Inside the cartel

cape town stadium Inside the cartel

An exclusive report into how the stadium bids were rigged. Lloyd Gedye reports

WBHO’s brown, three-storey head office is nestled just next to the M1 highway near Grayston Drive in the plush Sandton business district in northern Joburg.

It is alleged it was in these offices in mid-July 2006 that senior executives of South Africa’s construction sector got together to discuss the rigging of tenders for the construction of 2010 Fifa World Cup stadiums.

According to responses from WBHO, the central location next to the highway was the reason for the choice of venue.

A source claims the company chairperson, Mike Wylie, chaired the meeting, but Wylie denies there was a chair. This week, WBHO said the meeting was “informal in nature”.

Wylie has had a long career with WBHO – 35 years to be exact. He joined the companyin 1978 and became chairperson in 2002.

City Press has learnt that former Group Five chief executive Mike Lomas, former Murray & Roberts senior staffer Philip Taylor and former Basil Read chief operating officer Kobus van Biljon are also alleged to have been present at the meeting, representing their employers at the time.

According to sources, Grinaker, a subsidiary of Aveng, was represented at the meetings by Schalk Ackerman, the former construction executive who has since applied for leniency from the National Prosecuting Authority (NPA) and spilled the beans in an affidavit on the inner workings of the cartel from 1997 to 2006.

City Press reported on the contents of this affidavit in February.

Ackerman is now a senior executive at Stefanutti Stocks, a company he joined shortly after these meetings took place. He couldn’t respond to City Press this week as he is bound by a confidentially agreement he signed with the NPA in order to secure immunity.

Aveng brought these meetings to light and has since settled with the competition commission.

It alleges that “during or about 2006”, Grinaker-LTA, WBHO, Murray & Roberts, Group Five, Concor and Basil Read met twice and reached an agreement in respect of the construction of the 2010 World Cup stadiums.

“In terms of which the firms agreed to allocate the Mbombela, Peter Mokaba, Moses Mabhida, Soccer City, Nelson Mandela Bay and the Green Point (Cape Town) stadium tenders among themselves and to exchange cover prices,” says Aveng’s consent order agreement, which is set to be ratified next week before the tribunal.

Responding to City Press this week, Aveng said: “Despite ongoing efforts, Aveng was unable to gain the cooperation of a few key former employees who, based upon the information conveyed by the competition commission, had knowledge of the collusion.

“This situation severely prejudiced Aveng’s position with regards to, firstly, obtaining leniency and secondly, to accurately verify the evidence submitted to the competition authorities by other firms.

“For the purposes of settlement, Aveng relied on the evidence presented to it by the commission.”

The company’s consent order agreement states that the cartel further agreed that they should all aim to obtain a 17.5% profit margin in all the World Cup stadium projects.

In total, these price-rigged stadiums cost R15.4 billion, which makes the margin the companies sought from construction of the stadiums just short of R2.7 billion.

But this week, Murray & Roberts chief executive Henry Laas told City Press that his company’s profit margin on the Cape Town Stadium, which it built together with WBHO, was less than 17.5%.

When asked if it was significantly less, he replied in the negative.

By comparison, a recently released report from Statistics SA titled Construction Industry 2011 shows the profit margins of the construction industry in 2011 ranged from 1.3% to 5.5% across a number of different areas of expertise.

On average, the profit margin was 2.8% in 2011, which puts into perspective the alleged 17.5% margin on the World Cup stadiums and the 12.5% margin on other allocated tenders between 2000 and 2004, which Ackerman testified to in his affidavit before the NPA.

Lomas did not comment when contacted this week. “I read what was in the press and I really don’t have anything to add,” he said.

Van Biljon referred City Press to his former employer Basil Read. At the time of going to press, attempts to track down Taylor were unsuccessful.

Van Biljon is now the CEO of Diesel Power and Taylor retired from Murray & Roberts in 2011.

A Murray & Roberts spokesperson said: “He (Taylor) had a company phone when he was at the group, so that number was held back when he retired. “His colleague who worked with him back in the day now works for an investment bank in Switzerland, so we don’t have any means of contacting him.”

Lomas retired from Group Five in 2007 and joined low-cost housing company Sea Kay, where he was chairperson until he resigned in 2010.

WBHO, Group Five, Murray & Roberts and Basil Read have not settled with the competition commission yet over their involvement in these meetings.

Asked about the meetings this week, Murray & Roberts and Group Five insisted that they were bound by confidentiality agreements with the competition commission.

Basil Read and Aveng had not responded to questions.

Schalk Ackerman 150x150 Inside the cartel
Mike Wylie 150x150 Inside the cartel
Graham Browne 150x150 Inside the cartel
Mike Lomas e1373719560228 150x150 Inside the cartel

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