Key legal files involving Lottery’s multimillion-rand litigation have vanished

National Lotteries Commission (NLC) legal files, including documents from litigation running into tens of millions of rands, have gone missing, according to Trade, Industry and Competition (TIC) Minister Ebrahim Patel, who has oversight of the Lottery.

And, an attempt to get this from the lawyers involved “has not proved successful”, Patel told Parliament’s TIC portfolio committee last week.

“What it points me to is that we are onto something here, that we need to probe harder,” Patel told MPs. He said there may well have been collaboration between old NLC management, including board members, with law firms to deprive the society of “resources that the NLC should make available to poor communities, and to frustrate and undermine the efforts of the ministry to introduce good governance”.

Patel was responding to a question by DA MP Mat Cuthbert, who was following up on an earlier response by Patel about the NLC’s spending on legal fees. Late in 2022, Patel said he was unhappy with an NLC response to parliamentary questions and asked for further, detailed information.

Included in the information Patel asked the NLC to supply are details of any expenses incurred for litigation or legal advice involving himself and his department, any politician, media house or journalist, and the South African National Editors’ Forum (Sanef). Litigation against Patel included a failed attempt by the NLC to have a corruption investigation he initiated declared illegal and litigation to force him to appoint a new Lottery board.

Patel told Cuthbert: “The NLC used lawfare against the ministry… [it] used public money, enormous quantities of public money, to fight oversight by this ministry over their affairs.

“So, I am even more interested that you would be in getting to the bottom of the legal costs, which lawyers were used, what are the briefs that were given to them, were those briefs legitimate and were those expenditures properly authorised [and] were any of those expenditures properly authorised? Were those expenditures for a proper public purpose or were they in defence of corruption? My interest in this is enormous.”

Quoting correspondence from February 2023 between himself and new NLC commissioner Jodi Scholtz, Patel said she had told him that the organisation was “experiencing challenges” in supplying the information he had requested.

“We are attempting contacting the relevant law firms but this has not proved successful in obtaining the relevant information,” Scholtz told the minister.

And when the NLC reported to the TIC portfolio committee on its most recent financial results last week, Scholtz told MPs that all the contracts with legal service providers were cancelled because they were irregular.

“This has compounded the difficulties and we have to look at other options in order to get this info [relating to litigation and briefs.] We have promised the minister that we will get the info to him by 31 March, but it is a challenge right now as we do not have access to any of this information,” she said.

She added that the problem was compounded by “challenges” within the NLC’s legal department as there was only one administrative staff member, since the head of the unit had resigned, and two people are on extended sick leave.

Read more in Daily Maverick: “Court orders former Lottery COO Phillemon Letwaba to pay punitive costs to veteran journalist”

Even though it had its own legal department with eight staff, the NLC’s legal costs skyrocketed under the previous executive and board, as the organisation used costly legal threats and litigation to silence critics and to ward off attempts by Patel and his department to hold it to account.

Soon after he was appointed on a three-month contract in 2022, (then) acting NLC commissioner Lionel October issued a memo instructing the organisation’s management to stop briefing the panel of lawyers on new or continuing matters. The reason, he said, was that the Auditor-General had declared payments to the NLC’s legal panel to be “irregular expenditure”.

Shortly before, the Auditor-General had noted in a confidential management report to the NLC on its findings for the 2021/22 financial year, that “… as per the analysis of the financial expenditure for the NLC, we noted that legal fees increased by R37-million, which represents a 91% increase from the prior year”. Legal fees had amounted to R78-million, which made up 31% of all goods and services that were procured, the Auditor-General said.

Based on a sample of legal fees paid out by the NLC, the Auditor-General found that 37% of these fees were for disciplinary hearings and cases at the Commission for Conciliation, Mediation and Arbitration. The next-highest category, 30%, was for “legal opinion on corporate governance and review of regulation”.

GroundUp reported that between 2016 and 2021, the NLC spent R8-million in litigation against former staff, including R5.7-million in matters involving whistle-blower Mzukise Makatse. DM

First published by GroundUp.