Former Minister of State security, David Mahlobo, and President Jacob Zuma were aware when they appointed SSA Director General, Arthur Fraser, in September 2016 that he was a key suspect in two damning and confidential reports by the then Inspector-General of Intelligence, Faith Radebe. The investigation into the clandestine and parallel intelligence structure, the Principal Agent Network (PAN), established by Fraser and former NIA DG Manala Manzini, found millions blown over the years without any authorisation, or accountability. The DA is considering approaching the courts to rule Fraser’s appointment as DG as illegal and irrational. By MARIANNE THAMM for SCORPIO.

Until veteran investigative journalist Jacques Pauw’s book du jour, The President’s Keepers – Those Keeping Zuma in Power and Out of Prison, was published in November, few South Africans were aware of the covert Principal Agent Network (PAN), its extent, what it stood for, how it operated, who its members were and what it had been tasked to accomplish.

However, many government insiders including MPs, various ministers, the Hawks and the NPA (and the president) knew about PAN and the Covert Support Unit (CSU) and were aware of allegations of wide-scale abuse of taxpayers’ money for a variety of unauthorised clandestine operations.

These included illegal surveillance, the unaccounted squandering of about R1.5-billion of public funds for the purchase and leasing of properties (worth R48-million), the purchase of some 293 cars for 72 PAN agents stored in warehouses (at the cost of R24-million), the employment of a network of undercover agents – none of whom had been vetted – as well as the alleged siphoning off of funds to Fraser’s relatives and family members. (R10-million was donated to the Community Peace Project of which Fraser’s mother was a board member).

In other words, PAN, as it evolved after its establishment in the early 2000s before it shut down in 2009, acted as a real rogue unit.

Now two confidential reports by former Inspector-General of Intelligence, Faith Radebe, after then Minister of State Security, Siyabonga Cwele, had requested the investigation, have emerged. They set out the extent of the covert work of PAN, how it flouted laws and acted as a law unto itself.

Radebe’s Report to the Minister of State Security on the OIGI Investigation into the Principal Agent Network Programme of the NIA was issued on 12 December 2013. It was followed by a supplementary report dated 25 April 2014 when Cwele extended the terms of reference of the investigation.

Radebe essentially found that PAN agents had been tasked with conducting illegal activities without proper authorisation.

The OIGI report also referenced the findings and conclusions of several earlier SSA internal investigations (about eight). Mahlobo was presented with the IG reports in June 2014. They were also presented to the Joint Standing Committee on Intelligence in November 2014.

So, when President Jacob Zuma appointed Fraser as DG of the State Security Agency in September 2016, he must have known about the various reports implicating Fraser in serious criminality and possible treason.

Mahlobo definitely knew but still expressed in a statement, after Fraser’s appointment, his “full confidence” in Fraser and added that the new DG would “bring with him immense understanding and knowledge of the intelligence environment and his astute managerial experience which will help move the organisation forward”.

The two OIGI reports consist of 174 and 67 pages and, perhaps most telling, with regard to Fraser’s “immense understanding and knowledge of the intelligence environment”, is former CFO Mkuseli Apleni’s account of how things went down under Fraser’s leadership.

“Mr Apleni reiterated that according to Treasury Regulations the CFO reported to the Accounting Officer. However, when he assumed his duties as CFO at NIA, this was not the case. The CFO was required to report to the DDG: Corporate Services. This arrangement seemed strange to him,” wrote Radebe in her report.

Apleni told Radebe that there were two financial accounting regimes in the NIA, “one which was covert and the other which was overt”. Apleni had been precluded from being part of the financial accounting in the covert area. This had also applied to the Auditor General.

Apleni told the IG that he was only privy to the fact that the CSU operated “on a cash basis, the net effect being that officers of the CSU would draw advances of large amounts of money, up to R10-million in some instances. The CFO was not supposed to make inquiries as to what the money was spent on and how they were spent.

“According to Mr Apleni, financial controls were non-existent as regards the covert area and that he was always told that he ought not to know about the covert environment,” said Radebe.

