The mega-millionaire Mpisanes time and again escape prosecution because the State's all tied up and captured.
Durban’s Lamborghini cop, Sgt S’bu Mpisane and his spouse Shauwn have made their fortune on the back of state housing contracts totalling more than R1 billion, often awarded without any tender processes (see noses103; 109; 125; 150; 195; 204).
Shauwn is the director of Zikhulise Cleaning Maintenance and Transport CC, the couple’s vehicle for state construction contracts. Between 2011 and 2013, she and Zikhulise faced 183 separate charges of fraud, corruption, forgery and defeating the ends of justice across three separate courts in Durban. But the Mpisanes are not rated leading members of Durban’s ignominious Teflon Club for nothing (see nose203).
The alleged incompetence of the prosecution, helped by some political manipulation, prompted SARS and the NPA to do some frantic back-pedalling and back-room bargaining. The outcome: Shauwn and her company were acquitted on some charges, while most were quietly dropped.
From the recent findings of a an internal inquiry held by the NPA, however, it appears that the Mpisanes’ defence lawyers, SARS and the NPA, collaborated in a scheme to discredit and destroy the career of the prosecutor in the case, Advocate Meera Naidu as a means to get the Mpisanes off the hook. She ended up at a back desk with a pencil and no phone for two years, before the NPA’s own internal disciplinary hearing eventually cleared her of any wrongdoing.
The evidence Noseweek has seen suggests that various serious criminal charges related to the Mpisane investigation which should have been prosecuted were simply abandoned without any evidence having been led. (Read below: “Claims against Naidu ‘spurious’”.) It appears that the evidence, which was voluminous, with over 20 witnesses lining up for the State, never even came into the equation when Shauwn was given a free pass.
Last month a senior SARS executive, Jonas Makwakwa, Group Executive: Auditing Division, was suspended on suspicion of having taken cash bribes, coincidently during the period when Shauwn somehow got the impression that she had successfully negotiated with Makwakwa a massive reduction of the R33m penalty she owed SARS (see nose204).
That bit of confusion contributed to the criminal cases against her being dropped in January 2014. In the bigger scheme of things, the R200,000 bail she had paid was such small change that she only bothered to collect the refund in April this year.
In the June 2011 case in the Durban Magistrate’s Court, Shauwn Mpisane faced 119 criminal charges, most of them involving forged VAT invoices submitted to SARS, and the under-declaration of VAT.
A year later, Shauwn was re-arrested, this time for allegedly trying to bribe a State witness and persuading him to alter his books with the promise of a lucrative cut of her state contracts. Then in 2013, Shauwn was charged for forging her company’s Construction Industry Development Board (CIDB) grading to score bigger tenders – which she duly did between 2007 and 2012. This matter was brought before the Durban Commercial Crimes Court.
The State’s cases ground to a halt when the former National Director of Public Prosecutions Mxolisi Nxasana weighed in, blaming Naidu for mismanaging the case.
Shauwn’s access to state contracts was because her late mother Florence Mkhize was an ANC struggle veteran – and chair of Durban’s powerful housing committee. (Earlier this year Shauwn’s sister, Nosipho Ngubo, also landed a cushy R20m housing contract from eThekwini – also without tendering.)
S’bu Mpisane’s climb up the ladder of success is less happily explained. He is not a director of the company but is fully involved in its affairs, and shares in the spoils.
According to various reports in 1998, S’bu, then an ordinary constable in the metro police, took part in a hit on a judge, the prosecutor and a witnesses involved in the murder trial of taxi boss (and nephew of President Jacob Zuma) Mandla Gcaba. Three people including a policeman were killed in a shootout outside the Durban Magistrate’s Court.
S’bu was identified as the driver of the hitmen’s getaway car. He was arrested and agreed to turn State witness, but days before Gcaba’s trial was to recommence he mysteriously disappeared and Gcaba’s murder trial collapsed.
A year later S’bu reappeared claiming he had been kidnapped and held hostage on some unknown African island. (We got no answer when we asked which island.) Without further ado, he got his job back and was promoted to sergeant.
The Mpisanes’ tax problems started in mid-2008, when SARS recommended a lifestyle audit on S’bu, who, as a low-ranking policeman was arriving at work in a Lamborghini, making him rather conspicuous in the crowd. But his wife was earning the money, so the investigation shifted. (He has since resigned from the police.)
