From the start, investigations into allegations that a purported covert unit operated within SARS have been marred by breaches of confidentiality, conflicts of interest and strategic leaks to the media. The leaks resulted first in the suspension of several senior SARS executives and later, a deep and perilous rift between accidental Minister of Finance, Pravin Gordhan, and SARS Commissioner, Tom Moyane.

It is an unseemly struggle now playing out in public and that has split the ANC with Minister Gordhan and his supporters including Gwede Mantashe on the one flank while a heavy-duty cordon including the Hawks, the Crimes Against the State Unit as well as Ministers of Police and State Security Nathi Nhleko and David Mahlobo surround Commissioner Moyane on the other. At a media conference on 2 March it emerged that it was Moyane who had made a complaint to the Hawks in May 2015.

The saga may reach a breaking point this week as Hawks head, Mthandazo Ntlemeza, has reportedly issued an ultimatum to the Finance Minister through his legal representative that he reply to 27 questions sent to him by the Hawks by Monday.

“I am not entering into a debate with you on this matter. All I require is for your client to co-operate by answering the questions I have sent to him,” Ntlemeza’s letter reportedly said.

The heavy hitters who have come out to bat for Moyane are indicative of the high stakes of the political power play that underpins this almighty and very public battle for control of the country’s revenue service and that threatens to undermine its integrity.

At the heart of it all now is a controversial report by the auditing firm KPMG which was commissioned by Moyane in December 2014 to conduct a forensic investigation into what has come to be termed a “rogue unit”.

At the time KPMG auditor Johan van der Walt was tasked to work with Advocate Martin Brassey to “capture oral evidence” as well as consider the findings of two other committees, the Kanyane and the Sikhakhane panels. (Brassey also represented SARS in former Deputy Commissioner Ivan Pillay’s successful Labour Court challenge to have his suspension ruled unlawful. SARS lost the case and was ordered to pay Pillay’s legal costs.)

KPMG was appointed on 29 December 2014 “as a contractor. Mr Jonas Makwakwa and the SARS Steering Committee were nominated as representative of SARS” reads the KPMG report’s section on “Basis for the investigation and sources of information”

Makwakwa, who is close to Moyane, is regarded, according to the Mail & Guardian, as the Commissioner’s “hatchet man” who had also previously clashed with the now-ousted officials over his past engagement with high-profile controversial tax payers. Makwakwa, according to the M&G, acts as SARS commissioner when Moyane is abroad and also holds key titles of chief operating officer for customs and information technology, acting chief officer for digital information systems and technology and chief officer for business and individual taxes. In other words, a man who currently enjoys an enormous amount of concentrated power.

The scope of the KPMG investigation stretched as far back as 2003 and general procedures agreed to include considering and perusing existing reports and evidence collated in the preparations of the Sikhakhane Committee and the Kanyane Committee, the consideration of legal papers, interviews with SARS officials “that might be considered to have knowledge”, draft affidavits, the identification and collation of electronic information including computers, cell phones, tablets and information on SARS servers and, most importantly, “INDEPENDENTLY (our caps) consider and review collected information and evidence to determine allegations”.

The Scope and Objectives of the KPMG report also highlight that “we were also instructed by SARS to assist its legal representatives on an ongoing basis.”

A version of the KPMG report was handed to Moyane on 4 December 2015 but with the strange proviso that “it was not prepared for the resolution or disposition of any disputes or controversies thereto and is not to be disclosed, quoted or referenced, in whole or in part. In the event SARS is required to disclose this report to any 3^rd party or use this report for any purpose beyond those mentioned above, it will seek our prior written consent, which shall not be unreasonably withheld.”

However, in a letter dated 30 November 2015, David Maphakela, on behalf of SARS attorneys Mashiane Moodley and Monama, unequivocally informs the legal team representing a former SARS official who has been implicated in the scandal that “further and as part of the forensic investigation, KPMG was mandated to advise SARS on any criminal or civil litigation to be pursued against any SARS official or 3^rd party.”

“There is not an iota of doubt that SARS is fully armed with the necessary legislative and constitutional competence to conduct such investigation to promote and maintain the high standard of professionalism and ethics within the institution so as to foster public confidence,” the letter reads.

It further states that KPMG was appointed on 23 December 2014 to conduct “a forensic investigation pertaining to various allegations which include but not limited to the establishment and operation of a rogue and covert intelligence unit within SARS with particularity to activities such as the procurement of equipment with interception capacity and any acts of impropriety against SARS officials.”

Versions of the confidential KPMG report have been leaked to the media drawing the fourth estate into the fray and also undermining its independence and objectivity. The Sunday Times, which was at the forefront of “exposing” the so-called “rogue unit” as well as a repeating the claim that the unit “ran a brothel” to spy on ANC leaders, has posted a link to the KPMG report which it says was used as a source for a series of stories on the “rogue unit”. The Sunday Times was later ordered by the Press Ombudsman to retract all these stories and to apologise to Minister Gordhan as well as Ivan Pillay and former group executive Johann Van Loggerenberg.

