How undercover police infiltrated a criminal network that spent years hiding behind a curtain of shelf companies, Swiss bank accounts and pseudonyms.
In June 2009, on a cool summer’s day in northern Germany, an HIV-positive man collected his regular antiretroviral (ARV) medicine prescription from his local pharmacy. Opening the drugs at home, he was shocked to find that – although sealed – not every blister contained a pill. This single discovery in a pack of Viramune, the trade name for nevirapine, unleashed a series of investigations that would expose a multinational pharmaceutical fraud operating in the shadows across a dozen countries in two continents.
The pharmacy reported the incident to the manufacturer, GlaxoSmithKline (GSK), who tested the product and concluded they were original Viramune pills inside fake packaging.
GSK opened a case with the Hamburg police.
The police worked methodically back down the supply chain. From the pharmacy they traced the wholesaler – one Ernst Schwarz, an elderly and seemingly respectable businessman from the far northern German resort island of Sylt.
Specialised medical fraud investigators from the German federal police picked up the case.
Search and seizure operations at Schwarz’s home and business premises uncovered a trove of documents, and a picture of his international network began to emerge.
Police discovered that Schwarz had bought thousands of packs of suspect HIV medicines from Moses Kraus, a wealthy Zurich businessman known to associates simply as “Mosi”.
The investigation snowballed as Swiss medical authority SwissMedic got involved.
And from Switzerland, the scent took investigators to South Africa, where nevirapine was made available to HIV-positive pregnant women and their babies after a fierce and drawn-out court battle between the country’s largest HIV activist group, the Treatment Action Campaign, and then health minister Manto Tshabalala-Msimang.
Research has shown that nevirapine can reduce the risk of HIV transmission from a mother to her baby by half. From 2004, nevirapine has also been used as part of HIV treatment for some adults and, for a short time, was also used as part of paediatric HIV treatment.
LISTEN: How an international syndicate profited from Southern Africa’s HIV epidemics
The plot thickens
In April 2010, another suspicious consignment of HIV medicines turned up in Germany – this time it was 900 packs of Norvir, an ARV manufactured by British pharmaceutical giant Abbott.
The batch number matched a consignment of 1 043 packs of Norvir that Abbot had distributed to the German market more than a year previously.
Laboratory tests on the Norvir capsules indicated they were “a different colour to the original” and that their outer packaging had been “falsified”.
Abbott concluded that these were “original products that had passed their expiry date, or had not been transported in accordance with ‘cold chain’ requirements”.
For the safety of users, ARVs must pass from end to end of the supply chain under controlled temperatures.
Investigations traced this dodgy Norvir back to companies owned by French-Tunisian businessman Antoine Mekni, who had bought the supplies from Rainbow Pharmaceuticals in South Africa.Mekni could not be reached for comment for this article.
James Buckley was your everyday kind of guy with a wife, children and a mid-sized house in the nondescript urban sprawl north of Cape Town. But in 2005, Buckley appears to have hit on a get-rich scheme that would change all that.
Buckley owned Rainbow Pharmaceuticals, a wholesale medical supplier. Investigations revealed that Buckley had been in contact with a pharmaceutical wholesaler in Ger-many, whom Buckley would occasionally request to send him sample packs of Norvir.
Buckley explained he needed German-language packaging because he was bidding for medical supply contracts for clinics and hospitals in German-speaking Namibia.
If he won the contract, he promised, bigger orders would flow back to the wholesaler in Germany.
But investigators speculate that Buckley did the opposite. These single samples of German-language packaging allegedly became the template for hundreds of fake packs later found in Germany, many of them containing expired or damaged capsules.
Business records obtained in Switzerland indicate that Buckley supplied 3 500 packs of Norvir between 2006 and 2009, invoicing Mekni €1.02-million in total.
Life was good. In 2008 Buckley splashed out on a R1.7-million house in Cape Town and a R1.25-million holiday home in Yzerfontein on the West Coast, deed office records show.
A Swiss bank account used to keep profits
The man who allegedly introduced Buckley to this lucrative European connection was Izak Coetzee, a brawny Johannesburg businessman with his finger in several pies. One of Coetzee’s pies was competing in the medical supply business in South Africa and neighbouring countries. Another was the import and export of goods between South Africa and the rest of the world.
