South Africa

SARS Wars: Purge has left SARS criminal investigative capacity vulnerable

By Marianne Thamm 7 September 2016

Several highly trained SARS investigators who for years have exposed criminal syndicates, individuals and networks in the illicit economy, raking in billions in unpaid VAT and taxes, have been effectively kneecapped by commissioner Tom Moyane’s ongoing “restructuring” of the country’s revenue service. This is part of the fallout from the still untested “rogue unit” allegations that have also driven the deep rift between the Minister of Finance, Pravin Gordhan, SARS Commissioner Tom Moyane, the Hawks, the NPA and ultimately President Jacob Zuma. By MARIANNE THAMM.

In January, senior SARS officials up to level seven were ordered by SARS commissioner Tom Moyane to re-apply for their jobs. Seasoned staff with years of experience and international training and with formidable successes under their belts were flown to Pretoria where they were re-interviewed and assessed by audit, consulting, corporate finance, tax services and risk advisory firm, Deloitte.

In August, many of those interviewed learned their fates. As National Projects is to be disbanded, says a SARS insider, the type of in-depth national investigation the unit was capable of conducting will no longer occur, leaving a massive gap that organised criminals as well as unscrupulous individuals are bound to exploit.

National Projects and Central Projects were investigative units that worked alongside the National Research Group (the second version of the Special Projects Unit) and the alleged SARS “rogue unit” led by group executive Johann van Loggerenberg. National Projects and Central Projects were backed up by other units, including Evidence Management and Support, Tactical Intervention, and the High-Risk Investigations Unit (which took on hardcore organised crime).

The National Research Group was tasked with investigating underworld figures such as Radovan Krejcir (who was only finally nabbed because of SARS, and not SAPS) Mark Lifman, (who owes around SARS R400-million but is fighting the hefty bill), security “boss” and Lifman associate Andre Naude, Jerome “Donkie” Booysen, Quinton “Mr Big” Marius, as well as Zuma family friends and ANC donors, Durban businessmen Thoshan Panday and Robert Huang and his Mpisi Group.

President Zuma’s lawyer, Michael Hulley, previously worked for Mpisi and President Zuma’s nephew, Khulubuse Zuma, once chaired the board of the company. The Gupta family too, of course, blipped onto the radar. As did others who orbit Jacob Zuma “not because they were close to him, but because he [the president] just happens to mix with those kind of people”.

Think Lifman, who attended Zuma’s birthday bash in Cape Town in April 2014 as a VIP guest.

We have been told to complete whichever investigations we are working on now and then that’s it. From now on investigations will be done by Internal Auditing in SARS but the problem is they don’t have the capacity and also audit won’t travel and work on a national basis,” a source who asked not to be named revealed to Daily Maverick.

Internal Audit, added the source, had also been given specific targets which would mitigate against the taking on of cases that usually take years of painstaking work to crack.

If you have to meet targets you are less inclined to take on a case that is going to take up too much time.”

Apart from this, said the source, taxpayers would now be viewed as individuals.

So Audit will not look at a syndicate. They will audit the individual. But if the individual is linked to two or three others they will miss this. Most of the money in the illicit economy is intertwined in very complex set-ups. You need to look at some 20-odd companies the guy might have, the myriad bank accounts, otherwise you are not going to find the money. In some of the cases over 100 witnesses were interviewed and around 80,000 documents would come in to be examined.”

From mid-2000 the Enforcement Division, later the Tax and Customs Enforcement Division, achieved spectacular successes in countless high-profile cases including busting Durban and Cape Town drug bosses Michael Barnabas and Colin Stansfield for tax evasion, exposing the electronics industry in the Accord, Hi-fi Corporation and Profurn cases, ensuring the collapse of the empire of once-Hyundai king Billy Rautenbach, nailing businessman Dave King (in a case that ran over 13 years), grounding the high-flying businessman Hennie Delport (a case that has also been running for over 13 years) as well as exposing drug lord Glen Agliotti, to name a few.

Over an above this the units also shut down the Barry Tannenbaum and Prinsloo ponzi schemes and investigated various tobacco cases under the “Honey Badger” project in 2013. The unit also assisted the NPA in developing a “dedicated capacity” for SARS cases which led to the creation of the Specialised Tax Units in the NPA, but these were disbanded in 2013.

But it is because of the allegations of an alleged “rogue unit” that Commissioner Moyane decided that the National Projects Unit “had to go”, said the source.

None of the National Projects managers were spoken to by the consultants to ask what they did or why the unit was different,” said our source.

