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South Africa

SARS vs KPMG: Cornered Moyane risks total exposure

SARS vs KPMG: Cornered Moyane risks total exposure

On Monday, SARS Commissioner Tom Moyane, barely able to contain his rage, denounced KPMG SA for retracting on Friday the findings and recommendations of its 2014 report into an alleged SARS rogue unit. But instead of lambasting KPMG for selling SARS a legally dodgy R23-million dud based on a bad copy-and-paste job and which was later used as a political blunt instrument, Moyane claimed the report and its findings as solid and, most important, an opinion SARS had bought and owned, no matter that KPMG International has found it fell short of its own “standards”. By MARIANNE THAMM.

We already have many examples of how Tom Moyane responds when cornered and under pressure or when the commissioner wants things to go his way, no matter what.

Vlok Symington, SARS’ now embattled deputy director of law, found out in October 2016 when he was held hostage by members of the Hawks and Moyane’s bodyguard, Thabo Titi, in a boardroom in the SARS head office in Pretoria.

It was Symington’s “exculpatory memorandum” that resulted in the NPA dropping charges of fraud against former minister of finance Pravin Gordhan, former SARS Deputy Commissioner Ivan Pillay and another former SARS Commissioner, Oupa Magashula. Symington is now facing the consequences of doing the right thing and has been threatened with a disciplinary hearing.

So desperate are the times, so tangled the web that has been spun during the entire “rogue unit” saga, that Moyane himself seems to exist in a parallel universe where a report, discredited in parts by the very people who compiled it, is claimed as good, honest and true by those (SARS) who have bought, paid for it and require it to accomplish a political mission.

Monday’s press conference in Pretoria where a seething Moyane, flanked by an interesting collection of individuals clearly deliberately chosen to be seated with him for structural support, was instructive for what it revealed.

Up with the “man of the moment” – as Hlengani Mathebula, SARS’ Chief Officer of Governance, International Relations, Strategy and Communications, introduced Moyane – were none other than ANC Scopa member Nyami Booi, SARS acting Chief Officer Dan Zulu and SARS Chief Legal Officer, Refiloe Mokoena (formerly deputy chair at Armscor and non-executive board member of Denel before joining SARS in March 2017 – although she only resigned from Denel in June).

It was Mokoena who filed a responding affidavit on behalf of SARS in the current Symington matter in the Pretoria High Court, denying that Symington is being targeted and punished by SARS. In her affidavit Mokoena denied and disputed almost all of Symington’s founding affidavit.

Booi’s presence at the main table has been questioned by many, with the EFF releasing a statement terming it “puzzling” and saying that it “gives the impression that SARS is run by Parliament, defying simple logic of separation of powers. It also creates an impression that Parliament is agreed to and in support of the pronouncements of SARS”.

Booi was later interviewed by SAFM’s PM Drive host, the firm and relentless Tsepiso Makwetla, who attempted repeatedly and unsuccessfully to get Booi to explain lucidly why he had attended Moyane’s presser.

Booi intimated that KPMG had disrespected the sovereignty of the South African state by making the announcement on Friday without first informing SARS and Moyane.

We are of the view that KPMG must account on its involvement in what appears to be politically motivated immoral and unethical conduct,” said Booi.

When pressed by Makwetla to elaborate on what exactly this “politically motivated” conduct was on the part of KPMG, Booi pointedly dodged the question.

Booi also seemed to have been deployed to issue a veiled threat to KPMG suggesting that “the report [he did not say which part of it] called into question the integrity of KPMG as an auditing firm entrusted to do business with the state”.

Moyane also suggested that KPMG be punished and “blacklisted” by government.

The presence of the top-heavy main table as well as a squadron of senior Chief Officers dragged in to sit in the front row of the press conference was no doubt aimed at signifying the gravitas and importance of it all, that Moyane was the man in control, drawing a line in the sand, saying, “Up to here and no further. Citizens, compatriots, we were lied to, we were cheated, KMPG sold us a dud for R23-million. This is scandalous.”

