Daily Maverick

Scorpio: Makwakwa Dossier, Part 5 – Fiction, Deceptions & Falsehoods – how Moyane washed away Makwakwa’s sins

SARS boss Tom Moyane lied to Parliament and the public about the extent and content of the disciplinary inquiry into his right hand man Jonas Makwakwa. Scorpio can reveal that the closely guarded and highly secretive disciplinary findings had no relation whatsoever to the damning financial intelligence report that forced the suspension of Makwakwa in the first place. Thanks to Moyane’s sleight of hand, Makwakwa found himself back in his top job after a year of what amounted to paid leave. Scorpio shows how the whitewash was done. By PAULI VAN WYK for SCORPIO.

Previous installments:

Scorpio can reveal that none of the six charges levelled against Jonas Makwakwa relate in any manner to the damning Financial Intelligence Centre (FIC) report that accused the top SARS official of money laundering, tax evasion and growing a “dependency” on mysterious cash to maintain his lifestyle.

The 60-page document describing the six unrelated charges and disciplinary findings has been kept under wraps since 13 October 2017, when the disciplinary process was “concluded” and the report was signed by advocate Terry Motau SC. Based on this document, Moyane announced Makwakwa’s return to SARS after a year of suspension. Makwakwa was suspended in September 2016 based on the FIC’s allegations of tax evasion and money laundering.

The disciplinary findings document contradict at least three of Moyane’s public statements to Parliament and the public about:

  1. The content of the disciplinary hearing. Moyane’s early press releases inferred that the disciplinary process related directly to allegations in the FIC report;
  2. Why Moyane declined to submit crucial disciplinary documents to Parliament. According to Moyane disclosure of the documents were governed by the FIC Act; and
  3. Why Makwakwa was allowed back in SARS. Moyane implied several times that the FIC allegations were found to be without substance.

None of this is true.

Why Moyane would mislead Parliament and the public, ostensibly to help Makwakwa, is as yet unclear. The effect of his actions is however that SARS welcomed back Makwakwa who wields enormous power over taxpayers, yet stands accused of tax evasion and money laundering.

When quizzed about the discrepancies, SARS repeated that “Makwakwa answered all allegations as per the FIC suspicious report during the investigation for possible misconduct and which investigation found that he had not committed any misconduct as a result of those allegations”.

Daily Maverick will show that the facts contradict this statement. Makwakwa did not answer to all allegations detailed in the FIC report.

SARS continued, claiming “no contradiction in our statement and to allege that the SARS commissioner is lying, whilst it is clear that you do not understand the processes, is offensive and defamatory”.

SARS’ full answer to us could be found here.

***

Makwakwa, chief officer for business and individual tax, is the second most powerful official in SARS. He rose to notoriety after the FIC accused him in May 2016 of receiving mysterious cash payments from undisclosed sources that may be “proceeds of crime”.

But Makwakwa was “not guilty of any of the charges levelled against him”, Moyane announced on 30 October 2017, after a “thorough” and “independent” investigation and disciplinary process conducted by Hogan Lovells, professedly based on allegations by the FIC report. Moyane announced Makwakwa’s immediate return to SARS based on the disciplinary outcome.

Neither Moyane nor law firm Hogan Lovells were clear and forthcoming about the exact charges Makwakwa had been cleared from. Instead, plenty of legal-speak was thrown about, including opaque phrases like how “provisions” of the FIC Act and the Tax Administration Act “prohibits the disclosure” of any information about the disciplinary process. The inference created however was that Makwakwa was cleared of all allegations the FIC levelled against him.

This, Part 5 in the Makwakwa series, will highlight Moyane’s three falsehoods and misrepresentations to Parliament and the media, seemingly designed to appease hawk-eyed parliamentarians while keeping the public in the dark.

Part 5 goes to show, further, how not one role player in the saga, including Hogan Lovells, Makwakwa’s lawyers as well as adv. Motau, had courage and professional pride to set the record straight when Moyane drifted into the post-fact territory.

