IN THE DISCIPLINARY INQUIRY
Before A Bham SC
In the matter between:
PRESIDENT OF THE REPUBLIC OF
SOUTH AFRICA.
SOUTH AFRICAN REVENUE SERVICES
and
TOM MOYANE
FILING SHEET.
DOCUMENTS: AFFIDAVIT IN SUBSTANTIATION OF CHARGES
FILED BY: EMPOLYER’S ATTORNEYS
STATE ATTORNEY, PRETORIA
SALU BUILDING
316 THABO SEHUME STREET
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PRETORIA
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PRETORIA
Enq: AGF MOKGALE
Ref: 1507/18/253/me
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Fax: (086) 452 7073TO: ADVOCATE A BHAM SC
CHAIRPERSON
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DATE:
TIME:IN THE DISCIPLINARY INQUIRY
Before A Bham SC
In the matter between:
PRESIDENT OF THE REPUBLIC OF
SOUTH AFRICA
SOUTH AFRICAN REVENUE SERVICE
and
TOM MOYANE
AFFIDAVIT IN SUBSTANTIATION OF CHARGES
|, the undersigned
PRAVIN JAMNADAS GORDHAN
state the following under oath:
1 lam a Member of Parliament and the Minister of Public Enterprises. |
am based at the Department of Public Enterprises at 1090 Arcadia
Street, Pretoria
2 | am the former Minister of Finance, having been appointed to that
Position on 10 May 2009 by former President Zuma. | served as
Minister of Finance until 25 May 2014. On 14 December 2014 | wasreappointed as the Minister of Finance. | served in that capacity until 30
March 2017, when I was removed by former President Zuma.
3 | accordingly have personal knowledge of the facts relevant to this
matter up until 30 March 2017. Furthermore, the documents and
correspondence relevant to this matter were within my custody and
control during that time.
4 In respect of the period after 31 March 2017, | refer to the confirmatory
affidavit of officials, inter alia, from National Treasury and the South
African Revenue Service who had knowledge of the relevant events and
custody of the relevant documents from that time.
5 The facts contained in this affidavit fall within my personal knowledge,
alternatively they appear from documents under my custody and control,
or from copies of documents that | have seen. To the best of my
knowledge and belief the facts are both true and correct,
6 Where | make legal submissions, | do so on the basis of advice received
from my legal representatives which advice | believe to be correct.
7 Where necessary, | have obtained confirmatory affidavits from
individuals referred to in this affidavit. Their affidavits will be filed
together with my affidavit.
INTRODUCTION10
"
3
On 2 May 2018, the President of the Republic of South Africa, President
Ramaphosa, served the Commissioner of the South African Revenue
Service ("SARS") Mr Moyane, with notice of a disciplinary inquiry.
Mr Moyane was charged with having committed misconduct in violation
of his duties and responsibilities as Commissioner of SARS in terms of
the South African Revenue Service Act 34 of 1997 ("SARS Act’), the
Public Finance Management Act 1 of 1999 (“PFMA”) and the SARS
Code of Conduct, as well as his fiduciary duties and his duty to act in
accordance with the prescripts of section 195 of the Constitution.
‘The charge sheet listed four counts of misconduct, namely:
10.1 Gross mishandling of the Financial Intelligence Centre (‘FIC’)
Report of 17 May 2018;
10.2 Unauthorised bonus payments;
103 Misleading Parliament; and
10.4 Instructing a SARS employee not to co-operate with the KPMG
investigation into the SARS High Risk Unit.
The charge sheet set out the key averments in respect of each charge
and stated that the inquiry into Mr Moyane’s misconduct would be
conducted on paper and that an affidavit in substantiation of the charges
would be delivered in due course.
Le12
13
4
This is the affidavit envisaged in the charge sheet. Its purpose is to set
ut the facts and evidence which form the basis of the charges against
Mr Moyane.
Mr Moyane is no ordinary employee. His position as Commissioner of
SARS entailed a raft of duties and responsibilities in terms of legistation,
the SARS Code of Conduct and the Constitution itself. These are set out
below and itis in this context that the charges against Mr Moyane must
be considered.
THE DUTIES AND RESPONSIBILITIES OF THE COMMISSIONER OF
SARS
THE SARS ACT
14 Section 2 of the SARS Act establishes the SARS as an organ of state,
within the public administration, but outside the public service.