Based on that lifestyle audit, Durban-based SARS auditor Waheeda Osman (she later became a key witness in the State’s case) issued her and her company, Zikhulise, with that R33m tax assessment for the 2008 financial year. The bulk was for illegitimate VAT claims on the purchase of a Lamborghini, a Porsche, a Rolls Royce and a BMW. The Mpisanes claimed they were trading in luxury vehicles, but could produce no evidence of having traded in these cars; they drove them.
In early 2010 – with Zikhulise’s financials and VAT account in shambles, a huge tax penalty, and facing increased scrutiny – the company attempted to enter the Alternative Dispute Resolution (ADR) process with the help of their new tax consultant, Trevor Dalton (nose201), to sort out their 2008 tax audit. This process is meant to be informal, to avoid litigation and work towards a settlement – provided there is no tax evasion, fraud or serious non-compliance with the tax laws.
As is required, SARS asked for documents to validate claimed cash purchases and cash wages in the disputed 2008 financial year. The documents provided by Zikhulise’s tax consultant were sent to senior SARS officials including Poobanthiran Govender (who investigated Zikhulise’s PAYE) and Osman. Govender plays no further role in this story as he was murdered alongside his girlfriend in Sandton a month before Shauwn was formally charged. The couple were shot 16 times, and their bodies found only three days later. Their relatives still don’t know why they were killed and have only a vague theory involving the Nigerian underworld.
Alternative Dispute Resolution official Solomon Mthembu had been tasked with dealing with the Zikhulise dispute. He would later claim that a tax consultant acting for the Mpisanes, Myesh Pillay, tried to bribe him. (Read below: “Jimmy’s killer prawn bribe trap”.)
In June 2010 Dalton, and the Mpisanes met ADR manager Dierdre Pieterse (since resigned), along with other officials and presented them with invoices that, it later transpired, were forged.
Pieterse told Dalton in an email the invoices given to them made no sense.
“[The auditors] have found that invoice serial numbers on the relevant VAT invoices have only been used by the supplier this year. It… needs to be explained by your client how the relevant invoices, dated 2007, could have been issued by the supplier. Very little of those invoices [supplied to us on 4 June] may be allowed by SARS”.
Dalton, after leaving Zikhulise’s employment, gave three statements to investigators. He told Naidu that Shauwn and her accountant Kishal Reddy (who would later turn State witness) “denied fabricating any invoices”.
On another occasion Dalton told SARS investigator Martin van der Merwe that neither Reddy nor Shauwn had a “straight answer” for the same forged invoices.
There was also the strange claim by Shauwn to Dalton that a SARS official called “Mark” tried to solicit a R4m bribe to “assist her with her tax issues”. She met “Mark” at the Beverley Hills Hotel, Umhlanga on 31 August 2010. SARS eventually obtained the video footage from the hotel but they didn’t have the software to open it. “Mark” had also sent an SMS to Shauwn which said he could “resolve her appeal” for the sum of “R500,000 for each of the eight members of the “committee”, who would adjudicate her situation.
While SARS claimed they couldn’t investigate the matter, Shauwn told Dalton that “Mark’s” phone was traced, allegedly by SARS, to “an address of a tax-services company that was based next to the SARS head office in Brooklyn (Pretoria)”. Nothing came of this matter.
The ADR process was terminated on 25 August 2010. An investigation followed on the orders of former SARS anti-corruption and security head, Clifford Collings – later to be among the victims of the “rogue unit” scandal (nose190) – who allocated the case to Van der Merwe, who in turn was joined by the SAPS Serious Economic Offences Unit’s Johan Prinsloo.
Shauwn’s legal team was made up of well-known criminal law advocate Jimmy Howse, Wim Trengrove SC and Rafik Bhana SC.
In this story, family connections count. Bhana is related to liquidator Enver Motala (See noses113; 126; 128; 147) as well as Fazel and Solly Bhana, who were involved in the looting of Aurora Mine, Grootvlei, along with Motala, Khulubuse Zuma (President Zuma’s nephew), Zondwa Mandela (Nelson Mandela’s nephew) and President Zuma’s wheeler-dealer lawyer Michael Hulley.
Rafik Bhana also has an exceptional talent for claiming enormous fees for non-stop reading of clients’ documents (nose140).
