The Bain Files, Part 1: Massone knew in advance Moyane would become SARS head and Bain would get restructuring contract

5 Oct 2018

Boston-based consultancy firm Bain & Company’s SA managing director Vittorio Massone colluded with Tom Moyane and Jonas Makwakwa in order to receive a R187-million contract to restructure the South African Revenue Service. More than that, Massone appears to have lied under oath to the Commission of Inquiry into SARS in an attempt to hide the fraud.

This is Part One in a three-story series on Bain South Africa’s corrupt relationship with key politicians and fixers in a bid to elbow its way into the local market.

Bain and Company: Guided by True North

Vittorio Massone was informed that Tom Moyane would be appointed to the top position in SARS a month before then president Jacob Zuma made the announcement on 23 September 2014. Bain’s managing director and his team had been coaching Moyane to step into the top job at SARS during at least six sessions between October 2013 and August 2014. After he received the tip-off, Massone immediately invited Moyane to the firm’s local offices in Melrose Arch. Jonas Makwakwa, the SARS official who would later become Moyane’s right-hand man at SARS, joined the discussion about what Bain could and should change in SARS.

Scorpio pieced together these stunning revelations based on documents Bain provided to the Commission of Inquiry into SARS, Massone’s affidavit, the testimony of National Treasury’s Solly Tshitangano before the Commission, and interviews with three key sources.

Bain declined to respond to our inquiries, saying:

“While the Commission of Inquiry and our own internal investigation are ongoing we will not be commenting on specific questions relating to SARS and our work.”

The information, derived from Bain’s own server, proves that a month before Moyane was to be appointed at SARS, he colluded with Massone and Makwakwa over “procurement procedures” relating to a tender yet to be conceptualised – the redesign of SARS’ operation model.

This is how it happened.

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A telephone call on the morning of 28 August 2014 brought good news to Vittorio Massone: The official announcement of Tom Moyane’s appointment to the top job at SARS was imminent, he was told.

Massone and his team at Bain, a multinational consultancy, had invested a lot of work and valuable time in Moyane prior to that call. Starting at the latest in October 2013, Massone and his team extensively briefed Moyane on about six occasions over the course of that following year on how the Bain team thought SARS should be changed. It was a gamble, because Moyane was officially still a nobody. He got kicked out as Commissioner of Correctional Services in August 2013 and in the meantime got a job as an adviser to Sita, the State Information Technology Agency. But Massone was introduced to Moyane by a close acolyte of then president Jacob Zuma, the man with the power to appoint the next SARS head. By then Massone knew Zuma well, after having briefed the president several times on how to improve government structures.

Moyane asked to be briefed on SARS and, weighing the odds, Massone jumped at the chance. His gamble paid off; Moyane would be the next Commissioner of SARS. The winnings: A multimillion-rand tender to redesign the SARS operations model.

Typical of the Zuma administration, the presidential announcement of Moyane’s appointment came later than expected by the insiders – on 23 September 2014. Massone however did not know that yet and, closing the telephone call, he penned an email to his team members, time-stamped at 8:04am on 28 August 2014:

“Just had a call and heard that the SARS announcement should happen tomorrow or monday (sic). Meeting later in the office, to discuss also procurement process (sic).”

He sent it to his colleagues Stephane Timpano, Fabrice Franzen, and John Beaumont. Documents suggest that these senior managers assisted Massone’s collusion with Moyane in order to get the SARS operations model contract.

Hours after the phone call on 28 August 2014, Moyane walked into the Bain offices at Melrose Arch, Johannesburg. With him was Jonas Makwakwa, then group executive of audits at SARS.

Not one other member of the then SARS management team was aware of how their future would be reshaped by this meeting; nor that this meeting would culminate in SARS missing three consecutive annual targets, adding to a recent VAT increase. As Moyane and Makwakwa walked into Bain’s offices to discuss the “procurement process” of the SARS operations model tender they were planning to rig, they may have noticed the company’s logo and motto at the entrance.

It reads: “Bain: Guided by True North”, a mantra based on the principles of “honesty and openness”.

The Nugent Commission of Inquiry into SARS

Almost exactly four years after Massone’s secret discussion with Moyane and Makwakwa over the SARS operations model tender that was yet to be conceptualised, Massone and Bain disclosed 933 documents, which filled 23 lever arch files, to the Commission of Inquiry into SARS.

The Commission was appointed in early 2018 by President Cyril Ramaphosa to investigate administrative and governance issues at SARS after it became clear that Moyane has managed the revenue service into failure. Moyane was suspended on 19 March 2018 based on Scorpio’s extensive investigations into governance issues at SARS.

Massone seems to have been in the dark over what Bain would disclose to the Commission of Inquiry. Whether they realised the significance of what they did disclose is uncertain. National Treasury’s Solly Tshitangano also testified before the Commission, providing their insights into their own Bain/SARS tender investigation. Read together, the body of evidence proves that Massone elbowed his way into SARS by chumming up with Zuma, by becoming Moyane’s confidante and coach, by listening attentively to Makwakwa’s gripes and then by colluding with these officials in order to get Bain the R187-million tender to redesign the operation model of the revenue service.