15 _In terms of section 6 of the SARS Act, the President must appoint the
Commissioner of SARS for an agreed term not exceeding five years.
16 Mr Moyane was appointed Commissioner of SARS by Presidential
Minute dated 27 September 2014 for a period of five years.
17 Section 9 of the SARS Act sets out the responsibilities of the
Commissioner. It provides that the Commissioner:
17.1. is responsible for the performance of SARS functions;
4A18
19
20
17.2 _ takes all decisions in the exercise of SARS’ powers;
17.3 is the chief executive officer of SARS; and
17.4 is the accounting authority of SARS.
The responsibilities of the Commissioner, as chief executive officer of
SARS, are set out in section 9(2) of the SARS Act. They include
responsibility for, amongst other things, the formation and development
of an efficient administration, the organisation and control of staff, the
maintenance of discipline, and the effective deployment and utilisation of
staff to achieve maximum operational results.
The responsibilities of the Commissioner, as accounting authority of
SARS, are set out in section 9(3) of the SARS Act. They include
responsibility for all income and expenditure of SARS, all revenue
collected by SARS, all assets and the discharge of all liabilities of SARS,
and the proper and diligent implementation of the the PEMA,
Section 22 of the SARS Act reinforces the Commissioner's obligation, as
accounting authority of SARS, to comply with the PFMA in respect of all
income and expenditure of SARS, all assets and liabilities and financial
transactions and all revenue collected by SARS.
THE PFMA APPLIES TO SARS A SCHEDULE 3A NATIONAL PUBLIC
ENTITY
Af
Lea
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6
Section 50 of the PFMA sets out the fiduciary duties of accounting
authorities. They are required to act with utmost good faith, with honesty,
fidelity and integrity and in the best interests of the public entity for which
they are responsible. They are also required to disclose to the executive
authority responsible for that public entity, all material facts which may
influence the decisions or actions of the executive authority,
Section 51 of the PFMA sets out the general duties and responsibilities
of accounting authorities. They are required to ensure that the public
entity for which they are responsible establishes and maintains effective,
efficient and transparent systems of financial and internal control.
In terms of section 83 of the PFMA, an accounting authority commits
financial misconduct if he or she fails to comply with the requirements of
sections 50 to 55 of the PFMA, which includes the failure to act in the
best interests of the public entity concerned. Such financial misconduct
is grounds for suspension and may be grounds for dismissal.
SECTION 195 OF THE CONSTITUTION
24
In terms of section 4(2) of the SARS Act, SARS must perform its
functions in the most cost-efficient and effective manner and in
accordance with the values and principles set out in section 195 of the
Constitution,
4b25 Section 195 of the Constitution sets out the basic values and principles
underlying the public administration and provides that the public
administration must be governed by, amongst other things, a high
standard of professional ethics, accountability, transparency, and
impartiality.
THE SARS CODE OF CONDUCT
26 The SARS Code of Conduct is binding on all SARS employees, Its
Purpose is to “express the set of values and behaviours expected of all
SARS employees in their work endeavours and socialisation that may
relate to their status as SARS employees.”
27 The SARS Code codifies the values and principles governing the public
administration set out in section 195 of the Constitution.
28 The SARS Code states that it is ‘the integrity comerstone of the SARS
governance model and is essential for the effective administration of a
tax and customs system that is anchored on voluntary compliance.”
29 The SARS Code sets specific standards of conduct that represent
SARS’ core values and the appropriate conduct expected of all SARS
8 LE
employees. These are inter alia:30
29.1
29.2
293
29.4
29.5
29.6
Faimess;
Accountability;
Integrity;
Respect;
Trust; and
Honesty.
The SARS Code sets additional specific standards of conduct that the
Commissioner and SARS management are required to follow. It states
that the Commissioner, members of the SARS Executive Committee and
senior managers should, as the leadership of SARS, lead by example
and champion the Code of Conduct by adhering to, inter alia, the
following standards and principles:
30.1
30.2
30.3
Perform their duties and exercise their powers with the utmost
professionalism, diligence and honesty, and conduct themselves
in a decent manner at all times;
fulfil all the obligations imposed upon them by the Constitution
and law;
act in utmost good faith and in the best interests of good
governance;30.4
30.5
30.6
30.7
9
at all times uphold the reputation of SARS and avoid in any form
or manner causing reputational harm to SARS;
in all respects act in a manner that is consistent with the integrity
of their office;
not use their position or any information entrusted to them to
enrich themselves or improperly benefit any other person; and
not use information received in confidence in the course of their
duties otherwise than in the discharge of their duties.
