Racketeering, Fraud, Theft, Precious Metals Act
The organized criminal group is highly organised and operates transnationally. They are commonly known in South Africa as the “Mountain Boys”.
The syndicate engaged in a range of criminal activities that constitute serious offences under South African law. The offences relate to racketeering activities and related categories of offences including money-laundering offences. The information gathered further indicates that in addition thereto these entities and persons have through their criminal activities committed a range of further serious offences including theft, fraud as well as offences under the provisions of the South African Mining Rights Act as well as the Precious Metals Act. There are five clearly distinguishable levels of activities used by the syndicate to smuggle unwrought precious metals (PGMs). This is illustrated as follows:
As a starting point, PGMs are stolen at source from the mines, often in large quantities. These PGMs are eventually sold through various receivers to exporters.The various levels of the criminal operators in the illicit PGM industry can be explained as follows:
Level 1 “the runners”
The unwrought PGM’s are stolen from the processing plants in South African Mines and is commonly referred to as “theft at the source”. A runner, who is mostly an employee of the mine, will then transport the material from the mine by bag or by other methods and sell it to a middleman. Runners tend to have a wide network of black market contacts, including illicit smelters.
Level 2 “the middleman”
The middleman buys considerable volumes of PGMs from the runners. The middleman crushes the PGMs into smaller pieces and packages it for the national buyers, before delivery.
Level 3 “national buyers”
The national buyers are mostly based in the RSA and they buy the PGM’S from the level 1 and 2’s. These buyers appear to be the link between the runners and more sophisticated syndicates who constitute the next level in the hierarchy of the criminal operators. These buyers are often the agents of the more sophisticated syndicate or they operate as independent couriers for such syndicates. Their task is to buy and transport the material from the middleman to wealthy local syndicate leaders.
Level 4 “the local syndicate leader”
The syndicate leader / buyer use a fronting company, usually a Scrap Metal dealer to export the product from the RSA. The PGM stocks that they have purchased from various sources are processed, containerised or packaged and then sold to local or international contacts. Processing allows for detailed records to be kept by the syndicate leaders from whom the product is bought and samples are also taken
for analysis (assay) to determine value and PGM content. Storage bags/drums are weighed, marked and sealed. Smaller high value PGM parcels are exported using a courier network and bulk tonnage of PGM is containerised and either flown or shipped from the RSA. Misrepresentations are made to customs by undervaluing and falsifying the nature of the consignment. This then successfully overcomes the requirements for prescribed permits and licences to possess transport and deal in the product as required by the Act.
Level 5 “the international buyers”
The international contacts are situated abroad. The international market for unwrought PGM’s appears to be more attractive than the South African market as it is unregulated. Sophisticated networks, consisting of legal persons and entities register to deal in PGMs have been established abroad to deal with the imports and proceeds derived from the sale after being sold to the refiners in Western Europe, United Kingdom and Canada, capable of refining the product for commercial use. It appears that the ultimate destination is inevitably a buyer abroad rather than someone in South Africa.
Note: The current syndicate under discussion were classified as level 3 to 5 operators.
Legal entities involved in the case:
1. Group members and others employed by or associated with the group, procured unwrought precious metals (PGMs), comprising platinum in the main from mines in South Africa, especially the Rustenburg area, where after samples thereof would be assayed by legal entities and/or persons to determine content and value, where after it would be exported to Just Refiners and Technology, UK or to a company styled as an international freight forwarding company, based in Felixstowe, Suffolk, United Kingdom, Canada and elsewhere.
2. Before being dispatched by front companies especially used as part of the concealment of the illicit PGMs, the PGMs would be stored and packed into containers for export purposes in various warehouses in and around Johannesburg. If of large quantity it would then be shipped from Durban and if of smaller quantity from Johannesburg airport.
3. Before being shipped, documentation for export purposes containing false information regarding content, value and/or exporter would be prepared and presented to the authorities.