Our investigation and analysis is based on Moyane’s reportage to Parliament and the public, his private letters to the ministers of finance, documents used in the disciplinary process, interviews with Hogan Lovells and interviews with officials from SARS and Treasury.

The disciplinary findings

The six charges against Jonas Makwakwa relate to a breach of his suspension conditions and the failure to declare business interests and property. Disciplinary chair adv. Terry Motau SC found Makwakwa not guilty on all these charges.

Four charges relating to the breach of his suspension conditions were laid against him after Makwakwa contacted a SARS official in January 2017 about a SARS matter.

They are:

  1. Breach of suspension conditions;
  2. Gross insubordination;
  3. Failure to act in the best interest of SARS and/or placing SARS in a position to be brought into disrepute; and
  4. Abuse of position and/or exercising undue influence.

Two additional charges alleged Makwakwa’s failure to report his directorship in the company Biz Fire Worx and the non-disclosure of his property.

They are:

  1. Breach of SARS’ internal ethics policy – conflict of interest and code of conduct;
  2. Breach of SARS’ internal ethics policy – conflict of interest – failure to declare immovable property and rental income.

That the disciplinary findings have no relation to the FIC report stands in stark contrast to Moyane’s first press release on the matter.

171013_Disciplinary Findings by Motau SC

On 30 October 2017 Moyane announced the decision to bring Makwakwa back. To fully understand the extent of how misleading it was, one needs to read the press release, titled “Jonas Makwakwa to return to SARS”, in total.

This was Moyane’s first falsehood.

The press release mentions the suspension and disciplinary action based on the FIC report, but does not state exactly what the charges were or what it related to.

Then Moyane concludes:

SARS wishes to confirm that advocate (Terry) Motau SC has submitted the final report which found that Mr Makwakwa was not guilty of any of the charges levelled against him. This concludes the disciplinary action against Mr Makwakwa.”

The statement seems to be deliberately vague: The reasonable man could conclude that the FIC report was thoroughly investigated by Hogan Lovells, that Makwakwa had to explain discrepancies that lead to disciplinary charges but that Motau SC cleared him of all charges relating to the FIC report. This especially because the only allegations mentioned in the press release relates to the FIC report.

In parliamentary answers and to the media Moyane always held that Hogan Lovells was indeed appointed to:

The first proof that something big was amiss, was when Hogan Lovells published its own press release four days later. Hogan Lovells, it says, “did not seek to directly investigate the financial transactions identified by the FIC”.

This was an astonishing admission.

Said Hogan Lovells chair and attorney on record Lavery Modise:

As a result of that independent investigation, Hogan Lovells produced a report which contained recommendations for the management of SARS. One of those recommendations was that disciplinary action should be taken against Makwakwa for non-disclosure of external interests. No action was recommended against Elskie.

Hogan Lovells seems to have wanted to correct Moyane’s lie, but didn’t dare to go far enough. Instead Hogan Lovells created more confusion about the exact nature and content of the investigation, disciplinary process and findings.

It was only when British peer Peter Hain dropped a bomb on Hogan Lovells in the British parliament, asking for an international investigation, that Modise directly contradicted SARS’ statements. In a statement titled “Hogan Lovells sets the record straight on SARS”, Modise said:

SARS issued a press release on 30 October 2017 that implied that we had investigated the FIC allegations and said we had recommended that disciplinary action be taken against Jonas Makwakwa. Only the latter was correct…

That Hogan Lovells did not investigate all the FIC payments was staggering news for all the investigators who had sight of Makwakwa’s bank statements and the FIC report. Even Motau SC, presiding over the disciplinary matter, was “surprised” about the charges he had to consider, Scorpio is told.

“Motau was under the impression, as was everyone in the country, that he would be chairing a disciplinary hearing relating to the FIC report,” an impeccable source said.

“He was surprised when it became clear that the charges were for smallish misdemeanors that Makwakwa explained away quite easily. It had no bearing on the FIC report.”

