South Africa, SCORPIO

Scorpio: The curious case of ANC benefactor Robert Huang, a never-ending investigation and billions owed to SARS

By Pauli Van Wyk 23 January 2018

Panicked SARS officials compiled a confidential internal report to their managers on the status of one of the biggest tax evasion investigations, just days after journalist Jacques Pauw’s blockbuster book The President’s Keepers hit stores around the country in November. The report’s focus: The curious multibillion-rand and decade-old tax case of the Taiwanese national and Zuma-linked businessman Jen Chih (Robert) Huang, his company Mpisi Trading 74 and an estimated R3-billion owed to SARS. Based on information from the heart of SARS, Scorpio can reveal that Huang attempted to settle his tax affairs for R20-million, that the finalisation of Huang’s case, code-named “Project Nightfury”, seems to have ground to a halt, and that Pauw’s revelations about Huang were spot-on. By PAULI VAN WYK for SCORPIO.

Tax boss Tom Moyane scored a magnificent own goal when he dragged investigative journalist Jacques Pauw to court in December 2017. By accusing Pauw of unlawfully disclosing taxpayer information in his book The President’s Keepers, Moyane catapulted the serious allegations the book contains into the realm of confirmed facts. Pauw formally confirmed that he will oppose the declaratory order that he contravened the Tax Administration Act requested by Moyane.

In his court papers, Moyane mentions several instances of where Pauw “disclosed taxpayer information”, including in the case of Taiwanese national Jen Chih (Robert) Huang – an investigation that started back in 2008. SARS subsequently declined to confirm or deny the veracity of Pauw’s startling revelations.

After having sight of an internal confidential SARS memorandum dated 1 November 2017, Scorpio can, however, confirm the “accuracy of information [relating to Huang] contained” in Pauw’s book. The memorandum further confirms the bribe list, mentioned in Pauw’s book, that was seized by SARS after a raid of Huang’s premises. The SARS memorandum describes it as a list that “forms a significant portion of the assessment raised against Mr Huang and contains references to persons that received payment from him”.

Pauw describes the list as written in Mandarin or a dialect of Mandarin, supposedly “contain(ing) the names of important people, government officials and politicians. Next to the names are amounts of money. It can mean one of two things. It is either money that Huang had paid to them. Or it is money that he laundered for them out of the country to foreign bank accounts.”

Huang, his wife Shou Fang (Judy) Huang, their main company Mpisi Trading 74 and a host of businesses they are linked to, are the subjects of one of SARS’ biggest tax evasion investigations ever. So intricate and vast was the investigation that SARS registered a project, allocated a team of top investigators to probe Huang (initially between 2008 and 2013) and code-named it “Project Nightfury”. Just the assessments raised amount to a value of R2.35-billion in income tax and VAT owed to SARS, claimed the internal memorandum of the revenue service.

This excludes the accumulated penalties and interest that might thrust Huang’s tax bill over the R3-billion mark, sources say. Huang said he is “not aware of a R2.35-billion tax assessment”, when Scorpio quizzed him about the facts listed in the SARS report.

The SARS memorandum is a status update and brief history of Project Nightfury, prompted by the release of Pauw’s book. The memo was sent to Fhatuwani Ntsieni, an executive in the investigative audit team, and the team’s senior manager, Charity Nxele. The memo concludes that “management’s attention is drawn to the publication” of The President’s Keepers and the “accuracy of information contained” in the book. The investigators are at pains to say that the two investigators – after a purging of the unit that investigated Huang – “have had no contact with the media or Mr Pauw”.

Huang styles himself as a clearing and forwarding agent and importer-exporter. He is also a convicted murderer, amaBhungane revealed, and has been accused by SARS of being a fraud, a smuggler and a money launderer. Scorpio uses the word “accused” because SARS’ case against Huang seems to have gone nowhere. (More about that later.) Huang has gained notoriety with his business links to President Jacob Zuma’s nephew Khulubuse. And when SARS came knocking, President Zuma’s long-standing attorney and fixer, Michael Hulley, at first represented the Huangs.