4. With reference to certain of the charges, Boekhoud would cause the unwrought precious metals to be assayed upon receipt in the United Kingdom at a company based in Sheffield, United Kingdom, and then upon receipt of the correct values of the product prepare or cause to be prepared so – called self – billing invoices and inform the exporters of the true value and content. Boekhoud, would then, having been provided with banking details by V Naidoo or Hoosan, remit the proceeds of sales to accounts as directed.
When acting as they did the accused acted with a common purpose to commit the offences charged with.
5. The Accused and others were a group of individuals associated in fact with one another for purposes of obtaining monetary benefits by means of engaging in illegal procurement and smuggling of unwrought precious metals, and, as such, their association in fact constituted an enterprise as defined in section 1(1) (v) of the Prevention of Organised Crime Act, 121 of 1998.
6. V Naidoo was the leader of the group. He was actively involved in the procurement and dispatch phases of unwrought precious metals and directing where proceeds from sales were to be remitted to.
7. Boekhoud was a director and shareholder of a company styled Just Refiners & Technology Ltd, based in Ramsey, Huntingdon in the United Kingdom (“JRT, UK”). JRT, UK received, refined and disposed of the unwrought precious metals at a profit on behalf of the group. Boekhoud was a member of or associated with the group until the end of 2001.
8. R Naidoo, a younger brother of V Naidoo, assisted in the procurement of unwrought precious metals and in storing such before being exported to the United Kingdom, Canada or elsewhere.
9. R Moonian assisted in the procurement and storing of unwrought precious metals before disposal.
10. Longhow collected and caused to be sampled unwrought precious metals on behalf of the enterprise during the period 2000 to 2001, where after he left the group with Kevin Naidoo (the younger brother of V Naidoo and R Naidoo) and formed a new group involved in the same activities.
11. Y Chetty collected and caused to be sampled unwrought precious metals on behalf of the group.
12. Hoosan procured unwrought precious metals on behalf of the group. He also, on occasion, directly or indirectly, informed accused 1 as to where the proceeds of sales of unwrought precious metals were to be remitted into international bank accounts and also assisted the syndicate to trade with the proceeds of crime in exchange for South African currency (using a havala type informal banking scheme)
13. James procured PGMs and was the accountant for his brother in law, Boekhoud and JRT.
14. There were also other individuals employed by or associated with the group from time to time, who assisted in the procurement, transportation or disposal of unwrought precious metals.
To counter this problem, a dedicate investigating and prosecuting capacity was established by the then Directorate for Special Operations (DSO) of the National Prosecuting Authority (the NPA) and the South African Police Services (SAPS) under the project code name, Project Yield, and operation Fatcats to deal with the crime focus area.
It would be prudent to allude to the fact that this investigation initially resided with the now defunct Directorate of Special Operations (DSO colloquially known as the “Scorpions”) under the auspices of the NPA. In terms of the provisions of the National Prosecuting Amendment Act, 2008 as well as the South African Police Service Amendment Act, 2008. The DSO seized to exist as of 06 July 2009 (being referred to as the fixed date). However Section 28 of the Act has not been repealed and is thus still in force.
The principle objective of the project was to identify and target syndicates involved in the illicit dealing and export of PGMs. To gather the necessary intelligence against targeted role players, investigate their activities, to prosecute the syndicate’s enterprise and to ensure recovery processes by means of asset forfeiture. This will also include persons who supply the illicit product to the targeted exporters. The process will include the establishing of an assay facility to assist the syndicates with the analysis of stolen PGMs, the buying-up of the illicit PGM product from identified targets in undercover operations, the selling of the illicit PGM product to the principle targets, and eventually acting as transporter of the illicit product for the targeted exporter to foreign destinations to then identify the foreign dealer and to identify the off-shore accounts utilized by the syndicates, for purposes of recovery at a later stage.
To reach set objectives the project was structured into short, medium and long term phases do deal with the delivery and create the necessary impact.
