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HomeNews UpdateAG flags irregularities as Gauteng Health bosses implicated in new graft claims

AG flags irregularities as Gauteng Health bosses implicated in new graft claims

As fresh allegations of graft implicating top Gauteng health officials emerged, the Auditor-General has outlined a litany of irregularities totalling millions of rands which her office uncovered at Health Departments across all provinces, writes MedicalBrief.

Payments not made on time, payments for goods or services not rendered, rental payments for radiology equipment not in use and fictitious payments made from the infrastructure maintenance budget are among the material irregularities identified in different provinces by Auditor-General Tsakani Maluleke, according to a City Press report.

This was contained in her review of annual performance plans that she presented to the portfolio committee on health this week.

She said that, because of the material irregularities she and her staff had identified, financial losses of R148m had been recovered, potential financial losses of R636m had been prevented and financial losses of R509m were in the process of being recovered.

The report comes as an insider’s affidavit filed with the Hawks showed email communication, contracts, invoices and bank statements to back fresh corruption allegations against the Gauteng Health Department, involving an acting head of department, among other officials, accused of accepting bribes.

The bribes allegedly involved the influencing of tender awards to companies owned by Roodepoort businessman Landus Armstrong.

The insider, a former service provider at Gauteng Health, has implicated acting HoD Arnold Malotana and two other senior officials in a scheme to allegedly score millions in kickbacks.

Malotana, Edgar Motha and Sheriff Lecholo are accused of manipulating supply chain processes to ensure medical devices company BAS Medxpress (BAS Med) secured two tenders in 2016 and 2017.

In exchange, the three received millions in bribes, said the insider-turned-whistle-blower.

BAS Med is owned by Landus Armstrong, a businessman with a portfolio of businesses under the Bhekani Abantu Services Group (BAS Group), that provides security, cleaning, medical supply and vehicle services.

In Daily Maverick, the amaBhungane investigative unit writes that it has a copy of the insider’s affidavit filed with the Directorate for Priority Crime Investigations (the Hawks), including emails, contracts, invoices and bank statements as evidence supporting the corruption allegations.

The trio occupied senior positions in the department when the events occurred.

Malotana was chief director of Gauteng Health’s Special Projects Directorate and the CEO of the ambulance services division Gauteng EMS.

Motha is the special directorate’s deputy director for laundries and waste, while Lecholo is a contract management assistant director in supply chain.

The insider worked closely with Armstrong at the time and says the bribes were split between two tenders.

The first was a R31m contract to supply plastic food containers to the department’s Masakhane Laundry and Cook-Freeze Factory which produces food for six hospitals and 17 healthcare centres.

Malotana, Motha and Lecholo allegedly received more than R8m for their assistance, and then a R3m kickback payment when BAS Med was selected as part of a panel of service providers to supply hospitals with orthopaedic equipment and surgical implants.

Bank statements show nearly R2m of this amount was wired from BAS Med’s bank account to two companies alleged to have links to the officials.

AmaBhungane identified a link between the officials and only one of the two companies, via the company director, although he denied facilitating any payments to them.

Apart from the above-mentioned payment, there is no visible money trail between the trio and BAS Med’s Armstrong. The whistle-blower claimed this was because most of the kickbacks were in cash.

The insider implicates himself in the scheme, admitting to being “present when cash payments for these … orders were prepared or paid to the officials”.

Right of reply 

Armstrong has denied the allegations, declining to respond.

His lawyers said: “Our clients have since September/October 2022 given their co-operation … will do so in the future… deny the allegations …and reserve the right to answer thereto … at the appropriate time.”

Malotana said he had “fully co-operated” and was awaiting an “outcome with anticipation”.

Motha also declined to respond, while Lecholo said: “I would have loved to respond but … the matter is still under investigation.”

No one has been charged.

Masakhane 

In 2016, BAS Med won a three-year tender to manufacture/supply plastic containers to package frozen food made by Gauteng Health’s Masakhane Cook Freeze factory.

Masakhane supplies more than 115 000 meals to patients at six hospitals and 17 community health centres monthly.

The three-year contract was from 1 April 2016 to 31 March 2019, during which period it was estimated at least 1.5m three-divisional trays, 200 000 lids and 150 000 small dessert tubs would be needed every year for three years.

Before the tender was awarded, “multiple meetings” took place between Armstrong, Malotana, Motha and Lecholo, said the whistle-blower.

“I was present, where it was agreed these officials would receive a cash payment upon my signature of the contract,” said the insider.

“The amount agreed upon was R6m in total as the contract was estimated to be valued at R31m.”

This was close to 20% of the tender’s total value.

The tender award information published on the open tender portal shows that 16 companies responded to the advert.

Bidders were scored on technical compliance with the tender specifications and price and BEE-status using the 90/10 preference point system.

