Before the AK 47 debacle, Mr Marius Vermaak was pursuing a successful and promising career at Armscor. He travelled abroad a great deal, bargained with international dealers and agents, undertook delicate negotiations involving large sums of money, and concluded valuable contracts on behalf of Armscor. As manager of the stock sales department, he had charge of five officials, plus two support staff. The senior manager above him, Brigadier A Savides, described himself as only 'nominally' Vermaak's superior: he was appointed to 'supervise' Vermaak only because it was 'part of Armscor's requirements that there must be a senior manager'. (The structure of Armscor marketing and other officials is set out in appendix five.)
Indeed, almost every Armscor witness emphasised Vermaak's independence, seniority, authority, experience and trustworthiness. There is no doubt that some of the autonomy the witnesses ascribed to Vermaak was accentuated by their desire to distance themselves from the debacle he initiated. But it is nevertheless clear that Vermaak had extensive responsibilities, and enjoyed substantial freedom in carrying them out.
Vermaak flourished under these conditions. His section consistently exceeded the sales targets management set: in 1992, when the target was R10 million, the section achieved R42 million. The accomplishment was repeated in 1993 (a R30 million target exceeded by sales of R55 million). The 1994/5 target was R50 million, but by the time the Commission was appointed in October, the figure realised was already R58 million.
Vermaak's individual efforts in exceeding his sales targets were encouraged by management awards: in 1993, he received in his individual capacity the executive general manager's award for outstanding achievement. In 1994, the chairman's prize for achievement in the non-technical category was awarded to his section. The pressure to achieve sales was heightened by the fact that Vermaak started with what he called a 'negative' figure - the section's running costs had to be recouped from the 5% cut Armscor received from stock sales.
Vermaak thrived, partly because he favoured client service over administration and paperwork. 'Paper can wait,' he emphasised in his testimony, 'but not clients'. Furthermore, 'If I had to record everything in writing, I would not make much progress with my sales performance'. The result was that administrative compliance and maintenance in his section were severely lacking.
4.1.2 Mr Elias Wazan
Mr Elias Wazan constituted himself the mystery figure of the story. He played a crucial role in effecting the entire AK 47 transaction. Yet, despite sustained efforts to procure his presence, he evaded all attempts to contact him and did not testify before the Commission.
Mr Wazan appears to be a man of many parts. It is evident that Wazan had considerable charm. To Armscor, he was a prized business associate whose relationship with the corporation stretched back to at least October 1983, and which apparently included, on 31 July 1989, an appointment as an 'exclusive agent'. At the same time, the Lebanese government regarded Wazan as a crook. Memoranda the official Office of Interests of Lebanon in South Africa supplied to the Commission state:
The so-called E Wazan is a well-know civilian arms dealer who used to work with a banned and disbanded militia, which participated in the disastrous Lebanese civil war. This dealer is currently being pursued. Orders have been issued to the effect of his arrest and prosecution with regard to the violations and other crimes he has committed, including the suspicious arms deal with Armscor.According to the instructions received from the relevant authorities, many crimes have been committed for which Wazen (sic) will be charged accordingly. Amongst which include the falsification of documents and acting fraudulently on behalf of the Lebanese government.
Even in Armscor's repertory, Wazan played multiple roles. He is described variously as 'the official buyer' or 'agent' for the Lebanese Christian Militia or the 'Lebanese Security Agency' (a term he uses of himself), or as Armscor's 'agent'. His capacities changed chameleon-like. In September 1993 Vermaak, in a document asserting that Wazan acted on behalf of the 'Lebanese Christian Militia', claimed that Wazan was also 'in the process' of becoming 'the agent of the government of the day'. Armscor documentation shows that, to the knowledge of Mr Vermaak, Wazan acted also as agent on behalf of Nigeria and Yemen.
4.1.3 Mr Michael Steenberg
Mr Michael Steenberg undertook the shipping arrangements for the consignment. Relying on his own admissions, he can fairly be characterised as a modern-day buccaneer and a rogue. He admitted that, in the arms business, he 'had no morals'. Would he lie if he had to? 'If that's what it takes to get the business, yes.' He described himself as specializing in 'international hazardous shipments'. These encompass munitions and chemicals. His companies include Dan-Am Shipping, March Shipping Inc (a Liberia registered corporation), March International, and Cargo Coordinators International (CCI).
Steenberg was initially reluctant to testify before the Commission, fearing arrest or apprehension in consequence of his alleged fraud in the course of the debacle. The Commission declined his request to sit in partial secrecy for his evidence. He eventually testified in Switzerland. His avowed reason for doing so was to exonerate persons whom he considered had been unjustly implicated in the debacle.
4.1.4 Prince Anwar F Al-Shaalan
Prince Anwar Bin Fawaz Bin Nawaf Al-Shaalan emerged as the actual purchaser of the consignment. He is a prince of the Kingdom of Saudi Arabia, and related through multiple connections to the Saudi royal family. He holds a diplomatic passport of that country. He was described in papers placed before the Commission as 'a commodity speculant with a special interest in the sugar trade'. He operates through a Jordan-based company, Eastern Discovery SA. He strongly resisted attempts to implicate him in any impropriety in relation to the AK 47 transaction. The Prince's trust of Hovsepian, his business associate, was profound and complete - even to the point of his according Hovsepian some implicit mandate to wheel and deal, provided it was in the Prince's ultimate interest, and that his honour was not impugned.
4.1.5 Mr Joseph der Hovsepian
Mr Joseph der Hovsepian is a Lebanese-born international trader of Armenian Orthodox extraction. In recent years, under circumstances he declined to disclose, he obtained citizenship and took up residence in the Federal Republic of Germany. He is a business associate and close family friend of Prince Anwar. It was clear during his evidence that Hovsepian had a sophisticated appreciation of the international arms business. When Mr Vermaak sought a secrecy order from the Commission for his testimony, he claimed to fear Hovsepian. During his testimony in Berne, Steenberg, who otherwise presented a picture of worldly confidence, confirmed that he feared Hovsepian, and had taken precautions to protect himself.
4.1.6 Mr P C Smith
Mr Smith, as General Manager: Import and Export Control, was the most senior Armscor executive official with direct line responsibility for SANDF stock sales. He signed many of the documents in contention before the Commission. He was also the recipient of and the responsible signatory on the monthly stock sales report. Smith himself was Armscor's representative on the DFPC for many years, including the period 1987 to 1990, and was its alternate chair. Immediately after the debacle, the Minister of Defence requested Armscor to provide him with a report. Over the weekend of 24 September 1994, Mr Smith convened a team of marketing and shipping officials (including Vermaak, Savides, Bronkhorst and Robinson) and produced and signed a report dated 26 September (the Smith Report is contained with its annexures in appendix six). This was in the succeeding week presented to the Minister. The accuracy, completeness and significance of this report were extensively debated at the Commission. There is no doubt that it is inaccurate in a number of respects. The most significant inaccuracy in the Smith Report is the false statement that the 1993 Vinland Saga arms shipment ended up in Lebanon. As is indicated below [Sections 4.5.5 and 4.8.4], Smith had knowledge at his disposal, at the time of compiling and signing the report, which indicated that this statement was untrue.
4.1.7 Mr Deon Bronkhorst
Mr Bronkhorst was the administrative head of Vermaak's section. In this capacity, he played a central part in the marketing process for SANDF stock sales, though generally only in regard to the paperwork. His responsibilities in this regard included the price determination; quotation; acceptance of the quotation; liaison with the SANDF regarding availability of the goods sought; SANDF acceptance of the quotation (where required); requisitioning the goods; ensuring their issue; procuring the export permit; and facilitating shipping arrangements with Macro Shipping, Armscor's in-house shipping division.
Bronkhorst was responsible for all Vermaak's administrative work in relation to the debacle. He played no part in negotiating the deal or in determining material details such as the price, commission, or the destination of the goods. He described arrangements regarding both shipments as 'chaos'.
