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A criminal corruption investigation will be conducted after Chinese electric bus company BYD paid for accommodation and meals and a high-speed train ride for City of Cape Town (CoCT) transport officials on a trip to China – a year before the company was awarded a tender for a pilot project as a "sole provider".
This trip was in August 2015, but the project was put out to tender in February 2016.
In August 2016, the tender was awarded to BYD.
Part of the deal with BYD was that they would build a plant in Atlantis, but this has thus far not materialised.
This is one of the alleged cases of corruption and maladministration that law firm Bowmans investigated at the behest of the City of Cape Town.
After the Cape Town City council adopted the report in a dramatic council meeting on Thursday, criminal investigations will be instituted against Cape Town Mayor Patricia de Lille, Mayco member for transport Brett Herron and City officials, including suspended transport and urban development authority commissioner Melissa Whitehead.
De Lille is however not directly implicated in the BYD affair, although there are allegations that she protected Whitehead.
De Lille informally met an official from BYD, but told Bowmans she did not remember the conversation.
Trip to China
The story starts in October 2014, when Herron and Deputy Mayor Ian Neilson found themselves on an electric bus in Hangzhou, China, attending the Sister City Mayors’ Conference.
The Bowmans report states: "BYD presented their electric-powered bus technology to them, in which Herron apparently expressed an interest".
Correspondence between Herron, City officials and BYD commenced.
"At that point in time, it is apparent that the CoCT’s interaction with BYD was focused on attracting them to invest in the Atlantis SEZ (special economic zone) rather than on purchasing electric buses from them," reads the report.
Eventually, the correspondence between the City and BYD resulted in an invitation to visit BYD in China.
Read: City of Cape Town to table Bowmans reports into maladministration
The report finds that as the arrangements for meeting with BYD in China were being made, it "is apparent that BYD had already at that stage been identified as potential suppliers of electric buses to [the City's transport department] by at least Herron and Whitehead and that there had been an exchange of information in respect of specifications and pricing."
The City's payment documents indicate that it paid for visas, airfare, hotel accommodation for five nights in the Chinese city of Shenzhen and subsistence and travel allowances for the three officials – Herron, Whitehead and the City's fleet and asset manager James Groep. No evidence of payment for expenses incurred in relation to return travel between Shenzhen and Changsha – where BYD is based - nor any accommodation in Changsha appears in the City's payment documents.
The report further states that there is no evidence of any credit granted in respect of the accommodation for August 4, 2015, when the City's delegation was hosted by BYD in Changsha.
In Bowmans' interview with Groep, he stated that the only BYD electric bus plant they had visited was situated in Changsha.
"He later, via email, identified the hotel that they had stayed at as being the 'Huawen Yuexi Hotel' and stated that, while he was not involved in arranging the trip, he assumed that BYD had paid for both the train travel between Shenzhen and Changsha and the hotel accommodation in Changsha," the report reads.
Feedback report 'largely silent'
The delegation provided a feedback report to De Lille.
"Notably, the feedback report is largely silent on the potential foreign investment by BYD, which constituted a considerable portion of the motivation for this travel," reads the report.
Bowmans found that no transport and accommodation expenses appear to have been incurred by the City in respect of the Changsha visit, nor were expenses for the Changsha visit recorded in the trip approval report or the feedback report.
Whitehead told Bowmans that she didn't include it in the feedback report as it was not a "travelogue".
In De Lille's response to Bowmans, she states that she was not aware that BYD paid travel and accommodation costs.
"The motivation for the visit to BYD explicitly stated that the costs would be paid for by the City," reads De Lille's response.
"The mayor would not have approved the overseas travel and the motivation for the visit to China had she been aware that BYD was paying for any of the costs related to the visit to BYD. We point out that the travel arrangements for the visit were made by officials tasked with this duty. The mayor accordingly accepted that the officials would act in accordance."
In his response to Bowmans, Herron said he did not know BYD paid for the Changsha trip and therefore did not declare it.
"Our client (Herron) was aware that officials were in the very early stages of exploring whether BYD could be sourced as a 'sole provider' prior to the trip to China. However, it is important to note that our client is not involved in any procurement/tender process, and was certainly not involved in any facet of this specific process either," reads Herron's response to Bowmans.
"Our client takes exception to the fact that he is accused of receiving benefits from BYD. Our client did not receive any benefits from BYD and he is not aware of any official from the City of Cape Town that received any benefits. His rights in this regard are specifically reserved," Herron's response reads.
"BYD did supply lunch in their boardroom on a couple of occasions, and the delegation was taken out to dinner on a couple of occasions during the trip. If this is considered a separate benefit to the hosted trip itself, which our client denies they are, then those are the only benefits that he received during this trip."
Also read: Corruption and confusion: DA stands firm on criminal probe into Patricia de Lille and co
White also denied that the accommodation or travel constituted a benefit.
"I am not aware of any benefits which were received by any City official, including myself, from BYD and/or any of their agents and/or representatives, other than the token painted teapot which I declared," reads her response Bowmans.
Whitehead said BYD arranged the itinerary, which indicated that we would be staying in Shenzhen and travelling to Changsha for a day trip. BYD then changed the itinerary, necessitating the overnight stay in Changsha.
"BYD changed the programme after the City had already paid. The City could obviously not pay twice or forfeit the monies which had been paid. BYD was informed of this and indicated that they would pay for the accommodation in Changsha as they had changed the itinerary," reads her response.