The case dragged, at first because Huang did everything in his power to frustrate the investigation and subsequent litigation. This is recorded in thousands of pages of court documents and confirmed by sources close to the case. Reacting to the allegations, Huang denied it, saying he always “attempted a bona fide resolution of the matters”, and anyone trying to assert mala fide on his side is “disingenuous”.

I am entitled to exercise legal remedies and if the exercise of my rights is viewed as delaying any investigation, this is indeed unfortunate.”

But the SARS investigators – working in the pre-Tom Moyane era – refused to back down. Moyane’s appointment as SARS commissioner was followed by a much criticised and highly controversial restructuring and the disbanding of investigative units.

Enter Jonas Makwakwa – a top SARS official accused of money laundering, corruption and fraud because he stuffed ATMs with hundreds of thousands of rand in cash and grew a dependency on mysterious and possibly illegal payments to maintain his lifestyle. Thanks to a tailored disciplinary process conducted by Hogan Lovells and strenuous word gymnastics from SARS, Makwakwa found himself back in his job by November 2017. To date Makwakwa has refused to provide the public with explanations for the mystery payments flagged by the highly respected Financial Intelligence Centre.

A letter from Mpisi Trading 74 addressed to Makwakwa and signed by Makwakwa on 15 September 2015 records at least two meetings between Huang, Makwakwa, George Baloyi and SARS HR official Luther Lebelo. (It is unclear why Lebelo, from the human resources division, would be privy to a meeting with an alleged delinquent taxpayer.)

Mpisi Trading 74’s letter complains of unfair treatment in order “to crucify Mpisi and Mr Huang, notwithstanding that there had been no evidence of any wrongdoing”. The letter ends with a request for another meeting “in order that we may canvass a possible settlement of the matter”.

Replying to Scorpio’s questions, Huang confirmed meeting Makwakwa and Lebelo, and said he also met several times with Pieter Engelbrecht and Nelia Wessels, investigators working on his case.

Huang seems to have been remarkably emboldened by the meetings. The internal SARS memo records Huang’s proposal of a R20-million settlement for his multibillion-rand tax problem. SARS would have none of it, however. According to SARS’ internal memorandum, Huang’s settlement was declined. “It was the team’s opinion that this will not be accepted taking into account the preserved assets and the tax debt regarding the [Mpisi Trading 74] group is in excess of R2-billion, excluding penalties and interest”, the memorandum states.

Huang seemingly went back to the drawing board and managed to up his settlement proposal to R30-million in December 2016, but this time for only seven entities.

Since then, the settlement proposal has been delayed, ignored, or ordered for amendment by several SARS departments, the internal memorandum states.

Huang seems to confirm the last settlement offer without going into detail, saying “a settlement offer was made to SARS. This was properly motivated and to date we have had no official response from SARS”.

In the meantime, SARS has been bogged down by Mpisi Trading 74’s incessant litigation. Four sources with direct knowledge of Project Nightfury also claim that SARS’ management is not eager to conclude the matter. If true, it would be astounding, seeing that SARS is haunted by a projected R50-billion revenue deficit for the financial year ending in February 2018.

The tax affairs of the Huangs and their main company Mpisi Trading 74 is one of the revelations in Pauw’s book that has tax boss Tom Moyane hot under the collar. Moyane asked the High Court in Cape Town in December 2017 for a declaratory order that Pauw “disclosed SARS’ confidential information or taxpayer information in contravention of Chapter 6 of the Tax Administration Act”. Chapter 6 makes provision for the “confidentiality of information”. Moyane also asked the court for a cost order against Pauw if the application is opposed. Pauw was cited as a respondent in his personal capacity. His publisher, Tafelberg, was not listed as a respondent in the proceedings.

Moyane’s lawyers, the firm Mashiane Moodley and Monama Inc. drafted the papers. They made basic mistakes, including the assertion that Moyane was appointed by the president in terms of the SARS Act 34 of 1997. The 1997 version of the act actually states that the minister of finance appoints the commissioner. The amended SARS Act 46 of 2002, however, cedes the power of appointment to the president.