The ship was chartered by Mr Michael Steenberg, acting through his company Dan-Am Shipping and Chartering Inc. Armscor's clearing agent in Port Elizabeth was Eagle Freight (Pty) Ltd, represented for the most part by Mr Clive Reid. After various intermediate negotiations a second consignment of the goods originally contemplated in the Vermaak/Wazan contract of 20 September 1993, with the addition of a consignment of G3 rifles, was freighted in September 1994 from Port Elizabeth aboard the Arktis Pioneer. This time the ostensible buyer was the Lebanese government. (The armaments which comprised the consignment are set out in annexure 'A' to the Smith Report, which is appendix six.)
Rapport on Sunday 18 September 1994 broke the story: a secret consignment of South African arms, supposedly headed for Lebanon, was actually destined for an illicit Middle East destination. The insinuation was that the new ANC-dominated government had connived at a shipment of arms that would probably end up with the PLO (the ANC's long-standing ally), and then be used against Israel (a staunch ally of the previous apartheid government).
The suggestion of sinister illegality was accurate. But the South African government knew nothing of the shipment or its destination. The destination, in 1994 as in the previous year, was a Yemeni port - this time Hodeidah. Yemen was now in the throes of a civil war triggered by dissatisfaction on the part of secessionists in South Yemen. On this occasion, however, the goods did not reach their intended destination. They were rejected by the Yemeni authorities and eventually returned to South Africa.
The circumstances under which the 1994 shipment was aborted are at present the subject of litigation involving a number of the parties who were represented at the Commission. It is not necessary or desirable for the Commission to give an account of why the goods were not off-loaded at Hodeidah.
Under the Cabinet's country classification then in force, Yemen was a category III country, and therefore prohibited from receiving arms from South Africa. Armscor internal practice in 1993 required the issue of an export permit in the case even of SANDF stock sales, though by law this was not required. Had the true destination of the 1993 shipment been known, it is plain that no export permit would have been granted. Indeed, the SANDF would doubtless not have released the goods, and the shipment would not have taken place. Even though an export permit was at that time not a legal requirement, effecting or attempting to effect a shipment of SANDF stock to a destination prohibited under the Cabinet classification would therefore have amounted to a fraud on the public administration (compare R v Heyne 1956 (3) 604 (A) 624G-625B).
By the time of the 1994 shipment, SANDF stock sales were no longer exempt from export permit requirements. Without an export permit, the 1994 shipment would have been unlawful. No permit would have been granted if the true destination had been known. Effecting the 1994 shipment therefore, as in 1993, amounted to a fraud on the public administration. In addition, and more explicitly, the export permit for the second shipment stipulated the government of Lebanon as the end user. The 1994 shipment therefore did not take place 'under the authority of or in accordance with the conditions stated in a permit', and it consequently violated the applicable regulations read with section 4E(a) of the Armscor Act.
The nub of the tale is thus that in 1993 and 1994, two consignments of SANDF weapons were freighted to Yemen, at a time when Yemen was a prohibited destination for South African arms. As observed earlier, a detailed exposition of the evidence would not serve much purpose. The broad issue arising from our terms of reference is whether the transaction violated any law or international embargo, and whether there is prima facie evidence that any person committed a criminal offence or whether there was any serious misconduct, negligence or impropriety. In practical terms, therefore, what is presently important are answers to the following questions:
Hovsepian, Wazan, Steenberg and Vermaak were already mutually acquainted. In 1991, Hovsepian and Wazan were involved in freighting a cargo of Armscor goods on the Anke (its apparent destination is dealt with shortly). Steenberg had previously concluded a deal through Vermaak, purchasing from Armscor a consignment of Lee Enfield rifles for sale in the United States as collectors' items. Steenberg thereafter had continuous contact with Vermaak regarding, as he put it, 'anything the SANDF deemed sellable'. The four characters eventually came together in 1992. In that year, Hovsepian, Steenberg and Wazan were involved with Vermaak in shipping a consignment of SANDF stock from South Africa: Wazan as dealer, Hovsepian as purchaser from Wazan, and Steenberg (at Hovsepian's instance) as charterer. This consignment was freighted on the Skybird.
The ostensible destination in the case of both the Anke and Skybird was the Lebanese Christian Militia. Steenberg claimed in testimony that Hovsepian asked him to represent to Vermaak, and to Reid of Eagle Freight, that the destination of these shipments was Beirut. In fact, during the Commission's proceedings in Switzerland, it emerged that these weapons had been destined for, and had ended up, with purchasers in the republics that formerly constituted Yugoslavia. This was despite the Cabinet prohibition on arms sales to Yugoslavia and these republics.
In 1993, Hovsepian contacted Wazan about the AK 47s that the Prince sought to procure for his Yemeni buyer. A complex duplicate deal, entailing the Prince, Hovsepian, Steenberg, Wazan and Vermaak, now eventuated. On the one side, a supposed sale of AK 47s involving Armscor (represented by Vermaak) and Wazan, with the ostensible end user the Lebanese Christian Militia, could now be constructed. In reality, however, there would be a parallel sale by Wazan, in which the purchaser would be Prince Anwar, with a South Yemen entity as his on-purchaser. Hovsepian would participate in the deal as a 5% partner of the Prince.
In May and June 1993, Wazan drew Steenberg in as charterer for the prospective shipment. Vermaak met Wazan in Switzerland in late August or early September 1993. The essential part of the deal - for Armscor to sell Wazan a consignment of AK 47s and ammunition - was now concluded, by way of oral agreement. This was given written expression in the Wazan/Vermaak contract of 20 September 1993. Meanwhile, Wazan's negotiations with the Prince about the details of the on-sale to him also reached finality in September 1993. By 16 September, the deal between Wazan and the Prince was finalized; that between Wazan and Armscor, soon after. The Prince paid half of the purchase price to Armscor.
Steenberg, as charterer, meanwhile went ahead with the shipping arrangements. These were confirmed on 17 September. All that remained was for the Prince, on his own insistence, to visit South Africa to inspect the goods, before paying the remainder of the price. In South Africa, Vermaak processed the export documentation, in the name of 'Lebanon - Christian Militia; E J Wazan', at a post office box number in Beirut. The Prince, Wazan and Hovsepian on arrival in the latter half of September were whisked through passport control and customs as VIPs, and housed in first class hotel accommodation. The Prince and his party inspected the goods in Grahamstown and found them adequate. The consignment was shipped aboard the Vinland Saga to Yemen, where the Prince's purchaser received it.
The evidence strongly suggests that at least Vermaak had actual knowledge, or should have known, that the real destination of the Vinland Saga cargo was a prohibited category III country. This conclusion follows from the reasons set out below.
4.5.1 Vermaak's diary and state of knowledge in 1993:
Vermaak's diary, certain extracts from which he submitted to the Commission, reveals that during the September 1993 visit of the Prince and his party, he expressly inquired of the Prince, Hovsepian and Wazan 'how the three of them fit together and Lebanon (Christian Militia)'. Their response he records thus: 'They explained that an exchange transaction between Lebanon (CM) is taking place with Jordan. Jordan is buying on behalf of Lebanon.' Vermaak thus knew that the purchaser was not Wazan nor the Lebanese Christian Militia, but Jordan. Jordan would in turn supposedly exchange the weapons with the Lebanese Christian Militia. In terms of the Cabinet classification, Jordan was a category II country, to which only 'non-sensitive' armaments (which included AK 47s) could be sold.
Hovsepian could not state conclusively whether Vermaak at this stage actually knew that the weapons were destined for Yemen. In an unsatisfactory portion of his testimony, Hovsepian initially seemed to suggest that Yemen as a destination was mentioned in the presence of Vermaak, but he later seemed to shrink from this implication. Hovsepian insisted, however, that the Prince's party made no attempt to hide the fact that the destination of the AK 47 consignment was Yemen.