The award form shows BAS Med was the only company to receive 10 points for BEE while the rest of the bidders’ points were under five.

It is clear BAS Med’s submission was not the most affordable option, price accounting for 90% of the points in the evaluation.

At R31m, it was the third highest of the 16 bids received.

Inside info

The insider said BAS Med’s advantage was based on the company having “contact(s)” to “assist with the approval” of its application.

For instance, the plastic container tender was advertised on 10 April but emails show BAS Med was given a two-week head start to prepare its submission after receiving the tender specs from Motha on 23 March.

The Hawks have a thread of emails showing Motha sent the specifications to Armstrong using his Gauteng Health email address.

Motha refused to respond questions from amaBhungane.

In a brief call with an amaBhungane reporter he would not confirm if he sent Armstrong the specifications and tried to suggest someone else, with access to his email, may have sent the document. He denied receiving kickbacks.

Hand-holding 

Documents sourced by amaBhungane show Motha’s colleague and associate, Sheriff Lecholo, an assistant director in the contract management unit in supply chain, was part of the tender process.

Bidders had to submit samples of their products for testing by Masakhane as part of the technical evaluation, as the items were highly specialised and not run-of-the-mill containers easily sourced. The three-divisional container had to withstand temperatures of between -30°C and 150°C without affecting food quality.

BAS Med, a medical devices company, had no experience in food packaging manufacturing but, the insider claimed, they were “given samples of the plastic containers by Sheriff Lecholo”, which were then submitted for the bid.

Lecholo is also accused of allowing the company to amend its submissions, including its pricing, after BAS Med submitted its tender on 30 April, the closing date.

“I received a call from (Armstrong) on Sunday 3 May 2015 regarding (the) tender… which we had submitted on 30 April 2015. He said we needed to decrease the pricing and was irate because our company tax clearance certificate was apparently not included with the tender submission.”

The insider said Armstrong told him these documents had to be submitted by “the following Monday morning before the adjudication committee meeting”.

“I emailed the pricing and tax clearance certificate to Armstrong, then handed the original documents to Lecholo at the Oriental Plaza on Monday, 4 May 2015,” he said.

Emails show BAS Med submitted its financials more than three months after the closing date.

Though the tender advert made provision for companies to submit alternative documents if they had not yet traded or were briefly in operation, BAS Med’s submissions did not submit those either.

Instead, the financials for “the four months ended June 15” were sent to Lecholo’s work email inbox on 12 August 2015.

Lecholo then forwarded these to the Gauteng Health official who appeared as a contact on the Masakhane tender advert.

The tender document stipulated that these were supposed to be originals “not faxed copies”, so it is not clear how BAS Med’s email submission was accepted.

The tender also warned that failure to submit the financials “may result in disqualification” but this was not applied to BAS Med.

Instant red flags 

Email communication shows Masakhane started complaining about BAS Med’s services almost immediately after the company had signed its contract.

A review of internal emails between Masakhane’s management, department officials and BAS Med shows the company could barely deliver on the container quantities needed to prepare food for patients.

The company tried to buy the containers from Plastform, one of the companies that lost the bid for the same tender.

“You promised us deliveries of containers from 1 April 2016. On Friday 22 April you deliver 5 000 containers. Further promises were made to deliver on Monday 25 April 2016,” reads an email sent to BAS Med and other departmental officials by Masakhane’s David van Zyl.

“I received a call from another company that you bought the 5 000 containers from them. So you lied from the start,” said Van Zyl.

In another email, Van Zyl said Masakhane, which produces about 5 500 meals on a working day, “came to a standstill” on 26 April when, after four weeks, BAS Med only managed to deliver 5 000 containers.

BAS Med could only fulfil its orders because it asked one of the losing bidders, Plastform, if it could buy 50 000 units from them.

A BAS Med bank statement shows a payment of more than R231 000 to Plastform’s parent company on 29 April.

The correspondence does not explain why BAS Med could not procure the containers from the supplier it named as a subcontractor in its bid application documents.

The whistle-blower told the Hawks the company “had no clue about food packaging” because it specialised in medical devices.

Emails show Gauteng Health’s supply chain director for contract management Rose Phashe and her assistant Lecholo were made aware of the challenges but were seemingly unperturbed.

Despite the company failing to meet its contractual obligations from the start there were no consequences from the department. Instead, BAS Med, on 17 May, concluded a service-level agreement with the department.

The insider said that in the first week of May, Armstrong paid a visit to Phashe’s office where he apologised for the stock crisis created by BAS Med.

Armstrong was allegedly “met by Edgar Motha to deliver R100 000 in cash as … gratitude for assistance in resolving the complaints from Masakhane”.

“The cash was handed to Motha who said he would hand it to Phashe,” he added.

Phashe, who retired in 2021, denied receiving money from BAS Med or giving the company special treatment. She said Motha was responsible for managing the contract.