SwissMedic identifies Coetzee as Swiss businessman Moses Kraus’s “contact” in Africa, taking Kraus’s orders for HIV medicines, sourcing them from Buckley and Zambian Alexander Lawrence, and then dispatching them by airfreight to Kraus in Zurich.
Contacted for this story by Swiss magazine Beobachter, Kraus confirmed: “My main contact in South Africa was Coetzee. I was hardly ever in touch with Buckley, or Lawrence.”
Kraus had registered his medical trading companies in Panama, where nonresident companies pay 0% tax. Morgan & Morgan, a Panamanian law firm that specialises in incorporating companies, provided the nominee directors – shielding Kraus’s ownership from outside view.
Kraus also banked at the exclusive P&P Private Bank in Zurich, which has been in the hands of a single Swiss banking family for eight generations. Until very recently, it was a criminal offence in Switzerland for banks to disclose any information about their account holders to third parties.
After Coetzee completed four successful deliveries to Kraus from late 2007 to early 2008, Kraus helped to arrange Panamanian shell companies and Swiss bank accounts for Buckley and Coetzee. Kraus did the same for Lawrence in 2009.
According to the SwissMedic verdict against Kraus, Coetzee, Buckley and Lawrence, each personally visited P&P Private Bank’s sleek Zurich lakefront premises to open their new accounts.
Kraus confirmed to Beobachter that “they all came to Zurich and I went to P&P bank with them”.
Immediately afterwards, Coetzee wrote a thank you to his new private banker for “the good service … and hospitality”.
Kraus could now receive invoices from his Southern African suppliers’ Panamanian front companies and pay them into their secret Swiss bank accounts. The Johannesburg-Zurich supply chain was now tax-free and cloaked in anonymity.
Perhaps reflecting this newfound sense of security, from May 2008 the deliveries to Kraus quickened pace. In all, Kraus received 15 consignments from South Africa that year and another 16 in 2009.
Kraus sent the medicines on from Zurich to Brussels, then by road to Antwerp, before a final truck journey across the Dutch-German border brought them to Ernst Schwarz’s warehouses in Sylt.
SwissMedic believes that Kraus and Schwarz shared at least €1.8-million in profit from these drugs.
Extrapolating from SwissMedic’s figures, Kraus could have paid his Southern African suppliers as much as €1.2-million.
Kraus told Beobachter that he “never wondered why such big quantities of these drugs with German packages came from South Africa”.
“In this business, you don’t ask questions. As long as the stuff is not counterfeited or stolen. I hope it was not stolen, at least …”
Kraus said he was “no criminal” and had been “dragged into this shit by others”.
Schwarz died in 2014.
Contacted telephonically, Coetzee said his only role was to introduce Buckley to a European supplier. He did not name the supplier and did not respond to further written questions.
Lawrence denied any involvement, suggesting the Swiss had misidentified him.
LISTEN: A 10-year investigation finally fingers Southern African ARV thieves
Erasing the paper trail
Although the fallout from the German customer’s discovery of the empty pill pack in June 2009 alerted the suspects, Swiss investigators were slow to react.
When SwissMedic belatedly froze Coetzee, Buckley and Lawrence’s Zurich bank accounts in November 2010, they found Coetzee’s and Buckley’s were empty. Lawrence’s account held €6 024,16.
In South Africa, where the Medicines Control Council and the South African Revenue Service had picked up the scent from the German police, Buckley was already liquidating his assets.
Perhaps mindful that he might be targeted for asset forfeiture, Buckley took the unusual step of bringing a liquidation application against his own company, Rainbow Pharmaceuticals, in April 2010.
Deeds office records show that Buckley also offloaded three houses in 2011, two of them for less money than he’d paid for them.
Finally, in November 2011, the South African Police Service’s commercial crime unit raided Buckley and obtained enough evidence to convict him for trading medicines without a licence.
Buckley received an R80 000 fine in 2012, suspended for three years on condition he did not break medical control laws again.
Update, 21 February 2017: According to Swiss law, the indicted person has a right to have the indictment reviewed by a judge. Antoine Mekni’s lawyer informed Bhekisisa in February 2017 that he had filed an appeal at the Criminal Tribunal in Geneva.
This is a joint investigation between the African Network of Centres for Investigative Reporting,Beobachter (Switzerland) and Bayerischer Rundfunk (Germany).