FirstRand still haunted by Spitz and Ansbacher woes

Banking group FirstRand could be forced to disclose details of the offshore accounts of 500 clients, which could, for the first time, lift a lid on payments related to the controversial R30-billion arms deal.

The International Tax & Law Institute - which was set up by international tax expert Barry Spitz - asked the High Court in Pretoria in April to force FirstRand to disclose the transactions of 500 of some of the bank's wealthiest clients.

Some of the accounts were previously held at the controversial Ansbacher Trust Company. Should the institute succeed, South Africans could find out how and to whom payments related to the deal flowed.

The exposure of the bank accounts is the latest action by the institute in a nine-year litigation process between itself and FirstRand after Spitz - who was contracted to Ansbacher - was fired in 2001.

This is the third time that FirstRand has potentially exposed its clients to law enforcement officials.

FirstRand has previously made an undertaking to co-operate with the SA Revenue Service after it handed over information to SARS officials on alleged tax evasion by Discovery Health executives Adrian Gore and Barry Swartzberg, through Ansbacher. The information requested from FirstRand could implicate other parties not directly involved in the case.

The institute believes that, as a result of its court action, black economic empowerment investors in FirstRand could be implicated, given that the bank used the proceeds from the sale of Ansbacher to fund its BEE deal - thereby "implicating in the proceeds of unlawful activities, Kagiso Trust and other BEE investors".

Thus far, FirstRand has failed to have the client records treated as confidential.

The bank has made discovery of many of the documents of the clients and, in the process, lost a landmark case against Noseweek, which had published information identifying about 100 of these clients.

The disclosure was requested by the institute to establish the amounts due to it in its civil claim against FirstRand Bank.

The institute claims in court papers that its contract entitled it to 7.5% of the gross revenue earned by Ansbacher and certain other FirstRand divisions.

The institute has argued that, for it to establish what sum constitutes this percentage, FirstRand must disclose such gross revenue.

As the revenue disclosed by FirstRand is in dispute, it is believed to be inevitable that the clients concerned and even their records will be subpoenaed.

Topping the list of Ansbacher clients exposed is Basil Hersov, the former economic adviser to former president Thabo Mbeki. Hersov, who is also the former chairman of Anglovaal, and a former director of Anglo American, was reportedly fingered by the UK's Serious Fraud Office (SFO) as having distributed arms deal "commissions" paid by the controversial arms manufacturing giant British Aerospace to unidentified people.

It was reported that both the SFO and German investigations had revealed that bribes paid in arms deals flowed through Ansbacher offshore accounts.

It is now believed that exposing Hersov's Ansbacher account could show how and where the commissions were distributed.

Other wealthy clients' accounts that FirstRand is being compelled to disclose are those of individuals linked to Anglo American, Discovery Health, Ethos Private Equity and FirstRand.

FirstRand officials denied any "wrongdoing in relation to the arms deal" and accused Spitz of "dreaming up" the bank's involvement.

The bank accused Spitz of being "disgruntled" and said the latest court application was only one in a series of several in an effort to "embarrass" it and its clients for his own ends.

But it could not vouch for any of its clients as far as involvement in the arms deal is concerned.

"FirstRand was not involved in any wrongdoing relating to the 'arms deal' and no regulatory authority has ever alleged involvement by the group in this issue.

"FirstRand could not have benefited directly from the defence or national industrial offset packages. We also do not know which of our clients may have benefited," it said.

When contacted for comment, Hersov said he had "no idea" about the litigation process that was under way. He said he did not own an Ansbacher account but could not say whether he "never" did.

Hersov also said he had never been questioned by law enforcement authorities regarding his involvement in the arms deal. "I don't know anything about this," he said.

When asked whether he never held an Ansbacher account, Hersov said: "Never is a long time, I have no idea. And whether I did have one, I have no idea. I have no idea of what's going on and I can't comment on that. You are taxing my memory."

The SFO's findings could result in FirstRand being ordered to disclose "all" documentation that would help determine which of the payments formed part of the total gross revenue of Ansbacher, and which amounts would need to be used to calculate the gross revenue on which the commissions to the institute are payable.

The morass started while First National Bank owned 100% of Ansbacher (Cayman). FNB acquired Ansbacher in 1992.

In 1999, investigations by Irish authorities into alleged illegal practices by the bank found about 200 of some of that country's elite, including high-ranking politicians, were using the services of Ansbacher (Cayman) to evade tax and worse.

In their 10000-page report, the Irish inspectors drew a disturbing picture of money laundering, tax evasion, the holding of unlawful payments to politicians in offshore accounts of Ansbacher, laundering stolen and embezzled government funds, and laundering money for drug dealers.