Phase one (short term) consisted of the setting up phase involving:
- gaining an understanding of the operating environment and legislative/regulatory framework where applicable;
- assessing the identified priority areas for investigation;
- obtaining and analysing relevant information and intelligence in order to identify further priority
- areas and targets to include in a motivation for authorisation in terms of section 28 (1)(a) of the NPA Act;
- design the relevant strategy for gathering court directed intelligence, investigation, prosecution and asset recovery;
- assessing our findings to establish whether sufficient information exists to justify the issuing of an authority to investigate;
- drafting a motivation for the necessary authority to investigate;
- Identify relevant resources (Multi Disciplinary), public private partnerships and stake holders
- Finalise governance, oversight and reporting structures
- Establish operational budget
- prepare a report on our findings and recommendations.
Phase 2 (authorised investigation):
During this phase the investigation focussed on:
- conducting the detailed investigation of the identified priority areas as well as priority areas identified for further investigation through infiltration/penetration and undercover process that was initiated during Phase One
- apply infiltration strategy (safe house and undercover agents)
- prepare case files and evidential records
- determining the appropriate remedial action and obtain the necessary authority for arrest, search and seizure;
- finalise indictments
- obtain necessary authorities to execute nationally and internationally (MLA requests)
- execute arrest nationally
- conduct search and seizure nationally and internationally
- freezing and recovery of assets
- reporting on findings and recommendations to Head of DSO.
Phase 3 (remedial action and project close - out):
During this phase the team focussed on:
- prepare case files for prosecution
- prepare additional MLA requests for gathering of information and evidence internationally
- instituted of appropriate legal/criminal action, including the criminal prosecution and recovery of proceeds of crime, in appropriate instances;
- prepared a final report on our findings and recommendations for presentation to the Head of the DSO;
- preparing a close - out report for submission to Head of the DSO.
Section 252A of the Criminal Procedure Act was applied for from the relevant DPP and granted to undercover agents to indemnify them from the commission of certain crimes during undercover operations.
Section 205 and/or section 28 of the NPA Act summonses were issued to banking institutions and other entities to recover records and data. Search and Seizure warrants were obtained to conduct searches and recover evidence.
Certain persons who were involved in assisting the accused were asked to assist in terms of section 204 of the Criminal Procedure Act. (indemnity provision to testify for the Prosecution).
Assets belonging to the mentioned accused were frozen and seized in the United Kingdom (see attached) EXPLANATORY MEMORANDUM TO THE Criminal Justice Act 1988 (Designated Countries and Territories) (Amendment) Order 2004, No.1981 and in South Africa in terms of the Prevention of Organised Crime Act 121 of 1998 (POCA under the two chapters, viz chapters 5 and 6, providing mechanisms for the forfeiture of assets associated with crimes and other unlawful activities to the State.
The United Kingdom provided undercover operations, investigations and the identification and recovery of assets exhibits and evidence. This was done in conjunction of the legal instrument of Mutual Legal Assistance requests which was sent through the relevant official channels to the Home office in London.
During the discussions for cooperation it was established that the South African government had no authority to request the freezing and recover of assets in the United Kingdom. This resulted in an urgent application being made to the relevant Court in London. The result was that the UK can now apply to court to register South African orders through a relatively simple procedure - previously they had to seek a new order on our evidence. (see attached Statutory Instrument 2004 No. 1981 – The Criminal Justice Act 1988 (Designated Countries and Territories) (Amendment) Order 2004.
MLAs were concluded and dispatched to 17 countries to discover and recover evidential material. To date evidence has been obtained in most of the requests.
The charges against Kevin Naidoo and Terrence James were finalised. Both pleaded guilty in terms of section 105 A (plea agreement). Both will be testifying for the prosecution. The trial against the rest to proceed in October 2011.
A number of witnesses who were associated with the accused in one or more activities related to the illicit exports were offered indemnity should they testify for the prosecution in terms of section 204 of the Criminal Procedure Act. Pleas agreements in terms of section 105 A was also entered into with some of the accused who would, as part of the pleas agreement, testify against one or more of the accused.
The matter against, accused Longhow, was withdrawn after consultation with his legal advisor and elected to testify for the prosecution in terms of section 204 of the Criminal Procedure Act. He agreed if placed in a witness protection facility, which was done.
Counter measures were employed to ascertain any plots to assassinate witnesses.