Hawks probe construction industry price-fixing
Top construction industry leaders illegally fixed state and other contracts – including two World Cup stadium deals – worth billions, evidence in a major fraud and racketeering probe shows.
M24i can today exclusively reveal details of a decades-long, formal kickback and price-fixing racket that allegedly involved household names among industry leaders – and which shows how the South African taxpayer was routinely ripped off with inflated project prices.
Details of the scheme are revealed in at least 11 affidavits made by executives from Stefanutti Stocks – one of the country’s biggest construction firms – to a Hawks serious economic offences investigator and the National Prosecuting Authority (NPA).
The statements have also been handed to the Competition Commission for its probe into construction industry tender-rigging thought to involve contracts worth at least R30 billion.
The affidavits claim the projects that were “fixed” included Soccer City in Joburg, the Coega development project in the Eastern Cape, the Green Point soccer stadium, the Nelson Mandela Bridge in Joburg and the Gautrain, among dozens of others.
In the affidavits the executives admit they may be guilty of fraud, corruption and racketeering, and offer their full cooperation to police investigators. They hope to gain immunity from prosecution, but so far only one executive has been granted this.Among the industry leaders named as having actively been involved in the bid-rigging arrangements are:
» Duncan Barry, a managing director at WBHO;
» Richard Saxby, former CEO of Stocks & Stocks civil engineering and an MD at Murray & Roberts;
» John Willmott, former group managing director of Concor and former executive director at Group Five;
» Mike Wylie, CEO of WBHO;
» Trevor Robinson, a former director at Concor; and
» Hylton Macdonald, group risk manager at Aveng and former managing director of Grinaker-LTA.
Captain James Hills of the Hawks said in his affidavit there was evidence of criminal conduct involving the top five construction companies: Murray & Roberts, Group Five, WBHO, Basil Read and Aveng.
Additional documents detail how this formal collusion used mechanisms like “cover prices”, “dummy tenders” and hidden “tender fees”. The Hawks have been investigating corruption and fraud in the construction industry since October 2011 and m24i understands that the prosecution of top executives might follow.
Stefanutti chief executive Willem Meyburgh, who earned more than R500 000 per month last year, in his affidavit lifted the veil on a secret society in the construction industry in which contracts and tenders were fixed.
Meyburgh told m24i Stefanutti acknowledged and took responsibility for having participated in “unlawful conduct which has been a feature of the construction industry for a number of years”.
Stefanutti executive director Schalk Ackerman, who, according to Businessweek, earned R435 000 per month last year, admitted in his affidavit that he was a “coordinator” of the secret society.
Both Ackerman and Meyburgh admitted their possible complicity in fraud, corruption and racketeering.
Said Ackerman: “At these meetings, participants agreed which company would be awarded a particular tender. “A schedule of project allocations was maintained on the basis of perceived market share.”
He named executives from all the other big construction companies who sat in on the secret meetings in order to decide who was going to get which contracts.
At the height of the collusion, Ackerman, in the late 1990s and 2000s, was the managing director of Grinaker-LTA (now part of Aveng), and listed 23 major projects where his company colluded to fix contracts and tenders.
He also listed 68 cases where money was owed to Grinaker-LTA or paid out by them to other construction companies after fixing contracts. “This allocation system was standard practice in the industry and . . . had been in place for a very, very long time. It was part of the job of a managing director,” said Ackerman.
“Clients were misled and defrauded,” admitted Stefanutti Middle East head Casper Steenkamp, who also wants indemnity from fraud and corruption.
The police launched an investigation into tender-rigging after Ackerman approached NPA senior prosecutor Glynnis Breytenbach and made an affidavit about his complicity in tender-rigging. Ackerman said in his affidavit that lawyers warned him he might face criminal prosecution. He decided to confess in order to turn state witness.