‘THE EXECUTIVE AUTHORITY RESPONSIBLE FOR SARS
34
32
While the Commissioner is appointed by the President, he is
accountable to the Minister of Finance (‘the Minister’) as the Executive
Authority responsible for SARS.
As the Executive Authority responsible for SARS the Minister has the
following powers under the SARS Act:
32.4
Under section 7(1) the Minister may designate a SARS employee
to act as Commissioner when the Commissioner is absent or
unable to perform the functions of office, or when the position is.
vacant.33
10
32.2 Under section 11 the Minister may appoint one or more specialist
committees to advise the Commissioner and the Minister on any
matter concerning the management of SARS’ resources,
including asset management, human resources and technology.
32.3 Under section 13(1) the Minister may assign specific powers to
the members of a specialist committee for the purposes of
performing the functions assigned in terms of section 11.
32.4 Under section 18(3) the Minister must approve the terms and
conditions of employment for employees in the management
structure of SARS
In terms of the PFMA, the Commissioner is subject to the authority of the
Minister, as Executive Authority of SARS, in the following respects:
33.1 Under section §3(1) and (2) of the PFMA, the Commissioner
must submit a budget of estimated revenue and expenditure for
the financial year to the Minister for approval. Under
section 53(4), once the Minister has approved the budget, the
Commissioner must ensure that expenditure in SARS is in
accordance with the approved budget.
33.2 Under section 55(1)(d), the Commissioner is required to submit
SARS audited financial statements, an annual report on SARS’
activities during the financial year, and the report of the auditors1
on those financial statements to the Minister within five months of
the end of a financial year.
34 Furthermore:
34.1 In terms of section 76(4) of the PFMA, National Treasury may
make regulations or issue instructions to organs of state,
including SARS, that are regulated by the PFMA.
342 The Minister, as head of National Treasury may make
regulations or issue instructions to SARS concerning all matters
listed in section 76(4) of the PFMA, financial management and
intemal control, and the administration of the PFMA.
CHARGE 4
THE FACTS
Financial Intelligence Centre Report of 17 May 2016
35 By way of a letter dated 17 May 2016, the director of the Financial
Intelligence Centre (‘FIC’), Mr Murray Michell, informed Mr Moyane, in
his capacity as Commissioner of SARS that the FIC had flagged two
‘SARS employees for suspicious financial transactions.
Sis36
37
38
39
40
12
The first employee was Mr Mashudu Jonas Makwakwa, Mr Makwakwa
was a senior member of the SARS executive. He held the position of
Chief Officer for Business and Individual Tax. As such he was tasked
with controlling SARS’ biggest revenue streams, income tax from
corporates and individuals including high net worth individuals in South
Africa. He was widely known to be Mr Moyane's second in command,
‘The second employee was Ms Kelly Ann Elskie. She was employed as a
junior consultant in the Alternative Dispute Resolution division of SARS’
Legal Department.
Mr Michell provided Mr Moyane with a report compiled by the FIC, which
detailed suspicious and unusual cash deposits and payments made into
the accounts of Mr Makwakwa and Ms Elskie ("the FIC Report’).
The FIC Report is a confidential document and may not be released
publicly without the approval of the Director of the FIC. Given its
relevance to Charge 1, | am in the process of making the necessary
arrangements to obtain the approval of the Director of FIC for the Report
to be made available to the Presiding Officer on the understanding that
he will maintain its confidentiality.
The FIC Report flagged a number of suspicious transactions in respect
of Mr Makwakwa, including a number of substantial cash deposits into
his personal bank account and irregular ad hoc payments from SARS
and other entities, including an entity known as Biz Fire Worx (Pty) Ltd.4a
42
43
13
The FIC Report noted that the volume and value of the deposits and
payments was highly unusual given that Mr Makwakwa was permanently
employed.
The FIC Report flagged several suspicious cash deposits into the
personal bank account of Ms Elskie and noted that the source of these
funds was unknown and that the value of these deposits was suspicious
and unusual given Ms Elskie's financial profile.