At the least, however, as counsel for Armscor pointed out, there can be no doubt that Vermaak's suspicions should by now have been aroused. It is also notable that the written Wazan/Vermaak contract of 20 September 1993 was concluded on the same date as this diary entry: yet it in no way reflects the fact that the primary destination was Jordan.
Hovsepian inferred that it must have been clear to Vermaak that the Prince was the buyer of the goods. This conclusion is inescapable. Immediately after concluding the deal orally with Vermaak in Switzerland in early September 1993, Wazan faxed Vermaak, explaining that 'one or two friends will come to meet me for 48 hours to inspect the goods and seal the containers with their own seals'. The 'friends' were the Prince and his party. A clearer assertion of proprietary interest, and indeed of title, than inspecting and sealing the subject of the sale can hardly be imagined. What is more, documents prepared by Vermaak thereafter consistently refer to the Prince as the 'client' and Wazan as the 'agent'.
The export permit for which Bronkhorst (acting as Vermaak's administrative functionary) applied at the end of September, reflected the end user country as 'Lebanon - Christian Militia' despite the fact that Vermaak knew that the Prince was involved, and that he was acting ostensibly on behalf of Jordan. Vermaak made no mention of the alleged 'exchange agreement' with Jordan. 4.5.2 Vermaak's Yemen solicitation on behalf of Wazan: In 1993 Vermaak engaged in another transaction which casts an even sharper light on his state of mind at the time. In early October, shortly before the Vinland Saga arrived in South Africa to load the cargo for Yemen, Vermaak had a telephone conversation with a Mr Chia of a Singapore firm, Glamco Aviation. As emerges from a follow-up fax, Vermaak had called Chia on behalf of 'Mr Elly Wazan (my good friend)'. He requested Chia to quote on specified items of military equipment for Yemen, and concluded by noting 'that this will be a contract between your company and Mr Wazan (no Armscor involvement)'.
This fax is significant for two reasons. It establishes, in the first instance, that Vermaak knew in October 1993 that Wazan was involved in procuring military equipment for Yemen. The fact that the Yemen link in the Vinland Saga consignment was through the Prince, and not through Wazan directly, is irrelevant to Vermaak's state of mind. Second, the fax constitutes an attempt by Vermaak, at a crucial point in the Vinland Saga events, to assist a sale of military equipment to Yemen - a prohibited country in terms of the Cabinet classification.
In evidence, Mr Vermaak ventured a threefold answer to his Glamco Yemen solicitation. First, he denied that he had sought to 'facilitate' an arms sale to Yemen. Second he raised a technical point that the log pamphlet is a policy document applying only within South Africa: 'I do not believe that I am transgressing if I refer someone to another country' [that is, Singapore]. Third, he observed that if he had not assisted Wazan with this inquiry, Yemen would in any event have found a potential supplier for the goods elsewhere.
Vermaak's bald denial that he sought to facilitate the sale was unimpressive; and his technical point meritless. His third contention invokes an argument, perennially raised about unlawful or unethical arms sales, that needs only to be stated to be rejected. It relies on the unacceptable premise that one can do wrong because others will do so anyhow.
The Commission does not accept that Vermaak could honestly have believed that it was proper for an Armscor official to facilitate on behalf of third party sellers the sale of military equipment to countries with which military commerce was prohibited in South Africa. The Glamco Yemen inquiry on behalf of Wazan is strongly suggestive of a general state of mind on the part of Vermaak in which the boundary between permitted and prohibited marketing conduct was disregarded. It is also lays a basis for the suspicion that Vermaak knew in October 1993, or earlier, that his deal with Wazan in respect of the Vinland Saga goods involved Yemen as the destination.
4.5.3 FOB shipments and the Armscor draft bill of lading:
The Prince, in his and Hovsepian's arrangements with Wazan, insisted that the contract price should include arrangements for shipping the goods to the intended destination - in other words, that the contract should include shipping costs, insurance and freight (CIF). However, in terms of the Armscor/Wazan contract, the shipment was to take place free on board (FOB). This, as well as on the general practice of FOB shipments, is the subject of comment later in this report. It was because Armscor was the FOB shipper (which meant that it took no responsibility for the shipping arrangements), and Wazan the CIF shipper (which meant that he had to arrange for the ship and attendant details), that Wazan had to arrange for a charterer, in the person of Steenberg.
Reid of Eagle Freight, who were Armscor's shipping agents, testified that it was the responsibility of the charterer (Steenberg) or his agent - and not the FOB supplier (Armscor) - to draft and frame a bill of lading, the document of title to the goods shipped. Armscor's in-house shipping concern, Star Freight, nevertheless in mid-October faxed to Armscor's dockside agents (Eagle) a draft bill of lading. The despatch of this draft bill, and its contents, are most mysterious. In material respects, it is identical to the bill of lading Steenberg issued in the Skybird shipment of June 1992. It bore a false name - 'Ronald James International', Singapore - as shipper; and indicated 'Singapore', falsely, as the port of loading; with the same city, falsely, as the place of issue. The draft - with equal inaccuracy - stated 'Beirut' as the port of discharge.
It is clear that whoever at Armscor framed the draft bill of lading for the Vinland Saga knew that the details regarding supplier, place of issue and port of loading were false. The question is: did that person or persons know equally that the alleged port of discharge, 'Beirut', was false? Mr Robinson, the manager of Armscor's shipping section, testified that Star/Macro would sometimes draw up a draft bill of lading for a particular shipment of arms; where his section did this, it was upon the instruction of marketing or some other Armscor department; and the information reflected in the draft bill would emanate from the instructing department.
Beyond this exculpation, however, Robinson invoked his privilege against self-incrimination. He refused to answer questions about Star's role, or his own participation, in issuing such possibly fraudulent draft bills of lading. Vermaak, likewise, refused to enlighten the Commission about the false details on the draft. His refusal to testify on this point, together with that of Robinson, makes it impossible for the Commission to determine from the draft bill of lading whether Robinson, or anyone else at Armscor, knew at that point that the specified destination of Beirut was a sham.
The Armscor draft bill of lading for the Vinland Saga was never signed by or on behalf of the shipper of the goods, and was thus never formally issued. But it affords a telling insight into the world of sanctions, evasion and deceit within which Armscor then operated.
4.5.4 Steenberg's bills of lading and the Eldor Roos episode:
As far as the 'real' Vinland Saga bill of lading is concerned, Steenberg appears to have created three bills of lading, only one of which, dated 11 October 1993, he formally issued. This reveals the consignee as Abdul Magid Saweydan, at a telex and phone number in Jordan; and the port of discharge as Roads, Mokha, a Yemeni port. One of the other, unissued, Steenberg bills of lading makes a crucial appearance. At the end of November 1993, some six weeks after the Vinland Saga sailed, Mr Eldor Roos of Star/Macro requested Eagle Freight to send Macro copies of the bills of lading for the Vinland Saga. A fax from Eagle Freight to Macro Shipping, dated 30 November 1993 and directed for Roos's attention, enclosed 'copies of the bills of lading as requested'.
Robinson testified that such a request could have been made as a matter of general practice in order to complete the file, or if the marketing section, as the principal in the transaction, had made an inquiry in this regard. One of Steenberg's drafts, faxed by Eagle, indicated the consignee as Saweydan Magid, at a post box address in Hodeidah, Yemen; and the port of discharge as Roads, Mokha.
One of the strangest aspects of these strange events is that the Steenberg draft bills of lading apparently never came to the attention of any responsible person at Armscor. This is despite the facts that Armscor's shipping section requested the documents; that they were sent; and that they were addressed to Roos and directed expressly for his attention. The peculiarity of the incident is not mitigated by Robinson's suggestion that Roos may have filed the draft bills without reading them since they were unsigned drafts, and that Reid may have communicated to Roos that they were therefore of no legal import. The fact is that, on its face, one of the draft bills constitutes glaring proof of the true destination of the Vinland Saga.
