.

Hlongwane set up his own companies, including Westunity, to receive payments for "the provision of Hlongwane's services" to Arstow.

Downer says that "between 5 October 1999 and 30 July 2001, Arstow paid Hlongwane £4.9-million" through Westunity's Lichtenstein account, and the Hong Kong bank account of Shun Hing, which prosecutors believe is owned by Hlongwane.

Roberts, the man who ran Arstow, told the Lichtenstein authorities this cash was paid "because of Hlongwane's contacts to the new black economic business establishment".

In a statement to Lichtenstein prosecutors, Hlongwane denies being bribed, saying he acted as a consultant to Arstow and Modise - and couldn't have been bribed because he was never a full-time civil servant.

But a letter from Lichtenstein prosectors to the National Prosecuting Authority in October 2008 says: "It is suspected that frozen assets belonging to Hlongwane ... are linked with active and passive bribery and corruption by (BAE) using a system of international representatives."

More than 800 pages of new evidence have emerged from a criminal probe into Hlongwane by Lichtenstein prosecutors in the past two years - all of which was shared with the NPA last October.

Karla Saller, a lawyer working for the Asset Forfeiture Unit, signed an affidavit on March 2 this year for the court action against Hlongwane, summarising this new evidence.

In papers, Saller says the Lichtenstein courts believe it is clear "that (Hlongwane) received money from BAE via (Arstow) for consulting services (while also) advising the then-minister of defence", and "finds it likely that he acted as an intermediary between BAE and the minister".

In another document, sent to the Lichtenstein prosecutors and signed on March 5, AFU deputy director Willie Hofmeyr backs up Downer's contention that there are "reasonable grounds" to believe Hlongwane "was paid funds, directly and indirectly, to facilitate the commission of such offences".

But Hofmeyr was apparently bulldozed into accepting the "abandonment" of the freezing order, which was officially done on Wednesday this week.

Insiders said Hofmeyr believed the freezing order should remain, but he was called to a meeting with Simelane on Monday, at which Hlongwane's lawyers were present. Here, it was decided that the order should be "abandoned", despite the evidence.

But Simelane said yesterday that, while the facts "look funny", the bottom line was that there was not enough evidence.

"Can the NPA produce a charge sheet in the next month? The fact is we can't. We have a crime scene, we have finger prints, but we still don't know who committed the crime," he said.

A 2008 affidavit signed by Gary Murphy, an investigator in the UK's serious fraud office (and submitted to Judge Van der Merwe in this month's case) said bank statements showed BAE paid £115-million to advisers "to assist in the securing and maintaining of the Hawk and Gripen contract" with South Africa and other countries.

Regarding Hlongwane, Murphy says: "I suspect that this secretive arrangement was designed to facilitate ... the onward payment of monies by Fana Hlongwane to SA government officials who could influence the decision-making process on the selection of the Hawk and the Gripen."

Adding together evidence from the UK probe, as well as from the SA investigation, Hlongwane was apparently paid more than R200-million by BAE and its agents.

Murphy says Hlongwane Consulting was paid £10-million for a "consulting contract" and another R52-million by another BAE entity, while the Arstow payments amount to another R53-million. The Sunday Times revealed last year that Hlongwane, dubbed Johannesburg's Hugh Hefner, lives a millionaire lifestyle that includes sports cars and pampered ladies on his arms.

Hlongwane's lawyer, Christo Stockenstrom, said: "I'm not going to comment on anything."