The Financial Intelligence Centre Act 38 of 2001 (‘the FIC Act’), per
section 40 thereof, requires the FIC to make information reported to or
obtained by it available to, amongst others, SARS, if it believes that the
information is required in order to investigate suspected unlawful activity.
‘The FIC Report was referred to SARS in terms of section 40 of the FIC
Act for investigation to determine:
44.1 Whether Mr Makwakwa and Ms Elskie had committed acts of tax
evasion and/or other contraventions of the Tax Administration
Act 28 of 2011 (‘the TA Act’),
44.2 Whether the funds received by Mr Makwakwa and Ms Elskie
constituted payment of the proceeds of crime arising from corrupt
activities as defined in the Prevention and Combating of Corrupt
Activities Act 12 of 2004 (‘PRECCA’)45
14
Whether Mr Makwakwa and Ms Elskie effected payments in
contravention of intemal policies and/or the PEMA.
Whether Mr Makwakwa and Ms Elskie were guilly of money
laundering as defined in section 1 of the Prevention of Organised
Crime Act 121 of 1998 (‘POCA’).
Importantly, section 41 of the FIC Act prohibits the disclosure of
information held by or obtained from the FIC except in certain narrowly
defined circumstances, namely:
45.4
45.2
45.3
45.4
45.5
within the scope of that person's powers and duties in terms of
any legislation;
for the purpose of carrying out the provisions of the FIC Act;
with the permission of the FIC;
for the purpose of legal proceedings; or
In terms of an order of court.
On 20 May 2016, Mr Moyane acknowledged receipt of Mr Michell’s letter
of 17 May 2016 together with the FIC Report, in writing, In his letter, Mr
Moyane stated:
“| have taken note of the report, seriousness and sensitivity of the
matters it refers to from your letter and hereby confirm SARS will do a
further investigation into the matter.”15
47 Acopy of Mr Moyane’s letter to Mr Michell is attached, marked "FA1"
Mr Moyane's actions in response to the FIC Report
48 On Friday 20 May 2016, Mr Moyane forwarded a copy of the FIC Report
to Mr Makwakwa. He asked Mr Makwakwa to peruse the FIC Report and
to meet with him first thing on Monday moming 23 May 2016. A copy of
Mr Moyane's letter to Mr Makwakwa is attached, marked "FA2”.
49 On or about 20 May 2016, Mr Moyane also forwarded a copy of the FIC
Report to Ms Elskie.
50 On or about 30 May 2016, Ms Liesel David came on record as the
attomey representing Mr Makwakwa and Ms Elskie. Mr Moyane had
requested Mr Makwakwa and Ms Elskie to provide him with their written
responses to the FIC Report by 1 August 2016. In response, Ms David
requested extensions of time on behalf of her clients.
51 Ina letter from Ms David to Mr Moyane dated 10 August 2016, almost
three months after Mr Moyane had been furnished with the FIC Report,
Ms David recorded that Mr Moyane had agreed to the following
extensions of time:
51.1 30 August 2016 for Ms Elskie to provide her written response to
the FIC Report; and
Sig16
51.2 30 September 2016 for Mr Makwakwa to provide his written
response to the FIC Report.
In the same letter, Ms David demanded a raft of information and
documentation from the FIC in order for Mr Makwakwa and Ms Elskie to
produce their written responses to the FIC Report. This was the
following:
52.1 whether the FIC's personnel conducting the investigation had the
requisite security-screening certificate as required in terms of the
provisions of section 12 of FICA. If so, copies of such certificates
were requested;
522 whether the FIC personnel who examined and made copies of
bank accounts held by Mr Makwakwa and Ms Elskie obtained
copies thereof under a warrant properly issued by a Magistrate or
a Judge in terms of section 26 (1) and (2) of FICA. If so, copies
of such warrants were requested.
62.3 the reports filed in terms of section 28 and 29 of FICA.