Mr Roos did not testify before the Commission (nor did the Commission request that he should). It is accordingly not possible to determine whether Roos read the fax. The episode nevertheless supports two conclusions. First, Reid emphasised that, in shipping practice, the supplier of goods is at liberty to request copies of the charterer's bill of lading - as Armscor, through its shipping arm, in fact did in November 1993. It would therefore not have been unreasonable or inappropriate for Vermaak to have asked to see the bill of lading. Indeed, according to Robinson, Roos's request for Eagle to fax the bills of lading may in fact have emanated from Vermaak's department.
So far as could be determined, Vermaak did not request or demand to see the Vinland Saga bill of lading. Vermaak admitted that he took no steps to check on the destination of the FOB shipment Armscor freighted on the Vinland Saga. This failure indicates at least an indifference on Vermaak's part that gives the lie to his repeated professions of concern about the destination of armaments shipments. Yet there was equally an indifference on the part of Armscor's shipping officials about critical details regarding destination that were available to them.
Secondly, the Vinland Saga bill of lading episode underlines the lack of coordination at Armscor: the shipping section requests and receives a fax, but neither the responsible official nor anyone else reads it. No one can tell with any precision whether the request came originally from marketing or whether the documents were passed on to them. The copies were probably, according to Robinson, simply filed. This lack of coordination repeated itself at another crucial point in the saga, nearly a year later, when faxes, similarly indicating the true but prohibited destination of the second shipment, also failed to come to the notice of any responsible official at Armscor.
4.5.5 January, 1994 - Vermaak's knowledge that the first consignment supposedly ended up in Jordan
Hovsepian testified that, at his and the Prince's January 1994 meeting with Vermaak and the Prince, Vermaak was informed that the Vinland Saga shipment had gone to Yemen and that the second consignment was similarly destined for Yemen. As set out earlier [Section 4.5.1], Vermaak's version contradicts this. He claims the Prince informed him in January 1994 that the weapons ended up in Jordan, where the Prince allegedly distributed them to 'his troops' (manskappe).
This version is set out in Vermaak's official report dated 31 January 1994, and directed to Savides as his senior manager. Vermaak testified that he regarded the alleged Jordanian destination not as a red light, but as an 'orange light', which he referred to his superiors. Savides informed Smith of the alleged Jordanian destination - yet neither he nor Smith saw any problem with this because Jordan was a category II country, to which 'non-sensitive' items - which included AK 47s - could be exported.
Yet, setting aside the question whether Vermaak knew that the first shipment had gone to Yemen, his alleged belief that it ended up in Jordan, shared with his immediate superiors, in any event raises disquieting questions about Armscor, its marketing system and the export controls then in force.
First, in terms of Armscor's standard conditions of sale, issued in a document entitled AMQ 4/91, goods may not be resold or transferred to any other third party without Armscor's written consent. This document was not expressly incorporated in the written contract Wazan and Vermaak signed on 20 September 1993. But it was supposed to be part of all quotations issued in respect of stock sales - and Vermaak and the other executives responsible for marketing were familiar with it. There can thus be no doubt that the supposed distribution of the first consignment's weapons to the Prince's 'manskappe' was, to the knowledge of Vermaak, Smith and Savides, in direct violation of Armscor's standard contract terms. Yet no one seemed in the slightest concerned about it.
Second, van Dyk's export permit for the 1993 shipment was issued in the name of the Lebanese Christian Militia. The alleged destination in Jordan conflicted frontally with this. Yet the matter was apparently not raised with van Dyk nor was any attempt made to remedy it, even in terms of mere compliance with bureaucratic procedures. This starkly indicates the attitude of the officials to the export permit.
Third, Vermaak's supposed belief, conveyed to Savides and Smith, that the weapons were distributed to the Prince's 'own troops', indicated that they ended up in private hands. Taxed with this incontrovertible fact, Smith claimed that his perception was that Prince's men were part of the Jordanian army. He gave no basis, however, for this perception, and it is difficult to imagine what basis there might have been. (To Vermaak's knowledge, the Prince carried a Saudi Arabian passport.) Moreover, nothing seems to have been done to confirm or verify this 'perception'. Vermaak acknowledged under examination that, speaking in general, the distribution of weapons to private soldiers would constitute a black market transaction. This concession was unavoidable. A DFPC or Cabinet licence to export to a category I country like Italy cannot include authority to sell South African arms to the Mafia. The responsible officials were heedless of this consideration in the Jordan 'manskappe' affair.
Fourth, Smith's report to the Minister, dated 26 September 1994, falsely informed the Minister that the first shipment was sold and shipped to the Lebanese Christian Militia. For nearly eight months, Smith had known that the shipment had not gone to the Lebanese Christian Militia. The serious implications of this falsehood are examined elsewhere [Section 4.8.4].
The Jordan episode warrants two conclusions. First, the strictures of the export permit and Armscor's standard conditions of contract appeared to matter little to Smith, Savides and Vermaak. Their supposed concern about where Armscor shipments ended up certainly did not extend to the alleged distribution of the first consignment to the Prince's men in Jordan. Second, the episode casts light on Vermaak's state of mind. It is difficult to believe that any responsible official could have believed that the first consignment was anything other than a black market transaction. Vermaak's supposed belief about the Jordanian destination of the consignment confirms the impression gained from his Glamco Yemen solicitation: that he cared little for respecting or observing the Cabinet classification; that the destination of SANDF stock sales was of minimal concern to him; and that he would, on his own telling, accept unexamined and far-fetched tales, and retail them to his superiors.
4.5.6 The Lebanese Christian Militia as a supposed end user:
Another deeply troubling aspect of the Vinland Saga shipment is the question of the Christian Militia's status in terms of the country classification. Smith acknowledged under questioning from the Commission that 'with hindsight' it might have been 'irresponsible' of Armscor to sell weapons to the Militia after the civil war in Lebanon had ended and the Militia had been banned. He also conceded that it might have been inappropriate in any event to have classified AK 47s as 'non-sensitive' weapons. Smith, however, sought to place responsibility for such classifications on the DFPC and in particular on the DFA. The question of institutional accountability is considered below [Section V].
4.6 The Arktis Pioneer shipment, 1994 - overview of developments
Armscor was under the impression that a second consignment of AK 47s would be
shipped fairly soon after the Vinland Saga. Indeed, the written Vermaak/Wazan
contract of 20 September 1993 made provision for two shipments as part of the
same deal. In anticipation, Bronkhorst in November 1993 applied for an export
permit, which was issued, in respect of the balance of the contemplated package.
The destination in the end user country on the permit was again indicated as
'Lebanon - Christian Militia' followed by a reference to Wazan, Beirut. Other
Armscor export procedures were in the meanwhile also activated. In January 1994,
Vermaak went to Switzerland to make general contact with agents, and to resolve
the question of the remaining portion of the AK 47 package. Vermaak met Wazan
and, separately, Hovsepian and the Prince - who had expressly requested that
Wazan should not be present.
The accounts of Vermaak, Hovsepian and the Prince agree on three aspects regarding their meeting. First, the Prince contested the quality of the first consignment. Both he and Hovsepian avowed later that the complaints about quality were in fact trivial, and that the professed dissatisfaction was a bargaining ploy. Second, Vermaak proved to be a determined bargainer. Thinking that Vermaak was resisting a price reduction in respect of the second consignment so as to procure some personal benefit, the Prince offered him a $100,000 bribe (or 'kick-back', as Hovsepian preferred to term it). This, to the Prince's admiration, Vermaak rejected, and reported to his superiors on his return to South Africa. Finally, the Prince, having apparently come to learn of Wazan's intelligence connections with Israel, insisted that Wazan should thereafter be excluded from all dealings between himself and Armscor.
