South Africa 18.6.2018 06:00 am

Sars warfare back in court

The plot thickens as Andries Janse van Rensburg, Johann van Loggerenberg, and Ivan Pillay appear in court for ‘installing cameras’ at the NPA offices.

The SA Revenue Service (Sars) saga continues today in the Pretoria Magistrate’s Court, with Andries Janse van Rensburg, Johann van Loggerenberg and Ivan Pillay appearing again on charges of illegally intercepting communications and corruption related to the installation of cameras at the National Prosecuting Authority (NPA) offices.

Supposedly called “Project Sunday Evenings”, the three were accused of spying on the Hawks’ previous iteration, the Scorpions, and the NPA in 2007, through the equipment at the NPA’s head office in Silverton, Pretoria, during the case of former national police commissioner Jackie Selebi.

The NPA’s list of witnesses include suspended Sars commissioner Tom Monyane, his former number two, Jonas Makwakwa, and disgruntled former Sars employee-turned-alleged rhino poacher Michael Peega.

Other witnesses include former finance minister Trevor Manuel and advocate Gerrie Nel. It’s been a little over two years since the release of the Sikhakhane report and nearly two years since the release of the Kroon Advisory Board recommendations – and now a pending commission of inquiry into Sars.

Through most of this, Van Loggerenberg has remained mostly silent, not discounting his book Rogue: The Inside Story of SARS’s Elite Crime-busting Unit which, although tying up many loose ends, being constrained by the Sars Act has meant he hasn’t been able to speak out too much against the findings of the various reports.

Yesterday, Van Loggerenberg spoke out against the findings of the reports which had slammed him, and repudiated them in their entirety. He called the Sikhakhane panel report flawed in fact and law.

“The manner in which some taxpayers in dispute with our tax authority have sought to use – or abuse – this flawed report as if fact, which it most certainly isn’t, in litigation, using what has become known in certain legal circles as the ‘rogue unit defence’ is simply a disgrace,” Van Loggerenberg said yesterday.

His full, line-by-line response to the reports – available to read in full below – described how some witnesses’ “bogus” allegations were reflected uncritically in the report. As a result they went on to act as “witnesses” and assistants to advance the “rogue unit defence”, which he said was an even greater travesty of justice.

“Let me say nothing about the fact that they then actually got paid by these taxpayers to do so,” Van Loggerenberg said.

“I would advise extreme caution on any party which seeks to rely on the Sikhakhane panel report as if conclusive and factual.

“Had the Sikhakhane panel and Kroon Advisory Board allowed me a hearing and put all allegations made against me, which they did not, and allowed me to respond thereto, they would not have made the adverse comments, findings and recommendations that they ultimately did.”

– amandaw@citizen.co.za

Van Loggerenberg’s full response:

As the subject of a panel instituted by the South African Revenue Service (SARS) in terms of section 9 of the South African Revenue Service Act, chaired by advocate Muzi Sikhakhane, assisted by advocates Patrick Ramano and Nasreen Rajab-Budlender, instructed by Mr Imraan Mohamed of Hogan Lovells, I respond herein to its findings and recommendations in some greater detail.

I wish to place on record as follows:

1. I dispute the content of the Sikhakhane panel report and Kroon Advisory Board statement in their entirety.
2.The Sikhakhane panel report is overall flawed in fact and law.
3. I refer to my formal response to the Sikhakhane panel report and Kroon Advisory Board statement dated 2015-10-09 wherein which I recorded a basic response with the Ministry of Finance, Justice Frank Kroon of the Kroon Advisory Board and to SARS. That response should be incorporated in my response herein.
4. I refer to my confirmation to SARS in writing that my submissions made to the Sikhakhane panel during 2014 were done in terms of the Protected Disclosure Act.
5. I reserve all my rights in this regard and this response is without prejudice to my rights.
6. I do not intend to dissect the Sikhakhane panel report and Kroon Advisory Board statement herein on a line-by-line basis but reserve the right to do so at any time and legal platform in order to exercise my rights.

What follows is my line-by-line response to the complete and unedited set of “findings” and “recommendations” contained in the Sikhakhane panel report:

My general comment in respect of the entire report:

Had the Sikhakhane panel afforded me a fair hearing on all allegations made against me, which they did not, they would not have made the adverse comments, findings and recommendations that they ultimately did.

