Reality Check: How 'rogue unit' allegations weakened SARS and undermined its authority

Mark Lifman is back in the news: on Monday, the Cape Town businessman with alleged links to the underworld and who is close to former ANC provincial chair, Marius Fransman, who is in turn close to President Jacob Zuma, lodged an application with the Cape High Court to have his tax 2014 audit of R388-million reviewed.

Days before Lifman lodged his application he was named in one of two leaked internal SARS memoranda detailing a new investigative unit that has been established under Commissioner Tom Moyane’s watch and which is headed by Yegan Mundie, a senior manager with the SARS anti-corruption unit in Pretoria, and former SARS KZN investigator Gobi Makhanya.

While SARS whistle-blowers have alleged that the unit has been set up essentially as a front to dig for more dirt on Finance Minster Pravin Gordhan as well as former Deputy Commissioner Ivan Pillay, one memo in particular by Mundie to Hlengani Mathebula, Chief Officer for Strategy and Communications, names only one individual whose tax matters need to be re-audited – Mark Lifman. Which suggests that the unit is about more than just Gordhan but also about high-profile and possibly criminal taxpayers with links to Jacob Zuma’s ANC.

In his August 10 memo to Mathebula, Mundie writes that the audit performed on Lifman and other competitors of British American Tobacco were “done unfairly and with malicious intent” and so the businessman’s tax bill should be re-audited.

What Mundie does not mention in the memo is that the High Risk Investigative Unit (HRIU) that has been falsely accused of being the “rogue unit” (by the Sunday Times) was not involved in any aspect of Lifman’s tax case. Mundie could have determined this had he had simply referred to SARS’s existing files (which run into thousands of documents) as well as court documents including debt judgments.

Earlier this year Mundie reportedly met with the National Projects team in Cape Town, which has dealt with the Lifman case and requested all files. Mundie did not approach any former HRIU staff (some of whom are still employed by SARS). It would surely be these members who could corroborate or deny charges by Lifman that the “rogue unit” had conducted illegal surveillance to obtain information about his businesses and tax affairs and he was thus entitled to a re-audit.

But this will all, no doubt, emerge in Lifman’s case, which is now scheduled to be heard in February 2017.

The point is, if SARS under its current leadership wanted to oppose Lifman’s tax audit, it would have to counter Lifman’s “rogue unit” narrative which would place Tom Moyane on the horns of a very sharp dilemma. In so doing SARS would expose that the HRIU and the “rogue” narrative is false and has never been tested in a court where evidence is presented and witnesses cross-examined. The charge is and remains an extrajudicial one – one that was born of media reports leaked by SARS officials and published by Sunday Times.

An interesting aside with regard to Lifman is that Daily Maverick obtained reliable information a month ago that Lifman was seen in the company of Arthur Fraser, the newly appointed Director General for State Security, entering the headquarters of auditing firm KPMG in Cape Town. Daily Maverick sent an e-mail on October 16 to Ministry of State Security spokesman Brian Dube asking whether Fraser’s presence at the meeting was with regard to official business and if so what was the nature of this.

“Mr Lifman was also seen and photographed wearing a VIP tag at President Zuma’s birthday celebrations at Vygieskraal in 2014. I look forward to your reply,” we wrote to Mr Dube.

While Dube replied that he would look into the matter and we prompted him a second time, we have yet to receive a reply.

SARS has faced several other cases where tax audits have been challenged employing the “rogue unit” defence and all of them, without fail, quote the Sunday Times articles in their court papers. These include tobacco manufacturer Carnilinx in a case valued at around R150-million, Garry Porritt of Tigon who also used the rogue unit narrative to divert his case, valued at more than R1-billion, Martin Wingate-Pearse who has also pushed for SARS to negotiate an audit valued at over R1oo-million, as well as cases involving businessman Hennie Delport’s Phoebus Apollo Aviation company and Khulubuse Zuma’s business associate Robert Huang’s Mpisi Trading with a combined value of R3-billion.