Some of these seasoned managers and investigators with years of experience have not been re-appointed to senior positions (in some cases they have accepted jobs on lower levels) which means also that according to the Tax Administration Act, they are no longer able to depose affidavits in crucial criminal cases.

The assessments of experienced staff occurred shortly after Gordhan was parachuted back into the Finance Ministry after Nenegate in December 2015. By then the entire SARS executive, including Deputy SARS Commissioner Ivan Pillay, group executive Johann Van Loggerenberg, head of risk Pete Richer, spokesman Adrian Lackay and others had already left.

This after a Sunday Times “expose” of an apparent covert unit that had operated in the revenue service under Van Loggerenberg’s command. It was Belinda Walter, Pretoria attorney and spy for both the State Security Agency (SSA) as well as British American Tobacco (BAT) who tipped the first domino in the saga. She also chaired the Fair Trade Tobacco Association which represented smaller tobacco companies, some of them in competition with BAT.

Commissioner Moyane, who is close to President Jacob Zuma and who was appointed by the president in September 2014, lodged a complaint – the now infamous Brooklyn CAS 427/5/2015 – with the Hawks in March 2015. And it is this case that keeps repeating like a bad bout of indigestion, returning periodically to haunt Gordhan, other former members of the SARS executive, the country and the economy.

In January 2015 Moyane began his review of SARS, its staff requirements, its IT systems and work processes. To oversee this he appointed Jonas Makwakwa, SARS Chief Officer of Business and Individual Taxes & Digital Information Systems and Technology, a man who is immensely powerful and who occasionally stands in for Moyane.

Gordhan, on his reappointment 11 months later, immediately met with Moyane and requested the commissioner to halt the restructuring of SARS and the implementation of a new operating model. It was an order Moyane has refused to comply with, creating a massive tension between the Treasury and the revenue service. It is a tension that still continues.

In April this year Moyane and Makwakwa, in their personal capacities, both sued the amaBhungane Centre for Investigative Journalism, after an investigation published in the M&G in February revealed that SARS insiders had accused a group “close to Moyane” of seizing control of the Large Business Centre, a key revenue generating division which deals with large corporations and wealthy individuals. According to the M&G this was an attempt by Moyane’s “new guard” to obtain undue influence in settlement negotiations which could run into billions of rand. The matter is still pending.

The Large Business Centre, wrote amaBhungane, controlled the country’s biggest taxpayers and high net-worth individuals but Moyane was delegating its functions to smaller regional centres in a move described as similar to the manner in which capacity and skills were destroyed in the SAPS with the disbandment of specialised units.

The same applies, said Daily Maverick’s source, for the kneecapping of the National Projects. The direct impact will result in a lack of capacity to conduct sophisticated investigations into tax evaders and criminals.

No one can do these types of investigations. Not the Hawks or the cops. SARS used to throw money at these kind of investigations, appointing external attorneys, external advocates, external auditors etc. There was another team housed at head office called Centralised Projects. They did Dave Kings, Julius Malema. They have also gone,” said the source.

Responding to questions from the Daily Maverick, SARS replied that it had not disbanded units tasked with undertaking enforcement responsibilities.

It has strengthened its ability to deal with its enforcement related activities by ensuring there is a clear split between civil and criminal enforcement in line with the Tax administration Act. The organisation has also not retrenched any employees as part of its restructuring process. All employees who were available to ‘deal with high risk taxpayer’ prior to the restructuring are therefore still present in the organisation to deal with such cases (except those who have resigned or retired),” reads a statement from SARS media.

The rationale for the restructuring, said SARS, was to ensure that the “organisation better meets its mandate to collect all revenue due to the fiscus and to maintain control over all goods entering and leaving the country. We are unable to delve into the details of our enforcement strategies and tactics to prevent any compromise to our investigations”.

In early 2015, 55 senior managers left SARS in the slipstream of the “rogue unit” saga. We cannot help but notice that since then SARS has made fewer headlines with regard to successes outside of ordinary tax collection targets or drug busts at border posts.

Said one insider, “If SARS had capacity it would have been all over the Panama Papers leak, Oakbay, Tegeta, Denel and Prasa and it would also probably not have bombed out on the Malema case that was messed up good and well.” DM

(Ivan Pillay, and later Chief Officer Gene Ravele, were overall heads of the Enforcement Division. The Criminal Investigations Division fell under Group Executive Godfrey Baloyi who left SARS in 2015)

Photo: SARS Commissioner Tom Moyane (GCIS)

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