Had the Kroon Advisory Board afforded me any hearing on all allegations made against me, which they did not despite my formal request for this, they would not have made the adverse comments, findings and recommendations that they ultimately did.

Had the Sikhakhane panel and Kroon Advisory Board put all allegations made against me, which they did not, and allowed me to respond thereto, they would not have made the adverse comments, findings and recommendations that they ultimately did.

Had the Sikhakhane panel and Kroon Advisory Board afforded me a right of reply on all allegations made against me, which they did not, they would not have made the adverse comments, findings and recommendations that they ultimately did.

Had the Sikhakhane panel afforded me an opportunity to respond to their comments, findings and recommendations on all allegations made against me prior to completing their report, which they undertook to do and subsequently reneged upon, they would not have made the adverse comments, findings and recommendations that they ultimately did.

Had the Kroon Advisory Board afforded me an opportunity to respond to their comments, findings and recommendations on all allegations made against me prior to completing their report, they would not have made the adverse comments, findings and recommendations that they ultimately did.

FINDINGS

Panel:

186 In light of the above set of facts, our findings are as follows:
186.1 While SARS remains an efficient and effective organisation, the unlawful establishment of a unit that operated ostensibly in a covert manner, has created a climate of intrigue, fear and subterfuge within the organisation.

My response:

This allegation is emphatically denied. The Sikhakhane panel cannot seek to have it both ways. Either the unit was “unknown and unheard of” as per their comments in the body of the report, or not. If it had not been “known” and was “unheard of”, one can hardly ascribe “intrigue, fear and subterfuge within the organisation” to them. The unit had been known publicly since 2009. It featured large in a best-seller book which has been republished 6 times. Over 300 SARS managers were engaged on the unit at a national management forum. The media was briefed in detail as to the existence, purpose, mandate and efforts of the unit in November 2009 and again in February 2010 and thereafter, year after year, in lengthy line-by-line documents, complete with annexures which named the units and set out their mandates. These reports are on record at SARS. The record will show that the unit was involved in over 50 projects which assisted other SARS units and law enforcement agencies greatly. Their work resulted in seizures of illegal drugs, illicit tobacco, abalone and contraband over the years, persons arrested by the police, charged by the NPA and hundreds of millions of rands in taxes recouped or losses prevented. The only people who “feared” the unit were the criminals they investigated. By its own admission, the Sikhakhane panel, it failed to hear me or give me a right of reply to allegations about the unit, and as a consequence wouldn’t really know much about it and most certainly would not have been in a position to express any views of it. This is a most disingenuous “finding” which precisely caused “a climate intrigue, fear and subterfuge within the organisation”. This “finding” failed to reflect on all the work the unit did, how it was lawfully established and the legislation it functioned under.

Panel:

186.2 While we consider it improbable that Mr. Van Loggerenberg was unaware of the manner in which the Special Projects Unit, the NRG and/or High Risk Investigation Unit operated, he was not responsible for their establishment.

My response:

Correct. However, this finding is a mere platitude.

Panel:

186.3 Although he was indeed intimately involved in the functioning and later management of the NRG, there is no direct evidence linking him to any illegal interception of conversations of Ms. Walter or any other taxpayer.

My response:

Correct. But the panel failed to reflect upon and state a word of the three years of data from handsets and a data cloud which contains evidence of very serious crimes, campaigns to derail investigations, discrediting of officials, hundreds of millions lost to the taxpayer, corruption, fraud and money-laundering which I had provided it. This “finding” omitted the obligation in law on the panel to report evidence of fraud, theft, corruption and money-laundering to law enforcement agencies.

Panel:

186.4 Although his involvement with Ms. Walter was improper, there is no evidence that he entered the relationship with the sole purpose of obtaining incriminating information about Ms. Walter’s clients.

