South Africa, Politics

SARS Wars: Fresh controversy hits Moyane’s new ‘investigative unit’

By Marianne Thamm 22 November 2016

While SARS has issued a statement that it views in a serious light claims that a top official, Yegan Mundie, appointed to head Commissioner Tom Moyane’s new SARS “investigative unit”, ostensibly to probe the tobacco industry, has links to the criminal underworld, the tax collector says it is at present unaware of any “illegal or unauthorised activities” by Mundie. Meanwhile, a tobacco war is brewing as British American Tobacco (BAT) South Africa competitor Carnilinx has lodged a criminal complaint against the multinational’s local and overseas directors as well as several others named in a recent massive Twitter data leak suggesting widespread bribery, corruption and espionage by the tobacco giant. Where there is smoke, there are mirrors. By MARIANNE THAMM.

The fallout at SARS that has been destructively playing itself out in the public realm for at least three years now, shattering the careers of several committed civil servants and resulting in the ultimate hounding of Finance Minister Pravin Gordhan by the Hawks, began with an attack on SARS by the tobacco industry.

The SARS story, the original allegations of a “rogue unit”, the purging of the top executive including Deputy Commissioner Ivan Pillay, is a vital piece of the much greater “state capture” mosaic. The country’s revenue collection service is crucially important for South Africa, for without a scrupulous and vigilant SARS, the state’s coffers cannot be adequately replenished.

Also, those who seek to avoid paying tax, those who withhold what is due unto Caesar, including the powerful and the politically connected (across the globe, we might add), are deeply invested in compromising the vigilance and the scruples of the tax collection agency and those in its employ. That’s just the way the dice are loaded. Which is why those employed by SARS need to subscribe to the highest ethical standards.

SARS, under Moyane, has suffered a fair amount of reputational damage this year alone with the shocking revelation that his most trusted right-hand man, his No 2, his sometime acting commissioner, Jonas Makwakwa, had been allegedly squirrelling large suspicious amounts of money into his and his girlfriend Kelly-Anne Elskie’s private bank accounts.

This weekend, after initial denials, SARS confirmed that a new “investigative unit” has been established by Tom Moyane, ostensibly to investigate “corrupt activities in the tobacco industry”.

Strangely, this was exactly one of the functions and mandates of various iterations of the High Risk Investigative Unit – later dubbed the “rogue unit” – and it was this unit’s 2013 letter to the tobacco industry that directly led to the initial attack on SARS and a purging of the top leadership structure.

The man appointed to head Moyane’s new unit is Yegan Mundie, a senior manager with the anti-corruption unit in Pretoria. However, reports from SARS whistleblowers, which have been denied, are that Mundie, as well as former SARS KZN investigator, Gobi Makhanya, are essentially digging for dirt, any dirt, on Finance Minster Pravin Gordhan, former Deputy Commissioner Ivan Pillay as well as group executive, Johann van Loggerenberg.

Hence NPA head Shaun Abrahams’ announcement (before he withdrew fraud charges against Gordhan et al) that investigations into the “rogue unit” were “at an advanced stage”.

Enter forensic investigator Paul O’Sullivan (he is never far away) who has been a key player in attempting to expose corrupt police officials for several years. On November 15 O’Sullivan e-mailed SARS, copying in National Commissioner Kgomotso Phahlane and Gauteng Hawks head, Prince Mokotedi, about Mundie’s alleged links with the criminal underworld.

As I have it, Mr Mundie is not only a long-standing friend of erstwhile head of detectives, Lt General (retired) Vinesh Moonoo (who himself has had a long corrupt relationship with [Robert] Huang), but is also one of the persons responsible for the ongoing investigations into Mpisi/Huang/Khulubuse Zuma. I feel a public statement on SARS’s position viz the investigations (or lack thereof) into the Mpisi customs and tax fraud may help clear the air. Especially if such public statement sets out what will be done about the relationship between Mr Mundie and Huang/Mpisi.”

For those of you who have not been paying attention, Jen-Chih Huang is a Taiwanese businessman and convicted murderer and owner of Mpisi Trading which had assets worth over R541-million frozen in a 2014 tax claim. President Jacob Zuma’s nephew Khulubuse Zuma was at some stage the chairperson of Mpisi.

Mundie also had links, said O’Sullivan, to Amalgamated Tobacco Manufacturing’s Yusuf Kajee.

Accordingly, it would simply be wrong to allow Mundie near any of the investigations involving Moonoo’s friends, which includes (but is not limited to) Jen-Chi Huang, Yusuf Kajee, Khulubuse Zuma, Edward Zuma, the Bhanas,” said O’Sulivan in his e-mail to SARS.