"The City therefore did not pay twice or pay a penalty for changing a booking already paid for."
The report states that when Herron, Whitehead and Groep returned to Cape Town on August 7, 2015, "the attempt to procure electric buses upon the basis that BYD was a single source provider, accelerated considerably", according to evidence found in the contents of emails between BYD and City officials and confirmed in recorded interviews with the various officials involved in the process.
'Fruitless and wasteful expenditure'
Bowmans came to the conclusion that "the omission of any mention of the delegation’s trip to Changsha, being the location of the only electric bus manufacturing plant and two independent bus operators visited by them (key objectives of the journey as stated in the trip approval report), may have been intentionally designed to avoid disclosure of BYD’s payments in that regard".
It also found that Whitehead’s submission that the feedback report was not meant to be a “travelogue” as a reason for omitting their trip to Changsha, had little merit and that Herron's submission that he did not prepare the report, but signed it, could not absolve him from liability for misleading De Lille and the City.
"That he admits to have known that five nights’ accommodation were booked in Shenzhen, while also admitting to spending a night in Changsha without ever asking questions about the hotel arrangements and later endorsing a report that inexplicably did not disclose the Changsha visit, supports this view," reads the report.
"His averment that the trip was arranged by Whitehead’s office appears to be incorrect. The contact person reflected on the trip Approval report is Paulse, the Executive Support Officer assigned to his office."
Read more: De Lille lays into Bowmans reports as she mulls her future as mayor
Bowmans said that in light of the meals BYD paid for, a reduction of the subsistence allowances paid to them ($115 per day) was appropriate in terms of the prescripts of the 2015 Department of Public Service and Administration's manual.
Bowmans also said, since the delegation only spent four instead of the five nights booked in the Crowne Plaza Hotel in Shenzhen and since there appeared to have been no attempt to recover or limit wasted costs, fruitless and wasteful expenditure of R6 600 had been incurred.
Bowmans also found that evidence existed that Whitehead continued to deploy and direct considerable City resources in pursuit of achieving an "overtly irregular procurement process", despite recorded warnings by three City officials that the single source process in the circumstance was untenable.
"We submit that Whitehead ostensibly thereby caused fruitless and wasteful expenditure and that such conduct amounts to an act of financial misconduct," the report reads.
Bowmans also found that Whitehead's and Herron’s own versions that they had conducted prior research with other electric bus manufacturers, confirmed their knowledge that BYD was not the only source of electric buses at that time.
"It follows thus that any endeavour to procure the buses from BYD upon a single source deviation would therefore have been intrinsically irregular," the report reads.
Recommendations for disciplinary proceedings
Bowmans also found that Herron was by his own admission aware that BYD was a potential supplier of electric buses to the City, "but nevertheless, for reasons he has failed to adequately explain, involved himself in pre-engagement discussions with them".
However, Bowmans stated they did not find evidence that he influenced the procurement process in contravention of the Municipal Finance Management Act.
Bowmans recommended that "sufficient evidence existed to sustain a reasonable suspicion that" the Prevention and Combating of Corrupt Activities Act (PCCA) might have been contravened.
The City is obliged to report this to the police.
"It is in any event likely that much of the information required to establish the precise facts of this matter, will only become available by virtue of the powers afforded [in] a criminal investigation," the report reads.
Bowmans further recommended that the City institute disciplinary proceedings against Herron, Whitehead and Groep for contravening the City's supply chain management policy by accepting hospitality from BYD and because they failed to declare it, as well as for incurring fruitless and wasteful expenditure by not using the booked hotel accommodation.
Another recommendation was that the subsistence allowances paid to Herron, Whitehead and Groep be recalculated and measures be instituted to recover any overpaid amounts.
Bowmans also recommended that disciplinary action should be instituted against Whitehead for an act of financial misconduct for her deployment and direction of the City and achieving an irregular procurement process in relation to the single source procurement of BYD electric buses during August 2015.
They also recommended that the City establish a special committee to determine the extent of the influence of Herron’s involvement in the BYD procurement and whether such conduct amounted to a contravention of the Municipal Finance Management Act.
'I have nothing to hide'
In a statement on Thursday, Herron expressed his outrage at the Bowmans report. A day before, De Lille also questioned Bowmans' credibility.
"I have handed the report to my lawyers and I intend to take whatever steps are deemed necessary to clear my good name. I shall pursue a claim for damages against those who have sought to unlawfully and without just cause insult and defame me and damage my reputation," Herron said.
"The one Bowmans report states that my involvement in the procurement process 'has not been sufficiently established'," he said.
"This is a flagrant misrepresentation of the indisputable facts contained in their own report, and is therefore a false conclusion as the report contains no allegation, no prima facie evidence, no direct evidence, no inference nor any suggestion by any person or document that I was involved in the procurement process at all."
"As a result I can only surmise that it is based on their own unchecked bias, alternatively it is based on external influences that are not disclosed in the report. The conclusion that something corrupt happened, or that I influenced the procurement process, is so poorly constructed, it is hard to believe it was properly considered by a legally qualified person before being presented."
He also said he would not repay any costs as he "was in no way responsible for the last-minute changes which resulted in the change to the itinerary and the wasted hotel cost".
"I wish to state categorically that I have nothing to hide and that my conduct at all times has been beyond reproach."
De Lille has consistently described the allegations against her as a smear campaign.