My response:

Correct. However, I must question why the panel did not consider the obvious possibility of the converse to this “finding”, as it would have likely exposed people and efforts intended to disrupt the institution and its work? I deny that the relationship was ‘improper’, and even the ‘complainant’ has pointed out under oath before a High Court in 2016 in an affidavit (which I wholly dispute bar a few instances), that the Sikhakhane panel’s reasoning to this was factually wrong. This affidavit was, among others, served on SARS. She correctly states that I had been informed of a potential conflict when I was unaware of it, and that it was immediately dealt with by me and that I was informed of such in writing by her immediately on the same day as I had requested. This “finding” omitted the obligation in law on the panel to report evidence of fraud, theft, corruption and money-laundering to law enforcement agencies.

Panel:

187 Mr. Van Loggerenberg as a senior manager must be judged by a much higher standard than an ordinary employee of SARS. Accordingly, it is found in this regard that:
187.1 Mr. Van Loggerenberg is clearly an experienced investigator, but has no appreciation of the domain of ethics and standards by which senior management must conduct themselves within a civilian structure. His failure to see conflicts of interest in his conduct demonstrates that he should remain in positions in which he must be an operator rather than a senior manager.

My response:

This is facile commentary, unsubstantiated and unnecessary. It is defamatory and false. Since the Sikhakhane panel never heard me on this allegation, nor the hundreds of people I’ve managed over many years, it would not be in any position to express such opinions in any event. As for the “conflicts” referred to, the Sikhakhane panel did not read the letter under legal letterhead, nor my text exchanges, given to the panel by me and did not reflect it in the report – all of which totally contradict this assertion. This is a speculative and biased opinion.

Panel:

187.2 His interaction and disclosure of certain information to the media was in violation of SARS’s Code of Conduct. The nature of his correspondence with the media had the potential to bring SARS into disrepute.

My response:

I emphatically deny this. Because the Sikhakhane panel failed to honour its undertaking to me at our first meeting to hear me on all allegations made against me, and to afford me a right of reply, and by not putting such allegations to me to respond to, and not giving me a right of reply, has led it to be dispossessed of evidence I have which demonstrates that I had permission to engage the media at all times and with full knowledge of management – at times even at their request. This is a biased and factually incorrect “finding” which is the result of ignoring my human rights.

Panel:

187.3 His initial meeting with Ms. Walter was clearly in violation of SARS’s Code of Conduct that no official must meet a taxpayer alone.

My response:

I emphatically deny this. The Sikhakhane panel stated that the meeting was recorded but obviously did not listen to the recording. I was not alone. Another manager, Mr [name removed], also sat in on the day. The ‘complainant’ has pointed this out under oath before a High Court in 2016 in an affidavit served on SARS. She explicitly points out that the Sikhakhane panel entirely erred in fact, in this regard. This is a biased and factually incorrect “finding” which is the result of ignoring my human rights.

Panel:

187.4 Although there is no SARS policy prohibiting a romantic relationship with a taxpayer under investigation or a representative of such taxpayer, Mr. Van Loggerenberg’s relationship with Ms. Walter showed poor judgment on his part as there was a conflict in his role as an investigator and that of Ms. Walter as a representative of FITA and Carnilinx. In particular, in his failure timeously to disclose the relationship, he failed in his duty as a senior manager to report a potential conflict as would be required of a manager at his level.

My response:

This is emphatically denied. Because of the fact that the Sikhakhane panel failed in putting allegations to me to respond to, and by not giving me a right of reply, I’d have shown it evidence that I disclosed the relationship to three senior officials at inception. The ‘complainant’has stated the opposite under legal letterhead and pointed out under oath before a High Court in 2016. The Sikhakhane panel did not read the letter under legal letterhead, nor my text exchanges, given to the panel by me and did not reflect it in the report – all of which totally contradict this assertion. It has been pointed out under oath before a High Court in 2016 in an affidavit served on SARS. She explicitly points out that the Sikhakhane panel entirely erred in fact, in this regard. This is a biased and factually incorrect “finding” which is the result of ignoring my human rights.

Panel:

187.5 Although there is no SARS policy prohibiting romantic involvement with fellow staff members, it was poor judgment for Mr. Van Loggerenberg to get involved with staff members, particularly those subordinate to him.

My response:

This finding is most disingenuous and defamatory. On this rationale, because I dated someone briefly, over ten years prior, my senior at the time, in another business area, it is its business? This is a biased and factually incorrect “finding” which is the result of ignoring my and others’ human rights. It is in any event factually incorrect.