While copies of the draft report were only handed to a few key people it appears that there has been no investigation as to how it was leaked or it found its way into the hands of Sunday Times reporters. The question, of course, that still begs answering is in whose interests is it that the report was leaked. Considering that almost the entire SARS senior executive was suspended after the stories had appeared in the Sunday Times and that the mandate of the Sikhakhane panel was altered to include the media reports, it would appear to have benefitted those who support Moyane.

Suffice to say the KPMG report has now found its way into the public realm and Daily Maverick can now reveal that it contains, at least in the 3^rd draft sent to Moyane, several troubling and possibly illegal breaches.

It appears that large chunks of this, third draft – at least sixteen points – from a 25 August 2015 letter or “memorandum” to KPMG’s Van Der Walt from SARS attorneys Mashiane Moodley and Monama in which the legal firm essentially tells KPMG which findings to make in their INDEPENDENT REPORT have indeed found their way into the report sent to Moyane. This certainly calls into question the independence of an outside auditing firm tasked with the investigation, as well as legality of the entire process.

For example in its August letter to Van Der Walt Mashiane Moodley and Monama suggest:

• 2.1.10 “On instructions of Pillay, the Unit unlawfully monitored, intercepted communication, recorded and transcribed recordings at the NPA offices. The SARS intelligence gathering exercise at the NPA was known as ‘Project Sunday Evenings’ and was aimed at gathering intelligence in the criminal investigation of Selebi. The reports, transcripts and recordings were handed to Pillay for his consideration.”
• 2.1.11“The members of the Unit made use of technical surveillance.”
• 2.1.12 “SARS unlawfully engaged in the procurement of intelligence gathering equipment with the necessary interception capability….

The “Executive findings and conclusions” of the KPMG report quote verbatim the suggestions from Mashiane Moodley and Monama except under different numbering. Spot the difference.

• 12.1.12 On instructions of Pillay, the Unit unlawfully monitored, intercepted communication, recorded and transcribed recordings at the NPA offices. The SARS intelligence gathering exercise at the NPA was known as ‘Project Sunday Evenings’ and was aimed at gathering intelligence in the criminal investigation of Selebi. The reports, transcripts and recordings were handed to Pillay for his consideration.”
• 12.1.13 “The members of the Unit made use of technical surveillance.”
• 12.1.14 “SARS unlawfully engaged in the procurement of intelligence gathering equipment with the necessary interception capability….

What follows is the pages of the report in which Mashiane Moodley and Monama “recommendations” are pasted into the KPMG report, draft 3, highlighted in blue colour.

Last week Daily Maverick sent a list of questions to KPMG CEO, Trevor Hoole, as well as Olof van Niekerk, KPMG Head of Legal Services, asking whether it was not irregular that an auditing firm would solicit/receive recommendations and findings from the legal firm representing its client.

This is particularly pertinent as the 3 September 2015 version the KPMG report setting out its “Scope and Objectives” states that one of its tasks is to “independently consider and review collected information and evidence to determine relevance to allegations”.

Van der Walt, the author of the report, also states “we were also instructed by SARS to assist its legal representatives on an ongoing basis”. This statement would suggest that communication should have been from KPMG to SARS and not the other way around.

Further questions we asked were;

• Comparing the letter then from MMM to Mr VD Walt and the Executive Findings and Conclusions in Draft three, it is clear that all of these recommendations have found their way, verbatim, into the draft report. Is this not irregular? And while the report might not be final and may change, the question is did KPMG request/solicit these findings and recommendations from SARS’s legal representatives?
• In their submissions to SARS and the Sikhakane panel, Mr Ivan Pillay and Mr Johann van Loggerenberg provided evidence implicating BAT UK (British American Tobacco) and BAT SA and attorney Ms Belinda Walter in corruption and money-laundering. Does the KPMG report reflect on this evidence?
• In March 2015 KPMG was appointed as auditors for BAT. Did KPMG reflect on this potential conflict of interest when undertaking to perform an independent forensic audit?
• Did KPMG advise SARS, or alternatively on their own, comply with the statutory provisions of the POCA, FICA and PCCA to report corrupt practices and money-laundering to the Hawks and the FIC? Specifically, the question refers to Section 34 of the Prevention and Combating of Corrupt Activities Act in respect of Ms Walter, British American Tobacco SA and British American Tobacco UK and her declared involvement with BAT UK and BAT SA?
• When do you expect the final version of the report to be published and handed to Mr Moyane?

