House of Cards: What does the Sunday Times apology mean for the rest of the pack?

In a full-page apology on Sunday, the newspaper’s new editor, Bongani Siqoko, admitted that the Sunday Times, under its previous editor Phylicia Oppelt, “had got some things wrong” and added that “in particular, we stated some allegations as fact, and gave incomplete information in some cases. In trying to inform you about SARS, we should have provided you with all the dimensions of the story and not overly relied on our sources.”

It was misinformation from these sources in particular that led – a day after the Sunday Times had published on 9 November 2014 a story about an alleged SARS “rogue unit” – to the suspension by Commissioner Tom Moyane of the entire SARS executive committee, including acting commissioner Ivan Pillay as well as group executive, Johann van Loggerenberg.

Before the 9 November Sunday Times report that the National Research Group (as the unit headed by Van Loggerenberg was known at the time) had set up a “brothel” to spy on “ANC heavyweights”, the term “rogue unit” had never been used in the media or anywhere else.

The fallout from this sequence of events has been politically cataclysmic, pitting not only accidental Finance Minister Pravin Gordhan against Moyane but also jeopardising some of the successes of the National Research Group (NRG) and SARS in recovering millions in unpaid taxes during its existence.

One such case is that brought by tax offender, suspected drug smuggler and shareholder in the tobacco company Carnilinx, Martin Wingate-Pearse, who paid millions in penalties after a 2005 SARS probe. Wingate-Pearse has now claimed that information on his taxable income between 1998 and 2005 and obtained by the “rogue unit” is unlawful and should be set aside. It is a test case that will have serious repercussions in the recovery of revenue from several other tax evaders by the NRG and who have had to pay penalties.

It was in an affidavit, given by former Sunday Times investigative journalist Pearlie Joubert in support of SARS challenging a motion of notice brought by Wingate-Pearse, that damning allegations of methods used by the Sunday Times investigative team and the paper’s editor Phylicia Oppelt in reporting on the matter were first made public.

In this affidavit, which was handed to a Press Ombudsman hearing into the Sunday Times, Joubert revealed the original source for the paper’s stories had been Advocate Rudolf Mastenbroek, a former SARS official and ex-husband of the Sunday Times editor, Oppelt.

Joubert, a veteran investigative journalist who cut her teeth at the Vrye Weekblad, had been employed as part of the Sunday Times investigative unit from July 2013. In her affidavit Joubert said that she had resigned in January 2015 because she had not been “willing to be party to practices at the Sunday Times which I verily believed to have been unethical and immoral”. She charged that the stories that were published had been false and appeared to have been “an orchestrated effort by persons to advance untested allegations in a public arena”.

Joubert said the issue was part of a much bigger narrative and “there is much more there” and added that she had flagged information given to the Sunday Times but her questions had been ignored by Oppelt and other journalists who formed part of the investigative unit. One of these was Piet Rampedi who has recently left the Sunday Times.

Joubert also said she had previously privately written to then Finance Minister Nhlanhla Nene raising concerns about the appointment of Advocate Mastenbroek to an advisory committee investigating SARS and chaired by retired judge Franklyn Kroon. The Kroon Commission essentially endorsed the findings of an earlier inquiry by the Sikhakhane panel.

The dominoes started tipping in May 2014 when Pretoria attorney, Belinda Walter, a State Security Agent who also spied for British American Tobacco (BAT), who acted as legal counsel for Carnilinx, a rival tobacco company, and who also headed the Fair-Trade Independent Tobacco Association, levelled various allegations against Van Loggerenberg. These included that Van Loggerenberg had revealed confidential tax information to her. Van Loggerenberg and Walters had a short-lived relationship which had soured and which was to prove a hand grenade lobbed into the heart of the once efficient and impeccable South African Revenue Service.

In June 2014, Pillay, concerned by Walters’ allegations, appointed the Kanyane Panel, led by lawyer Moeti Kanyane, to investigate Walter’s allegations. The panel concluded its report on 12 August 2014 stating: “We are unable to conclude that the evidentiary material presented by Ms Walter in support of the allegations is credible, especially in circumstances where the allegations are denied by Van Loggerenberg.”

Despite these findings the Kanyane Panel did record some concerns relating to Van Loggerenberg but before these could be put to him the report was mysteriously leaked to the Sunday Times.

In a further attempt at drilling down and before his departure Pillay, on 5 September 2014, appointed the Sikhakhane Panel, led by Advocate Muzi Sikhakhane.

The Sikhakhane Panel was tasked with critically assessing and evaluating all evidence and to determine whether “adverse findings” against Van Loggerenberg, based on Walter’s complaint, could be made.

Further terms of reference included whether Van Loggerenberg deliberately set out to establish a relationship with Walter “for the purposes of obtaining incriminating information about her clients, many of whom are suspected of being involved in illicit tobacco trading”, whether there had been “any possible breach by Mr Van Loggerenberg of any law arising from the unlawful interception of information” and also whether “there was any breach of any law or code of conduct by engaging in an intimate relationship with a taxpayer or its representative who was under investigation”.

There was no reference anywhere in the original mandate to a “rogue unit”.

On 5 November the Sikhakhane panel handed its report to Commissioner Tom Moyane who had been appointed to the post by President Jacob Zuma about two months earlier, on 27 September 2014.

That same month, the Terms of Reference of the Sikhakane panel were suddenly extended to include allegations of the “rogue unit”. This only occurred after reports about the alleged unit, now admittedly inaccurate, had appeared in the Sunday Times. Moyane met with the panel to confirm these new terms of reference.

Paragraph 57 of the Sikhakhane report reads: “Shortly after the panel was appointed and commenced its work, the media reports escalated and alleged the existence of a covert unit that had been operating at SARS.”