Motau SC declined to comment on the matter, but confirmed the veracity of the disciplinary findings leaked to Scorpio.

Neither Motau, nor Hogan Lovells, corrected Moyane’s deliberately misleading public statements.

If you are out of breath, dear reader, you have reason to be. It took Scorpio four months to piece together Part 5 of the Makwakwa Dossier. But keep your wits about you, because we are only one third into this mystery and the devil is in the detail.

The worst from Moyane was yet to come.

SARS replied as follows to our questions about severe contradictions in Moyane’s statements:

It is clear that your aim is to simply portray SARS negatively in the public space for reasons unknown to us. Here are our responses, most if not all of them repeated.

Creating a continuum

No falsehood was as blatant as what Moyane fed Parliament and the public a day after Daily Maverick published Scorpio’s first story in the Makwakwa Dossier series.

(Scorpio’s revelations in Part 1 showed how Makwakwa’s disciplinary process was tailored and that Hogan Lovells abetted Moyane in getting Makwakwa back into his top job when Makwakwa only explained a fraction of the accusations in the FIC report. According to Hogan Lovells, Makwakwa became combative and challenged their right to interrogate him properly. Nonetheless, Hogan Lovells materially deviated from the brief to investigate, curate all evidence, write a disciplinary report and conduct a disciplinary process if necessary. At the time, no one else was however any the wiser about the content of the disciplinary findings, a fact Moyane seems to have intended to keep it that way by misleading Parliament.)

On 22 November 2017 Moyane reacted publicly to a formal request from Parliament’s standing committee on finance (SCOF) for access to the Hogan Lovells investigative report as well as Motau’s disciplinary findings.

Said Moyane in the press release dated 22 November 2017:

In principle, SARS is not opposed to the release of the two reports (to Parliament), namely the report of the internal disciplinary enquiry and the investigation report by law firm Hogan Lovells into these allegations… However, legal provisions of the FIC act do not allow the disclosure of a South African citizen’s personal information arising from a FIC suspicious report” (our emphasis).

This is a claim Moyane later verbally repeated in Parliament when quizzed about the matter.

But now we know that the disciplinary report had nothing to do with any allegation contained in the FIC report, so the legal parameters Moyane was referring to actually do not exist.

It is therefore not possible for Moyane to claim that he is withholding the disciplinary report from Parliament because the FIC Act has no bearing on Makwakwa’s disciplinary findings.

It was, however, a handy strategy to keep the content secret and get Makwakwa back into SARS while keeping Parliament and the public in the dark.

Even former minister of finance Malusi Gigaba had to repeatedly ask for the disciplinary report. According to sources in Treasury and SARS Moyane attempted to dodge Gigaba’s request, but buckled late last year and submitted the disciplinary findings to treasury. Moyane has however not relinquished the Hogan Lovells report, we were told.

In the meantime Moyane did suggest a team compiled from parliamentarians and officials from SARS and FIC to “discuss” whether the reports can be handed over. Parliamentarians criticized the suggestion, saying Moyane attempts to kick the can down the road.

SARS, on behalf of Moyane, said:

SARS refutes in the strongest terms possible your unfortunate and derogatory comment that SARS Commissioner ‘obfuscated’ the facts and distorted the hearing process”.

It is difficult to see what Moyane’s endgame would be. Did he count on the reports never seeing the light of day? Did he count on Gigaba never breathing a word about the discrepancy? An interview with a SARS official may shed light on the matter:

“Tom Moyane is sloppy with his lies,” a highly placed source who frequently works with Moyane said.

“His belligerent attitude hides it well. An analysis of everything he ever said in public however created a continuum. Every piece of information he put out about Makwakwa did not, over time, perceptibly differ from one another. The start and end point is however substantially different.”

Third strike at the truth

By 27 November 2017, a day before Moyane was scheduled to report to Parliament, a dark and stormy news cloud has formed over SARS about the Makwakwa debacle. By then, Parliament’s standing committee on finance requested the disciplinary findings and the Hogan Lovells investigative report – a matter that Moyane kicked for touch.