Panel:

187.6 Mr. Loggerenberg’s role in the audit conducted on Ms. Walter while he was in a romantic relationship with her was in violation of the Code of Conduct and the principles of good governance.

My response:

This is emphatically denied. I was not involved in the audit. The Sikhakhane panel should have checked the Case Management System, work-ahead sign off, the submission made by the senior manager that did oversee it and the email confirming that the Chief Officer was to sign off on it and my text messages as provided to it. The “complainant” has stated the opposite under legal letterhead. The Sikhakhane panel did not read the letter of Ms. Walter under legal letterhead, nor my text exchanges, given to the panel by me and did not reflect it in the report – all of which totally contradict this assertion. This is a biased and factually incorrect “finding” which is the result of ignoring my and others’ human rights.

Panel:

187.7 Mr. Van Loggerenberg did declare his involvement in Wachizungu and on this narrow basis, he met the obligations to declare an interest.
187.8 Given his role in Wachizungu, there is a potential conflict of interest in so far as some of the donors are entities and persons that either have disputes with SARS or remain or have been SARS’s service providers.

My response:

Nobody donated to Wachizungu. Wachizungu comprised hundreds of people and these people raised funds for separate and independent charities and not for Wachizungu. The Sikhakhane panel failed to reflect on a detailed explanatory letter I wrote to my manager and Anti-Corruption and Security Unit in October 2012 at a time when I began to participate in these activities setting out exactly how it worked in precise detail, and their replies. When I asked the panel to name just one example of this they named an electronics company. I then told the panel that this was factually incorrect and that they never donated a cent to anybody that I was aware of and asked for proof. The panel members looked at each other, there was a moment of silence, they couldn’t provide proof and then moved on. This is a biased and factually incorrect “finding” which is the result of ignoring my and others’ human rights.

Panel:

187.9 While the panel was uncomfortable about the role of Wachizungu even in what Mr. Van Loggerenberg calls a good cause the panel lacked the requisite lawful basis to investigate a separate legal entity and its activities. However, if SARS has some legal basis to inquire into the affairs of Wachizungu, the panel highly recommend it.

My response:

This option was in fact offered to the Sikhakhane panel by myself and they elected not to take up my offer. KPMG did so subsequently at the behest of SARS. KPMG got it even more wrong than the Sikhakhane panel did. They acknowledged that I offered to assist and provide records, but this “was not considered necessary”. They got everything completely wrong and omitted material facts. This is a biased and factually incorrect “finding” which is the result of ignoring my and others’ human rights.

Panel:

188 In respect of the establishment of the Special Projects Unit, NRG and High Risk Investigations Unit, we find as follows:
188.1 The establishment of the unit without having the requisite statutory authority was indeed unlawful.
188.2 There is prima facie evidence that the unit may have abused its power and resources by engaging in activities that reside in the other agencies of Government, and which it had no lawful authority to perform.
188.3 There is prima facie evidence that the recruitment, funding and practices of the unit were in violation of SARS’s own Human Resources policy.
188.4 There is prima facie evidence that the existence of this unit had the real possibility of undermining the work of those agencies tasked with the investigation of organised crime and the collection of intelligence.
188.5 There is prima facie evidence suggesting that the activities of the Special Projects Unit may have included rogue behavior that had the potential to damage the reputation of SARS as an organ of state.
189 Finally, there appears to be serious concerns about whether settlements concluded with taxpayers who were the subject of investigation, were validly and properly concluded.

My response:

This is emphatically denied. The panel clearly did not apply their minds to legislation, practice, court cases and other units at SARS, e.g. the Organised Revenue Crime Unit, or the Criminal Investigations Unit. I challenge the panel to produce any evidence whatsoever that the unit at any point in time whatsoever engaged with any taxpayer in settlement discussions or participated in any tax settlement. The unit never engaged in tax settlements. These are biased, legally and factually incorrect “findings” which is the result of ignoring my and others’ human rights. See my detailed explanation below in this regard.

Panel:

RECOMMENDATIONS

190 In light of the above findings, we make the following recommendations:

190.1 SARS should include in its Code of Conduct some guidelines regarding romantic relationships between its senior managers and staff.

My response:

I have nothing to state in this regard. See above.