52.4 details as to when the enquiry
fo the tax affairs of Mr
Makwakwa and Ms Elskie commenced;525
52.6
82.7
52.8
52.10
7
details pertaining to the first suspicious transaction in respect of
Mr Makwakwa and Ms Elskie;
full particulars relating to each suspicious transaction involving
Mr Makwakwa and Ms Elskie;
full particulars of suspicious transactions in respect of which Mr
Makwakwa allegedly received payments from SARS;
whether the FIC was aware of any disclosure, in contravention of
its Act by any of its personnel, of information pertaining to the
Report being referred to unauthorised third parties. If so, the FIC
was required to provide details as to when, full names and
designation of the FIC’s employees involved in making such
disclosure, to whom and circumstances under which this
disclosure was made;
whether the FIC had over the past three years received any
report concerning any suspicious transaction involving a SARS
employee, and if so, whether this has been reported to SARS. in
this regard, full particulars were requested;
an explanation of the legal procedure followed by the FIC in
obtaining Mr Makwakwa’s January 2016 payslip;53
54
55
56
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2.11 an explanation of the legal procedure followed by the FIC in
obtaining copies of Mr Makwakwa and Ms Elskie's uncertified
identity documents;
52.12 an explanation of the legal procedure followed by the FIC in
obtaining copies of photo footage from banks (FNB and ABSA)
pertaining to Ms Makwakwa and Ms Elskie;
52.13 an explanation of the legal process followed by FIC in obtaining
‘the bank statements of Mr Makwakwa and Ms Elskie’s personal
bank accounts from FNB and ABSA.
A copy of the letter from Ms David to Mr Moyane is attached, marked
“FAS.”
On 22 August 2016, Mr Moyane wrote to Mr Michell of the FIC
requesting, verbatim, the information and documentation requested by
Ms David on behalf of Mr Makwakwa and Ms Elskie. A copy of this letter
is attached, marked “FA.”
On 7 September 2016, Mr Moyane wrote a further letter to Mr Michell,
again requesting the information and documentation set out above and
Fequesting that it be provided by no later than close of business on 12
September 2016. A copy of this letter is attached, marked “FAS.”
When the information was not forthcoming on 12 September 2016, Mr
Moyane wrote a further letter to Mr Michell on 13 September 2016 in87
19
which he expressed his disappointment that the information and
documentation had not been fumished. He did so in the following terms:
“The purpose of this correspondence is to duly communicate my
sincere disappointment at the fact that, to date, your office, has not
deemed it necessary to respond, substantively or otherwise, to the
request for information’ and or documentation as per these two
letters.”
A copy of this letter is attached, marked “FA6.”
On 13 September 2016, Mr Michell responded to Mr Moyane in writing.*
Mr Michell expressed grave concem over the manner in which the FIC
Report was being handled by SARS. He took particular issue with the
fact that the FIC Report had been disclosed to Mr Makwakwa and Ms
Elskie and with the fact that the SARS was requesting information, to
which Mr Makwakwa and Ms Elskie were clearly not entitled, on their
behalf. The relevant portions of Mr Michell’s letter read as follows:
“I am gravely concerned about the approach followed by the
South African Revenue Service (SARS) in the pursuit of this
matter. It is clear to me from the content of your letter dated 22
August 2016, in particular the detail of the request for
information from Mr Makwakwa's and Ms Elskie's legal
representatives, that the referral made to your office in terms of
section 40 of the [FIC Act] was made available to the objects of
the referral, Mr Makwakwa and Ms Elskie, or at the very least
brought to their attention, subsequent to being handed over to
your office.
The FIC has been providing SARS with financial intelligence
since 2003. SARS' employees are well aware of the access,
handling and terms and conditions of use of such sensitive
information. | point out that the conduct mentioned above
constitutes a serious criminal offence under section 60 of the
FIC Act.20
The process followed by SARS in this matter also appears to be
inconsistent with investigative practice and tradecraft. It is the
FIC’s experience that SARS does not give affected taxpayers
copies of informer information when people blow the whistle on
an errant taxpayer ~ a practice that would amount to ‘tipping off
the taxpayer as to the possibility of a pending investigation
against him or her. If such conduct was normal practice it would
undermine the whistle blower mechanism and result in the
collapse of whistle blowing as a source of information to enforce
tax collection.
Against this background it should be clear that the legal
representatives for Mr Makwakwa and Ms Elskie are not entitled
to receive any of the information they have requested and
providing them with any such information would exacerbate the
contraventions of the FIC Act which have already occurred.”
59 Mr Michell concluded his letter as follows:
“I strongly recommend you undertake a formal investigation into
the gross mishandling of the FIC's referral to your office in this
matter and take the necessary steps to restore confidence in the
professional legal and investigative services within SARS so as
to ensure that future co-operation between the SARS and the
FIC is not jeopardised.”