That evening, at 17:37, Moyane sent out another press release titled “Moyane breaks silence on Makwakwa”.

The press release contained more falsehoods and misleading statements than is sensible to use in this already inordinately lengthy story. You can read Moyane’s entire press release here.

We will focus on two main points Moyane makes in his press release of 27 November:

  1. All transactions as per the FIC suspicious report were put to mr Makwakwa to respond; and
  2. Hogan Lovells concluded that no act of misconduct could be found based on the FIC report.

When MP’s met with SARS on 28 November, both sides were charged up.

Despite Moyane’s belligerent attitude, or maybe because of it, the parliamentary session was brutal. The pressure caused the SARS boss to make a mistake.

MP’s across party lines forced a crucial and shocking concession from Moyane: The criminal investigations into Makwakwa’s tax affairs and allegations of money laundering were not finalized when he was allowed back into SARS.

(At the time only Daily Maverick’s Makwakwa Dossier Part 1 contained this fact – a story soliciting a blanket denial from SARS. The story prompted SARS to lodge an extensive complaint against Daily Maverick at the Press Ombud. We are in process of defending the matter.)

Not satisfied with Moyane’s “fuzzy” answers (though Moyane denied that he was being “fuzzy”), MPs ordered him back to Parliament on 6 December.

Parliamentary Monitoring Group’s minutes recorded the event like this:

Committee members were adamant that Mr Moyane did not act in the best interest of SARS, government and the country in allowing Mr Makwakwa back at work with a serious criminal investigation against him, still unresolved – at the very least he had to be suspended until there was clarity on the Hawks investigation outcome.

Despite Mr Moyane maintaining that he had followed correct protocol on Mr Makwakwa and that SARS would abide by the unfolding legal process, [Yunus Carrim] the Committee Chairperson [of SCOF] said the actions of the Commissioner were not credible and not befitting a person in such a senior government post.

SCOF chair Yunus Carrim criticised Moyane for providing “fuzzy” and “evasive” answers while feeding the perception that Makwakwa is shielded from consequences.

Said Carrim: “There’s a strong perception Mr Makwakwa is being protected and what you are doing, wittingly or unwittingly, Mr Commissioner, you are feeding directly into that perception… Your management of this matter leaves a lot to be desired,” Daily Maverick journalist Marianne Merten reported.

For all their criticism against Moyane, parliamentarians failed on two occasions to refer back to Moyane’s press release of 27 November to test his concession that the investigation into Makwakwa is far from finalised.

Pity about that. Moyane seems to be “sloppy with his lies”, and his concessions under pressure to Parliament on both 28 November and 6 December 2017 contradicted the press release he sent out on 27 November which said:

All transactions as per the FIC suspicious report were put to mr. Makwakwa to respond and he did. It was those responses which lead to Hogan Lovells concluding that an act of misconduct could not be found from the transactions and their sources.”

In just two sentences Moyane managed to lie twice: By Moyane’s own admission under pressure from MPs, the tax investigation as well as the Hawks investigation was not yet concluded. It is therefore not possible for “all transactions as per the FIC suspicious report” to have been put to Makwakwa for him to respond to. It follows that Hogan Lovells therefore did not have all the information before them to consider when the law firm “cleared” Makwakwa.

Even Hogan Lovells was astounded by the lie. Said Modise:

On 27 November SARS issued another press release that essentially stated that we had investigated the FIC transactions. We had no control or influence over that statement…

It is further misleading to say Hogan Lovells concluded that no misconduct was committed “from the transactions and their sources” mainly because Moyane refused Hogan Lovells access to the tax information. Hogan Lovells confirmed to Daily Maverick that SARS refused to provide them with the tax investigation into Makwakwa (more about this later).

Moyane’s 27 November press release continued with perhaps an even worse lie:

The Hogan Lovells report concluded that there was no prima facie evidence that Mr Makwakwa had committed any misconduct in relation to the financial transactions emanating from the FIC report” (our emphasis).