Hovsepian also asserted in evidence that he told Vermaak at this meeting that the Vinland Saga shipment had gone to Yemen. He testified further that it was made plain that the weapons shipment under negotiation was also destined for Yemen. Vermaak's report to Armscor contradicts this. It claims instead that the Prince told Vermaak that, because the weapons in the first consignment were of substandard grade, Lebanon had rejected them, and the Prince had therefore been 'obliged' to take the weapons 'to his country (Jordan)': 'Here', Vermaak states, 'he decided to issue them to his own troops'.
An 'agreement' involving the AK 47s and a package of G3 rifles was reached at this meeting. This Hovsepian and the Prince regarded as contingent on their confirming an on-purchaser for the goods (Hovsepian distinguished between the Arabic terms for an 'agreement' and a 'contract'). Vermaak's report on the meeting envisages, likewise, that the transaction has yet to be finalised.
In fact, the envisaged finalisation did not occur. Complex negotiations followed in the ensuing months between various configurations of the main parties. What follows are only the critical points which emerge from the documentation and testimony about these negotiations:
4.6.1 Vermaak and Wazan: the $50,000 'repayment':
Vermaak appears to have had, at the least, a 'special relationship' with Wazan - and he accorded him special treatment. This emerges from an extraordinary episode, in which Vermaak in May 1994 procured a 'repayment' of $50,000 by Armscor to Wazan. This was in respect of an alleged 'prepayment' by Wazan on the second AK 47 package. The available documentation clearly indicates that there was no such 'prepayment'. This payment to Wazan lacked any lawful foundation and was thus improper.
One possible construction of the 'repayment' is that it may have been intended to 'compensate' Wazan for falling out of the projected deal between Armscor and the Prince in regard to the second consignment. The Prince had indeed undertaken to pay Wazan $50,000 for every transaction the Prince concluded with Armscor, so as to vouch that he was not cutting Wazan out of the connection for monetary reasons. Yet Vermaak brought Wazan back into the emerging deal in May, immediately after the alleged 'repayment' to him.
4.6.2 Vermaak and Wazan: the new EUC requirement:
The democratic transition in South Africa occurred in April 1994, and the new government took office in May. Vermaak visited Switzerland in May, and, though Hovsepian and the Prince denied meeting him, it seems that Vermaak did at least hold discussions with them about the package. By now, end user certificates were no longer discretionary but required for all arms exports. As Armscor submitted in argument, it is likely that Vermaak discussed this new obstacle with one or more of his projected partners at this time. The relevance of this is discussed below [Section 4.7.1].
4.6.3 Vermaak and the Prince: the Yemen deal falls through, and Lebanon re-appears:
The Prince in the meanwhile was concluding his arrangements with the authorities in Yemen. But on 21 June, Vermaak indicated to the Prince that South Africa could not be party to an arms sale involving Yemen. Vermaak was informed that the Prince 'was now looking for new buyers'. At this point, Vermaak's notes record: 'Johan [van Dyk] will now clear Lebanon with Foreign Affairs.' Shortly thereafter, in a fax to Wazan, Vermaak records that '[Prince] Anwar told me that he is a man of his word and that he will sell these items.'
There is, however, only one indication in the evidence that Lebanon was in any way in contention at this point as a possible destination for the weapons: in the computer records of the marketing section, a new transaction was entered on 7 June 1994, with a registration date of 10 June. Lebanon is given in the column headed 'country', and 'Elly/Joe' (Wazan/Hovsepian) as 'contact persons'. This is curious, since Vermaak believed that Hovsepian and Wazan were no longer in contact with each other. Furthermore, Hovsepian stated that, from the Prince's side, Lebanon was in no way envisaged or mentioned as a possible destination for the second shipment. The implications of Vermaak's allusion to 'clearing' Lebanon with the DFA are assessed below [Section 4.7.1].
4.6.4 Vermaak keeps Wazan fully informed:
Vermaak meanwhile maintained continuous contact with Wazan, keeping him abreast of the developments as far as the other parties' attitudes and actions were concerned.
4.6.5 Yemen is supposedly cancelled; Wazan gets details of the shipment:
In June 1994, the configuration of parties changed - or was made to seem to change. The deal between Armscor and the Prince was called off, ostensibly because Yemen was not acceptable as an end user. In a fax dated 26 June 1994, which the Prince and Hovsepian signed jointly, they note that 'for reasons beyond our control, we can not proceed with the transaction any more'. Only two days later, Bronkhorst faxed Wazan a detailed summary of the items in the second consignment 'as requested'. This fax was in large part a transcription of a fax sent earlier in June to Hovsepian.
4.6.6 Steenberg becomes the 'offeror' in a deal with the Prince:
In a further configuration, Steenberg had spoken to Vermaak on the evening of 20 June, just as the deal with the Prince was supposedly falling through. Steenberg was also in contact with Wazan: on 24 June, Wazan faxed a note to Steenberg insisting, somewhat urgently, that 'the bank draft' [for the second consignment] 'must not show any similarity to the previous ones we used [in the first shipment]'. This is a clear indication that a deception was being planned. The day after receiving details from Bronkhorst on 1 July, Wazan faxed Steenberg the particulars of the package, which Steenberg on the same day faxed to Hovsepian as a 'pro forma offer' for the goods.
The Prince and Hovsepian accepted this offer, and it became the basis for the second consignment. It thus seems clear that, from the viewpoints of Vermaak, Wazan, Hovsepian and Steenberg over the period late June to early July 1994, the deal was to proceed, in one configuration or another.
Significantly, Steenberg's 'pro forma offer' to Hovsepian, in addition to freight and insurance charges, carries an item, 'EUC cost: US$ 50,000.00'. The implication is that at this stage, already, it was envisaged that an EUC would be procured at a special cost.
4.6.7 Steenberg's 'offer' corresponds with existing offers:
As regards weapons and prices, Steenberg's 'offer' is largely identical to the one already on the table and supposedly cancelled: the details, in fact, were derived from Armscor's fax of 10 June to Hovsepian, which Bronkhorst supplied to Wazan two weeks later. Hovsepian had in the meanwhile supplied the identical details to Steenberg. The only difference was that Steenberg's 'offer' made provision for one additional AK 47 rifle (pushing the merchandise price up from $902 420 to $902 455), ostensibly to disguise the transaction.
4.6.8 Steenberg's 'offer' - the Prince's view:
Hovsepian and the Prince claim to have seen Steenberg as the supplier of the goods; not to have known that Wazan was now again involved; and to have been ignorant of why the end user certificate - which normally carries no charge - should require a premium of $50,000. In evidence, both Hovsepian and the Prince, denying ardently that they knew that a fraud regarding end destination was to be perpetrated, ventured improbable suggestions for their readiness to pay $50,000 for an EUC.
4.6.9 The deal was never off:
The most significant aspect of these events is that, despite the ostensible 'cancellation' of the deal between Armscor and the Prince in the latter half of June, the deal was at all times clearly proceeding. Armscor was still the supplier, and the Prince still the purchaser. Wazan and Steenberg had become active intermediaries. The Prince, meanwhile, finalised contractual arrangements on 17 July with his on-purchasers, the parastatal Yemen [Military] Economical Corporation.
4.6.10 End user clearance proceeds in South Africa:
Export arrangements were undertaken in South Africa. In pursuance of the proposal he noted on 21 June, Vermaak had set the machinery in motion for Wazan's proposed end user certificate to be cleared. In early August, Armscor's armaments control section requested DFA to approve the transaction, on the basis of a 'Lebanese government issued EUC' (the initial inquiry, two days earlier, had mentioned the 'Lebanon (CM)', but also envisaged supply 'to their Government'). DFA indicated that it had no objection, provided that a government EUC was obtained and sent to them. Hovsepian and Steenberg met in Geneva on 9 August, where the cheques for Steenberg's charges and Armscor's price were handed over. After this, Steenberg put in motion the shipping arrangements. He flew to South Africa to oversee the freighting. An export permit application by Bronkhorst on 17 August 1994 states the end-user as Wazan, but the permit van Dyk issued indicates the Lebanese government as end user.