And while Apleni had proposed various financial management controls, this had “caused conflict between him and members of the senior management, including Mr Fraser in particular”.

Apleni had attempted to set up regular budget committee meetings “where General Managers would discuss expenditure trends” but which Fraser and other DDGs simply failed to attend.

“According to Mr Apleni he informed the Director-General [Manzini] about the injunction in the Treasury regulation that the CFO must report to the Director-General. He also informed the Director-General about the large sums of money that were being requested by the CSU and that he was not aware about the purpose for drawing such large amounts of cash”.

The IG report noted that Apleni was never shown any documents to support expenditure. The Auditor General too could not express an opinion on the financial statements of the NIA as “they were not allowed to access the covert environment”.

Apleni said the covert unit had continued to resist disclosing information to him as the CFO for the purpose of availing this to the AG. He even attempted to introduce an asset register for use by the CSU but this was ignored.

Apleni, said Radebe, had been accused of “encroaching” on Fraser’s area of responsibility (operations).

“According to Mr Apleni in these disputes between the CFO and the DDG Operations the Accounting Officer [Fraser], DDG NIA, Mr Manzini, would always overrule the CFO and make decisions in favour of Mr Fraser.”

The Inspector-General found that “the exclusion of the CFO in the management of covert funds falls largely on the inaction of the DG, Mr Manzini, as the Accounting officer. He should have ensured compliance with Treasury Regulations.”

In addition, said the IG, Fraser, as DDG Operations, should have ensured proper access and control by the CFO as prescribed in OD:09 (Operational Directive 09 Authorisation and Conduct of Cover).

Fraser and Manzini’s close bond continued after both men had left the employ of government (before Fraser’s return in 2016) and went on to co-found Resurgent Risk Managers. Resurgent is now part of an extensive probe into systemic corruption at Prasa.

Fraser and Manzini’s company is accused of ignoring tender processes and submitting a false tax certificate in order to secure a R90-million contract from Prasa. This is according to an investigation by National Treasury and the Public Protector. Fraser resigned from the company after his appointment by President Jacob Zuma as Director-General of State Security.

Backdrop to PAN

The Principal Agent Network (PAN) is, said Radebe, “an internationally accepted practice”. The concept, to establish a national clandestine operation capacity, was approved by Former Minster for intelligence, Ronnie Kasrils, and was implemented to collect information for the NIA but with no links to it, publicly at least. The PAN was the brainchild of Fraser and Manzini.

The Covert Support Unit was established to conduct administration and support for the PAN which included ensuring that the covert structure complied with companies, close corporation ACTS and SARS statutes (which it clearly did not).

Consultation on PAN took place with Kasrils and Manzini and a strategic plan was drafted, presented and approved.

An audit of covert members had been conducted by the SSA and a report submitted in January 2010 to then DG Gibson Njenje.

This audit report should be verified, said Radebe, to address key “findings inter alia on compliance with OD9 (see ‘Legislation’ below), misapplication of OD4 and OD9 conclusion of contracts without authority, the absence of authority to appoint former members, inadequate supporting documentation for various projects, claims without supporting documentation and incomplete financial transactions”.

She found that the PAN programme had been long-term in nature and that the establishment had required “huge investment in time, resources and training. The need for secrecy is paramount but so is the need for accountability and control.”

The support environment of the concept “was not clearly understood and led to lapses of judgement and poor control. Too much emphasis was placed on secrecy and the so-called ‘need to know’ principle to the detriment of oversight, audit and control,” the IG found.

OD9 is explicit in that audits should be a continuous process but “this we know did not seem to take place and it was only following the appointment of Mr Njenje as Director Domestic Branch in 2009 that a decision was taken to look into the PAN programme and CSU which resulted in an audit being conducted. It is our considered view that had this directive been adhered to some of the irregularities could have been averted.”

Legislation

The NIA (later to become the SSA) regulatory framework recognised the concept of PAN and gave effect to it through something known as Operational Directive 09 (OD9) Authorisation and Conduct of Cover.

The OD9, said Radebe, “is comprehensive and provides for planning requirements and approval standards, authorisation levels and procedures, administration, support and control, establishment and cover structure, responsibility for running a cover structure, utilisation of intrusive techniques, financial management and related matters, human resource.”

