April 17, 2005, Michael Schmidt (Independent Online)

Specialised anti-organised crime and corruption unit, the Scorpions, are probing allegations of another corrupt arms deal involving crisis-torn weapons company Denel paying a British firm of agents millions of dollars, in part to influence India's decision to choose Denel as the supplier in a $3,86-million arms deal (about R24-million).

This bombshell came hot on the heels of a press report on Saturday that the Scorpions were also probing whether any kickbacks were paid to late defence minister Joe Modise and other South Africans including former Denel chiefs as part of a R100-million "sweetener" paid to a Saudi agent in the late 1990s.

Under a standard clause in Indian military procurement agreements which refers to the Indian penal code on corruption, the deal for Denel to supply anti-materiel rifles (designed to destroy equipment) and ammunition to the Indian military could now be invalidated.

Signed documents from the Denel treasury purport to show that Denel paid Varas Associates, a company based on the Isle of Man, two sums of $2 408 373 (about R15-million) and $1 099 672 (about R6,8-million) on January 27 in 2003 and $151 350 (about R1-million) on June 19 of the same year. There is no indication what the payments were for.

Varas Associates, which had at the time as one of its directors Marc Craig Veitch, was apparently one of a cluster of Manx companies that included Africa Link, of which Veitch was a director.

The Manx registrar of companies had no listing for Varas, but said Veitch's Africa Link had been registered in January 1997. Denel group spokesperson Sam Basch said yesterday he had never heard of Varas Associates.

The invoices in question were sent by Varas's office in Douglas, Isle of Man, to the headquarters of Denel. The first, signed by an unknown person and dated May 1, 2002, is for $143 446 (about R900 000) for "fees for technical services as per agreement".

The third, signed by Veitch in his capacity as director and dated May 30, 2003 is for $450 364 (about R2,8-million), also for "technical services".

The second, apparently signed by Veitch and dated December 8, 2002, for $393 720 (about R2,5-million) for "fees for consulting and technical services as per agreement" allegedly relates to the arms deal with India, giving as a reference "project - AM2 & AM3", which an insider said was the contract for the Denel-produced rifle.

This source alleged that Varas, which was appointed to act as an agent for Denel by its head office, was paid a 12,75 percent commission on all deals that it secured for Denel.

The source has also alleged that Varas traded on its influence with the Indian military's price negotiating committee (PNC) in New Delhi which rules on military tenders.

This newspaper was given a document purporting to be the secret minutes of a PNC meeting on May 23, 2003 "to procure 200 anti-materiel rifles & 1 lakh (100 000) rounds of ammunition with TOT (transfer of technology)", which, the Denel source claimed, had been provided by Varas Associates to Denel as part of its "consulting and technical services" for Denel's rifle project".

The Denel source claimed that the provision of the secret minutes by Varas to Denel in exchange for payment was corrupt because it enabled Denel to know what deal the PNC would settle for and gave the South Africans an unfair advantage in tendering for the rifles and ammunition.

This article was originally published on page 5 of Cape Argus on April 17, 2005