New Lottery boss promises huge clean-up

 

• New commissioner of the National Lotteries Commission (NLC), Jodi Scholtz, says the Lottery “has wronged communities and we need to say sorry”.
• She says the proceeds of sales of seized properties and other assets could fund reparation payments to communities and people affected by corruption.
• The NLC will use the SARS reparation model as a guide.
• “The system was enabled for corruption,” she says.

The board of the National Lotteries Commission (NLC) has approved a reparation process that will lead to apologies and, in some cases, financial reparation, to former staff who were punished or driven out of their jobs for blowing the whistle on corruption.

The NLC will use a reparation model similar to the one used by the South African Revenue Services (SARS) which apologised and paid reparation to staff who were forced out during the capture and hollowing-out of the organisation during Jacob Zuma’s administration.

“We’re doing it because the NLC has wronged communities and we need to say sorry,” the new Commissioner, Jodi Scholtz, told GroundUp in a candid interview.

“It needs to be lawful and authentic. We need to make amends within the PFMA (Public Finance Management Act). The idea is to say sorry in a way that is meaningful and for everyone. My original proposal was for staff only. But communities have also been affected. They have been hurt. We cannot just say it is business as usual.

With regard to projects that collapsed when grants were looted, she said the NLC had asked the Industrial Development Corporation to provide engineers to investigate abandoned or unfinished projects “to see what could be done to make them useful for the communities where these facilities are situated”.

Since last year a clean-up at the NLC has led to the replacement of the entire NLC board and much of the senior executive, and the resignation both of the previous Commissioner, Thabang Mampane, and the former chief operating officer, Phillemon Letwaba. Several other senior staff are currently on suspension pending disciplinary inquiries.

Scholtz also confirmed that the NLC plans to introduce lifestyle audits and integrity testing for all staff “starting from the top … me, the executive and the NLC board”.

One idea being considered was to fund reparation awards from money raised by selling off assets such as seized luxury houses and properties and cars bought with looted lottery funds, Scholtz said.

One example, she says, is the R3.9-million that was raised from the sale of Tsotsi star Terry Pheto’s house, which was paid for from a grant intended to fund an initiation project.

The Special Tribunal has already issued preservation orders running into hundreds of millions of rands on properties and other assets, involving multiple individuals, companies and non-profit companies.

Among the other luxury properties paid from lottery funds that the Special Investigating Unit (SIU) has seized are a Pretoria mansion belonging to former NLC board chairperson Alfred Nevhutanda, and a luxury home on a golf estate belonging to a trust in which former Commissioner Mampane and her family are beneficiaries.

“The system was enabled for corruption. It was as if people sat around a boardroom table and planned how to corrupt and steal,” said Scholtz.

She added: “With my tongue firmly in my cheek, I can say that the one thing we were good at is paying out. Some grants were adjudicated one day and paid out the next day,” she said. “But others who needed it were kept waiting.”

Zero tolerance

Scholtz has been meeting staff and labour unions as part of an organisation-wide clean-up.

She said she has made it clear to staff that the NLC will have “zero tolerance” for fraud and corruption and that there will be consequence management. I have told them that everyone is obliged to report corruption if they encounter it.”

She has also held meetings with former staff who were driven out after they tried to blow the whistle on corruption.

Among those she has met with are Sello Qhino and Mzukise Makatse. Both have paid a heavy personal price after being hounded out of the NLC.

She said at times the meetings had been heartbreaking. She had met an unnamed whistleblower who told her that his daughter had been so affected that she contemplated suicide, said Scholtz.

“I am a parent. How can I not be affected by this?”

She has also met communities where tens of millions of rands of public money was spent on facilities that were not needed, and representatives of organisations whose credentials were “borrowed” or hijacked and then used to apply for Lottery funding.

“I found a legacy of good people [at the NLC] who wanted to do the right thing,” Scholtz said. “But they were very disempowered and scared of doing their work. Records and functions were in odd places and there were problems with record management.”

“We brought in consultants to compare job descriptions, standard operating procedures and what people actually did. There were lots of disconnections and things that didn’t fit.”

She also found “a lack of attention” to working conditions.

“Chairs are in a state of disrepair, and locks on toilets are broken. The focus was not on how to help people, but rather on ‘how can I loot?’”