By then, of course, Pillay, Van Loggerenberg and others had already been interviewed by the panel but were never given an opportunity to present evidence with regard to the expanded investigation into the “rogue unit”.

One of the recommendations of the Sikhakhane report was that a more detailed investigation, now the third, be conducted. To this end Moyane appointed, in December 2014, the external international auditing giant KPMG as a contractor. KPMG’s auditor, Johan van der Walt, was to conduct a “forensic investigation” with Advocate Martin Bressey who worked with the auditing firm on behalf of SARS in “capturing the oral evidence”. SARS Chief Officer Jonas Makwakwa and the SARS Steering Committee were nominated as representatives of SARS.

(Brassey also represented SARS in former Deputy Commissioner Ivan Pillay’s successful Labour Court challenge to have his suspension ruled unlawful. SARS lost the case and was ordered to pay Pillay’s legal costs.)

Makwakwa and Moyane on Friday 1 April revealed that they are suing, both in their personal capacities and as part of the SARS executive, the Mail & Guardian and the amaBhungane Centre for Investigative Journalism for R4-million in damages “for severe reputational damage”. The revenue service itself is listed as the third applicant in the matter.

The defamation suit arrises from an investigation by amaBhungane of Moyane’s current restructuring of SARS and in which it was revealed that SARS insiders had accused a group close to Moyane of seizing control of the Large Business Centre (LBC) a key revenue-generating division that deals with large corporations and wealthy individuals. The M&G and amaBhungane reported that this had been an attempt by Moyane’s “new guard” to give themselves undue influence over settlement negotiations running into billions of rand.

Moyane is also seeking a court order declaring that the amaBhungane article violated the secrecy provisions of the Tax Administration Act by disclosing interactions between SARS and three taxpayers, Taiwanese-South African businessman Robert Huang, Durban businessperson Shawn Mpisane and multinational financial services group Old Mutual.

In 2014, at the time of its appointment as a contractor to SARS, KPMG did not disclose that it had in March that year been appointed as the auditors for British American Tobacco, one of the entities that featured prominently in the “rogue unit” saga. Essentially KPMG had been tasked with investigating allegations relating to one of its biggest multinational clients while being in the employ of that client. It is not known if KPMG declared this serious conflict of interest to SARS. However in the version of the KPMG report that has been leaked the firm mentions the names of all other “suspects” involved but does not once name BAT.

In December 2015 KPMG, after interviewing more than 30 people, but crucially not Pillay, Van Loggerenberg, strategic planning and risk head Peter Richer and SARS official Yolisa Pike, who are at the heart of the investigation, handed a version of their “draft” final report to Moyane.

The report was issued with the sudden proviso that it was not to be used for the “resolution or disposition of disputes or any controversy associated thereto…”; however, a SARS legal letter to one of the subjects states the purpose of the KPMG investigation was to “inform civil and criminal proceedings”.

It has subsequently emerged that the KPMG report had been seriously compromised when large chunks of a 30 November 2015 letter written on behalf of SARS attorneys Mashiane Moodley and Monama to KPMG, found its way, verbatim, into a draft of the KPMG report.

In essence KPMG, an independent and outside investigator, had taken instructions from its client about what the final findings should be. KMPG have consistently maintained that they are unable to comment on this apparently serious breach.

A version of this report, which had unsurprisingly found that the unit had been “illegal” and that those implicated, including Pravin Gordhan, should be investigated, was strategically leaked to the media, specifically the Sunday Times.

Only a few people received a copy of the KPMG report. These include Moyane, the former Chief Officer of Human Resources, members of the Kroon Board (Mastenbroek was a member), SARS lawyers as well as the minister and deputy ministers of finance.

(An interesting aside is that KPMG were also the auditors for the Gupta family, No 1’s close friends and business associates but severed ties with the family’s businesses on 1 April as, according to KPMG CEO Trevor Hoole, “the association risk is too great for us to continue. It is with heavy hearts that we have reached our conclusion, and there will clearly be financial and potentially other consequences to this, but we view them as justifiable”.)

The entire SARS “rogue unit” applecart (with all the rotten fruits apparently now exposed) was unexpectedly upset in December when President Zuma fired Minister of Finance Nhlanhla Nene, ultimately opening the road for the return of Pravin Gordhan. Once back in the saddle, Gordhan, who was a previous Commissioner of SARS when the NRG had been established, approached Moyane to halt his restructuring of the country’s tax collection service. Moyane refused point blank.

A few months after Gordhan’s re-appointment, the Hawks and the Crimes Against the State Unit (Cats) began persuing him for his alleged involvement in the establishment of the SARS investigative unit. Discredited Hawks head, Lieutenant-General Mthandazo Berning Ntlemeza, personally delivered 27 questions to Gordhan shorty before he was due to deliver his budget speech.

In the meantime, Minister of Police Nathi “Nkandla Magician” Nhleko and Minister for State Security, David Mahlobo, came out to bat for Moyane and the Hawks saying the investigation into Gordhan was justified and that he was not “above the law”.

On March 30 Gordhan replied to the Hawks questions, standing his ground and reiterating that the Hawks had no right to investigate him, demand answers or threaten him with retaliation should he fail to respond to their questions. He added that the action by the Hawks and the Cats in pursuing him had, in fact, been unlawful.

Gordhan maintained that the unit had been legally constituted and approved of and had not breached any law.

The Sunday Times apology on Sunday has pulled the pin out of the hand grenade and has exposed the huge fault lines that run through SARS and the purging of all of its senior officials as well as the hounding of Pravin Gordhan. It is only a matter of time before the political blowback will expose those behind the saga. But what will the consequences be for Moyane, KPMG, Ntlemeza and others who have doggedly pushed the “rogue unit” narrative – which the Sunday Times has now admitted was wrong – until now? Popcorn anyone? DM