He added that “not only is Mundie not fit to be involved in any investigation concerning Huang, for obvious reasons, due to his wife working there, repairs to his BMW being paid for by Huang etc. He is also unfit to be involved in any investigation into the counterfeit and duty-free customs rackets of the tobacco industry, for precisely the same reasons. You will recall that in the previous mail, I pointed out that Mundie was a close friend of Moonoo, having worked under Moonoo, prior to feathering his nest at SARS. Indeed I recently found out that Moonoo provided a reference for Mundie’s employment at SARS, which makes it look suspiciously like a case of ‘infiltration’”.

On Monday SARS spokesperson Sandile Memela, responding to questions by Daily Maverick, confirmed that Mundie was a member of the “SARS investigative unit” but that he was “doing legitimate work in terms of the organisation’s mandate. At times he may be asked to collaborate with law enforcement agencies.”

With regard to O’Sullivan’s claims, Memela responded, “The allegations suggest that Mr Mundie may be engaged in illegal and/or unauthorised activities. We wish to put it on record that SARS is not aware of any such illegal or unauthorised activities by Mr Mundie.

Thus the allegations are viewed in a very serious light. In the event that anyone has information and proof, SARS will appreciate for such information to be reported to SARS and law enforcement agencies for investigation. SARS will take appropriate action in accordance with the organisation’s policies if it found that any of its officials are engaged in illegal or unauthorised activities.”

However, said Memela, if the matter had been reported to law enforcement agencies, “SARS will not be able to comment until investigations on the matter have been completed. SARS will co-operate fully with law enforcement agencies when required.”

Meanwhile a war between major tobacco companies is brewing and will soon play out in public in the country’s courts.

In August this year a massive data leak on the Twitter account @EspionageSA pointed to wide-scale industrial espionage, fraud, racketeering, corruption and bribery by agents representing and working on behalf of British American Tobacco SA (BATSA). The copious documents, sound and video clips, affidavits and PowerPoint presentations revealed how a security company, Forensics Security Services (contracted by BATSA) as well as members of the State Security Agency, the Hawks, SAPS and SARS had been drawn into BATSA’s attempts at eliminating competition in the country.

The documents had belonged to the Forensics Security Services (FSS) and were leaked by Luis Pestana, a smallish player in the tobacco industry. Pestana had been approached by a colonel in the Anti-Tobacco Task Team and a former FSS investigator, Francois van der Westhuizen, who had wanted to sell the explosive information contained in the files.

Van der Westhuizen’s 70-page affidavit, which formed part of the leak on @EspionageSA before the account was suspended, exposed how BAT had used a network of corrupt police and SARS officials to spy on and thwart competitors.

In September this year Van Der Westhuizen told the Financial Mail, “We talk about state capture, but BAT has done state capture high up — when it comes to SARS (SA Revenue Service), the police, and state intelligence.”

As a result of the leak, tobacco company Carnilinx has registered a criminal complaint (CAS Number: 1232/10/2016) based on this evidence “which points to various practices by certain role-players in the tobacco industry that speak to unfair treatment of some by the state, preferential treatment in other cases, and various anticompetitive practices”.

The offences are in terms of Sections 4,6, 20, 21 and 34 of the Prevention and Combating of Corrupt Activities Act 12 of 2004; section 67 and 234 of the Tax Administration Act 28 of 2011; section 6(2) of the Regulation of Interception of communications and Provision of Communication Related Information Act 20 of 2002; and Defeating or Obstructing the Course of Justice.

The timeline of the offences, say Carnilinx, are “between 2012 to 2016”.

The respondents in the case include BATUK Plc and its directors; BATSA and its director Martin Potgieter; Forensic Security Services; Derick Vosloo of Forensic Security Services (FSS); Brigadier Casper Jonker of the Directorate of Priority Crimes Investigations (DPCI); Colonel Hennie Niemann of SAPS Crime Intelligence; Advocate Johan van Heerden of the NPA; Allan Evans of BAT UK; Colin Denyer (also known as Colin Daniels) and Ewan Duncan of BAT UK; Chris Burger of the State Security Agency; Belinda Walter (who acted on behalf of inter alia the SSA and BAT UK); all members of the Illicit Tobacco Task Team, as well as Piet Swart and Danie le Roux of SARS.

We expect of the state to investigate these complaints with the same vigour and allocation of resources as they appear to have directed against us in their multiple inspections, raids and criminal investigations over the past few years. We also call upon the relevant state departments to ensure that those state officials implicated in our complaints are removed from matters where they are required to deal directly with us as Carnilinx, and further, with other local tobacco manufacturers, pending the outcome of these criminal investigations,” Carnilinx said in a statement.