Radebe found that in the course of employment PAN members had been tasked to conduct illegal activities without securing proper authorisation. This non-compliance or violation of directives OD5 and OD9 required further investigation, she said.

Various Investigations

The investigations by the IG had been carried out after then Minister of State Security, Siyabonga Cwele, had requested the Office of the Inspector-General (OIGI) – an independent oversight body – to probe the management of PAN’s assets, unlawful acts by NIA officials or those rendering services to the agency, the employment of the PAN agents, and to evaluate whether sufficient evidence existed in order to institute criminal charges.

The IG had also been asked to investigate whether any money or assets had been unlawfully acquired and the prospects of recovery of these.

The OIGI obtained documents and briefings from a State Security Agency internal investigation team. This team provided a detailed report to Cwele in November 2012 with certain findings. Those interviewed by the OIGI team included Apleni, Fraser and Prince Makhwathana, former head of the CSU.

Makhwathana was suspended in 2010 and surfaced again in June 2016 when he took the SSA to court after sitting at home on full pay for five years (earning around R6-million for doing nothing) on charges of misconduct.

He was eventually charged in January 2015 for over 100 transgressions including promoting agency employees and for being involved in illegal surveillance activities. The charges, however, were later dropped and Makhwathana was reinstated after Mahlobo had intervened and lifted his suspension.

In her 12 December 2013 report Radebe notes that her findings “are at odds with the findings contained in the November 2012 report” concluded by the SSA.

“Prior to concerns being raised, we wish to place on record the number of investigations that ensued in this matter which the OIGI team was informed about. This will provide the minister with the bird’s-eye view of what unfolded since 2009 when a decision was taken to close down the PAN programme.”

These investigations included one by an audit team established in 2009 by Njenje and completed in January 2010; three further State Security Agency investigations, another by Langa attorneys (paid R4.5-million) and yet another involving members of Crime Intelligence.

These reports were presented and submitted to the State Security Agency executive and/or the minister. Various presentations took place between 2010 and 2013 which included SSA leadership. The outcome of the reports of the various SSA teams culminated in the SSA November 2012 report.

“Arising from this, the first concern relates to the delay in the investigations and the non-action by the SSA executive and the Minister. As outlined above, investigations into the PAN Programme commenced as far back as October 2009 upon Mr Njenje assuming office at the NIA.”

Over and above the SSA investigations, as well as those by Langa attorneys and CI, was another undertaken in 2009 by a private company owned by Russel Christopher (a former security adviser to former speaker Frene Ginwala) who conducted a forensic investigation into the CSU and the PAN Programme.

“It is therefore inexplanalbe (sic) and illogical why reports of these two investigations were never availed to the OIGI team as one would expect. Instead we were advised in terms of the reference to consult with the SSA team and no mention was made of other investigations. This obvious omission is somewhat disconcerting and can be construed as directing the investigation of the OIGI,” said Radebe.

Radebe states she could not understand how four years after the investigations no action had been taken and the minister had opted to task the IGI to investigate.

“There is no plausible explanation for the delay as good governance dictates that at the very least action should have been taken by SSA management on matters investigated and finalised by the various teams such as the finalisation of employment of the PAN’s on’going unlawful suspensions and finalisation of the assets accrued in the Programme.”

In a 2013 affidavit by Fraser’s predecessor, Sonto Kudjoe, and in response to Makhwathana’s attempt to have his suspension declared illegal, Kudjoe revealed that in 2009 “it came to the agency’s attention that acts of misconduct as well as criminal acts were committed in the establishment, conduct and management of this project”.

The audit had indicated “acts of theft, fraud, forgery and uttering in an amount exceeding Two Hundred Million Rands” and implicating Makhwathana.

Questions by Daily Maverick to SSA spokesperson Brian Dube as well as the Office of the President were unanswered at the time of writing. DM

Photo: Former Minister of State security, David Mahlobo, and President Jacob Zuma at the ANC policy conference, 5 July 2017, Nasrec.