Canada's export credit agency is worried that a Canadian-financed Bombardier luxury jet could become the escape vehicle for the controversial Gupta brothers as they flee a corruption prosecution in South Africa, according to court papers filed by the agency in Johannesburg.
Excerpts from the documents were reported by a South Africa newspaper and confirmed to The Globe and Mail by a reliable source familiar with the court documents that EDC filed.
The Guptas are refusing to surrender the aircraft, and the tracking device on the Bombardier jet has been switched off in an attempt to hide its whereabouts, the documents say.
The Guptas, business partners of the son of former South African president Jacob Zuma, are at the heart of a corruption scandal that led to Mr. Zuma's dramatic late-night resignation last week. Five of the Gupta associates and family members were arrested by police last week, and several others are now the target of a police manhunt.
For years, the Guptas have flown between South Africa, India, Dubai, Russia and Switzerland on their private Bombardier Global 6000 jet, which they purchased from Bombardier for US$52-million in early 2015.
The Guptas obtained 80 per cent of the purchase price in a loan from Export Development Canada, the federal Crown corporation that helps Canadian exporters and their clients.
Late last year, the Guptas began defaulting on their loan payments and EDC cancelled the US$41-million loan. Since then, the federal agency has been trying to repossess the jet, without success so far. In documents filed in a Johannesburg court, EDC says the Bombardier jet could be used for unlawful and corrupt purposes, such as fleeing from justice or taking money out of South Africa.
The documents were filed to support EDC's legal efforts to force the Guptas to surrender the jet. The documents also ask South Africa's aviation authority to cancel the jet's registration so that it will be grounded.
In recent weeks, flight-tracking websites have shown the Gupta jet flying between Switzerland, France, Dubai, India and Russia. The documents, filed in the Johannesburg court last week, say that the jet's tracking device has now been switched off, apparently after it was flown to Moscow earlier this month.
The court documents also cite a large discrepancy between the financial statements that the Guptas provided to EDC in 2014 and the realities of their finances as described in recent court filings by South African prosecutors. If the prosecutors are correct, the Guptas deceived EDC by providing a "grossly overstated" estimate of their income and assets, the EDC court documents say.
Critics have questioned whether EDC conducted an adequate "due diligence" review of the Guptas when it approved the loan in 2014. One Canadian human-rights group, Above Ground, says it will push for reforms that require the EDC to conduct a more rigorous screening of its potential clients. The agency's enabling legislation is due to be subject to a parliamentary review this year.
In December, when EDC confirmed its cancellation of its loan to the Guptas, the agency acknowledged that the "political exposure" risks of its dealings with the Guptas had increased. But it has denied that there were any mistakes in its due-diligence process.
The political influence of the Guptas has been widely reported for many years in the South African media and in investigations by independent watchdog agencies. In 2013, for example, the Guptas obtained the use of a military airport in South Africa so that a planeload of wedding guests from India could bypass the normal immigration and customs procedures. An inquiry found a series of illegalities in the incident.
The India-born Gupta brothers, who controlled an empire of South African mining companies and media outlets at the peak of their power, were so influential that they allegedly hand-picked their favourite politicians for appointments in Mr. Zuma's cabinet.
Last month, in sworn statements filed in court, South African prosecutors said the Guptas had pocketed about US$20-million in government money that had been intended for impoverished farmers in a dairy project. The government project was a "well-orchestrated plan" to "swindle" the government, and almost all the money ended up in the bank accounts of the Guptas and Gupta-controlled companies, the prosecutors said.