Meanwhile, BATSA, which has suffered serious reputational damage (it is the year of reputational damage, it seems) appears to have embarked on a spin cycle, placing a full-page advertisement in the Sunday Times at the weekend, not a cheap exercise, in an attempt to proclaim the company’s “contribution to the economy”.

We contribute R18.4-billion, or 0.51, to the country’s GDP. Our operations support over 72,000 job, including retailers, farmers and small business suppliers. Over 86% of jobs in our value chain are held by black South Africans. We buy 90% of all locally grown tobacco leaf. We spend R11.9-billion on local suppliers,” reads the text of the BAT advertisement.

Unsurprisingly, the sentiments in the BAT ad are remarkably similar to those in an Oakbay Investments (the holding company for the Gupta family businesses in South Africa) statement this year after the company’s auditor KMPG, banks ABSA and FNB as well as their JSE sponsor Sasfin Capital cut ties with the Guptas in March.

The Oakbay statement back then trumpeted that it had “invested more than R10-billion in the country”, that its portfolio companies employed more than 4,500 people in South Africa and that Oakbay Investments “is a proud South African company”.

In September this year BAT’s new CE, Soraya Zoueihid, terminated “as a precaution” the contract with Forensic Security Services (FSS) which, on the surface of it all, assisted the company and law enforcement “to investigate illicit tobacco”. BAT also appointed Global law firm Norton, Rose Fullbright to conduct, it says, “a thorough and comprehensive investigation” into these allegations. The probe would take, said Zouehid, around six months.

But things are going well for BATSA. In October the multibillion corporation moved from Stellenbosch to its sparkling new corporate headquarters that loom at the newly developed Canal District at the V&A Waterfront.

It is a tragic and all-too-common measure of the lack of capacity in South African law enforcement agencies (or perhaps an indication that they have been deeply compromised) that so many private auditing and legal firms are being contracted to investigate allegations of gross criminality in the private and public sector in South Africa.

We have, it seems, outsourced policing.

There is the Grant Thornton probe, “Operation Lion”, at SARS (and being paid for by taxpayers of course) as well as the R23-million (also taxpayers’ money) KPMG report that is still in one of Moyane’s desk drawers, yet to be released. The Grant Thornton investigation is also allegedly to uncover any dirt on Gordhan and other former officials.

Then there is legal firm Hogan Lovells, also appointed by SARS to “look into” the Jonas Makwakwa fraud matter, the Hawks no doubt working overtime chasing Pravin Gordhan and other threats to the stability of the country. Taxpayers too will pay for this little expense.

It is perhaps fitting to return, at this point, to the moment it all seemingly began, when the fissure first ruptured SARS.

On November 14, 2013 SARS addressed a letter to Francois van der Merwe, Chair and CEO of the Tobacco Institute of Southern Africa (TISA) and Belinda Walter, then Chairperson of the Fair Trade Independent Tobacco Association (FITA).

This communique is addressed to both your organisations, representing the majority of stakeholders in the tobacco industry in South Africa. The document briefly explains the South African Revenue Service’s (SARS’s) approach to compliance and explains our position regarding a number of pertinent compliance issues. This is deemed necessary in view of envisioned enforcement action by SARS,” the letter begins.

The letter then went on to set out the SARS inaugural Compliance Programme, published in April 2012, and which provided an overview of plans for the following five years to encourage compliance with the country’s tax and customs legislation.

Based on research, this programme identifies a number of high-risk areas where general levels of compliance appears to be undesirable, for special attention and intervention over the medium term. The tobacco industry falls within this category,” says the letter, signed by then Group Executive Tax and Customs Investigations Division: Projects, Evidence Management and Technical Support, Johann van Loggerenberg.

Other categories, of course, were politically exposed people, including those at the top of the power pyramid.

Within a short matter of time Van Loggerenberg along with the rest of the SARS executive were gone, excommunicated.

The irony, for now, is that Moyane appears – officially at least – to have set up a unit exactly like the one he complained to police about in March 2015. This is the same complaint the Hawks and NPA used to go after Gordhan, Moyane’s direct and, dare we say, accidental superior in the chain of command.

As the dreadful 2016 draws to a close, South African courts, it seems, will continue in 2017 to be the only arena left to exact accountability from those who have been entrusted with the task of governance and those who have been drawn into the game of capturing the state. DM

Photo: Burnt & Used, by Bala Sivakumar via Flickr.

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