Panel:

190.2 SARS should clearly develop formal operational relations with state agencies authorized to gather intelligence and investigate organized crime. In this regard, SARS in co-operation with the relevant organs, should develop clear guidelines for co-operation in respect of SARS’s own mandate.

My response:

Such proposed operational relations existed throughout my years at SARS i.e. 1998 to 2015. Operational agreements and memoranda of understanding with the South African Police Service, State Security Agency, National Prosecuting Authority and Asset Forfeiture Unit to name a few. These may well do with some updates though.

Panel:

190.3 SARS should institute disciplinary proceedings in accordance with its Code of Conduct and Disciplinary processes and charge Mr. Van Loggerenberg in regard to the following conduct:
190.3.1 His unauthorized engagement with and disclosure of information to the media and consequently bringing SARS into disrepute.

My response:

I deny this emphatically. I had permission in every instance mentioned and sometimes I was actually asked by management to do so, see above.

Panel:

190.3.2 His unauthorized disclosure of certain information to Ms. Walter and consequently violating section 7 of the TAA.

My response:

The part of law which deals with unauthorised disclosure is not “section 7” but rather Chapter 6, sections 67 to 74. I emphatically deny this in any event.

Panel:

190.3.3 Failure to adhere to SARS’s Code of Conduct by meeting Ms. Walter alone on 2 September 2013.

My response:

As stated, the Sikhakhane panel erred in fact in this finding. See above. I was not alone.

Panel:

190.3.4 Conducting himself in a manner which brought SARS into disrepute in:
190.3.5 His involvement in the audit of Ms. Walter in violation of the principles of good governance and in violation of the Code of Conduct.

My response:

I was not involved in the audit, see above. To have been involved in the audit, would have required of me certain elementary and basic aspects which any auditor would have been able to explain. Notably, the report does not explain precisely how it claims I was supposed to have been “involved”, which is telling in itself.

Panel:

190.3.6 His conduct in engaging in a romantic relationship with Ms. Walter while knowing that she was a representative of entities that were under investigation by SARS.

My response:

I deny this emphatically. I dealt with the single instance, not several as suggested, immediately, and the moment I became aware of it, and gave the panel evidence in the form of Ms Walter’s own words under legal letterhead, and multiple text exchanges, see above. The ‘complainant’ has also stated under oath that the Sikhakhane panel erred in fact insofar their conclusions in this regard.

Panel:

190.3.7 His involvement in Wachizungu with full knowledge that some of its donors had had their disputes settled with SARS, were under investigation or represented entities under investigation by SARS had the potential to bring SARS into disrepute.

My response:

The statement that persons donated to Wachizungu is factually incorrect. Nobody has ever donated to Wachizungu. I fail to understand this obstinate persistence with this allegation in whatever form. The Sikhakhane panel was unable to identify a single person or entity that “had had their disputes settled with SARS” and “under investigation or represented entities under investigation by SARS” and which according to them “donated to” or were “donors to” Wachizungu when I asked these questions. This is because this allegation is a fiction.

Panel:

190.4 In respect of the unlawful establishment of the Special Projects Unit/NRG/HRIU the following is recommended:
190.4.1 As we understand it, the Inspector General of Intelligence is already investigating Ms. Walter’s complaint. The activities and functions of this unit must be specifically investigated by the Inspector General, alternatively.

My response:

The Inspector General of Intelligence cannot in law investigate SARS. This was the panel’s job and it made a hash of it. In fact, the law limits its jurisdiction to the intelligence services. The Inspector General of Intelligence is statutorily bound to audit, investigate and oversee “the services”. “The services” are defined in the Inspector General for Intelligence Services Act as “the Agency, the South African Secret Service, the Intelligence Division of the National Defence Force and the Intelligence Division of the South African Police Service”. SARS clearly falls outside the scope of “the services”. The Auditor General of South Africa is the entity statutorily required to investigate, audit and oversee other state organs that are not “the services.” The Auditor General of South Africa did actually audit the unit’s annual reports and finances and could find no wrong. This has been publicly confirmed by the Auditor General of South Africa and reported as such in the media. The Inspector General of Intelligence was supposed to, among other things, actually investigate allegations against the ‘complainant’ and others. The Ministry of State Security announced this on 14 August 2014. See: https://www.news24.com/Archives/City-Press/State-Security-will-investigate-spy-Belinda-Walter-David-Mahlobo-20150429

However, I doubt the public will ever see the “findings” of this process.