KPMG’s CEO Hoole was in Lisbon last week so Van Niekerk replied on behalf of the auditing firm. He did so thus:

“Due to confidentiality constraints as per the agreement with our client we unfortunately cannot divulge any information to you or discuss any aspect with you. Please direct any questions that you may (have) to SARS.”

Which we did, on Thursday, 10 March. At the time of writing Daily Maverick had not yet received any response.

Meanwhile, last week, the Treasury announced that it was evaluating the work of the now discredited Kroon Commission, established by former Finance Minister Nhlanhla Nene to assist SARS with issue of governance. The commission’s term ends this week.

The Kroon Commission has been accused of merely endorsing the findings of the Sikhakhane report without properly investigating the allegations. Also Sunday Times editor Phylicia Oppelt’s former husband, Advocate Rudolf Mastenbroek, a former SARS official who journalist Pearlie Joubert claimed was one of the sources for the Sunday Times stories, was a member of the panel, thus presenting a clear conflict of interest. In this light it is unlikely that the Kroon Commission’s mandate will be extended.

The war at SARS was triggered after Pretoria attorney Belinda Walter, a self-confessed State Security Agent who was also spying for British American Tobacco while working as an attorney for the global company’s smaller competitor Carlinix, complained to then Deputy Commissioner Pillay after a relationship with SARS group executive and head of the National Research Group – the special investigative unit – Johann Loggerenberg had soured. Walter had had been involved in several romantic relationships, including with her SSA handler, Chris Burger.

Van Loggerenberg, who appears to have fallen for the oldest trick in the book, has claimed that Walter wore a “wire” to their first meeting as the SSA had wanted to determine whether he was corrupt. And while the relationship was certainly inappropriate, risky and presented a conflict of interest, the Kanyane panel concluded that it was unable to conclude that that evidence presented by Walter was “credible, especially in circumstances where the allegations are denied by Van Loggerenberg”.

The sordid saga escalated quickly when the Sunday Times began publishing a series of articles about a “rogue unit” after Walter (and others) had made contact with the paper. This in turn led to the ultimate suspension of Pillay and Van Loggerenberg. None of the allegations about the “rogue unit” have been tested or cross-examined in a court of law and none of the key players, including Pillay and Van Loggerenberg, were interviewed or interrogated in the process of the Kroon commission, or compiling of Kanyane, Sikhakhane or KPMG reports.

The “war” reached the Treasury almost by accident when Gordhan was re-appointed finance Minister after President Zuma had attempted to slip David Van Rooyen into the hot seat through a back door. It was a decision that backfired spectacularly and has now begun to shift the balance of political power in the ruling party.

Moyane (a Zuma acolyte) and Gordhan now appear to be caught in a Mexican standoff with Gordhan – after his sudden reappointment in December – ordering Moyane to suspend his current restructuring of SARS while Moyane has kicked back, refusing to take orders from the Minister, to whom he must report.

Gordhan too has been targeted by the Hawks who handed him a list of 27 questions relating the the unit a few days before he was to deliver his budget speech on 24 February. In the meantime Gordhan has now been ordered by Hawks head, Mthandazo Ntlemeza, who has issued an ultimatum to the Finance Minster through his legal representatives to reply to the 27 questions by Monday and warning that “your client should be aware of the powers of the DPCI (Directorate of Priority Crime Investigation) as contained in Chapter 6A of the SAPS Act, and I have no doubt that those powers and mandate of the DPCI to investigate independently and without fear, favour or prejudice.”

It is telling that neither former President Thabo Mbeki nor former Minister of Finance, Trevor Manuel, appear to have been approached by the Hawks which is odd as the specialised SARS unit – which officials have always maintained was legally constituted and established to fight organised crime while Gordhan was SARS Commissioner – was approved by both men during their tenures.

Even more disturbing is that the specialised Crimes Against the State unit with its commander, Brigadier Nyameka Xaba, is now leading the investigation into SARS. This is a unit tasked with investigating potential terrorist threats to the country and not its own officials or cabinet ministers.

The stakes in the game have clearly been upped.

However, there is a lacuna in the law which offers Minister Gordhan a way out, although it might cost him politically and will require him to move boldly.

SARS derives its mandate from Section 2 of the South African Revenue Service Act 1997 which was amended in 2002 to allow the President to appoint the Commissioner. In other words, he or she who appoints also dismisses. However, Moyane accounts to Gordhan for the management of SARS.

Moyane cannot have the same status as a cabinet minister and it is Section 6 of the Public Finance Management Act which relates to public entities which gives considerable powers to the Minister of Finance. Using this legislation Gordhan could demand that Moyane report to him. If the Commissioner refuses, Gordhan has the power to suspend him.

Moyane must know that he is on shaky ground even though he appears to enjoy presidential protection.

What is required now from Minister Gordhan is the political will to act. With enough support he well might do so. Can he? Will he? DM