Pay back the money: Special Tribunal asked to order Msagala and another company to pay back R20m

The Special Investigating Unit and Transnet said they had made a strong case for the recovery of millions of rand improperly obtained by former Transnet Capital Projects executive Herbert Msagala and engineering company IGS.

The SIU and Transnet made this submission before the Special Tribunal on Thursday as they sought an order that Msagala, the Msagala Family Trust, IGS Consulting Engineers and its sole director Sipho Sithole must pay Transnet about R20m in funds that were obtained through alleged illegal conduct.

They said the amounts were part of the secret illegal profits made by Msagala — while he was in the employ of Transnet — and IGS that need to be disgorged, or surrendered, to Transnet.

SIU, through evidence presented before the tribunal last week and on Thursday, showed that Msagala received millions from IGS, a company which was given questionable tenders by Transnet Capital Projects when Msagala was executive.

Viven Govender, chief forensic investigator at the SIU, presented a number of spreadsheets before the tribunal on Thursday detailing flows of money from Transnet, to IGS and then to Msagala. The spreadsheet showed that Transnet had paid IGS a total of just over R160m for various contracts.

Thereafter, various payments were made to Msagala, either through cheques that he or other people cashed, or bank transfers to a family trust. The cheques  and transfers were from IGS.

The SIU believes R24m was paid by IGS to Msagala.

When the Msagala Investment Trust bank account was opened in November 2015, three cash deposits totalling R1.5m were made into the account.

Paul Kennedy SC, for the SIU and Transnet, said Msagala had filed an affidavit claiming he had received only a R300,000 loan from IGS. Kennedy said Msagala had claimed that the cash in his bank accounts was from a number of businesses, including rental accommodation and selling of livestock.

Kennedy asked Govender whether Msagala's explanation about the source of funds in his accounts was probable. Govender said it was improbable.

Govender said Msagala made himself out to be a businessman with extensive business interests, but did not have a business account in which to channel income from those businesses.

Govender said of the millions in rand that were cashed from cheques by Msagala from IGS, IGS and Msagala incurred cash-handling fees totalling about R450,000.

Msagala withdrew from the first day of the trial on Monday, claiming he did not have money to employ new lawyers after his previous lawyers withdrew their services on the eve of the trial.

IGS and Sithole informed the tribunal in March that they would not participate in the matter, even though there is a claim against them.

In closing arguments on Thursday afternoon, Kennedy said Transnet was entitled to the disgorgement of profits that the employee had obtained without the employer's knowledge. Kennedy said Msagala kept saying the SIU could not prove anything because it did not have evidence Msagala awarded contracts to IGS.

Kennedy said the question to ask was why did Msagala receive money from IGS and Sithole.

“We maintain there is a cloud of suspicion.”

Kennedy said Msagala was employed in a division that dealt with IGS and received vast amounts of money from Sithole and IGS.

“If IGS was receiving these vast amounts and it had large amounts of monies to afford payments to Mr Msagala,  it stands to reason that the procurement process was manifestly flawed,” Kennedy said.

Judge Lebogang Modiba reserved judgment.

In separate proceedings in November last year, the Special Tribunal declared that properties belonging Msagala, including two farms, a fleet of vehicles and a plot in Steyn City, were forfeited to the state.

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