Forensic
investigators appointed by the state-owned asset manager, the Public Investment
Corporation (PIC), have recommended reporting suspended chief operating officer
Vuyani Hako to the police.

This comes after
a lifestyle audit, triggered by a whistleblower report, uncovered “suspicious transactions”, with transfers exceeding R4.5
million directed into Hako’s home loan accounts.

Hako, who
occupies the fourth most powerful position in the PIC, was placed under
precautionary suspension in June 2022 after allegations of misconduct were made
against him. He remains suspended 18 months later.

At the time of
his suspension the PIC, which oversees close to R2.6 trillion in assets,
primarily of government employee pension savings, provided no detail about the
nature of the allegations, merely stating that it was in the “best
interest of both the employee and the employer to ensure that an independent
inquiry can proceed unencumbered.”

Now,
confidential board audit committee documents obtained by amaBhungane reveal
that before his suspension, the PIC received at least five whistleblower reports
in which Hako was accused of nepotism and corruption.

The documents
show that in response to the whistleblower reports, the PIC instituted various
investigations, including a lifestyle audit by Fundudzi Forensic Services, which
uncovered a series of “suspicious”
payments and transfers into
Hako’s bond accounts beginning the month
after he was appointed COO – in December 2020 – and continuing until November
2021. 

These payments –
which according to investigators
came from Hako and an in-law – went directly into Hako’s bond accounts to settle loans for
two of his properties in East London and Centurion.

A report of the
audit committee’s in camera meeting states that when
investigators questioned him about these payments, Hako “failed” to explain the source of the funds.

As a result of
these suspicious and unexplained transactions, Fundudzi recommended that the
PIC lodge a criminal case against Hako in terms of the Prevention and Combating
of Corrupt Activities Act.

The Act makes it
an offence not to report suspicion of corrupt activity to the police.

The audit
committee resolved to recommend Fundudzi’s
forensic report and recommendations to the full board for adoption, its meeting
minutes show.

In response to
amaBhungane’s questions, the PIC would not
confirm whether a case had been opened against Hako, nor did they provide
clarity on other allegations made against him, saying only that the COO was “under precautionary suspension while
the allegations against him are being investigated and are yet to be concluded”.

“Mr
Hako remains a PIC employee and is entitled to the same protection of his
rights as any other employee, including entitlement to confidentiality for any
matter or process between the employer and employee,” said the PIC in an email.

“The
PIC must follow due process,” it added, emphasising that “it
would go against applicable policies and labour legislation for the PIC to
publicly disclose any detail or make public comments about any aspect of
confidential labour proceedings that are still underway”.

“Legally,
this would undermine the PIC’s own case and therefore the PIC is
not in a position to respond in further detail.”

Hako also
declined to respond to detailed questions.

Forensic
evidence

A confidential
report on the proceedings of a board audit committee meeting in November 2022
sets out a summary of the forensic auditor’s case
against Hako.

It states that
in 2021 Hako paid off his home loans with Rand Merchant Bank for two properties
bought in 2015 and 2018 using money he could not adequately account for.

Fundudzi
Forensic Services, the company the PIC appointed to conduct a lifestyle audit
on Hako, reported that Hako made repayments of at least R1.9 million for the
two properties over a few months.

Over a period of
six months, an additional R2.7 million allegedly flowed from accounts belonging
to a relative of Hako’s by marriage.

Fundudzi said
Hako “failed”
to provide the source of the
R1.9 million transferred into his accounts; he claimed that the payments made
by his relative were for “the
rental of his property based in Mthatha”.

But
investigators said there was “no
agreement and/or lease agreement detailing rental arrangements”.

Suspicious
transactions

“The
PIC should register a criminal case against Mr Hako in order to determine the
source of the total amount of R4 521 905.00 paid and/or transferred into his
bond accounts,” Fundudzi recommended.

Fundudzi
emphasised that the payments were deemed “suspicious transactions and
require further investigations in terms of section 34 of the Prevention and
Combating of Corrupt Activities Act (PRECCA).”

In simple terms,
Section 34 of PRECCA places a duty on the relevant individuals to report
suspected or actual acts of corruption, fraud or bribery involving transactions
of R100 000 or more. 

Estate agents
consulted by amaBhungane said that the typical rent for houses in Fort Gale,
Mthatha, where Hako reportedly claimed he had received R2.7 million in rental income,
ranged from R13 000 to R15 000 per month.

This is
significantly lower than the over R440 000 per month that Hako received and
raises further questions about
the explanation he reportedly provided to forensic investigators.

Source of
funds?

A separate
document, flagged as a “Report
of Tax Crime”, was
leaked to amaBhungane alongside internal PIC documents, though its origin is
not clear, nor is it certain that it formed part of any PIC investigation.

The document
speculates on the source of Hako’s extra cash, alleging that “it is very likely that … all or some of the monies are traced
from a company called Mazwe Financial Services”.

Mazwe was the
recipient of a R180 million payment in 2021, part of a controversial R294
million loan facility approved by the PIC that also triggered a forensic investigation
in the same year, but that report purported to find no irregularities in the
approval process.

Hako, who was
acting CEO, signed the resolution to approve Mazwe’s
funding application, which had been struggling to gain momentum within the PIC
since 2018.

Responding to
questions sent by amaBhungane, Mazwe’s CEO Xolisa Bebula emphatically
denied these allegations, characterising them as “false, malicious and unfounded”.