That is, of course, impossible.

Hogan Lovells confirmed to Daily Maverick they did not have access to the tax investigation. SARS refused to provide them access, Modise said.

SARS responded to this, saying:

“SARS never refused Hogan Lovells access to the PwC investigation, neither did Hogan Lovells have the expectation nor the right to the confidential tax information of the taxpayer. Your allegations are fishing and speculative.”

Hogan Lovells was not afforded the information they needed to conduct a proper disciplinary procedure, despite SARS’ claims to the opposite.

Hogan Lovells also more than once conceded to not having spoken to the Hawks out of their own accord, so any findings from the criminal investigation was also excluded.

If Hogan Lovells had only tried, they might have been surprised by what the Hawks did manage to find. By the end of October 2017, around the same time as when Makwakwa has been found “not guilty on all charges”, the Hawks allegedly told Corruption Watch that the arrests of Makwakwa, Elskie and Moyane were “imminent”.

The Hawks did not reply to our questions about the current status of the Makwakwa investigation. Hawks sources alleged that the case has been subjected to some interference in the meantime, but could not back it up with evidence.

This means that Hogan Lovells most definitely did not find that there was no prima facie evidence that Mr Makwakwa had committed any misconduct in relation to the financial transactions emanating from the FIC report. In fact, if the Hawks were indeed poised to strike, it would indicate a strong criminal case against Makwakwa.

The only allegations Hogan Lovells actually “cleared” Makwakwa of was the small and irregular payments SARS made to Makwakwa. This is a far cry from Moyane’s statement that he answered to all allegations made by the FIC.

Taking a step back: The root of the issue

SARS boss Tom Moyane’s Makwakwa-nightmare started in May 2016 when an investigative report from the Financial Intelligence Centre (FIC) landed on his table. It was damning. Investigators accused Makwakwa and the mother of his child, Kelly-Ann Elskie, of tax evasion, money laundering and corruption. Makwakwa was Chief Officer, Business and Individual Tax at SARS. He was the highest paid official in SARS for the previous financial year (he received more than Moyane even while he was on suspension) and works with big taxpayers. Elskie is a low-level employee in the legal department of SARS. FIC investigators said Makwakwa grew a “dependency” on mysterious cash deposits to maintain his lifestyle, despite Makwakwa’s handsome earnings from SARS.

The FIC recommended an investigation into the good fortune of Makwakwa and Elskie to determine if the cash deposits and payments flagged between 2010 and 2016 were “proceeds of crime and/or money laundering”.

A subsequent Scorpio investigation found that Makwakwa lived far beyond his means. An analysis of his bank statements between 2014 and 2016 showed he spent at least three times more than he earned from SARS in April, May and November 2015. During an additional eight months in the analysed period, Makwakwa’s expenses were about twice as much as his monthly income.

Moyane immediately showed the FIC report to Makwakwa and Elskie, asking them for comment on the allegations. This is a crime in terms of section 40 of the Financial Intelligence Centre Act 38 of 2001 – it prohibits the disclosure of FIC information, including to the subject under investigation. Moyane however denied that he contravened the FIC act.

Four months later Moyane would vehemently deny that he committed a crime, but Makwakwa’s bank statements that Scorpio has seen show the suspicious payments stopped right after Moyane tipped him off about the FIC investigation. Moyane also misused SARS as a postbox in an attempt to ferret information out of the FIC that Makwakwa was not entitled to. This, too, is a crime and contravention of the FIC Act. SARS previously declined to comment on Moyane’s culpability, while denying any and all criminality.

For four months Moyane kept the lid on the devastating FIC investigation while trying to solicit further information for Makwakwa from the FIC. An exposé by amaBhungane however blew the lid off the Makwakwa-secret. Within five days after the news broke, Moyane met with Gordhan to explain himself, suddenly found reason to suspended Makwakwa and appointed law firm Hogan Lovells to do an “independent investigation” and conduct a “fair disciplinary hearing”.