Panel:

190.4.2 We are of the view that the Commissioner should recommend to the President that a judicial commission of inquiry with powers of compulsion in terms of section 3 of the Commissions Act 8 of 1947 should be appointed. Such Commission, if considered should inquire into the activities, funding, management of the NRG and its predecessors as well to determine if there has been improper conduct on the part of senior government officials, including those who may have left their positions. We are of the view that an unlawful establishment of a covert unit within a civilian organ of state is indeed a matter of public concern as envisaged in section 1 of the Commissions Act.

My response:

As for the “matter of public concern as envisaged in section 1 of the Commissions Act”, insert. Section 1 of the Commissions Act doesn’t elaborate as to what precisely a “matter of public concern” is exactly, unfortunately. The Sikhakhane panel seems to assume that its “finding” is indeed accurate i.e. “unlawful establishment of a covert unit within a civilian organ of state”, but they don’t really say why. To begin with, the panel’s contradictory statements in the report are worth bearing in mind here. The report states that “it is generally accepted” that the unit never progressed to conduct anything more than the “limited intelligence it did when it started”. This entailed “desktop research” and physical surveillance and tracking, using borrowed vehicles and tracking devices “in its entire lifespan”. The Sikhakhane panel also state they note how the returns of this “limited intelligence work” were “impressive”, and that the unit had contributed “immensely” to turning SARS into the “best revenue service on the continent and one of the best in the world”. SARS obtained a long legal opinion dated 24 May 2007, and a subsequent summarised shorter one dated 25 May 2007. This happened when the original agreement with the National Intelligence Agency fell through and efforts to find an alternative with the South African Police Service and South African National Defence Force didn’t move fast enough. As a result, the unit had to be used in the meantime as best as SARS could. The legal opinions first reflect on the Constitution. No limitations were identified. They then go on to reflect on the statute that created and guides the organisation, namely the SARS Act. The opinions note that section 4 (1) of the SARS Act imposes the statutory obligation on the institution to “…secure the efficient and effective, widest possible enforcement…” Then it says “May do all that is necessary and expedient to perform its functions properly…” “4 (1) To achieve its objective SARS must (a) secure the efficient and effective, and widest possible, enforcement of: (i) the national legislation listed in Schedule 1; and (ii) any other legislation concerning the collection of revenue that may be assigned to SARS in terms of either legislation or an agreement between SARS and the organ of state or institution entitled to the revenue…” Then they refer to section 5 (1): “SARS may do all that is necessary or expedient to perform its functions properly, including to: (a) determine its own staff establishment, appoint employees and determine their terms and conditions of employment in accordance with section 18…(c) obtain the services of any person, including any state department, functionary or institution, to perform any specific act or function…(g) perform any specific act or function within its competence on behalf of any other person, including any state department, functionary or institution…(i) perform legal acts, or institute or defend any legal action in its own name, (j) engage in any activity, whether alone or together with other organisations in the Republic or elsewhere, to promote proper, efficient and effective tax administration, including customs and excise duty administration, and (k) do anything that is incidental to the exercise of any of its powers.” Thus, it says, SARS may “Perform legal acts…engage in any activity, whether alone or with other organisations in the Republic…determine its own staff establishment, appoint employees and determine their terms and conditions of employment…to promote proper, efficient and effective tax administration, including customs and excise duty administration…do anything that is incidental to the exercise of any of its powers…(to perform its functions properly). SARS can therefore employ people and create units of staff in order to do all that is necessary and expedient to secure the efficient and effective, widest possible enforcement and engage in any (lawful) activity, to perform its functions properly.” They then referred to the laws of investigative powers and offences as administered by SARS and other relevant legislation imposing enforcement duties and giving powers to consider, some mentioning the institution specifically. They then reflect on the National Strategic Intelligence Act 39 of 1994 which regulates the functioning of intelligence structures in South Africa and that the Act prohibits the conducting of covert intelligence gathering inside South Africa by structures other than the South African National Defence Force the South African Police Service and the State Security Agency for purposes of “national security”. They conclude that it allows any state department empowered to do so by legislation “to gather departmental intelligence, and to evaluate, correlate and interpret such intelligence for the purpose of discharging such function” provided that the department “shall not gather departmental intelligence within the Republic in a covert manner”. “Departmental intelligence” is defined by the Act as “intelligence about any threat or potential threat to the national security and stability of the Republic which falls within the functions of a department of State, and includes intelligence needed by such department in order to neutralise such a threat”. This means, they conclude, that the Act does not prohibit any government entity from gathering intelligence. Nor does it prohibit any government organ from gathering intelligence covertly. The legal opinions also noted that given that virtually all done by SARS during enforcement actions are confidential by law, unless they come out in court actions, criminal cases and are made public, they’re all technically considered as ‘covert’ anyway in a broad sense, and this is not what the legislature had in mind in any event. It reflects on laws administered by SARS i.e:
• Sections 4, 4 A to 4 D;
• Sections 3, 74 A to 74 D, 104 of the Income Tax Act 58 of 1962; • Sections 5, 55 to 63 of the Value-added Tax Act 89 of 1991; Then there other relevant legislation imposing enforcement duties and giving powers to SARS to consider, some mentioning the institution specifically, e.g:
• South African Police Service Amendment Act, 2008 • Prevention of and Treatment for Substance Abuse Act, 2008 • National Environmental Management Biodiversity Act, 2004 • Prevention and Combating of Corrupt Activities Act, 2004 • Financial Intelligence Centre Act, 2001 • Drugs and Drug Trafficking Act, 1999 • Prevention of Organised Crime Act, 1998 • Criminal Procedure Act, 1977 • There are others too, and I won’t even mention the international obligations, treaties, agreements and world bodies applicable here. The list is too long. The opinions concluded that SARS was able to create such a unit, provided it was used to investigate tax, Customs and excise related offences and not national security related matters. This then informed the mandates following other agencies letting SARS down despite initially agreeing. What also informed the manner in which not only this unit, but all enforcement units in SARS were created, were certain developments in law over time preceding the unit – in fact SARS had practice notes to this effect dating back to 1999. In S v Botha and Others (1) 1995 (2) SACR 598 (w) the defence attorney argued that, according to Section 215(b) of the South African Constitution, only police officials could investigate crime and that no other possesses this authority. The court ruled that it was not the purpose of Section 215(b) to prevent someone who is not a member of the SAPS to conduct an investigation and admitted that there are many private and corporate sectors that conduct their own investigations before handing their results to the SAPS for the institution of a prosecution. Accordingly, said the court, this development has created new opportunities for private and corporate investigators, and all indications are that the scope for private and forensic investigations will increase. There are two (2) notable citations which SARS also relied on at the time: According to Swanepoel (2001:4) it was foreseen that the State would not have the capacity to investigate all crimes for a long time due to capacity constraints, and especially in cases of a commercial nature, the outsourcing of criminal investigation will increase. It is important to understand that private and corporate sectors are limited with regard to their jurisdiction of investigations. They have no powers to charge or subpoena suspects, but they are able to investigate any criminal activity that affects the company internally according to company policies (Joubert, 2003:49). This case and these principles informed the creation of every single enforcement unit in SARS since 1999 onwards up to 2014. It is well recorded in many internal documents. In S v Shaik and Others, delivered on 7 December 2004, the court dealt with the Commissioner’s authority to investigate whether a criminal offence under the Income Tax Act of 1962 had been committed, and the Commissioner’s discretion to lay criminal charges. In this judgment Judge Squires J held: “If there has been an offence committed by a taxpayer in one or other of those responses to his tax liability for tax then, in the first instance at any rate, it must be the Commissioner’s decision whether to prosecute the offender or not, because prosecution under the criminal law may not be necessary or even desirable in the interests of levying and collecting tax. If the Commissioner … thinks that a prosecution is desirable, then it would obviously take place under the auspices of the Director of Public Prosecutions, as any other prosecution instituted by that authority”. This judgement confirmed the existing understanding of the law and codified an established practice. Some elementary and basic aspects of criminal investigations were used by the unit, no different to how investigators in other state departments, private investigators and investigative journalists would do on a daily basis. The unit’s mandate was always to focus on tax, Customs and excise offences and to assist SARS investigative units, anti-corruption efforts and other law enforcement agencies within the legal and policy framework of SARS. This was the common feature in the unit’s mandates over the entire lifespan of its existence. Their methodology applied was to collect evidence to prove or disprove an allegation or suspicions of various forms of tax, Customs and excise criminal offences they were mandated to investigate. They largely conducted interviews of complainants or victims or witnesses. They were required to ask around, use whatever was given to them and identify documentary or physical evidence or potential witnesses or people who may have knowledge of the location of such evidence or witnesses. They were required to distinguish fact from speculation. These would result in affidavits, reports or information reports, depending on circumstances. In many cases, other SARS units would be directed to the witnesses who then obtained affidavits and testimony of such people. Where the unit identified the location of evidence or contraband, either SARS units or SAPS or the old DSO would usually have conducted the seizures. In some cases, they used limited physical surveillance lawfully so. Another tool sometimes used was to record persons being interviewed or obtaining their data and records from their phones and computers with their permission or where a participant recorded the conversation personally. Here they relied on the court case, S v Kidson 1999 (1) SACR 338 (W). The tool mostly used by the unit was third-party data which SARS had access to e.g. credit records, bank records, movement control, police records, company registration records, taxpayer records and so forth. These would often be used for what Sikhakhane called “desktop research” which allowed them to utilise voluminous data and create links between persons and entities and combine these with knowledge obtained from witnesses, people with knowledge, affidavits, audit findings and so forth.