4.6.11 Steenberg's three categories of end user certificates:
Steenberg admitted that the 1994 EUC was an act of misrepresentation. He assumed that Wazan had 'the means to get the green light' on the EUC. 'My assumption', he said, 'was that the EUC was checkable. I did not pay [Wazan] $50,000 for nothing.' From his evidence it appears that Steenberg considered that there are three categories of end user certificates: those which are authentic in that they accurately reflect the destination of the goods to a suitable end user; those which do not accurately reflect where the goods are going, but which are none the less 'checkable' (presumably because a source at the alleged destination will confirm them); and those like Wazan's EUC, which Steenberg denounced with grievance (despite his knowledge all along that the weapons were not going to Lebanon), as simply fake in that it was not 'checkable'.
4.6.12 Bills of lading:
The Arktis Pioneer had meanwhile reached Port Elizabeth, and on 25 August commenced loading the goods. The emergence of the bills of lading for this shipment, for which Steenberg was responsible, took a complicated course, which was in part calculated by Steenberg. One set designated the port of discharge as 'one Red Sea port'. This proved unacceptable to the ship owners, Elite Shipping of Denmark. They made it clear that they required the ship's true destination, Hodeidah (Kamaran range), to be expressly stated. The subsequent set of bills specified Hodeidah as the port of discharge, and the consignee as the 'Yemen Economical Corporation'. This Steenberg issued and signed on 25 August. Steenberg testified that there were two sets of bills of lading for the Arktis Pioneer shipment. Apart from the authentic set, he also produced another in order, as he put it, to 'lead the bird on a wild chase'. This was stamped non-negotiable, and stated the consignee to be 'Contex International Ltd', a name Steenberg blithely admitted he fabricated. It seems that the owners of the Arktis Pioneer, Elite Shipping, may have been party to Steenberg's deceptive stratagem. They received copies of both sets of bills, and faxed Steenberg in Johannesburg to ensure that one set had been stamped 'non negotiable'.
The 'original' or authentic bill of lading was released, on Elite's authority, on 26 August 1994, after the ship had sailed from Port Elizabeth. The ship reached Yemen but a dispute arose about off-loading the cargo. For the reasons indicated earlier[Section 4.2] , it is not necessary or desirable for the Commission to enlarge on this dispute.
4.7.1 21 June, 1994 - 'Johan [van Dyk] will now clear Lebanon with Foreign Affairs':
As recorded earlier [Section 4.6.3], at a time when Vermaak was supposedly turning Yemen down as a destination in his dealings with the Prince, a handwritten note he made abruptly records that van Dyk would 'now clear Lebanon' with DFA. The note is mysterious and suggestive. It was made at a time when there does not appear to have been, from any source, any talk of the consignment going to Lebanon. It resonates only in the marketing computer records for the week of 7 June, which note 'Elly/Joe' as contact persons in a deal with Lebanon. But this is at a time when Wazan was formally excluded from the transaction (except through Vermaak's surreptitious contact with him). Vermaak's note states that the Prince had undertaken to find 'new buyers'. It is not stated, or even suggested, where these might be. From the Prince's side, only Yemen (and at one point possibly Syria) were potential destinations.
This sudden and unexplained obtrusion of Lebanon as a supposed destination suggests an absence of any honest belief that the goods could genuinely have been destined for Lebanon. The note suggests that Lebanon was a fabricated destination, to be invoked cynically and instrumentally whenever the true destination of a consignment needed to be concealed. The note suggests in regard to the second shipment that Vermaak knew, after discussion with Wazan, that the deal could be reconfigured to include Wazan; Wazan would, as in the past, serve as a conduit supposedly to Lebanon. And it suggests in regard to the 1992 and 1993 shipments that Vermaak may have known that Lebanon was merely a facade.
4.7.2 August, 1994 - 'So , tell me, where is the ship going to this time, Michael?':
According to Steenberg, Wazan was at pains throughout the second shipment to emphasise that Vermaak was unaware that the true destination was Yemen. Yet, at lunch one day in Pretoria, before the despatch of the freight, Wazan absented himself from the table for a short while. Vermaak suddenly asked Steenberg, 'So, tell me, where is the ship going this time, Michael?' Steenberg, who was a bit nonplussed by the question, replied, 'The usual place, to Beirut.' When asked why Vermaak asked this question at all, Steenberg ventured: 'Perhaps he had a minor doubt.'
Steenberg could not explain the suggestive character of Vermaak's inquiry, or of his reply, 'the usual place'. And it is clear to the Commission that Vermaak had room for a great deal more than 'a minor doubt'. Vermaak's question seems without doubt to have been intended, and understood, as ironical. The 1992 Skybird shipment, in which Steenberg was involved, had allegedly gone to Beirut; the Vinland Saga shipment likewise had supposedly gone to Beirut; and the Arktis Pioneer was, for all Vermaak professedly knew, shortly due to sail for Beirut. Why then the inquiry? In its tone, it is fraternal, insinuating, and conniving. In the Commission's view it is compatible only with some guilty knowledge or expectation on the part of Vermaak. It suggests a shared knowledge in relation to the fabrication of the destination, as well as all that this fabrication entailed - namely, false documentation, deception and concealment.
Steenberg, by his own admission, was on occasion a liar who was prepared to deceive persons to attain his commercial ends. His evidence must be approached with circumspection. Yet Steenberg sought emphatically to protect Vermaak during his evidence. Steenberg even had recourse to implausible stratagems in order to maintain his cover for Vermaak. It is therefore extremely unlikely that he would have fabricated or distorted the lunch-time conversation in an effort to injure Vermaak. It seems more likely that in recounting the conversation to the Commission, he failed to perceive its grave inferential significance, implicating Vermaak in at least implicit knowledge of the unauthorised destination of that and other shipments. Vermaak's legal representative did not challenge the interchange in his cross-examination of Steenberg, and the Commission accepts that the conversation occurred substantially as Steenberg recounted it.
At the same time, Vermaak's inquiry may also indicate the possible limits of his knowledge at the time. Had he been conversant with all aspects of the charade, there would of course have been no need for him to make any form of inquiry as to where the ship was supposed to be going. If, however, as the Commission has found, the inquiry was ironical and collusive, it would strengthen the suggestion that Vermaak knew the true destination of the goods, or at least knew that their destination was prohibited. On an examination of all the evidence, the most likely inference is that Vermaak may have been ignorant of the actual destination; but knew that a scam was being perpetrated, and did not really care where the weapons were going.
4.7.3 Post-debacle events:
Events after the debacle, especially certain fax exchanges between Vermaak and Steenberg and Wazan strongly indicate that Vermaak knew that the Arktis Pioneer destination was unauthorised. In evidence, Steenberg initially claimed that, after the first press reports on the debacle appeared, he informed Vermaak on approximately 19 September 1994 that the ship was still in the Mediterranean. Mr Sheer, who appeared on behalf of the Commission, challenged Steenberg on this. He indicated that in his conversations with Steenberg, Steenberg had said that he told Vermaak on this occasion that the ship was in the Red Sea. So challenged, Steenberg shifted his ground, and eventually crumbled, admitting that he had informed Vermaak of the ship's true location before Armscor issued a damagingly inaccurate media statement claiming that the ship was in Lebanon.
Steenberg also claimed that he informed Vermaak about the Arktis Pioneer's destination only on about 5 October 1994. Yet after the debacle, and in October 1994 (the document is not specifically dated), Steenberg faxed a letter to Vermaak which indicates Vermaak's involvement in knowledge, from the outset, of the black market destination of the 1993 and 1994 consignments, and particularly in knowledge of Yemen. The letter states that 'the final destination was at all times known as Yemen'; and that 'prior [to] shipment, no formal indication was given to any parties as to what documentations was except indication was given that prior [to] shipment, the destination was advised as the Black Market'.