Instead Moyane was rageful that KPMG had behaved in an “aberrant and unethical manner” by withdrawing its report “despite the existence of a service level agreement” between the two parties.

The report, said Moyane, regardless of its dubious findings, belonged to SARS, all of it, every single word including those now unmasked as bullshit. KPMG, he said, had “irrevocably and in perpetuity transferred, made over and assigned to SARS, all intellectual property rights and which SARS has accepted; and KPMG has waived all its moral rights conferred upon it as an author by the provision of Section 20 of the Copyright Act, 1978.”

The commissioner added that SARS viewed KPMG’s conduct as “nothing else but a dismal attempt to portray SARS, its leadership, and in particular SARS Commissioner as incompetent, corrupt, inefficient and involved in a witch hunt. This is the same narrative that has been perpetuated for years by some treacherous elements within society and the media.”

Moyane appears to have taken KPMG International’s directive to KMPG SA very personally.

What Moyane failed to do on Monday was address the serious uncovering by KPMG International that KPMG South Africa was not contracted to provide legal advice or express legal opinions and that these were “outside of the mandate of KPMG South Africa and the expertise of those working on the engagement”.

It was David Maphakela of SARS attorneys Mashiane Moodley and Monama, incidentally, who signed off a memorandum to KPMG auditor Johan van der Walt, making the suggested executive findings and conclusions and that found their way, almost entirely copied-and-pasted, into KPMG’s final report.

These findings and conclusions – that Gordhan “ought to have known” about the existence of the unit and should be charged – have now been retracted.

It was also Maphakela who later appeared to have understood the political nature of the “investigation” into the alleged “rogue unit” and who informed Moyane in October 2016, when asked to obtain a further affidavit from Symington, that he [Maphakela] essentially refused to be involved in the continued persecution of Pravin Gordhan, Ivan Pillay and Oupa Magashula “on ethical reasons”.

Maphakela had mailed Moyane with this opinion after a request by the NPA’s Torie Pretorius to Hawks’ Crimes Against the State Unit, Brigadier Nyameka Xaba, that he obtain a further statement from Symington with regard to Gordhan’s signing off on Pillay’s early retirement package. Xaba had, in turn, wanted Maphakela to do the dirty work, but the lawyer refused.

It was Moyane who had accidentally printed out Maphakela’s email. It was this that was handed to Symington along with a batch of documents on the morning the Hawks, accompanied by Moyane’s bodyguard, came to collect their new affidavit at SARS’ headquarters in Pretoria on 18 October 2016.

Moyane’s apparent behind-the-scenes orchestration of the farcical events that unfolded between his bodyguard, the Hawks and Symington in the boardroom is indicative of his leadership style.

KPMG had originally been appointed on 29 December 2014 “as a contractor with Mr Jonas Makwakwa and the SARS Steering Committee as representatives of SARS” to conduct a documentary review of evidence gathered by two earlier panels, the Kanyane and Sikhakhane panels.

Makwakwa, then still Chief Officer of Business and Individual Tax – a key department in SARS – is now on suspension for having been caught allegedly making suspicious deposits of around R1.2-million into a number of bank accounts between 2010 and 2016.

In that instance, Moyane, instead of calling in the Hawks to investigate these serious allegations made by the Financial Intelligence Centre against Makwakwa, opted instead for a private firm, Hogan Lovells, to conduct an investigation. The report was due in August but has still not been released by Moyane.

On Monday Moyane said that the “abhorrent, unethical, and unprofessional conduct” by KPMG [in withdrawing parts of its report] had left SARS with no option but to consider legal action.

This would include “instituting legal proceedings against KPMG for reputational damage to SARS including but not limited to a civil claim”, reporting KPMG “to the relevant statutory audit bodies both locally and internationally”, and reporting the firm to the Minister of Finance “with the aim to blacklist KPMG for its unethical, immoral, unlawful and illegal behaviour”.