Then minister of finance Pravin Gordhan, MPs in Parliament and journalists accused him of keeping the FIC’s accusations a secret. Moyane denied the accusations vehemently and reported Daily Maverick to the Press Ombud (a case we are defending). Gordhan lambasted Moyane in a letter for including Makwakwa in meetings with the ministry, the Davis Tax Commission and taxpayers while the matter was being kept under wraps. Said Gordhan on 14 September 2016 after a meeting with SARS:

“I further wish to record that I expressed my serious concern and dissatisfaction” with Moyane’s handling of and silence over the Makwakwa-debacle.

The Makwakwa Dossier Part 1 shows how Hogan Lovells materially deviated from the terms of reference – these terms acted as a road map, if you will, of how the disciplinary process into Makwakwa was to be done. Hogan Lovells drafted the road map, conducted a small part of the investigation and was supposed to curate all the evidence from different role players into an investigative report from which charges, if necessary, would have been formulated.

It didn’t happen.

Instead, Hogan Lovells dished their part of the investigation out to PwC, the audit firm which also had to investigate Makwakwa and Elskie’s alleged tax evasion at the behest of SARS. The FIC reported the matter to the Hawks, who conducted their own criminal investigation into the money laundering and corruption charges.

But when Hogan Lovells was due to curate all the evidence to compile an investigative report, SARS suddenly refused to provide Hogan Lovells with the PwC tax report. According to Hogan Lovells chair Lavery Modise the firm asked for the report but was fobbed off by SARS. (According to Modise the PWC tax investigation was concluded. Moyane would later claim in Parliament that the tax investigation was not yet finished. We don’t know if this is the truth, yet. PwC refused to answer our questions. Modise’s and Moyane’s statements are diametrically opposite, suggesting one of them is fudging this point.)

SARS refused their own attorney’s access to the tax report, Modise said, by pretending that the tax administration act prohibits it. Neither Modise nor SARS could explain why PwC then had access to the tax information, but the lawyers who had to conclude the disciplinary process were refused access. SARS in fact denied refusing Hogan Lovells access to the tax report.

SARS alleged attitude should have been a red flag to Hogan Lovells. It was not.

In an interview with Scorpio, Hogan Lovells further conceded to not have approached the Hawks out of their own accord about the status of the criminal investigation. This should have been a second red flag. By Modise’s own version, it was not.

Hogan Lovells stumbled ahead without recognising the red flags and realising that the investigative report would be tailored without information from the tax and criminal investigations. This raises the possibility of Hogan Lovell’s incompetence, at the very least. It further indicates that Moyane has a lot to explain in a clear, level-headed manner. But Moyane’s fate – and that of SARS and the country with him – will ultimately come down to decisions by newly appointed Minister of Finance Nhlanhla Nene and President Cyril Ramaphosa. DM

Photo: SARS Commissioner Tom Moyane (Leila Dee Dougan for Daily Maverick)

As internal polls confirm his personal popularity, emboldened Ramaphosa moves to outflank plotters’ cabal
By Ferial Haffajee
Political bias within the system weakens SA criminal justice
By ISS Today
Not Forgotten: The sordid story of how Mosebenzi ‘Gupta’ Zwane’s thugs wreaked havoc in a Free State hospital
By Anso Thom
Time to tackle apartheid corruption, put an end to democracy-era graft
By Greg Nicolson
Asylum seekers say officials keep their passports until they buy tickets to Zimbabwe
By GroundUp
Bullied Banks
By Zapiro
Zuma’s lawyers argue their client’s victimhood in court once again, this time over his own legal costs
By Rebecca Davis
Final word: Empathy and humility must triumph over arrogance and aggression
By Saul Musker
How the Trump Stole Christmas, or, Oh, The Crazy Tariffs He Will Impose
By J Brooks Spector
VW Touareg 3.0 V6 TDI Executive R-Line: A cut above
By Deon Schoeman