Apart from mixing up the law, Moyane’s affidavit seems to have a material problem: It uses explicitly clear language, unlike the tax boss ever used in his most recent reporting stints in Parliament.

Moyane used words and phrases such as that Pauw “disclosed taxpayer information” and “certain extracts in the following chapters of the book constitute unlawful disclosure of the SARS’ confidential information and/or taxpayer information”.

Despite SARS’ denial, the papers create the perception that Moyane himself confirms the veracity of Pauw’s allegations.

Put differently: If Pauw made errors and disclosed false information, it can only be labelled as fiction – the publication of fiction may not be grounds to drag Pauw to court under the Tax Administration Act.

Reacting to questions about Project Nightfury, SARS declined to comment:

As you are aware, SARS is bound by the confidentiality clause, that is, Section 69, not to divulge specific information and details on the affairs of taxpayers. This is in line with the provisions of Chapter 6 of the Tax Administration Act, 2012 (Section 69 of the Act) which provides for the secrecy of taxpayer information. This includes information relating to any possible investigations. Section 67 of the Act, prohibits the disclosure of SARS confidential information, defined in section 68 as information that is relevant to the administration of the tax Act, that is, information related to the operations of SARS, including an opinion, advice, report, recommendation, or an account or consultation, discussion or deliberation.”

As previously mentioned, the preliminary investigation into Mpisi Trading 74, Huang, his wife and a myriad related entities was at first conducted between 2008 and 2013 by some of SARS’ best investigators. It was a massive and intricate investigation complicated by politics. In the run-up to the May 2014 national elections, SARS’ state-of-the-art (at the time) risk engine stopped a consignment of 181,300 ANC T-shirts entering the Durban port. (In his book Pauw puts the number of T-shirts at 18,500. Scorpio’s figure of 181,300 was documented in a SARS affidavit drafted at the time. It seems safe to say SARS stopped thousands of T-shirts meant for ANC supporters entering the country.) The T-shirts were decorated with President Zuma’s face and ANC slogans and were valued at around R118-million. No import tax had been paid on it, and SARS (then under the leadership of acting commissioner Ivan Pillay) promptly demanded about R41-million import duty. The ANC was livid.

A few months later, in September 2014, Tom Moyane was appointed as SARS commissioner. In less than a year Moyane disbanded the investigative units reporting to then investigative head Johann van Loggerenberg, including the now defunct Centralised Projects Unit that investigated Huang and Mpisi. Its members have been scattered and those who stayed at SARS are being persecuted, sources claimed independently of one another. Many resigned.

What is in store for Project Nightfury is not clear yet. A SARS seemingly dragging its feet over the case when it is facing a projected R50-billion revenue shortfall, however, seems odd.

Why is Scorpio disclosing SARS information?

Tax matters are private and Daily Maverick respects Huang’s right to privacy. When we received the internal SARS report with details about Project Nightfury from our sources, we considered whether the facts contained in it merit the infringement.

We consulted our lawyers, probed our sources’ motives and reviewed what is publicly known about Huang’s tax affairs. Pauw’s book contains some of the information repeated in this story, and SARS’ best efforts cannot unscramble that egg.

Our sources legally obtained the SARS report on Huang’s matter, and truly believe that an escalation through the correct channels will only result in victimisation and a further smothering of the matter.

Huang allegedly owes SARS an estimated R3-billion – a sum that will go some way to closing the gap on the projected R50-billion revenue deficit. The matter has dragged on for 10 years now – notably not only because of internal SARS problems. Huang has done his fair bit to frustrate any legal action against him. Daily Maverick believes the light must shine on this secretive, politicised and controversial case in order for it to come to finality soonest. Huang may also be found to be innocent, in which case justice delayed for the Huangs is justice denied. More important though is the perception that SARS is dragging its feet and dancing circles around some “politically connected” cases. South Africa’s laws – meant to protect citizens and residents of South Africa – should not be misused to hide criminality. DM

Photo: Robert Huang (right) with Khulubuse Zuma.

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