South African minister's affidavit details $490 mln in Gupta transactions reported as suspicious

JOHANNESBURG (Reuters) - South African Finance Minister Pravin Gordhan has revealed in a court affidavit distributed by the Treasury on Sunday that 6.8 billion rand ($490 million) in payments made by wealthy brothers Ajay, Atul and Rajesh Gupta, companies they control, and other individuals with the same surname have been reported to authorities as suspicious since 2012.

The three Indian-born businessmen are the subject of an official investigation into allegations that they have had undue influence over President Jacob Zuma.

The payments in question, whose destinations were not disclosed in the document provided by Gordhan, were ascribed to the three brothers, their nephew Varun Gupta, numerous companies that they control as well as other individuals named as Chetali Gupta, Shivani Gupta and Arti Gupta. Reuters could not establish whether all these individuals were members of the same family. 

Gordhan's court submission caps a week of high drama in which he was charged with fraud by approving early retirement for a deputy commissioner in 2010 while Gordhan was head of the tax agency and re-hiring him as a consultant - a charge that Gordhan said was politically motivated.

Gordhan has for months been at odds with Zuma, not least over the alleged political influence of the Gupta brothers, but is looked to by edgy financial markets as a guarantor of stability.

Gordhan's submission, dated Oct. 13, is a request to the High Court in Pretoria for a declaratory judgment that he cannot interfere with decisions by South Africa's major banks to cut their ties with businesses owned by the Gupta brothers.

Gordhan's submission had the effect of airing what he considered to be evidence supporting his concerns about the Gupta brothers' political influence.

The Gupta brothers are close to Zuma and the subject of a just-finished report by the outgoing Public Protector, a constitutionally-mandated anti-graft official, into allegations that they influenced the appointment of ministers. It was prevented from being made public on Friday by Zuma's application to the High Court to delay its release. 

Zuma has denied granting undue influence to the brothers and they have denied seeking it. Nevertheless, they said in August that they planned to exit all of their South African investments.

Several banks and companies have cut ties this year with the Gupta brothers' investment vehicle, Oakbay Investments, without publicly disclosing their reasons. They included South Africa's top four banks: Standard Bank, Nedbank, Barclays Africa's Absa and First National Bank (FNB), part of FirstRand.

REQUEST TO INTERVENE

Gordhan says in his 96-page submission to the court that Oakbay "demanded that on behalf of the government I intervene with the banks to achieve a reversal of their decision".

Gordhan supported his assertion by attaching correspondence between himself and Nazeem Howa, the chief executive of Oakbay Investments, although the letters viewed by Reuters did not appear to provide evidence of undue pressure.

Neither Howa nor the Treasury responded to requests for comment by phone and email, and an Oakbay spokesperson said the firm would not comment on the issue.

A lawyer representing the Gupta family did not respond to an email seeking comment. However, on Sunday the Oakbay-controlled ANN7 television news network cited unnamed Oakbay sources as rejecting allegations of wrongdoing.

In one of the attached letters, Howa said that 7,500 jobs were at risk as the company could not function without the support of local banks.

"Given your strong relationship with the captains of industry, I implore you help us save the jobs ... I look forward to hearing from you about any possible assistance you are able to offer," Howa wrote in the letter, dated April 17, 2016.

In another letter, dated May 24, Howa said "we seem to have no options open to us other than our appeal to you for assistance".

Gordhan also included in his affidavit advice from his lawyers stating that no minister, nor the cabinet as a whole, had "any power to intervene in the banker-client relationship".

The affidavit includes a report from the Financial Intelligence Centre (FIC), a government anti-money-laundering agency, listing 52 payments worth a total of 6.8 billion rand that were reported to the FIC between 2012 and 2016, presumably by the banks entrusted with them. It also included 20 cases of "multiple transactions" with no amounts specified.

The FIC requires banks to notify it of transactions that appear potentially improper. It says the transactions were "reported or sent to the centre in terms of Section 29" of the FIC Act, which deals with transactions regarded as "suspicious and unusual". 

"SERIOUS STATE OF AFFAIRS"

Gordhan's affidavit says that the FIC report "reflects the increasingly serious state of affairs which has arisen", adding: "This is illustrated by the number and scale of reported transactions linked to Oakbay."

The FIC report did not say why the transactions were regarded as suspicious and did not disclose who reported them or to whom they were directed. Nor did it say whether any had eventually been found to be improper. Reuters was unable to independently confirm any details about the transactions.

A spokesman for Standard Bank said on Saturday that the bank could not comment and the three other major banks did not respond to requests for comment. The FIC also did not respond to a request for comment.

Although the Gupta brothers' relationship with Zuma has been a source of controversy for years, it burst into the open in March when Deputy Finance Minister Mcebisi Jonas said in a statement that he had been offered his previous boss's job as finance minister by unnamed members of the Gupta family.

Gordhan, who had been finance minister from 2009 to 2014, was put back in the job in December after Zuma sacked Nhlanhla Nene and replaced him with the little-known backbencher Des van Rooyen, triggering a crash in the rand currency and sending banking shares sharply lower.

The Gupta family issued an emphatic denial of Jonas's allegation at the time.

Zuma told parliament in March that he was not the right man to question on the allegations.

“If Jonas says he was offered by the Guptas, I think you will be well-placed to ask the Guptas, or Jonas. Don’t ask me. Where do I come in?” he said. “I never offered Jonas the ministry. That’s why he is the deputy minister.”

(Reporting by Ed Stoddard and Ed Cropley; Editing by Kevin Liffey)