KPMG, said Moyane, should also be reported to the Minister of Finance “to consider stopping all work currently performed by KPMG in other departments as well as any work in the pipeline until all the work KPMG conducted for the state have been investigated and reviewed for quality and proper auditing quality and expected standards.”

Also, work KPMG was currently performing for SARS should be “seized” and all work conducted by the firm in the past 10 years should also be assessed with the aim to determine whether there was a value for money and whether SARS should demand its money back, report KPMG to Parliament through Scopa and SCOF with the aim to investigate the immoral conduct of KPMG and determine the appropriate action.”

It appears as if Moyane might be hoping to make up for the tax shortfall by getting KPMG to refund government.

Good luck with that one.

Moyane on Monday also made a thinly veiled attack on Gordhan and former SARS spokesperson Adrian Lackay who he said had been “criss-crossing different media platforms while making unfounded and baseless conclusions as a result of KPMG’s media statement”.

SARS wishes to categorically state that the allegations that KPMG report was used as the basis for disciplinary actions as well as the institution of a criminal offence are at best false and at worse deceitful, and aimed at misleading the people of SA.”

Moyane went on to list the sequence of events starting in August 2014 when Pillay, then acting commissioner, had commissioned an investigation led by Muzi Sikhakhane “with the mandate to investigate allegations that SARS ran a ‘Rogue Unit’.”

The information, said Moyane, had been “reported by the media… in particular Sunday Times and City Press newspapers. The claims were amongst others that SARS had a Unit which was not only established illegally but which was illegally intercepting taxpayers’ information and movements.”

Moyane did not mention that the Sunday Times, at a later Ombudsman hearing, admitted that it had based a series of reports on the “rogue unit” partially on the apparently strategically leaked KPMG report.

At the time, Moyane made no apparent effort to uncover who, out of the handful of individuals who had received the report, had leaked it to the media. The Sunday Times reports triggered the purge of the entire SARS executive.

Moyane on Monday said that the decision to institute disciplinary hearings against Johann van Loggerenberg, Pillay and Peter Richer (who all resigned in May 2015) had not been prompted by the KPMG report, the final draft of which was delivered on 26 January 2016, but on the Sikhakhane report.

It has, however, never been made clear on what legal basis these findings were made.

Constitutional law expert, Professor Pierre De Vos, writing in Daily Maverick in September this year pointed out that the Sikhakhane Report may have relied on section 3 of the National Intelligence Act to come to its conclusions that the establishment of an investigative unit in SARS was unlawful.

This section allows any state department empowered to do so by legislation ‘to gather departmental intelligence, and to evaluate, correlate and interpret such intelligence for the purpose of discharging such function’ provided that the department “shall not gather departmental intelligence within the Republic in a covert manner,” wrote De Vos.

Departmental intelligence” is defined by the act as “intelligence about any threat or potential threat to the national security and stability of the Republic which falls within the functions of a department of state, and includes intelligence needed by such department in order to neutralise such a threat”.

Says De Vos,

This means the National Strategic Intelligence Act does not prohibit a government entity such as SARS from gathering intelligence, even covertly. It does confirm that the covert gathering of ‘departmental intelligence’ (intelligence relating to a potential threat to the national security and stability of South Africa) by SARS would be in breach of the act.

It is unclear whether even the most outlandish allegations levelled at the ‘rogue spy unit’ contains any suggestion that it investigated potential threats to national security in contravention of the provisions of the act. In the absence of credible allegations, the claims that the unit acted in contravention of the National Strategic Intelligence Act would be a legal nonsense,” said De Vos.

Moyane’s threatened court action against KPMG will be the best thing that has ever happened in this sorry saga which has cost South Africa dearly and dragged SARS into a deadly political battle and the state capture project.

The sooner all the players in this destructive chapter are able to be challenged and cross-examined in a court the better. It will allow those who have been denied the opportunity to testify in their own defence to finally pull out all the skeletons hiding in the SARS cupboard and to finally join the dots. DM

Photo: Original photo of Tom Moyane by GCIS.


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