60 A copy of this letter is attached marked, “FAT.”
‘The Sunday Times Article and its aftermath
61 On 11 September 2016, the Sunday Times newspaper published an
article titled: “Revenue Services number 2 probed for R1.2 million in
suspicious cash deposits’.62
63
64
65
2
The Sunday Times article reported that Mr Makwakwa had been flagged
by the FIC for suspicious and unusual cash payments into his bank
account, and that a report compiled by the FIC had been handed to
SARS commissioner Mr Tom Moyane. The article stated that sources
had confirmed that the FIC Report had been handed to Mr Moyane in
May 2016 and that, despite this, four months later, Mr Makwakwa and
Ms Elskie remained in their positions at SARS. SARS spokesperson Mr
Sandile Mamela had declined to comment.
A copy of the Sunday Times article is attached, marked “FA8.”
Mr Moyane had not informed me of the existence of the FIC Report. |
‘only became aware of the existence of the FIC Report upon the
Publication of the Sunday Times article 11 September 2016. | was
shocked at the allegations contained in the FIC Report and at the fact
that Mr Moyane had not informed me thereof.
On 12 September 2016, the day after the publication of the Sunday
Times article, two things happened:
65.1 Mr Moyane gave Mr Makwakwa notice of SARS’ intention to
suspend him; and
65.2 | called Mr Moyane to an urgent meeting to account for his
actions in light of the Sunday Times’ revelation of the FIC Report.
A,
ie66
67
68
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| recorded the events of the meeting on 12 September 2016 in a letter to
Mr Moyane dated 14 September 2016. This included Mr Moyane's
account of the steps he had taken in response to the FIC Report. A copy
of this letter is attached, marked “FAQ.”
FAS records, amongst other things, the following:
“On 12 September 2016, only after the matter had become public on
the front page of the Sunday Times, you gave Mr Makwakwa a letter
inviting him to provide reasons as to why he should not be
suspended.”
“You have not reported the matter to any law enforcement authority
but state that you will do so in what you describe as due course.”
“You indicated that you will initiate a disciplinary process against Mr
Makwakwa in line with SARS policy.”
“You undertook to provide me with a proper chronology of events,
accompanied by all the relevant supporting documentation, by 13
September 2016, or the latest Wednesday 14 September 2016,
FAQ also recorded my extreme concem and dissatisfaction over Mr
Moyane’s handling of the FIC Report expressed at the meeting
“I further wish to record that | expressed my serious concern and
dissatisfaction with the following:
1. You made no effort to alert me of the serious allegations made
against a senior member of the SARS executive responsible for an
important SARS portfolio. Common courtesy and the integrity of our
entire financial system, of which revenue collection is a vital part,
require that such a serious matter (especially having regard to the
reputational damage to the organisation) should have been
reported to me as the responsible member of the Executive,
accountable to Parliament, as soon as you became aware of it.69
70
1"
23
2. The long delays and apparent lax manner in which this matter has
been handled, given that it has taken almost four months for you to
issue the letter of intention to suspend,
3. The public perception that you have only done so because the
matter has become public.”
As stated above, Mr Moyane gave Mr Makwakwa Notice of Intention to
Suspend on 12 September 2016. The Notice is attached, marked
“FA10", As is evident therefrom, the allegations of suspicious and
unusual cash deposits and payments into Mr Makwakwa's personal
bank account, made in the FIC Report, formed the basis of SARS’
intention to suspend him.
The Notice of Intention to Suspend gave Mr Makwakwa until 13
September 2016 to provide reasons why he should not be suspended.
This period was extended to 16 September 2016. Mr Makwakwa did not
challenge his suspension. In fact, it appears from the Notice of
Suspension, issued on 15 September 2016, that Mr Makwakwa
conceded that, given the seriousness of the allegations against him, his
continued presence at SARS, in the absence of his name being cleared,
would be prejudicial to the reputation of the institution. The Notice of
‘Suspension is attached, marked “FA11.”
It is noteworthy that despite this, Mr Makwakwa had for a period of four
months after the FIC Report was provided to SARS, continued in his
position and continued to participate in the senior management
structures of SARS. He had moreover, during this period, accompanied72
73
74
75
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Mr Moyane to meetings with me and to the parliamentary Standing
Committee on Finance on 24 August 2016.