Hako would not
be drawn into commenting on the transfers made to his bond accounts, but stated
that he had not had sight of the whistleblower and forensic reports referred to
in our questions.

Hako said:

Blowing the
whistle

Hako, who was
previously the executive head of properties, was appointed as the organisation’s
operations chief in November 2020. Documents show that after he was appointed
as the COO, he remained the head of properties in an acting capacity.

Before Hako’s appointment, the PIC had been operating
without a COO since 2015, when the PIC underwent a restructuring process.

The position was
officially removed in 2017 when the board, chaired by former deputy minister
Mcebisi Jonas, amended a clause in the company’s
memorandum of incorporation that outlined how the COO and chief investment
officer (CIO) should be appointed.

When the
Commission of Inquiry looking at allegations of impropriety in investment
decisions at the PIC completed its work in 2019, one of its recommendations was
that these two roles, with the addition of a chief risk officer, should be
reinstated to strengthen governance in the organisation.

The commission,
led by retired Supreme Court of Appeal Judge Lex Mpati, found that the removal
of the COO and CIO roles had created a “centralised operating model with a significant
concentration of decision-making responsibility, power and influence in the
hands of the CEO and the CFO”.

But in April
2021, six months after Hako was appointed COO, the PIC received a whistleblower
report through its internal reporting line that accused him of wide-ranging
abuses of power.

The allegations
focused on incidents that supposedly took place when Hako was acting CEO
between March 2019 and July 2020, as well as during his time as the head of
properties.

The authors of
the whistleblower report accused Hako of manipulating the appointment of senior
staff members to exert control over investment decisions, among other claims.

When the PIC’s internal audit team looked through the
various allegations, it found that a number of them were either without merit
or too vague to investigate.

However, a memo
submitted to the board’s internal audit committee and
signed by the PIC’s head of internal audit Lufuno
Nemagovhaniu recommended that a lifestyle audit be conducted on Hako to
determine whether “there
are any suspicious activities”.

“The
lifestyle audit will inform whether a forensic investigation is required on
some transactions or not,” reads the memo dated October 2021.

The Wedge

The allegations
from whistleblowers kept piling up and, according to a confidential report
submitted to the board by the chairperson of the audit committee, forced the
PIC to consider whether Hako should continue to act as the head of properties.

The confidential
report, seen by amaBhungane, detailed the proceedings of audit committee
meetings held between October 2021 and May 2022. It stated that in November and
December 2021, the PIC’s internal audit team received more
complaints of impropriety against Hako, involving two transactions in
properties.

One of the
whistleblower reports was related to a project to refurbish the Wedge Shopping
Centre in Morningside that supposedly led to the PIC’s
biggest client, the Government Employee Pension Fund (GEPF), incurring
fruitless and wasteful expenditure.

The renovation
of the shopping centre seemingly happened without the requisite approvals. Moreover, a whistleblower report claimed that
Hako “told
his team not to inform the GEPF about the matter. Staff were too scared to talk
about the matter”. 

Isago

The other
complaint was related to the PIC’s contentious decision to buy a 60%
stake in an empty piece of land located on the N12 highway between Klerksdorp
and Stilfontein (known as the Isago@N12 transaction) for an
inflated price of R510 million. In its 2020/2021 annual report, the PIC’s client, the GEPF, said it had valued the land
at just R178 million.

In a previous
article, amaBhungane shared details about a court dispute involving the
landowners, Isago@N12 Development, and a retired military veteran who helped
broker the deal with the PIC.

The
case revealed a dubious commission arrangement, signed in 2015 between Isago
and the veteran, providing for a 35% facilitation fee based on the money the
PIC invested in the vacant land.

The veteran’s fees were supposedly for leveraging his “connections”
to facilitate the land sale.

The
deal was finalised in 2018 during Hako’s time as the head of properties.

The audit committee report recorded
that a whistleblower report had included allegations that “Hako had
struck a deal to pay a bribe of R100 million to a specific military Colonel”.

The
audit committee resolved to appoint a forensic firm to look into the
allegations regarding both the renovations at The Wedge and the Isago
transactions, according to the documents.

The
PIC would not answer questions about the progress or outcome of these two
forensic investigations, nor reveal whether they had found any evidence of wrongdoing
against Hako.

Suspension

The
documents reveal that as early as February 2022, the audit committee had asked
the CEO of the PIC, Abel Sithole, to remove Hako as the head of properties, pending investigations into the allegations made against him.

Sithole’s response seems to
have been discussed in May, and the report of the audit committee chairperson states
that the “CEO noted the suggestion from the Committee
and stated that Mr Vuyani Hako will continue acting as Executive Head:
Properties as the person he was considering to act [in that capacity] was also
subject to an investigation.”

Unimpressed
with Sithole’s response, the committee requested that the
matter be discussed with the board.

A
few days later, Hako was suspended.

Disciplinary action

Hako
did not respond to our detailed questions, saying it would not be “prudent” to ventilate the allegations levelled
against him through a “media inquiry or a so-called court
of public opinion initiated by amaBhungane”.

“I prefer to deal with and answer to the
allegations levelled against me in a disciplinary process provided by my
employer, the PIC,” said Hako.

Hako
said that he was unaware of multiple whistleblower reports received by the PIC,
asserting that there “was only one so-called whistleblower report referred
to when I was placed on precautionary suspension”.

Hako
did confirm that the PIC has commenced a disciplinary hearing against him,
which is ongoing. However, he would not elaborate on the process or the charges
brought against him.