Genesis: Telkom

The genesis of this story lies at the origin of a dubious R91.1m advisory contract Bain signed with Telkom. Bain documents, as well as Massone’s affidavit, show that Massone met with then president Jacob Zuma for the first time on 11 August 2012. Massone presented to Zuma what he called Project Phoenix: An incongruous scheme where Bain would overhaul the whole of government, and later the ANC itself, starting with the telecommunications sector, and Telkom in particular. Also attending the meeting, says Massone in his affidavit, was one Sipho Maseko, who would seven months later be announced as the new Telkom CEO.

Maseko's assistant Noma Faku, answered questions on his behalf: “Sipho Maseko has not seen Mr Massone’s affidavit and is therefore not in a position to comment on its contents. Bain & Co, represented by Mr Massone in his capacity as its CEO of the South African operation, has consulted for various organisations that Mr Maseko has worked in, including BP South Africa and Telkom. Having worked together on some projects over the last 10 years, they have a collegial relationship.”

Massone describes Maseko as his good friend of some years.

Maseko also attended meetings on this topic with Zuma and Massone on 23 August and 27 October of the same year, Massone said. To this day Maseko maintains that Telkom’s contract with Bain was legitimate and fair. A timeline of events however casts a shadow over Maseko’s claim. Massone’s recommendations to Zuma on these three occasions entailed that Telkom needs a new CEO and board chair who would be willing to change the organisation the way Bain envisioned. It seems that Massone struck a note with Zuma. On 15 March 2013, seven months after Massone’s first meeting with Zuma, Maseko was appointed as Telkom CEO. According to Business Day, there was no record of a competitive bidding process that led to Bain as the successful candidate, and Maseko did not seek formal proposals from other consultancy firms.

Massone boasted often about his Telkom “success story”, sources say. The evidence suggests he had found a recipe that worked: ingratiate yourself with the president and other key influencers, identify a government department in need of a Bain overhaul, earmark a candidate to parachute into that department, and coach the candidate in the months leading up to their appointment. Once the now loyal candidate is appointed, Bain receives a multimillion-rand consultancy contract in an uncompetitive process. The blueprint for a bigger deal, this time with SARS, was set.

Getting a foothold at SARS

In a suspicious process which Tom Moyane never fought with conviction, he got kicked out of his position as Commissioner of Correctional Services in August 2013. He was in desperate need of a job. Moyane became a lowly adviser to Sita, but it was a job without much power and the salary was unsatisfactory. Two months later, on 13 October 2013, Moyane met Massone and Timpano for the first time at Bain’s Melrose Arch offices. (They were introduced by a famous Zuma acolyte, a person Scorpio will devote Part Three of the Bain Files series to.) The meeting is detailed in Massone’s affidavit to the Commission of Inquiry into SARS. His team at Bain, mostly Timpano, prepared a document titled “SARS 2.0” – an analysis of SARS based on publicly available documents.

It was the first of eight meetings, in which Moyane would get briefed and coached by the Bain team during at least six of the meetings between October 2013 and August 2014. In May 2014 Moyane was presented with a document titled “first 100 days”. According to Massone, the document was prepared by Timpano and another colleague, Alexis Bour. (Bour denied being one of the authors of the document.) It outlined the changes Moyane had to effect in his first 100 days as SARS head. With Bain’s help, of course. It is in this document that “Project Phoenix”, as proposed to Zuma in 2012 already, again received a mention.

This was four months before anyone ought to have known that Moyane would be appointed as SARS Commissioner in September 2014. In his affidavit to the Commission, Massone described these meetings as “ordinary” and similar to how “Bain approaches the coaching of CEOs in the private sector”.

“We work with dozens of executives annually to prepare them for interviews.”

Moyane, however, was no CEO, nor was he an executive of any kind.

Massone continues in his affidavit, saying:

“For the avoidance of doubt, we never ask for or look to create any expectation of future work when carrying out these activities.”

It is a statement that is contradicted by what transpired at SARS as well as at Telkom.

28 August 2014: The day of the email

Out of 933 documents, constituting thousands of pages dumped onto the Commission of Inquiry into SARS by Bain and Massone, one emailconstitutes their undoing. It is the email Massone sent to his team just after he heard that Moyane’s appointment as SARS head was imminent. Massone did not disclose the email to the Commission; Bain did. The content of the email shows Massone had a firm grip on the situation – Moyane was invited to a meeting at Bain’s offices later that morning for a discussion that included the procurement process of the tender to redesign SARS’ operation model. Sources confirmed the fact.

In the meantime, Massone’s team jumped into gear, assigning managers and team members to the SARS project. That Bain had to go through a competitive procurement process in order to fairly and transparently win a contract was no inhibiting factor. Wrote Massone in the email:

“I guess we should have a few weeks to ramp up (procurement process) but we’ll need to have a first contingent to start working asap…”

The Bain team thought the tender was already in the Bain-bag, as confirmed by Timpano’s reply.

“The last thinking was to start with 1 team…for 3 months to do fundamentally 2 things: 1) run a full operational/strategic assessment of SARS; 2) assist Tom in starting properly his new role (direct “CEO” support work). We will be then able, based on the operational/strategic assessment, to build up to the platform for a broader SARS transformational program (6-12 months plan).”