“Staff are very fragile and scared to speak out,” said Scholtz.

Broken systems

In some instances, “people were paid to be quiet and be incompetent,” Scholtz told GroundUp.

The NLC’s IT systems were in disarray and key documents, including some related to funding, board decisions and legal briefs, are missing.

Independent investigators who probed NLC corruption have reported how documents were often not supplied in spite of repeated requests. They concluded that some key documents had been removed, or had never existed. In some cases, they found that documents had been added to files without following proper NLC protocols.

A “flaw” in the NLC grants system meant that staff meant to monitor projects could not search grant recipients by identity numbers, making it impossible to find and weed out applications for – or recipients of – multiple grants. It is widely believed by NLC staff that this was intentional and designed to facilitate and hide corruption.

So far, close to R200-million has been spent on developing a new system that began around 2016 or 2017. But staff say there are multiple problems with it.

“We are not able to track grant applications via ID numbers, where one person is involved with multiple NPOs, not necessarily as a director, but who handles the application. The system cannot detect this,” Scholtz said.

This facility has now been programmed into the system and from April the NLC has been capturing ID numbers included in grant applications. But the fix is not retrospective and the NLC is now considering whether the best solution would be to rebuild the system from scratch rather than fix what doesn’t work properly, GroundUp has learned.

In December 2018, the NLC shut down its grants system for several days and when it came back online only a handful of staff at executive and very senior levels were able to access information about proactively-funded projects.

Around the same time, the NLC also stopped publishing the names of grant recipients, claiming that this was because of a clause in the Lotteries Act. The NLC eventually relented after pressure from the Minister of Trade, Industry and Competition and some MPs, as well as media attention.

Scholtz said the NLC’s risk management unit, whose job it is to detect and stop fraud, “did not have access to the system that they needed”. “Instead they were supplied with sanitised versions of reports.”

Monitoring and evaluation staff worked on a sampling basis and “were not allowed to touch proactive projects”, which did go through the NLC’s computer system, Scholtz said.

“Everyone complains about the system. It is clear to me that it was designed with corruption in mind.”

“We are looking at the SARS model of reparation,” said Scholtz. “We have had discussions with SARS and I am working on the final details.

“They had the advantage of recommendations by the Nugent Commission of Inquiry into Tax Administration and Governance by SARS to guide them, but we can learn from what they did.”

The SARS process resulted in apologies and reparation payments to current and former employees affected by the capture of SARS, including people forced out by the witch hunt around the now-discredited claim of a “rogue unit”.

SARS commissioner Edward Kieswetter issued an apology to current employees in November 2022. This followed a similar apology to former staff who had been hounded out.

A sub-committee of the NLC board has been elected to assist Scholtz in formulating and implementing the reparations policy.

Integrity testing

Scholtz said following recommendations by former board member Willie Hofmeyr, who is a former head of the National Prosecuting Authority’s Asset Forfeiture Unit (AFU) voice-driven integrity testing would be introduced.

Hofmeyr told GroundUp that integrity testing has been effectively used by the SIU for many years, before and during employment. He said the system recorded and analysed a person’s voice as they replied to questions. “When you lie it picks up any constriction in your throat.”

A senior SIU officer, who cannot be named as he is not allowed to speak to the media, said members of the unit regularly undergo integrity testing.

“I can tell you that it really works,” he said. (The PISA Integrity Centre disputes the accuracy of voice integrity testing.)

A tender for service providers closed on 10 June with plans to introduce integrity testing by the end of July, Scholtz said.

“Integrity testing has been through the courts and the SIU uses it all the time, so it is tried and tested. You are able to get a good sense of key dimensions using the voice box,” she said.

Scholtz has begun discussions with NLC staff and labour unions about integrity testing and lifestyle audit policies. “This is one of the Minister’s priorities,” she says. “We will start with integrity testing and then move to lifestyle audits.”

The integrity testing and lifestyle audits will be overseen by Vincent Jones, the NLC’s new chief audit executive.

“We are dealing with big money,” says Scholtz. “We have budgeted for everyone to be tested and we will start with the board and executive. I have no problem making my results public.”

Published originally on GroundUp.

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