HomeAfrica-NewsArmy of fake companies used to defraud the Lottery

Army of fake companies used to defraud the Lottery

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  • The Special Investigation Unit raided the National Lotteries Commission (NLC) office in east London on Wednesday morning.
  • Documents and computers were seized in connection with an investigation into a corrupt scheme led by former board member Muthuhadini Madzivhandila, who died earlier this year.
  • The scheme allegedly worked by having newly established non-profit companies obtain funding from the NLC, which was then funneled to a family member.
  • For more financial news, go to News24 Business Cover.

The Special Investigation Unit (SIU) seized documents and computers during a raid on the offices of the National Lotteries Commission (NLC) in east London as part of an investigation into dozens of dubious grants totaling more than R14 million. , presumably linked to a previous meeting. member.

The SIU began its investigation after a whistleblower provided a list of 40 questionable Lottery-funded projects allegedly linked to Muthuhadini Madzivhandila, who died earlier this year.

The SIU revealed some details of the raid in a series of tweets a few hours after the surprise attack began at 8:30 a.m. Wednesday.

“The SIU received a tip from a whistleblower alleging 40 non-profits were recruited to apply for grants,” the SIU’s official Twitter account tweeted. “They received approximately R14 million.”

In another tweet, the SIU said the money was funneled to a “family member” of a “former NLC board member.”

Earlier this year, a whistleblower sent GroundUp what appears to be a similar list of dubious projects allegedly linked to Madzivhandila. It contained the names of 40 different non-profit companies, based in small towns and villages in the Eastern Cape, that received grants from the NLC Arts and Culture sector between 2019 and 2021.

The grants were paid out to companies within months, and in some cases just weeks, of registering with the Business and Intellectual Property Commission (CIPC). Most of these are based in the Maluti district of the Eastern Cape, including Matatiele, Bizana, Mount Fletcher and Mount Ayliff.

The people were “specially recruited” to act as directors of the newly formed companies, which were then used to solicit Lottery funds, according to a source with knowledge of what happened. The source asked not to be named as they did not have a mandate to speak to the media.

Once the NLC paid out the grants, the companies transferred most of the money to a company owned by a close relative of Madzivhandila. Each of the company directors received “a few thousand rand” for his role in the scam.

Since all the companies had recently registered, it would have been impossible for them to submit authentic financial statements for two years that must be submitted as part of a grant application. This suggests that falsified financial statements may have been submitted or that the NLC was unable to obtain the financial statements.

It once again raises questions about the due diligence conducted by the NLC at the time.

After the SIU raided the NLC’s east London offices, some members of the raid team immediately began seizing documents relating to the dubious grants. They also seized computers belonging to at least four staff members. Among the computers seized was that of the NLC provincial manager and those of the staff in charge of supervising the grants.

At the same time, other SIU officers took over the boardroom where they spent hours questioning staff.

Madzivhandila sued over corruption allegations

In 2021, a dispute broke out in Parliament’s Trade, Industry and Competition Portfolio Committee after Madzivhandila was shortlisted for the vacant position of NLC board chairman.

Citing a presentation by Organization Undoing Tax Abuse (OUTA) which raised several concerns about Madzivhandila’s suitability for the board chair role, DA Dean Macpherson MP said: “There are very serious questions that have been raised about this gentleman. It’s been around since it completely collapsed under an epic corruption scandal that has continued unabated.”

Madzivhandila applied for an urgent injunction against the District Attorney and Mathew Cuthbert MP over the allegations against him.

He argued that the district attorney deliberately tarnished his reputation by portraying him as corrupt.

But shortly after the lawyers representing Cuthbert wrote to Madzivhandila’s lawyer to say they would oppose the application, they removed it from the court’s urgent list and he did not pursue the matter further.

After learning of the SIU raid, Cuthbert said, “I feel vindicated by this disclosure. At the time of his candidacy for NLC president, I raised serious concerns about his nondisclosure of past involvement with nonprofits funded by the Lottery and their attempts to hide this.

“The fact that he withdrew his urgent request to file a defamation suit against me indicates that he knew he was in serious legal trouble, as the statements I made about him in public were a statement of fact,” she said. “It is a great shame that he will never be held accountable for his misdeeds in the criminal justice system.”

NLC spokesman Ndivhuho Mafela said: “The National Lottery Commission continues to cooperate with all investigations conducted by the Special Investigation Unit and all other law enforcement agencies.

“The NLC wishes to reiterate its commitment to transparency and clean governance as investigations continue and to press ahead with previously announced steps to restore credibility, restore governance and build operational excellence.”

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