September 16, 2007
Mail on Sunday (UK)
By SIMON WATKINS and DAN ATKINSON
London - From humble beginnings in Johannesburg, a listing on the London Stock Exchange in July 2002 was designed to catapult Investec on to the global stage. But now the blue chip status of the £3.5 billion (R51 billion) Anglo-South African giant could be tainted by unintended links to arms deals in Iran and Kenya and an alleged multimillion-pound embezzlement.
Even worse, the UK's serious fraud office has launched its own investigation into the series of allegedly corrupt deals in Kenya known as the Anglo Leasing affair. It was an unfortunate choice of client by Investec's Guernsey arm almost six years ago that has dragged the financial firm to the fringe of transactions that would more usually grace the pages of spy thrillers. At the centre of the affair is Scottish arms dealer Lightweight Body Armour (LBA) and its Guernsey affiliate, and their involvement in deals that may have defrauded the Kenyan government of tens of millions of pounds.
LBA came to Investec as a long-standing client of Ian Burns, who became boss of the bank's Guernsey division in 2001 after working for another financial group. Investec in Guernsey processed the money for the Kenyan deals on LBA's behalf.
The arms deals involved an extraordinary list of weaponry, supposedly for the Kenyan police. A confidential schedule dated July 2002 lists 50 light machine guns, mortar rounds, anti-tank grenades and 10 000 fragmentation grenades. Mysteriously, other items purchased through LBA include a luxury Bentley car and an unspecified property in Minsk, the capital of the former Soviet republic of Belarus.
A second cause of anxiety was the huge amount of cash paid through LBA for Kenyan government contracts that were not fulfilled - part of the well-documented Anglo Leasing scandal. LBA was party to two vital deals, one for the Kenyan prison system and the other for its air defences. In these contracts, LBA acted as an agent for Apex Finance, owned by Kenya's Kamani family - some of whose leading members, such as Deepak Kamani, are already wanted by the Kenyan police investigating corruption allegations.
Neither of the deals led to any products being delivered and they were allegedly part of a fraud in which senior figures in Kenya enriched themselves. Potential links with such deals sparked horror at Investec's head office and prompted the company to call in top City law firm Allen & Overy and Channel Islands law firm Ozannes to investigate. The investigators' verdict was blunt: you risk prosecution and you should come clean to the authorities. The report by Ozannes concluded that Investec chiefs should perhaps have smelled a rat.
E-mails from Guernsey assistant manager Ollie Goddard to his bosses in September 2002, less than a year after LBA had become a client, outlined his concerns over its accounts. According to the report, Goddard also highlighted "documents that clearly represent a request for payments by LBA for the purchase of arms from Iran". It is believed the Iranian shipment was bound for Kenya. Goddard has since left Investec and refused to comment.
Investec's lawyers warned that the authorities might expect that Goddard's alarm should have prompted a much deeper investigation by Investec into LBA's business partners, and that failure to investigate could breach money laundering laws. "There is a real risk that a charge brought against Investec could be proven," warned the lawyers.
Andrew MacGill, chief executive of LBA's UK parent firm, has always denied any wrongdoing and said: "As far as we are concerned we acted in an entirely proper way. You need to remember this is Africa and you can't believe anything anyone says."
Burns left Investec five months ago and did not return calls.
An Investec spokesperson would only say: "We are aware of this matter and are satisfied that we have dealt with it appropriately." But with hindsight Investec must wish it had never got involved with LBA.
The penalties in the event of a conviction could be up to 14 years in prison for individuals found guilty and a sizeable fine for the company.
Ozannes' report urged Investec to confess everything to the local regulator, the Guernsey Financial Services Commission, and that the company should expect a demand to hand over all relevant documents. It added that, if Investec provided a thorough report of its own, it might head off the risk of a full-blown probe by the Guernsey authorities. The commission declined to comment.
- Mail on Sunday