Panel:

190.4.3 SARS should ensure that proper structures of co-operation between SARS and Government agencies statutorily tasked with intelligence gathering and crime investigation are established in order to assist SARS with the capacity it may require. Alternatively, the Commissioner, through the Minister of Finance may request Parliament to enact legislation giving SARS the investigative capacity it requires.

My response:

Such structures existed in my time i.e. between 1998 and 2015. Legislation was also amended accordingly. For instance, the Customs & Excise Act and Tax Administration Act were specifically adapted to include additional powers and investigative tools to SARS to conduct criminal investigations. Specifically, these provided for peace officer status, powers of arrest, conducting criminal investigations and carrying of lethal and non-lethal weapons to categories of officials. The Sikhakhane panel displayed absolute ignorance of an understanding of SARS’ enforcement mandate and powers in law. See above.

Panel:

190.4.4 SARS should conduct a forensic investigation into all the settlements concluded with tax payers that had been under investigation since 2005.

My response:

It seems KPMG was requested to do so. However, their “forensic investigation” miraculously turned into a “documentary review”, was evidenced of outside influence as was admitted before Parliament, and ended with withdrawn conclusions, recommendations and legal opinions. All sorts of “sorry”, “sorry can never be enough”, “sorry for the harm caused” were being bandied about in media interviews and KPMG ultimately even paid back their full fee of R 23 million. Notably, and despite this extremely flawed report, they could find no evidence such as suggested by the Sikhakhane panel.

Panel:

190.4.5 In the meantime, we recommend that the Commissioner moves speedily to put in place a process to ensure that the NRG or HRIU are truly disbanded, persons involved are debriefed, protected from intimidation and are reintegrated into SARS’s official and civilian structures.

My response:

Instead, many were consequently intimidated and harassed. I recommend that SARS institutes a proper investigation into who intimidated and harassed people, why this occurred, to what end and on whose behalf and identify all those past and current SARS employees harmed as a result. SARS should go out of its way to determine the extent of harm caused to its employees as it has a duty of care towards its employees.

My general response in conclusion:

The manner in which some taxpayers in dispute with our tax authority have sought to use (abuse) this flawed report as if fact, which it most certainly isn’t, in litigation, using what has become known in certain legal circles as the “rogue unit defence” is simply a disgrace. How some ‘witnesses’ whose bogus allegations were simply reflected uncritically in this report, and as a result gone on to act as ‘witnesses’ and assistants to advance this “rogue unit defence” is an even greater travesty of justice. Let me say nothing about the fact that they then actually got paid by these taxpayers to do so. I would advise extreme caution on any party which seeks to rely on the Sikhakhane panel report as if conclusive and factual. As I have demonstrated, it made material factual errors in its findings and recommendations.

 

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