Trial Report: Thirty-Eight

This report covers the period 29 January - 2 February 2001

Monday January 29, 2001

Monday, January 29, Swiss pharmacologist Dr David Chu was the 131st witness for the State and the first to take the stand in 2001.

Chu, 60, holds dual Swiss and Canadian citizenship and is of Chinese extraction. He obtained a B Sc at the University of Manitoba in 1964, followed by an M Sc in pharmacology and his doctorate, also in pharmacology, from McGill University in Montreal in 1972. Chu gained practical laboratory experience in zoology in Sweden, in cardiology at the Basel Hospital in Switzerland and Hammersmith Hospital in England before going to work as a clinical research assistant with pharmaceutical giant Hoffman-Laroche in Basel from 1978 to 1981. From 1982 he was self-employed, acting as a consultant to smaller research companies. He met Basson at a social function in Switzerland in late 1988, and in 1990, became managing director of Medchem Forschungs, a company specifically set up by Basson to promote Roodeplaat Research Laboratories in Europe as a pharmaceutical contract research facility.

On March 14, 1989 Chu and Basson signed a contract in Switzerland which gave Chu 16 weeks to find a market for RRL's services. The contract states that if information about the South African government contracts was needed for this purpose, it would be supplied by Basson. Chu was to be paid 150 000 Swiss francs for the task, and report monthly to Basson on progress. He received 75 000 francs immediately, the balance in two installments. Chu was under the impression after his visit to RRL that the company was a commercial enterprise and only found out during consultation with the Prosecutor over the weekend that it was a military front company.

Chu made it clear from the outset that in order to sell RRL's services to the target market, Swiss and German pharmaceutical companies, RRL would have to be Good Laboratory Practice (GLP) certified, and thus would have to comply with standard international laboratory procedures in conducting experiments, keep detailed documentation and comply with international standards regarding instrumentation. This certification never took place.

In 1992, Chu became managing director of another company, Inter-Business Solutions, which was set up to serve smaller businesses in the information technology field, specifically by supplying them with state-of-the-art computer network systems. Data Image Information Systems was one of IBS's clients and IBS provided the company with sophisticated computer equipment. (Note: Data Image Information Systems was the company responsible for scanning the technical information of Project Coast onto CDs after which the documentation should have been destroyed).

Chu was questioned by the state prosecutor, Adv. Anton Ackerman, about a personal account which he opened in Switzerland in 1989. 300 000 Swiss francs for Medchem Forschung's share capital was deposited into this account on September 30, 1989, while on November 14, another 450 000 Swiss francs - the operating capital - went into the same account. Ackerman put it to Chu that Basson claims the 450 000 Swiss francs was payment for 500g of the Thymus Peptide. Chu denied this, saying no such substance was ever supplied to Basson by or through Medchem Forschungs. A company mentioned by the defence in regard to the Thymus, Med-Alfa, did, in fact, produce a thymus extract - which is not the same as the thymus peptide - but Medchem Forschungs was not involved in any such deal, and Med-Alfa soon went bankrupt. According to Chu, 500g of Thymus Peptide is an extraordinarily huge amount, and major facilities would be needed to process it. To the best of his knowledge, Basson wanted to obtain Thymus Extract from Med-Alfa, and this substance is used for cosmetics. It would not be unusual to buy 500g of the extract.

On September 12, 1991, Chu opened a personal account at Arzibank on Basson's request. Basson said he had friends in England who had a cash-based business which generated large amounts of money, on which they wanted to avoid paying income tax and asked Chu to launder the funds for his friends. A day after the account was opened, Chu received, by courier from England, amounts in cash of £55 000, £23 000 and £109 000, which he paid into the account. On October 8, he transferred £180 000 from the account to that of Charles van Remoortere in Luxembourg, the so-called Barcelona account, on Basson's instructions.

On November 19, the courier brought Chu another £150 000 in cash. Further deposits, in the same manner, were £195 000 and £189 000, both on December 6, 1991. On Basson's orders, Chu transferred out of this account: £468 000 to the Barcelona account on July 15, 1992; £150 000 to the Barcelona account on August 26, 1992; £67 800 on November 23, 1992 to John Purvis, the Jetstar pilot, and on the same day, £100 000 to Colin Chisholm (unknown to Chu).

On June 29, 1992, Chu paid £60 000 from his account to Medchem Forschungs, where it was recorded as partial payment for penicillin (Chu's company had acted as a middleman in a deal to supply the UN with penicillin for Iraq). On April 29, 1992, he withdrew £33 800 in cash and gave it to Basson. On February 2, 1993, £250 000 was transferred by Chu to Blowing Rock Controlling Investments. Chu has no idea what this company was, or why he had to transfer the funds, except that Basson told him to. Reserve Bank documents record this payment as being in relation to the sale of Para-Chloro-Ortho-Cresol technology. No such sale was ever discussed with Chu and the formula as given is unfamiliar to him. The buyer is named on the bank documents as the MAIS Corporation, situated in the same street as Medchem Forschungs' Basel offices. But there is no street number, and Chu says he knows of no such business in that street.