Friends in high places

Amid this, BAS Med submitted a bid for another tender at Gauteng Health, to be part of a panel of providers for orthopaedic implants for spine and shoulder surgeries at public hospitals.

The company submitted its bid in February 2016 and was awarded the tender in April 2017.

This time, the “comrades” wanted “R3m in cash upfront “and a percentage of the invoice value of each surgical procedure we completed during the tender period”, claimed the whistle-blower.

But exactly what the officials were going to be paid for this time is not clear because, based on what the insider wrote in his affidavit, BAS Med did not lean on the trio for assistance.

The insider told the Hawks that Armstrong told him to not apply for the tender because “there was no ‘contact” at the Department of Health to assist with the approval”.

“I applied for this tender because we had been servicing hospitals with our spine implants and instruments, and I had introduced our range of products to various heads of orthopaedic departments at Charlotte Maxeke Hospital, Chris Hani Baragwanath and George Mukhari Hospitals,” he wrote.

Three weeks before the tender was awarded, he said Armstrong told him Gauteng Health officials wanted to meet to talk about the tender.

“I was displeased since I believed our technical specifications, pricing and administrative compliance were sound, and that we had been awarded this tender purely based on merit,” the insider stated.

Publicly available information shows the tender was advertised twice in 2016.

The first was published on 5 February and closed on 19 February. However, after being extended twice, the tender was cancelled.

The second tender was advertised on 16 September and closed in October.

While the insider is adamant there was no “departmental involvement” that led to BAS Med being selected to be on the panel, he admits receiving an internal departmental document with specifications before the first tender being advertised.

As early as 20 January, BAS Med was in possession of a “submission to advertise” document that was sent to the members of the department’s bid adjudication for approval.

It’s not clear if Malotana, acting head of department, chief director of special projects and CEO of emergency services at the time, was a member of the adjudication committee; but emails show he was one of the recipients of the email to committee members on 19 January.

The next day, the insider’s documents show, Malotana forwarded this email to Motha, who sent it to Armstrong.

Mamotlaletsi

A meeting was held with Malotana, Motha and Lecholo where the officials allegedly asked for the R3m advance payment.

“Despite my disagreement,” said the insider, the officials were paid close to R1m each through EFTs.

A bank statement shows that on 26 April 2017, two payments of more than R900 000 were made from BAS Med’s account to two recipients alleged to be linked to the officials.

The balance from the R3m was paid from one of Armstrong’s other companies, possibly Bhekani Abantu Security Services, said the insider.

One of the BAS Med payment references is “Mamotlaletsi”, traced to a company by the same name whose sole director, Moses Ndlovu, appears linked to the three officials.

Ndlovu said he knew Armstrong because Armstrong had bought security equipment from him, but he denied facilitating payments or bribes to Gauteng Health officials.

Toxic tenders 

The Department of Health and its facilities have been at the centre of a number of corruption scandals in the past few years – underlined by the murder of Babita Deokaran in August 2021, who weeks before her death, called for a forensic investigation into procurement at Tembisa Hospital after discovering questionable payments worth R850m.

Under R500 000

Much like the corruption at Tembisa Hospital, the whistle-blower claimed the kickback arrangement between Armstrong and this trio was not limited to tenders but included smaller contracts, valued at under R500 000.

“Payments were made to these officials of either 10% of the invoice value or the prices of goods or services supplied were inflated to accommodate their portion of the pay-out,” the insider alleged.

Some of these contracts are now part of a potential probe by the SIU.

This is separate to the Hawks investigation and specifically focuses on suspected procurement irregularities related to contracts awarded by the Special Projects Directorate at Masakhane.

On 23 February 2023, the SIU wrote a letter to former head of department Dr Nomonde Nolutshungu requesting information about all companies awarded infrastructure and maintenance projects at Masakhane between 2017 and 2022.

Nolutshungu left the department in March and was replaced by Malotana.

The SIU letter has a list of projects and contractors related to complaints, including BAS Med’s plastic containers tender and purchase orders awarded to Bhekani Abantu Security Services.

Another interesting overlap is the inclusion of purchase order requests made to Ndlovu’s Mamotlaletsi and another company, Mellisto Trading. Mellisto’s director is Ndlovu’s 23-year-old son, who does not share his surname.

City Press health-departments-in-the-spotlight-for-material-irregularities

Daily Maverick article – Gauteng Health bosses accused of bid rigging in tender-for-kickbacks scheme (Open access)

 

See more from MedicalBrief archives:

 

Blacklisted firms still allowed to bid for Gauteng Health tenders

 

SIU blacklisting of PPE-looters not implemented by govt departments, municipalities

 

Keep a particularly hot spot in Hell for health tenderpreneurs

 

Crucial Tembisa Hospital corruption evidence stolen

 

 

 

 

 

 

 

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