SARS suspended Ms Elskie on 20 October 2016.
On 15 September 2016 Mr Moyane responded to Mr Michell’s letter of
13 September 2016, Annexure “FA7”, quoted above. Mr Moyane stated
as follows in the penultimate paragraph of his letter:
“Furthermore, | intend to urgently refer this matter to the South African
Police Service ("SAPS") for criminal investigation against the aforesaid
employees, as | am required by section 34 of the Prevention and
Combatting of Corrupt Activities Act 12 of 2004 (‘PRECCA’). In order
to avoid duplication, kindly advise if FIC has already made the referral
to the SAPS.”
A copy of this letter is attached, marked “FA12.”
Itis apparent from the above that, as at 15 September 2016, Mr Moyane
had not referred the information contained in the FIC Report to the South
African Police Service.
‘The Hogan Lovells Investigation
76
On 16 September 2016, Mr Moyane responded to my letter dated 14
September 2016, Annexure “FA9” quoted above. In his letter, Mr
Moyane stated as follows:
“| have initiated a formal disciplinary enquiry in respect of the
allegations contained in the Report. In this regard, SARS has
appointed an independent and reputable international law firm, Hogan
Lovells to draw a project implementation plan (‘plan’) with time lines
and milestones with regard to the administration of the envisaged78
79
80
81
82
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disciplinary proceedings. | will avail the plan to the Minister as soon as
possible, and after receipt of same from Hogan Lovells.
| hereby reiterate my commitment to conduct a thorough and credible
investigation into the allegations of impropriety, tax evasion, corruption,
contravention of Public Finance Management Act and money
laundering against the two employees. As an Accounting Authority
vested with the responsibility to ensure the proper and diligent
implementation of the PFMA, | am particularly obligated by section 84
of the PFMA to investigate allegations of financial misconduct against
the aforesaid employees,”
A copy of this letter is attached, marked “FA13.”
It was not correct that Mr Moyane had initiated a formal disciplinary
inquiry in respect of the allegations contained in the FIC Report.
Mr Moyane had at this stage merely requested Hogan Lovells to conduct
an investigation into the allegations contained in the FIC Report. It
appears, from Annexure “FA17” below, that Mr Moyane had made this
request at a meeting held with Hogan Lovells on 15 September 2016,
There is however no written record of this meeting.
On 29 September 2016, Hogan Lovells wrote to SARS setting out the
scope of the investigation that could be conducted by it in respect of
allegations contained in the FIC Report.
A copy of this letter is attached, marked “FA14,”
Hogan Lovells began in FA14 by defining the matters identified for
investigation in the FIC Report as Requests A, B, C and D respectively:
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“Whether the funds received by Makwakwa and Elskie constitutes
Payment of proceeds of crime arising from corrupt activities as
defined in the Prevention and Combating of Corrupt Activities Act
12 of 2004 (PRECCA) (Request A’);
Whether Makwakwa and Elskie have committed acts of tax
evasion and other contraventions of the Tax Administration Act
(Tax Administration Act) (‘Request B’);
Whether Makwakwa and Elskie effected payments in
contravention of intemal policies and/or the Public Finance
Management Act 1 of 1999 (PFMA) (‘Request C’); and
Whether the aforementioned conduct of concealment and
disguising the true source of these funds constitute acts of money
laundering as defined in section 1 of the Prevention of Organised
Crime Act 121 of 1998 (POCA) (‘Request D’)"
Hogan Lovells then defined the scope of the investigation that could be
conducted by it in respect of each of these Requests as follows.
Requests A and D
84.4
In respect of Requests A and D, Hogan Lovells noted that the
investigation of criminal offences ordinarily falls within the
jurisdiction of the SAPS. It stated that “In our view, criminal
aspects of the allegations against these two employees (with the
exception of offences in terms of tax legislation which Consultant
would ordinarily investigate) should be referred to the SAPS for
criminal investigation.”
Hogan Lovells noted that it appeared from correspondence from
Colonel Heap of the DPCI’s Serious Corruption Investigation
Component dated 15 September 2016, that an investigation was27
already underway and recommended that SARS co-operate with
the DPC! in this regard
Hogan Lovells stated that in the event that it was established that
the employees had committed criminal offences then disciplinary
action should be taken against them and ‘at the appropriate
stage the Firm shall assist with all disciplinary action subject to
compliance with the Consultant's procurement policies.”