Other payments made by Chu from his account at Arzibank were £6 000 to Roger Buffham, $8 000 to Bell Flavours, Chicago, Illinois and £55 000 to the Bank of Ireland for Datacor Financial.

On November 20, 1992, Chu opened another personal account, this time at a Zurich bank. Arzibank had informed him they were not comfortable with the large amounts of cash from unknown origin flowing into the account, and were extremely reluctant to accept any more such deposits. Chu discussed this with Basson, who told him there would only be a few more deposits made by his friends, so would Chu mind opening another account. The cash began pouring in almost immediately: £194 000 on December 11, three separate amounts of £177 000, £6 700 and £5 100 on January 7, 1993. [Note: by this time Basson was no longer employed by the SADF, having been forced to take early retirement in December 1992] The funds were moved out almost as quickly. Chu transferred $100 000 to Atlantic International on January 12, 1993, £20 000 to Hoffman Laroche care of Medchem Forschungs, Basel - introductory fees for the penicillin deal - £100 000 to Van Remoortere's Barcelona account in Luxembourg.

On January 18 the courier brought Chu two separate money parcels - £14 700 and £164 000. On February 2, Chu paid £250 000 to BRCI, still having no idea who this company was. Ackerman calculated that a total amount of £1,5-m in cash was paid into the two Chu accounts over the 17-month period that Basson's "friends" couriered over their tax-free takings. Chu has no idea where the money came from.

Tuesday, January 30, 2001

Chu testified to knowing D John Truter, financial manager of the official Project Coast, who was introduced to him by Basson as a financial consultant accountant and trustee of Basson's investment funds. Truter told Chu he had considerable funds which he was looking to invest on behalf of other clients, but needed Chu's help. Truter assured Chu that transactions would be absolutely legal and Chu agreed to assist. Shortly afterwards, $4,6-m was deposited into the account of Chu-PM Trading, set up for this purpose on May 21, 1991. Four separate payments were made to Medchem Consolidated Investments and D J Truter Financial Consultants from this account during 1992. The account was extremely active, with payments being made almost immediately after deposits were paid in. Three cash withdrawals - 231 750 Swiss francs on August 2, 1991, £20 000 on April 4, 1992 and £6 200 on July 23, 1993 - were made by Chu. The withdrawals were at the request of Basson and Chu gave him the money in each instance. Large sums were also transferred to the Luxembourg account which Charles van Remoortere had allowed Basson to use.

Chu said that when he first met Basson towards the end of 1988, the subject of using calf thymus extract to treat AIDS was discussed. Basson told him that he was involved with OPALS, a pan-African organisation dedicated to fighting AIDS and which enjoyed the support of French first lady Danielle Mitterand, the honorary president of OPALS. The organisation was staffed, according to Basson, by eminent international scientists, including Professor Marc Gentilini, who according to Chu is "the man who identified the cause of AIDS". The document outlining the aims of OPALS claims that Gentilini, of the Pitie-Salpetriere Hospital in Paris was actually the leader of OPALS.

Basson explained that his role in the English-speaking sub-Saharan African states was to organise various projects, including research and development for anti-AIDS drugs, building of clinics and diagnostic centres and the purchase and stockpiling of drugs needed to treat the opportunistic diseases that plague HIV-positive patients. Basson told Chu that the project required funding before it could get off the ground. Chu told Basson that he may have a source of funding and Basson said that he would be able to get the South African government to guarantee a loan. Chu then explained the complex details of the transaction which involved the establishment of a Cayman Island account.

While Ackerman was leading Chu through his evidence on this matter he was interrupted by Judge Willie Hartzenberg, asking which charge in the indictment this document was relevant to. Ackerman told the judge the document was relevant to the entire fraud case against Basson, namely his business transactions for personal gain and failure to disclose his interest in the various companies listed in Charge 20, of which PCM was one. The State had indicated at the start of the trial that it would show Basson had not been acting in the interests of Project Coast in conducting his international business deals, but had assumed the role of wealthy businessman for his own account. Hartzenberg countered saying that General Knobel had testified that playing the role of international businessman was exactly what Basson was supposed to do in order to hide his military links. That was his cover story.

Ackerman explained that the State case was based on the premise that Basson was pursuing his own interests, using SADF funds, and said he wished to rebut the defence that all business deals conducted by Basson were a front for Project Coast. Chu had been told by Basson that the Contresida Trust had been set up with the sole purpose of administering the loan for the anti-AIDS project, through PCM International Inc, Cayman. Evidence before the court showed that Basson was the sole shareholder of PCM, and the document stated clearly that "we have identified a facility near Johannesburg which would be ideal for our purposes".

Chu had testified that he was told Delta G Scientific was engaged in normal chemical synthesis, but was not able to confirm that the facility referred to in the document was Delta G. However, the State would contend that the OPALS scheme was designed for the sole purpose of acquiring funding for PCM to purchase Delta G.

