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How KPMG's 'Rogue Unit' Report Was Ludicrous From The Beginning

This extract from "Rogue: The Inside Story of SARS’s Elite Crime-busting Unit" shows the report was full of laughable findings.

15/09/2017 18:06 SAST | Updated 15/09/2017 18:06 SAST
Mike Hutchings / Reuters
The Cape Town headquarters of the South African Revenue Service (SARS).

Extract from "Rogue: The Inside Story of SARS's Elite Crime-busting Unit", by Johann van Loggerenberg and Adrian Lackay (Jonathan Ball Publishers).

At the end of August 2015 during a presentation to Parliament's Standing Committee on Finance, SARS commissioner Tom Moyane revealed that the KPMG report into the 'rogue unit' had been finalised and was in the possession of the Finance Minister.

According to an article published in the Daily Maverick, a legal firm that acts for SARS sent a letter to the KPMG director, Van der Walt, 'recommending that specific findings be made in their [KPMG's] report', including the recommendation that Pravin Gordhan, Ivan Pillay, I and others should also be investigated.

So, in what is supposedly an independent process, a law firm representing SARS instructs an auditing firm that certain findings should be reflected in its report.

And then KMPG apparently does exactly that. Typos and all.

A copy of the legal firm's letter was published by the Daily Maverick. In it, the firm recommends that KPMG make the following findings, among others:

On instructions of Mr. Pillay, the unit unlawfully monitored, intercepted communication [sic], recorded and transcribed recordings at the NPA offices [in 2007]. The SARS intelligence gathering exercise at the NPA was known as 'Project Sunday Evenings' and was aimed at gathering intelligence in [sic] the criminal investigation of Jackie Selebi ...

The members of the unit were permitted to use technical surveillance.

SARS unlawfully engaged in the procurement of intelligence gathering equipment with the necessary interception capability ...

The relationship between Mr Van Loggerenberg and Belinda Walter caused conflict of interest [sic].

Mr Van Loggerenberg unlawfully interfered in the tax audit of Belinda Walter.

All the old complaints against me and Ivan were repeated in the KPMG report. However, the Daily Maverick also reported that KPMG added a strange disclaimer to their report – that the document was not to be used 'for the resolution or disposition of any disputes or controversies thereto and is not to be disclosed, quoted or referenced, in whole or in part'. This effectively rendered the report useless for any purpose.

So, in what is supposedly an independent process, a law firm representing SARS instructs an auditing firm that certain findings should be reflected in its report.

Then the Sunday Times published what they claim to be a summary of the actual KPMG report on their website on 5 December 2015.

In January 2016, KPMG issued a public statement after the 'considerable exposure' its report had received, which, according to KPMG, should not have happened 'as the work was being conducted under strict rules of confidentiality which were clearly articulated in our letter of engagement as well as in our findings'. According to the statement, KPMG submitted a number of drafts to SARS on which they received feedback and their last report was submitted to SARS on 4 December 2015.

'Our mandate was to undertake a documentary review and did not include interviewing individuals named in the report, nor were they given sight of our findings by us.'

The KPMG report, which had cost the state R23 million, was therefore not a comprehensive forensic investigation but merely a 'documentary review'.

I also wonder how they could claim they didn't interview anyone named in the report, when I met with the KPMG team on two occasions, at their request.

The report contains sweeping statements, is factually incorrect and there is little or no substantiating evidence in too many instances to mention here. The following examples should give the reader an idea, though, of how taxpayers' money was spent on a KPMG 'investigation'.

The KPMG report... had cost the state R23 million.

Take, for instance, the following finding: 'We found no evidence indicating that the Minister of Finance, at the time, new about the existence of the Unit in SARS.'

Firstly, the word 'new' means something entirely different from the word 'knew'. Secondly, since that 'unit' was established there have been three ministers of finance and three deputy ministers and two SARS commissioners and deputy commissioners. Which particular minister was being referred to here, and why leave out the deputy ministers and commissioners?

A real red herring was the finding on equipment: 'The Unit unlawfully engaged in the procurement of intelligence gathering equipment with the necessary interception capability.' A list of very complex descriptions of equipment is then provided.

This is absolutely not true. The listed equipment was acquired by an entirely different unit in SARS, the Anti-Corruption and Security Division, under Clifford Collings. As a cost-centre manager, I was not aware of the acquisition of any equipment of the kind that KPMG refers to. There will be no evidence that the unit acquired any of the equipment mentioned simply because it never happened. Nor did the unit ever use the equipment that was acquired by ACAS.

Furthermore, you can buy any of these items over a counter. And none have 'interception capability'.

Probably the most laughable of the findings is the following: 'There is no evidence that SARS owed [sic] a brothel but it seems that some members of the Unit engaged services of prostitutes during their leisure time.'

It gets even more ludicrous. The reports states that during the period 2006 to 2014, the unit 'acquired and or attempted to acquire, offered intelligence gathering equipment such as ...' Here the report mentions equipment such as audio recorders, video recorders and a 'pinhole covert camera'.

The finding is nonsensical. Either the unit acquired the equipment, or it didn't. Offered equipment? To whom? But, as I said, the unit never acquired or used any of the listed equipment in the first place anyway.

Probably the most laughable of the findings is the following: 'There is no evidence that SARS owed [sic] a brothel but it seems that some members of the Unit engaged services of prostitutes during their leisure time.'

I should really hope SARS never 'owed' a brothel any money. We know SARS never owned one either, as the Sunday Times seemed to believe once, and tried to make the nation believe. As for the guys and their 'leisure rogue time' – different strokes for different folks. But why exactly is this any of KPMG's business to start with?

It is most interesting that the allegations that the unit bugged Zuma, got new homes and cars, spied on top cops and infiltrated politicians have now completely disappeared.

One other small example. Back in 2010, I met with people in the tobacco industry who had asked to meet with the team members of the unit. I recorded the conversation, which was later transcribed. They warned us about the existence of a 'project' to discredit SARS officials involved in the tobacco industry investigations for which R600 000 had been made available. We were told how certain individuals had been infiltrating state intelligence, the Hawks and the NPA, and were going to use these institutions to discredit us.

I know that KPMG had access to this recording, as well as a document that was ultimately going to become an affidavit that proves the aforesaid. They had the 'Project Broken Arrow' reports and the warnings we received of people who were trying to discredit us. But not a word of any of this appears in KPMG's 'findings'. Why was this information not considered relevant to their 'documentary review'?