85 Request B
85.2
85.3
In respect of Request B, Hogan Lovells recommended that this
investigation be undertaken by SARS, in the context of Mr
Makwakwa and Ms Elskie as taxpayers, rather than employees.
Hogan Lovells noted that “as part of its overall function and
responsibilities, there exists a duty on Consultant to comply with
the first request by the FIC and determine whether the alleged
deposits and payments made and received by Makwakwa and
Elskie have resulted in contravention of tax legislation and
constitute a tax offence.”
Hogan Lovells stated that in the event that the investigation
established that tax offences had been committed, then this
would constitute misconduct and it would assist with the
institution of disciplinary proceedings in relation thereto.28
86 Request C
86.1 In respect of Request C, Hogan Lovells recommended that this
investigation too be undertaken by SARS. This was because,
according to Hogan Lovells, the basis of the payments made by
Mr Makwakwa and Ms Elskie as set out in the FIC Report had to
be established and this was best done by SARS.
86.2 Hogan Lovells stated that ‘once the basis of the payments made
is established, our offices will be in a position to determine if
there has been a breach of Consultant's internal policies and/or
the PFMA and recommend the manner in which the findings
should be addressed."
87 Mr Moyane accepted the scope of the investigation proposed by Hogan
Lovells by signing FA14 on 4 October 2016.
88 On 12 October 2016, Mr Moyane addressed a letter to Ms Refiloe
Ramaphakela, SARS Group Executive: Internal Audit instructing that the
tax affairs of Mr Makwakwa and Ms Elskie be audited. This instruction
appears to have been given in order to give effect to “Requests B and C”
which were, as per Annexure FA14, to be investigated by SARS. Thus,
this letter makes reference to the FIC Report and the “terms of
reference” entered into between SARS and Hogan Lovells in terms of90
29
which SARS was required to independently conduct an internal
investigation in order to determine:
88.1 whether Mr Makwakwa and Ms Elskie had committed acts of tax
evasion and/or contraventions of the TA Act; and
88.2 whether Mr Makwakwa and Ms Elskie had effected payments in
contravention of internal policies and/or the PFMA.
The letter stated further that:
89.1 As administrator the TA Act, SARS had an obligation to obtain
full information in relation to anything that might affect the liability
of a person for tax in respect of a previous, current or future tax
period; determine the liability of a person for tax and investigate
whether a tax offence had been committed.
89.2 As part of its overall functions and responsibilities, SARS had a
duty to comply with the request by the FIC and determine
whether the alleged deposits and payments made and received
Mr Makwakwa and Ms Elskie amounted to contraventions of the
tax legistation or a tax offence. In this regard, Mr Makwakwa and
Ms Elskie were to be treated as taxpayers, and not employees.
A copy of this letter is attached, marked “FA15."30
91 Notwithstanding this letter, as will become apparent below, SARS did
not conduct an internal investigation into Requests B and C in respect of
Mr Makwakwa and Ms Elskie.
92 On 19 October 2016 | wrote to Mr Moyane recording that | had since 20
September 2016 been requesting the terms of reference for the
investigation to be conducted by Hogan Lovells. | was eventually
provided with Hogan Lovells letter of 29 September 2016, Annexure
“FAIA”
93 My letter of 19 October 2016 is attached as Annexure “FA16.” In it, 1
expressed my concern both over the manner in which the “terms of
reference” had been formulated and their adequacy:
“On 16 September 2016, you advised me that you have appointed HL.
as investigator. You have not furnished me with the terms of
reference you presumably provided to HL to underpin their
appointment. Instead, it now appears that you requested HL to draft
their own terms of reference as outlined in their letter dated 29
September, and you only did that after my request for the terms of
reference on 20 September 2016.
It appears that you accepted the terms of reference as determined by
HL; and there is no indication to me as to whether you applied your
mind to the full scope of what needs to be investigated, which
appears to have been determined by HL. In this regard, one of the
aspects | am particularly concerned about is whether or not there are
any settlements approved by Mr Makwakwa that may be affected by
his alleged conduct and the current situation.”
94 On 27 October 2016, Mr Moyane responded to my letter of 19 October
2016. The salient portions of his response are the following:
if
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