Examination of the witness continued. Chu said that he was aware that Basson had been arrested in Switzerland in 1993 and said that he had assisted Basson to get legal counsel. Chu was also called on to testify at the inquiry some time after Basson's arrest, where he was questioned by both the Swiss authorities and Basson himself. Chu told the inquiry that he knew Basson as a businessman, and that, prior to his arrest, Basson had discussed with him the possibility of temporary residence in Switzerland, because he spent so much time there. Basson also questioned Chu about whether or not he knew Jurg Jacomet - he did, having met him twice, briefly, towards the end of 1988 as a businessman.

Cross-examination began with Chu confirming that Basson never received any personal financial benefit from Medchem Forschungs. Cilliers said his instructions were that Chu had not been completely frank with the court regarding the circumstances under which he met Basson. In fact, Basson had been told about Chu in advance, and eventually, Chu introduced himself to Basson via Jacomet, who was involved in a variety of sanctions-busting deals. Cilliers went on to say that it was because Chu was known to be involved in sanctions busting in East European countries and in money laundering that Basson had wanted to work with him - Chu denied these allegations.

Cilliers also claimed that Chu was involved in bogus deals from which he derived benefit - such as the sale of penicillin to Iraq. Chu denied that the deal was bogus. Cilliers questioned Chu about his relationship with people such as "Ray", "Simon" and "Dieter" - claiming that they were "East bloc" intelligence agents. Chu said he knew only a Dieter Dreyer who lives in Switzerland and where he runs a car rental agency. He later recalled association with a "Ray" and "Simon" but denied Cilliers claims that they were intelligence agents.

Cilliers also put it to Chu that he was aware of Basson's contact with the Libyan Intelligence community. Chu denied this saying that late in his association with Basson, Basson mentioned that Libya was a potential buyer for Roodeplaat Research Laboratories. Cilliers said that proof that Chu knew of Basson's contact with the Libyan agents was that he had accompanied Basson on a trip to Tunisia where Basson had met the agents. Chu denied knowing who Basson met with - saying he had not been allowed to leave the airport building.

Cilliers questioned Chu about the nature of work done at Medchem Forschungs and Chu admitted that no work was done at the company. He said this was because RRL was never GLP certified. Cilliers drew attention to the payments that Chu had made and implied that it was obvious that the company had merely been established to launder SADF funds.

Cilliers asked Chu about the MAIS corporation saying that it was situated in the same street as Medchem Forschungs. Cilliers said that MAIS was a front company for Russian intelligence agents, and was closely involved in the hiring out of Russian scientists on a contract basis to the Western world. Chu denied knowing anything about the organisation.

Turning to the huge amounts of cash paid into bank accounts on behalf of Basson's friends in England, Chu said he was merely doing a favour for Basson. But, says Cilliers, what else was this but money laundering and abetting tax evasion? And had Chu not collected some parcels of cash himself in England? He had told OSEO investigators that he had done so. Chu says he had forgotten this, but remembered that once he went to the UK and collected £30 000 in cash to pay into his account. But, he pointed out to Cilliers, he had also told the Office for Serious Economic Offences that he had been extremely uncomfortable about the large amounts of cash he was handling, and at some point, suspected there was "something fishy" about the arrangement. But when he raised his concerns with Basson, he was assured that there would be only one or two more transactions. And how much commission had he been paid for his trouble, Cilliers asked. Between 20 000 and 25 000 Swiss francs, said Chu, who was then forced to acknowledge that the cash transactions were nothing else but money laundering.

The court adjourned until Thursday.

Thursday, February 1, 2001

The cross examination of Chu continued. Cilliers asked Chu about $4,58-m which was paid by SA Defence Force for cancelled contracts (at Delta G) and round-tripped through Switzerland before being paid to Medchem Consolidated Investments in installments. Chu says it was not until consultation with prosecutor Anton Ackerman in the past week that he became aware of the military origin of the money, having up to now believed the funds emanated from Blackdale or a European pharmaceutical company. Cilliers said he was lying, and that he knew at all stages that the money came from South Africa, was transferred abroad by Volkskas Bank, and was to be paid to Medchem Consolidated Investments for Delta G Scientific. Chu denied this saying that he never was aware of the SADF involvement.

Cilliers dealt with specific payments through Switzerland which Chu had knowledge of, in each case arguing that Chu was aware of the SADF origins of the funds. In each case Chu denied the allegations.

The cross-examination and re-examination of Chu was completed. The next witness will be Christopher Marlow.

This report has been prepared by Chandré Gould and Marlene Burger. Chandré  Gould is a research associate at the Centre for Conflict Resolution working on the Chemical and Biological Warfare Research Project. Marlene Burger is monitoring the trial  as part of the CCR Chemical and Biological Warfare Research Project. The Chemical and Biological Warfare Research Project is funded by the Ford Foundation, the Friedrich Ebert Stiftung and the Norwegian Government.

Centre for Conflict Resolution, UCT, Private Bag, Rondebosch, 7701, South Africa Tel: (27) 21-4222512 Fax: (27) 21-4222622 Email: [email protected]