Bain was planning to work on and bill SARS for up to a year. This decision was made before the company won the tender and before it did a thorough diagnostic of the SARS environment.

Massone’s lies

Four years and few days later, on 30 and 31 August 2018, Massone was interrogated in detail about his relationship with Moyane by the Commission of Inquiry into SARS, chaired by retired Judge Robert Nugent. Massone was polite but decisive at the start of his testimony, and seemed to shrivel in his chair after hours of thorough questioning. By the end of 31 August, after two days of testimony and on a dreary Friday afternoon, Massone shocked his audience into stunned silence when he admitted to having met Moyane and coached him on how to change SARS months before Moyane was appointed as SARS head.

Massone, however, did not concede to having done anything wrong. He asserted the same in his affidavit to the Commission, deposed to on 17 September 2018. This affidavit is marred by lies, misleading information and half-truths. His tall tales, under oath, are specifically exposed by the email of 28 August 2014 – a document submitted to the Commission by Bain.

Scorpio will focus on the two most important lies. Said Massone in his affidavit:

“I learned of the appointment [of Tom Moyane], to the best of my recollection, via the media after it had been announced”;

That before 11 December 2014 Massone had no “knowledge of the substantive content of the Request for Proposal” from SARS, which invited select companies to bid for the tender to redesign SARS’ operation model.

Lie number 1: Massone learned of Moyane’s appointment via the media

The email of 28 August 2014, referring to the phone call about Moyane’s imminent appointment, belies this statement. Massone omitted to disclosing the phone call and email in his affidavit. He does however describe in some detail the meeting with Moyane and Makwakwa hours after the phone call. It is the same meeting mentioned in his 28 August 2014 email.

Said Massone in his affidavit:

“My recollection of this meeting is that I did not participate extensively and mostly listened to what Makwakwa had to say. What I recall is Makwakwa sharing his personal issues that he had been experiencing at SARS at the time. I don’t know who suggested he attend this meeting…”

The email penned by Massone reveals that the procurement process for Bain to receive the tender for the design of SARS’ operations model was also to be discussed.

Lie number 2: Massone had no knowledge of the content of the Request for Proposal before he was informed by SARS of it on 11 December 2014.

The email of 28 August 2013, again, belies this statement. In Massone’s own words the procurement process relating to the SARS operations model tender was to be discussed.

Another email, disclosed by Massone himself, also stands in stark contrast to Massone’s statement under oath. On 4 December 2014, Massone sent an email to his good friend Sipho Maseko, the CEO of Telkom, asking whether SARS could “piggyback” on Telkom’s contract with Bain.

Wrote Massone:

“I received a call from SARS (the acting COO) who told me that they would like to use Telkom’s contract to give a mandate to Bain – apparently law (or practice) says that they can piggyback another SoE. This will enable an immediate start avoiding long and complicated tender process (sic).”

The SARS acting COO at the time was none other than Makwakwa – the same person who in August 2013 discussed the procurement process for the SARS operation model with Massone’s team at the Bain offices. Makwakwa and Massone were looking for a short cut.

Moyane made the matter official. The very next day, on 5 December 2014, Moyane sent a letter to Maseko “to request approval of Telkom SA to participate in the contract secured by Telkom SA with Messrs Bain & Company SA for the procurement of their consulting services”.

Treasury’s Solly Tshitangano, investigator at the Office of the Chief Procurement Officer, took a dim view of this shortcut.

“Already a service provider has been identified, and for you to be able to know that Bain has a contract with Telkom obviously [SARS] will have done some analysis or market research, whatever, so that they will know,” Tshitangano testified before the Commission about his investigation.

Tshitangano did not know about the collusion of Massone, Moyane and Makwakwa to give Bain the contract, nor did he know about Massone’s link to Telkom, but Tshitangano realised something was off.

Maseko, however, did not play ball and the piggyback plan fell through the cracks.

There was no way out for Massone, Moyane and Makwakwa. A formal tender process had to be initiated. So Bain found itself on a shortlist with four other names of companies which were invited to tender on 11 December 2014.

The Request for Proposal from SARS however was a fraudulent smokescreen. The winning bidder had been picked a year before.

In his testimony before the Commission, Tshitangano highlighted several other problems and red flags, concluding that his “suspicion” was that the tender for the redesign of SARS’ operation model was rigged to favour Bain. His investigation into the matter continues.

***

On 22 January 2015 Bain was announced as the successful bidder who won a R187-million contract to redesign SARS’ operating model.

Testifying before the Commission of Inquiry, several SARS officials said they could not understand why, but they had the feeling Bain entered proceedings with a predetermined goal. The list of officials to be interviewed by Bain was drafted by Moyane; the interviews were wholly inadequate, some as short as 10 to 15 minutes, and often conducted by junior staff; key departments and units in SARS were closed down and reporting lines were fractured. When the mood hit Makwakwa, he would write officials with decades of experience out of SARS’ organisational structure. With all of this, Massone had no material problem, he told the Commission of Inquiry. DM

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