How a Gupta-linked firm tried to buy the Carlton Centre from government – and sell it back again

Business Insider SA
(Instagram, @visitjoburg)
(Instagram, @visitjoburg)
  • Gupta-linked Trillian got Transnet to pay it R46 million in 2016 to manage its property portfolio, including the Carlton Hotel, the OCCRP reports.
  • There is no evidence that Trillian and its front companies actually did any work.
  • They also tried to gain control of the properties and sell them to Public Investment Corporation.
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* This article has been updated below.

Transnet paid a Gupta-linked firm R46 million to manage its properties, despite no actual work being done.

The Gupta-linked firm then wanted to gain control of these properties - including Johannesburg’s landmark Carlton Hotel – and sell them back to the government, where they would be owned by the Public Investment Corporation (PIC).

The details of the plan were uncovered by the Organised Crime & Corruption Reporting Project (OCCRP), a worldwide group of investigative journalism centres, which obtained tens of thousands of internal emails detailing the complex web of transactions.

Read the full OCCRP report here: Money for Nothing: South Africa Paid a Firm Millions for Pretending to Manage Its Properties

At the heart of the Transnet transaction was Trillian, founded by former Investec trader Eric Wood and Salim Essa, a Gupta associate.

According to the emails seen by OCCRP, Wood initially tried to buy the Carlton Centre in 2010 while working for the investment firm Regiments Capital with Essa, who represented the Gupta family in business deals.

After leaving Regiments to found Trillian, the pair became interested in Transnet’s R30 billion property empire, including the Carlton Centre.

“Trillian was a key beneficiary of state capture,” said Hennie van Vuuren, founder of the transparency group Open Secrets. “With the help of auditors, lawyers, and bankers … the company traded on political connections and inserted themselves where they added no value.”

Evidence that Trillian milked Transnet has been mounting for years, to little initial effect. A 2016 report, for instance, laid out how the state company had paid R93 million to Trillian for little reason, an a finance deal for locomotives – but Transnet said it was confident there had been no wrongdoing.

According to OCCRP’s investigation, Trillian and two front companies that it controlled, Avren and Fuel Property Group, began sending unsolicited bids to Transnet in late 2015 in the hopes of managing Transnet’s properties.

The group pitched a proposal called “Project Navigator” in which Transnet would shift its most valuable properties into a private trust that they would manage. They also told Transnet that that could bring in a further R1.1 billion rand by selling the assets.

According to OCCRP’s emails, the group argued that “allegations of corruption and political unrest, internal conflicts, and a lack of technological expertise” were impeding Transnet’s management of these properties. If they were privately managed, they would net Transnet a better return.

“However, their real motivation appears to have been to create an opportunity to charge Transnet exorbitant fees for little or no work — all for a plan that would also stand to enrich them hugely if it were implemented,” says OCCRP.

Under Project Navigator, Transnet would keep just 75% of the profits of the properties it used to own, while 25% would go to Trillian managers.

According to OCCRP, it is unclear whether the transfer was ever completed. What is clear, however, is that Transnet began paying Trillian management fees – before approval for the project was even granted.

A leaked email shows that in April 2016 Trillian sent its first invoice to Transne, on the same day it submitted the proposal. For “professional services” relating to a “Transnet Property Database,” Trillian billed over R41 million.

According to documents obtained by OCCRP, Transnet paid Trilliant around R46 million for property management services during 2016. The organisation could find no evidence that Trillian and its front companies actually managed Transnet’s properties.

“Trillian’s intention was to strip the assets of the state with devastating consequences for millions trapped in poverty,” said Van Vuuren told OCCRP, “It’s a criminal playbook.”

Transnet's problems with property management were apparently not limited to the Gutpa network. In May last year Transnet chair Popo Molefe told the State Capture Commission of concerns with Transnet's lease of new offices in Midrand, saying its move out of the Carlton Centre had been a way to bail out construction company Group Five

Transnet moved out of the inner-city property, to an office park 30 kilometres away, to make room for a grand refurbishment of the icon building.

* This article originally referred to Trillian Asset Management as the company at the heart of the attempted Transnet transactions. That was not, in fact, the Trillian entity on which the OCCRP reported, and the reference has been removed. Business Insider South Africa apologises for the error.

(Compiled by Edward-John Bottomley)

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