Lottery fraudsters must personally pay back R14-million

The Special Tribunal has “pierced the corporate veil” of several companies it found were used as “sham fronts” in a R14-million NLC grant scam, and has ordered their directors to repay the funds personally. Archive photo: Ashraf Hendricks

• The Special Tribunal has “pierced the corporate veil” of four companies used as “sham fronts” in a R14-million lottery grant scam and ordered their directors to repay the funds personally.
• Brothers Tshimangadzo and Ndoweni Mukutu hijacked a community application for a cultural village that had already been built.
• Nearly R7.5-million flowed to companies linked to Ndoweni Mukutu, and R3-million to a trust of which advocate William Huma, a former NLC board member, was a trustee.

The Special Tribunal has “pierced the corporate veil” of several companies it found were used as “sham fronts” in a R14-million lottery grant scam, and has ordered their directors to repay the funds personally.

In a recent decision, Tribunal Judge President Margaret Victor ruled in favour of the Special Investigation Unit (SIU), setting aside a 2018 grant awarded by the National Lotteries Commission (NLC) to Madumelani NPO. The R14-million grant was ostensibly for the construction of a cultural village.

Judge Victor found that the “antagonists”, including brothers Tshimangadzo and Ndoweni Mukutu, had acted in concert to defraud the NLC.

The SIU submitted that the grant application was signed by Tshimangadzo Mukutu, who described himself as a director of Madumelani. The SIU said the community project had been hijacked and that Mukutu had obtained a copy of the organisation’s constitution under the guise of helping it secure funding. The entire process was fraudulent, the SIU said.

The founding members of the project said they did not know Mukutu and were unaware that an application had been submitted or that funding had been granted. Others listed as members in the fraudulent documentation submitted to the NLC told investigators they had no knowledge of the application and that their signatures had been forged.

The SIU said fabricated financial statements were submitted in support of the application. The cultural village the grant was meant to fund had already been built in 2015.

The SIU said the brothers were the “masterminds” of the scam.

The R14-million grant was deposited in a newly opened bank account. Funds were immediately transferred into accounts held by companies associated with the brothers. This included R3-million to a trust of which advocate William Huma, a former NLC board member, was a trustee.

Ndoweni Mukutu denied involvement in the “hijacking”. He claimed the money was used for its intended purpose. He said he opened the new bank account because “Madumelani members were not near the bank that day”. Payments to other companies, he claimed, were for professional services rendered, and he described his brother as the project manager.

The SIU disputed his version, stating that nearly R7.5-million had flowed to companies linked to him.

Judge Victor said that the scheme was clearly fraudulent.

“A lot of planning and intention went into executing the scheme, from obtaining a copy of the constitution, to appointing fake office bearers, inserting fraudulent signatures to the application, opening up a bank account and immediately paying out millions of rands,” she said.

She noted that the SIU had sought an order “piercing the corporate veil” of some of the companies involved. This is when directors are shown to have engaged in fraud or dishonesty and removes their limited liability protections.

“In this case, the facts are such that the conduct of the antagonists is unconscionable which justifies the piercing of the corporate veil,” Judge Victor said.

She declared the NLC contract and the subsequent grant award unlawful, and ordered that the directors of four companies linked to the brothers - Mdudonde Events and Investment Pty Ltd, RUM Management Consultancy Pty Ltd, Thwala Front Pty Ltd and Ndhava Management CC - be held personally liable for repayment of the R14-million. They were also ordered to pay the costs of the application.

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