In December 2014 Pillay provided a submission to Commissioner Moyane in reply to the Sikhakhane panel report. In the submission Pillay warned that should the speculative report (witnesses were not given the right to reply) be made public it would have devastating consequences for SARS. Moyane, Daily Maverick has learnt, replied that while Pillay was entitled to his view he was not to share it with SARS’s executive committee members. He also informed Pillay that he [Moyane] would not be reading the submission.

Pillay’s critique of the Sikhakhane panel report and Moyane’s comments form part of court documents relating to Pillay’s December 2014 Labour Court case which the former Deputy Commissioner won with costs.

On Monday, Moyane circulated a memo to SARS staff stating, “I am sure that you would have taken note of some negative, deceptive and blatantly untrue barrage of media coverage about SARS in recent weeks. I view this barrage of negative sentiment as a deliberate attempt by some quarters to distract SARS from the good work we are doing as an organisation.”

Moyane goes on to state that the leadership of SARS “does not condone any form of corruption. The so-called existence of the ‘secret unit’ is merely a figment of the imagination of those that seek to legitimise crime and corruption within our ranks. SARS will always remain committed to the law and do ‘what’s right’”.

He continues later “I can assure you that there is no new ‘rogue unit’, there is no safe house and there is no slush funds to support activities of this so called new 'rogue unit'. SARS stands firm and single-minded when it comes to obeying the laws of the land. There is no place for corruption and criminality within SARS.”

(Mr Jonas Makwakwa – are you listening?)

The memo strangely contradicts Moyane’s November 22 letter to Minister of Finance Pravin Gordhan where he admits that on September 15 he approved a team – constituted “by the South African Revenue Services staff from criminal investigations, audit support, physical security and internal investigations under the auspices of criminal investigations to work with the South African Police (SAPS), the National Prosecuting Authority (NPA) and the Directorate for Priority Crimes Investigations (DPCI) to look at the involvement of SARS officials in criminal activities”.

Moyane informed Gordhan that the mandate of the SARS officials “is only in as far as it relates to SARS employees involved in alleged criminal and tax matters. The team operates in SARS offices and are known in SARS that they are targeting criminal syndicates in SARS”.

Which directly contradicts Mundie’s memo to Mathebula where he clearly sets out that certain taxpayers – not SARS officials – should be re-audited including Mark Lifman. In that memo Mundie motivates for pool cars and the use of a dedicated boardroom until a “safe house” can be found.

Moyane did not explain to Gordhan the legislation in terms of which his new unit had been constituted nor what its mandate might be and whether this had been approved. He also did not set out how the new unit differed from the HRIU or how it would be funded.

On Monday Moyane told SARS staff, “Let us not give the satisfaction to those who wish to undermine our efforts. My request to each and every one of you is to ignore the negative media coverage and remain focused on our commitment to South Africa and the fiscus. Stand firm, execute your duties to the best of your abilities and always remember that you are working towards a greater good and better tomorrow.”

His communication is in stark contrast to his response to the allegations of the “rogue unit” that were leaked to the Sunday Times by SARS insiders. Moyane did not once – after the publication of almost 30 articles on the rogue unit by the Sunday Times and for which the paper was hauled over the coals by the Press Ombudsman – come out in defence of SARS officials or attempt to counter what was then a real “barrage” of negative publicity that has destabilised what was once the most efficient state institution under Gordhan’s watch as Commissioner.

On Moyane's watch SARS has undergone an extreme makeover that has kneecapped its investigative capacity. It began in January when senior SARS officials up to level seven were ordered to re-apply for their jobs. Seasoned staff with years of experience and international training and with formidable successes under their belts were flown to Pretoria where they were re-interviewed and assessed by audit, consulting, corporate finance, tax services and risk advisory firm, Deloitte.

In August many of those interviewed learnt their fates. As National Projects is to be disbanded, a SARS insider told Daily Maverick, the type of in-depth national investigation the unit was capable of conducting will no longer occur, leaving a massive gap that organised criminals as well as unscrupulous individuals are bound to exploit.

And here we are. DM

Photo: SARS Commissioner Tom Moyane (Photo by Financial Mail)