Steenberg's efforts to explain away this damning communication were particularly unconvincing. He sought to emend 'prior' in this fax so as to make it read 'after', claiming that his English was not very good. But he has lived in the United States for eight years, and he is perfectly if somewhat idiosyncratically fluent. He not infrequently used the word 'prior' elsewhere in his evidence, with no deviation from or uncertainty about its precise meaning. Steenberg's attempt to emend the fax of October 1994 in defence of Vermaak was transparently untruthful. This contributed to the conclusion, based on the other evidence and his overall demeanour, that Steenberg was seeking to protect Vermaak from the conclusion that Vermaak knew all along that the destination of the Arktis Pioneer and previous shipments was prohibited.
Faxes from Wazan to Vermaak after the debacle also indicate that Wazan sought to involve Vermaak in a falsely reconstructed version of events which would conceal their true nature. While Vermaak resisted cooperating in Wazan's design, the fact that Wazan assumed that Vermaak would be amenable to such a scheme is in the Commission's view a strong indication of Vermaak's prior knowledge of the illicit nature of the shipment. This conclusion is strengthened by an unsworn statement from Wazan which Armscor put in evidence before the Commission, apparently recorded by a partner of Armscor's attorney of record. Though unproven, this statement suggests that Vermaak knew at latest by August 1994 that the Arktis Pioneer consignment was destined for the black market.
The suggestion of collusion between Vermaak and Wazan is further borne out by the fact that the 'end user certificate' Wazan furnished in August 1994 in no way corresponded with that which van Dyk supplied to Vermaak (on Vermaak's request) as a suggested format. van Dyk admitted in evidence that the EUC Vermaak provided did "not even remotely match" the sample given. Yet Vermaak passed this on to van Dyk, who, claiming to rely on his trust in Vermaak, furnished it to DFA in order to procure authorisation of the deal.
4.7.4 The poker game:
Wazan, Vermaak, Steenberg and Hovsepian Counsel for Armscor submitted that, if the documents relating to the June/July negotiations are taken together with the parties' actions, the most probable interpretation is that 'a scheme of deception had been agreed upon between Wazan, Steenberg, and Hovsepian/Anwar to enable the transaction to go ahead once the end user certificate requirement had come into operation'. Counsel point out that, while the agreement between the Prince and Armscor was still in operation (that is, in the second half of June), 'a transaction was entered into between Steenberg/Wazan and Steenberg/Hovsepian/Anwar'. The only probable explanation, Armscor submits, is that at some point the role players 'got together and decided to pretend to Armscor that the transaction is cancelled, whereas in fact it would be facilitated by obtaining an end user certificate through Wazan'. Vermaak, Armscor suggested during cross-examination, was probably a party to this arrangement.
There is considerable substance in this submission, which suggests that there was an active conspiracy, involving Vermaak, Wazan, Steenberg and Hovsepian, to facilitate the deal and secure the delivery to Yemen of the consignment from Armscor. A conspiracy implies knowing action in concert in order to achieve a common, unlawful goal. The common goal certainly existed: to procure the shipment of goods from Armscor to Yemen. Yet the notion of a joint conspiracy may put the probable degree of common interest and joint action between Vermaak, Wazan, Steenberg and Hovsepian slightly too high. In fact, the parties had differing interests, which in certain respects conflicted with those of the others.
Thus, it was important for the Prince that Wazan should not be involved. It was presumably important to Wazan that the Prince should not know of his involvement. It was important to Vermaak that the Prince and Hovsepian, the parties to the deal already 'cancelled' because of Yemen, should not be seen to be involved. There appear to have been elements of deceit on the part of all parties, towards all parties.
What was transacted between Vermaak, Wazan, Hovsepian and Steenberg in that time can perhaps best be characterised, as Commissioner Nathan suggested during evidence, as a poker game. In a poker game each participant keeps his cards close to his chest, and attempts, through bluff, to conceal from the others what he really knows. The parties to this game of poker, and their respective bluffs, seem to have been:
The Commission has concluded, on the basis of the evidence set out above [Sections 4.5 and 4.6], that Vermaak in all likelihood knew of the black market destination of both shipments in the Wazan debacle. The deals were launched and implemented behind pretences which at times were paper thin, and were abetted by a sustained ignorance on the part of many of Armscor officials which seemed at times to have been calculated.
These indications are clearest in Vermaak's case. In his evidence, Vermaak emphasised the authority and responsibility of Bronkhorst and the administrative/commercial personnel in his section; the pressure and sales targets in his department; and the knowledge and participation of top management in crucial decisions. He showed great conversance and ease with the details of administrative requirements and procedures.
Yet Vermaak never sought to establish the bona fides of the foreign actors with whom he worked on the Wazan transaction. Of these, Wazan and Hovsepian are alleged to have been involved in criminal activity or to be under police investigation; and Vermaak soon after the debacle claimed that some or all of the persons he had been dealing with were thugs who posed a threat to him and his family. Even during the transaction, his written reports show that he harboured a measure of suspicion about some of these actors, and he indeed had good reason to be suspicious of all of them. None of this posed any obstacle to Vermaak's continuing to work with them. It was Vermaak's responsibility to check the bona fides of the foreign actors with whom he worked and, in particular, to heed any danger signals in his dealings with them. This he failed to do.
It is not an accident that Vermaak dealt with people like Wazan, Hovsepian and Steenberg: they were in fact precisely the kind of people who were prepared to assist him in evading the arms embargo, and who engaged in illicit black market trade in arms.
Vermaak insisted that he was at all times greatly concerned about the destination of weapons sold by Armscor: he would discuss this matter at length with any agent or client who contacted him, particularly if he had not previously worked with that person. He regarded observance of the end user classification as both a legal requirement and a matter of responsibility. In short, he claimed, Armscor always sought to ensure that its weapons ended up in the right hands. Much of the evidence in fact indicated the contrary. What emerged was a picture of abject irresponsibility in regard to arms sales and purchasers, on the part of both Vermaak and Armscor.
Weapons were sold with little regard for possible controls over their destination: thus, as Vermaak admitted, with an FOB transaction (which constituted the bulk of Armscor stock sales), the ship could, on leaving the harbour, turn left instead of right, and Armscor would be powerless.
Vermaak's irresponsibility was also evident in his disregard of procedures and controls within his department. In a stringent cross-examination, counsel for Armscor showed multiple instances of neglect, oversight and indifference on Vermaak's part. Why did Vermaak not at the time react to the apparent indications, appearing in monthly financial statements directed to him, that critical documentation was outstanding; that payments were overdue and in some cases unauthorised; and that the flow of money required attention? If his section was exceeding its targets so amply every year, some of the 'work pressure' must have been voluntarily accepted, or even been self-imposed. It would appear that Vermaak's distaste for administration probably coincided with a corporate culture which tolerated and may even have encouraged this approach.
4.8.2 Vermaak's subordinates: Bronkhorst
The witness who testified for the longest period was Mr Bronkhorst. Even though he was essentially an administrative functionary in Vermaak's department, he played a central role in the whole process of marketing and moving SANDF stock. At the stage he testified, many of the foreign actors had not yet indicated whether they would testify. Nor was it clear to what extent Vermaak would rely on his privilege against self-incrimination.
At the end of nine long days of examination, it was clear that Bronkhorst bore no direct managerial responsibility for the debacle. The Commission also concludes that he had no direct knowledge of the impropriety attending either shipment. Yet his administration was grossly deficient: paper work was grievously in arrear; documents were misleadingly back-dated; calculations in price determinations were ill-founded and frequently incomprehensible; and authorisations for the payment of sometimes considerable sums of money were fabricated. Bronkhorst correctly described the administration in relation to the two shipments as 'chaos'.
For this he blamed the extreme pressure under which marketing operated, and it is plain from the evidence that the section was short-staffed and over-burdened. Yet it is notable that in his evidence Bronkhorst frequently showed the capacity for exact recall of figures and financial calculations, and had an exact recollection of many items. On other occasions, he was unable to explain elementary errors and confusions.
