This report has been updated with additional information from the U.S. government and research by Kharon.
The U.S. Treasury Department on Thursday imposed sanctions on a network involved in corruption and influence peddling in South Africa that ensnared major international companies and banks, and led to the ouster of a president.
The India-born Gupta family has been implicated in several corruption schemes in South Africa, allegedly stealing hundreds of millions of dollars through illegal deals with the government, according to the Treasury. They used overpayments on government contracts, bribery and other corrupt acts, obfuscating their efforts through a network of shell companies and associates, the Treasury said. Ajay Gupta, Rajesh Gupta and Atul Gupta were sanctioned on Thursday, along with Salim Essa, a business associate of the family, under the Global Magnitsky Act.
“The Guptas and Essa have used their influence with prominent politicians and parties to line their pockets with ill-gotten gains,” said Treasury Under Secretary Sigal Mandelker.
The Guptas immigrated to South Africa in the 1990s; their business interests expanded due to their close relationship with the former president Jacob Zuma, the Treasury said. The Guptas’ tale has been widely reported in Western media; the family’s legacy in India has been “elevated to myth,” and “their story is told like a parable,” according to a December 2018 New York Times report.
They “found eager partners at all levels” of the ruling African National Congress party, including Zuma, the Times report said. The ties to Zuma led to allegations of “state capture,” a term describes a form of corruption in which business leaders and politicians exploit a country’s policy apparatus to advance their own self-interests. Zuma has denied wrongdoing, saying he’s “led positively and honestly.” The ensuing scandal led to Zuma’s resignation, and a South African government investigation is ongoing, according to media reports.
“The United States strongly supports ongoing efforts by the government of South Africa, including its independent judiciary, judicial commissions of inquiry, and law enforcement agencies, to investigate and prosecute alleged instances of corruption,” said Secretary of State Mike Pompeo.
Ajay Gupta, the patriarch, formulated the family’s business strategies and controlled its finances, the Treasury said. Atul Gupta oversaw the family’s outreach to corrupt government officials and Rajesh Gupta cultivated relationships with the sons of South African politicians, according to the Treasury. Ajay Gupta, in an October 2018 interview with The New York Times, denied the accusations, saying the family was the victim of a politically motivated witch hunt. The family left South Africa when Zuma stepped down, and they are believed to be in Dubai.
The family leveraged its ties to top officials by offering money to members of the South African government, or to help officials elevate within the government, in exchange for their cooperation with Gupta business efforts, according to the Treasury.
It cited an instance, according to media reporting, in which Ajay Gupta promised millions of dollars to a prospective finance minister in South Africa in exchange for his help with removing government officials considered to be stumbling blocks to the family’s enterprises.
In another instance cited by the Treasury, Rajesh Gupta purportedly promised a cut of a large scale development project to a provincial minister in return for the minister’s assistance. While making the offer, Rajesh Gupta apparently referred to two others at the meeting as having received similar offers in return for their help with a mining project, according to the Treasury.
Media reporting, citing leaked documents and whistleblowers, has drawn widespread scrutiny to the Gupta family’s business ties in South Africa with major international firms and financial institutions. It also contributed to the collapse of a London-based public relations firm.
German software giant SAP SE said in its 2018 annual earnings report, posted in February, that the company received whistleblower information alleging conduct that may violate anti-bribery laws in South Africa and the U.S., including the Foreign Corrupt Practices Act (FCPA). SAP said in 2017 that it had disclosed its ties to the Gupta family to U.S. authorities.
The company is conducting an internal investigation, and it is cooperating with probes in the U.S. and South Africa, it said in a U.S. regulatory filing.