The KPMG 'report' & the gathering clouds
- Stephen Grootes
- 25 Jan 2016 11:19 (South Africa)
For those experienced in such matters, forensic reports by independent accounting firms are incredibly important. They are usually commissioned when someone who has nothing to do with a difficult situation wants to get to the bottom of what happened. Often, the commissioning of such a report is the first step to a process that ends in a court case. But in this case what has become known as the “KPMG Report” has become mired in muck itself. Over the weekend it emerged it had been issued with a disclaimer saying it wasn't prepared to settle any “disputes” or “controversies”. Then, in what is probably a first for KPMG, the firm has now, in public, discussed its own report.
In a statement issued on Monday afternoon “from the desk of its CEO Trevor Hoole” the company laments the fact that the report has received so much media attention “which should never have occurred as the work was being conducted under strict rules of confidentiality”. The firm goes on to say that, “Ordinarily we would not choose to respond in the media on a confidential assignment, but are concerned that certain aspects of our report have been leaked...”.
After explaining that there are some limitations imposed on “our assignment” the statement then makes clear that the document currently doing the rounds is not the final report. It explains that in their view, a draft is a draft is a draft until a client has finished processing it. In other words, it’s only when SARS, in this case, says it’s final that it's final. It goes further, saying that it last submitted a report in this case on 4 December, and that later in that month the Deputy Finance Minister, Mcebisi Jonas, “indicated that the report was still a draft and not yet ready for release”. In other words, no matter what the Sunday Times says, there is no final report.
Clearly, someone at KPMG is now getting very, very worried. As well they should. For a company of its calibre and reputation to conduct an investigation like this for a client and then to say it “was not prepared for the resolutions of any disputes or controversies” would appear, to an outsider, to nullify the entire process. At the very least it looks like KPMG is now well aware that its work cannot stand up in court. And the reason for that, as the lawyer for former SARS Deputy Commissioner, Ivan Pillay, and the people around him, Muhamed Husain has explained, probably lies with the KPMG mandate and the allegations that SARS itself was part of the process of report compilation. In their words, KPMG was told not to talk to the people who were facing the accusations. Which means, on their version, it is almost useless, a position which the report's cover note explicitly agrees with.
What the makes the matter slightly more strange, is that KPMG should surely have seen trouble was coming when it received the mandate in the first place. There was no way a report like this, in a situation where the stakes were so high, was ever going to remain obscure and out of the public view. Just the fact that it was all broken in the Sunday Times in the first place should have been evidence of that.
The person who actually wrote the report, the man in charge is Johan van Der Walt. He is a man of considerable experience, appearing for the state as its main witness in the prosecution of Schabir Shaik. If it had not been for the decision of that now peripatetic acting judge, Mokotedi Mpshe, and his strange decision to withdraw the corruption charges against President Jacob Zuma, Van der Walt could well have ended up testifying against Number One himself. How did he not see this mess coming, surely his antennae would have indicated that this was going to be messy?
While KPMG appears to be sweating more than slightly, it seems another big fight is looming between SARS Commissioner, Tom Moyane and Finance Minister Pravin Gordhan. Officially SARS is simply refusing to comment on the Sunday Times claims that Moyane is planning to defy Gordhan’s instruction to stop with a big restructuring of SARS. In early January Gordhan told Moyane to stop the plan, saying that he wanted to study it. Now it appears Moyane has sought legal advice on whether or not he can disobey that instruction.
At first blush it would seem clear: Gordhan as Finance Minister has executive authority over SARS, he can actually issue instructions to its Commissioner. And he, himself, must believe he has this power, otherwise why issue the instruction in the first place? But Charles de Wet, a tax partner at Price Waterhouse Coopers disagrees. He's told EWN that “it seems to us, under the layout of the legislation is that the only power the Minister has under the circumstances is to appoint a special committee...but there does not seem to be any direct power between the Minister and the Commissioner in these circumstances.” De Wet says this would presumably mean that in fact Moyane can go ahead. However, and this must be stressed, this is surely untested law, in that no judge has ever been called upon to make a ruling. If De Wet is right (and he surely is) that would be bad news for Gordhan.
But perhaps we're asking the wrong question. As another interested observer suggested to me, what really matters is this: The Commissioner is appointed by the President. The Minister is appointed by the President. Now...who has the upper hand? And so, just like that, we're back to one of the main interpretations of the whole SARS story, that it is all about capture, to take over SARS to protect someone or something, and to save someone else, a huge amount of money. If one considers that one of the roots of this mess is a person called Belinda Walter, who has been accused of acting for cigarette smugglers, things might perhaps get a little clearer.
But there are other connected issues to peruse here. Amid the terror we all felt as we got poorer in the days after Nhlanhla Nene was fired as Finance Minister one of his predecessors, Trevor Manuel wrote an Open Letter to Lindiwe Zulu in which he referred to the arrival of Des van Rooyen at the Finance Ministry with two advisors. Manuel asked where these people came from, and how could they have known he was going to be appointed to the position in the first place. No answers have been forthcoming. He would not have asked if he did not think it was important. There have been claims that another newly appointed minister also arrived from his office in the provinces with advisors ready to go. Which is going to lead to Zuma's enemies making more rude remarks about “capture”, and hinting darkly about “political manipulation” and “Saxonwold”. We repeat, nothing has been proven. Yet.
While it may appear that Gordhan will find the going rather tough in the next little while, it's worth remembering that 10 days ago he refused to answer a question from 702's John Robbie about whether he had placed any conditions on his appointment as Finance Minister. Instead of saying “No, of course not, you don't place conditions on the President”, he said “It was a private conversation between me and the President”. Considering how important SARS is to Gordhan, that may well be an indication that he does have some sort of ace up his sleeve, and that he does, indeed, have the upper hand. DM