Bronkhorst frequently drew up documents which triggered payments which were unauthorised. For this he blamed his boss, Vermaak. Yet under cross-examination by Armscor's counsel Bronkhorst was unable to give a wholly satisfactory account of his near-slavish adherence to Vermaak's instructions, which included the fabrication of documents and the falsification of dates. This raised the question whether Armscor's organisational culture was not steeped in the duplicity of the arms embargo era and its consequent evasions and untruths.
A further conclusion follows: that the ineptitude the marketing section as a whole displayed in regard to administration was the product of an organisational culture that placed a higher value on sales turnover than on compliance with rules, policies and procedures. To the extent that these factors may have been responsible for the debacle, they were the product of an attitude which cultivated its occurrence.
4.8.3 van Dyk and DFA
van Dyk admitted that the EUC from Lebanon did 'not even remotely match' the sample he had provided to Vermaak: the office, the position and the name of the signatory are signally absent. Yet van Dyk persisted, even under close questioning, in his denial that he had any reason for suspicion at the time. He claimed that EUCs differ in form and content from country to country; that other documents from the Lebanese authorities (which are authentic) were stamped identically to the forged EUC; and that the EUC seemed on its face authentic.
Yet van Dyk testified that he had in the past rejected EUCs in other circumstances. There is in the Commission's view little doubt that van Dyk's suspicions in the Arktis Pioneer shipment should have been raised by the end user certificate Vermaak handed to him. A further question is why reference was not made to the Lebanese mission in South Africa. van Dyk alluded here to the haste of the Wazan transaction, in which he handed the documentation to DFA only three days before shipping was due to occur. Yet, this haste should itself have been cause for deliberation about the transaction and the ostensible EUC.
Van Dyk repeatedly indicated in his evidence how he relied upon the bona fides of his colleagues in applying the system. He asserted that he had no reason to doubt Wazan or Vermaak. The transaction was concluded by his colleagues in stock sales, whom he trusted. Because of what he called Armscor's "ten year" connection with Wazan, "he had no reason for suspicion".
van Dyk also observed that, because the DFA had requested a copy of the EUC, and had not reacted to it, he felt reassured. The DFA, for its part, in answer to a written inquiry from the Commission, stated that -
The DFA accepted the EUC at face value because there was nothing to
suggest that the document was forged or invalid. For this reason, the DFA
did not take any further steps in investigating the validity of the EUC.
The circularity of this system of reliance and trust is clearly unacceptable.
4.8.4 Vermaak's immediate superiors:
Savides and Smith Under examination, Vermaak accepted an essential principle of responsible management: that delegating responsibility does not remove the accountability of the manager. Accordingly, even though Vermaak delegated responsibility to Bronkhorst or Strydom, if they did not fulfil their tasks, or did not fulfil them properly, he remained accountable.
In the Commission's view, this principle applied equally to Vermaak's senior manager in regard to his work and that of his department. Vermaak testified that nothing negative was ever communicated to him by his superiors before the debacle. Not only were no problems raised with him, but over the years he continuously received good merit points. Vermaak raised continuously with Savides the fact that his section was under great pressure because it was short-staffed, but nothing was done about this.
In fact, the work pressure in Vermaak's section grew: management raised his annual sales target from R10 million in 1992/3, to R30 million in 1993/94, and then to R50 million in 1994/95; and the various reasons for this pressure to sell were communicated to Vermaak. In addition, Vermaak and his section were accorded various prizes and awards in recognition and encouragement of their sales endeavours.
In the light of all this, it seems clear that senior management at Armscor was more concerned about the volume of stock sales than about the quality of work in Vermaak department, or the efficacy of the controls exercised over it. Put differently, as Vermaak stated in his evidence, selling arms and satisfying clients was more important than paperwork. This attitude appears to have been shared by his superiors, and appears to have been an integral part of the organisational culture at Armscor.
Vermaak testified that, in general, he kept both his subordinates and his seniors informed of his activities and of important decisions; and that this was true also in regard to the Wazan transaction. A range of documentary evidence before the Commission confirms this. The documents include requests for payment to Wazan signed by Vermaak's superiors; reductions in price signed by his superiors; reports on his visits overseas directed to his superiors; and information in one of these reports concerning the destination of the first shipment was read by Savides who discussed the matter with Smith.
What appeared to emerge, as is set out in greater detail below [Section V], was a consistent pattern of bureaucratic confusion, neglect and ineptitude, at all levels of Armscor. All witnesses, at all levels of responsibility, took recourse to work pressure and time constraints, together with their supposed reliance on the good faith, efficiency and authority of others, to justify neglect of procedures and defiance of form.
Savides had not been with Armscor as long as Smith or Vermaak, or even Bronkhorst, but in his short period of service, he participated in numerous questionable transactions. He was frequently unable to say why he had signed a particular document at all. He, like other officials, took recourse in their trust in and reliance upon Vermaak. In addition, he suggested that he was merely Vermaak's 'nominal' superior, and therefore that he did not exercise any real authority over Vermaak's conduct.
The Commission considers Savides' approach an extraordinary and unacceptable abdication of management responsibility over Vermaak. Savides stressed that he was not in a position to double-guess every transaction Vermaak undertook, or to undertake each time an independent scrutiny of transactions or actions Vermaak placed before him for approval. This may be so. None the less, documents Savides was given to sign - such as claims for 'repayment' to Wazan of alleged 'shipping costs' - begged for examination, and proved upon simple inquiry to lack any semblance of authentication or validation.
Savides appears to have been, in relation to Vermaak, a weak and ineffectual manager; and to have been 'nominal', when structure and responsibility required him to exercise substantive control and authority. He was appointed and paid to manage, and did not. His failure to exercise appropriate control and supervision over Vermaak, in the view of the Commission, contributed to the debacle that ensued.
Smith was in every respect a more controversial and more important figure. Armscor's legal team expended great energy, expressed at times vehemently, in an attempt to shield Smith from adverse inferences about his role in the debacle. The Commission has considered with great care the defence of Smith which Armscor assayed. This is that he was busy; that he was senior; and that he had no reason to mistrust his subordinates or to inquire after their manner of operation.
For a number of reasons, the Commission cannot accept the suggested exoneration of Smith. He was the General Manager in charge of Import and Export Control. This was a critical role, and Smith was an experienced and worldly incumbent. Yet the debacle occurred under his supervision, and he failed to take any steps, managerially or organisationally, to prevent it.
In addition, Smith's own conduct is in signal respects open to serious criticism. The report that he signed and presented to the Minister was inaccurate in a number of material respects. This includes at least one vital count: the statement that the 1993 Vinland Saga shipment had reached the Lebanese Christian Militia. This statement was false. Smith had known, for at least seven months, that the statement was untrue. His repetition of it to the Minister, in a crucial report on an incident which had profound implications for Armscor and South Africa's international relations, amounted to serious misconduct.
For this, despite his disavowals, and despite the energetic protestations of the Armscor legal team, Smith must take unambiguous responsibility. In addition, Smith failed to inform the Commission during his evidence in November 1994 that he had been officially informed in June 1994 that a previous shipment of Armscor weapons supposedly destined for Lebanon (the 1992 Skybird shipment) had been confiscated in Belgium in the course of judicial proceedings. Smith wrote a letter in reply to an inquiry about this confiscation. In his reply, Smith volunteered the fact that, to his knowledge, the Lebanese Christian Militia - the supposed recipients - had links with Croatia - a country subject to a United Nations embargo, and which appeared on the prohibited Category III list in South Africa's country classification. It is hardly worthy of argument, as set out below [Section 5.5.4], that Smith could have 'forgotten' or 'overlooked' the fact that this significant development had been drawn to his attention, shortly before the Wazan debacle, and only months before he testified before the Commission. If he did, his conduct amounted to such serious neglect of his fundamental duties as an Armscor general manager, that it was hardly less damaging than deliberate oversight would have been.
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