The trial commenced in mid-2013 when SARS auditor Osman took the stand. On July 10 that year Shauwn’s counsel sent a submission to then acting NDPP, Adv Nomgcobo Jiba, (since struck from the Roll of Advocates), complaining about Naidu’s conduct in court and her apparent “coaching” of Osman.
Jiba in turn sent the 52-page submission to the complainant – SARS.
The submission to the NDPP, written by Bhana (of Shauwn’s legal team), said that irregularities in the trial “exposed misconduct” which was “so serious” that it demanded their “immediate attention”. Naidu’s conduct, he said, amounted to a “miscarriage of justice”.
He also accused Van der Merwe of using “illegal investigative methods”. Most particularly he claimed the State had failed to furnish the defence with an audit report on Zikhulise that was undertaken by (now former) SARS accountant Sumantha Ramharak which, he said, might have assisted the Defence.
The Ramharak audit report into Zikhulise’s 2008 tax year, was completed in 2010 on instructions from Makwakwa. He had issued the instructions at Shauwn’s request, after she told him she had “new information” about her 2008 financials. This “new information” was hand-delivered to Durban-based Ramharak by Shauwn’s personal driver. She was in constant telephonic contact with Ramharak at the time. At one stage, it is alleged, they had lunch together at a Nando’s and went joyriding in the Mpisane’s Lamborghini through the leafy streets of Umhlanga.
Ramharak’s actions would later see Van der Merwe suggest she was “compromised”. Van der Merwe said some of the “new” invoices given to Ramharak were also fraudulent. Ramharak admitted to Van der Merwe, advocate Etienne Coetzee, SARS’s legal advisor Helen Templeton and Prinsloo (of SAPS’s Economic Offences unit) at a private meeting that the “audit verification report was flawed in various respects”. She blamed the poor quality of the report on the fact that she was “very new at SARS”.
The defence claimed in its submission that the Ramharak report showed Mpisane had paid her tax and not evaded it. They said the tax paid on the genuine invoices of approximately R10m was higher than the tax owed on the (admittedly) fraudulent invoices totalling R5,056,035, and therefore no crime was committed.
While not denying the existence of fake invoices – which the Defence maintained was the work of rogue Zikhulise accountant Reddy – they argued that SARS was not robbed of taxes.
“[SARS accountant] Ramharak conducted a verification process on the genuine invoices to assess the impact on the tax claims based on the fictitious invoices… and confirmed the genuinness of the invoices and that they reflected purchases in a higher amount than the fictitious invoices. In consequence the benefit to Zikhulise based on the genuine invoices was greater than the tax benefit based on the fictitious invoices. “Stated differently, SARS was not prejudiced and the accused were not advantaged by the claim based on the fictitious invoices.”
“Osman’s evidence… proves that SARS and the state were up to no good during this investigation and the motive was to charge [Shauwn] at any cost,” said Bhana SC.
Bhana said he believed that “Naidu’s conduct was in flagrant disregard of several provisions of the Prosecution Policy and Code of Conduct”, and that Shauwn’s rights to a fair trial had been “seriously compromised” by Naidu.
Bhana said that before they made the submission, they had met with SARS counsel Adv Mike Helens and that “obviously SARS is concerned”.
Shortly after the trial’s postponement, then-SARS boss Ivan Pillay (who was known in tax circles for “settlement deals” for the rich (see nose69), moved the Mpisane tax file to Pieter Engelbrecht, the deputy of Johann van Loggerenberg (see noses190; 191).
Also worth mentioning: SARS deputy commissioner Raymond Lalla (nose195) deemed the matter so important that he visited the Durban court on one of the trial days and spoke to both Naidu and Osman. Osman complained to him about her treatment on the stand by Bhana. Lalla assured her “it will all be sorted out”. (It wasn’t and she has since reported Bhana to the Johannesburg Bar.)
On August 30, 2013 SARS replied to the NPA on the basis of Bhana’s submission with their own 40-page document. Drafted by former SARS head of tax and customs investigations, Gene Ravele, and sent to Jiba, KZN Directorate for Prosecutions Adv Moipone Noko, and national Specialised Commercial Crime Unit director Lawrence Mrwebi (also, since struck from the advocate’s roll), Ravele agreed that the “trial has been rendered unfair”, that “justice will best be served to stop the prosecution (sic)” and “there is no hope of a successful prosecution”.
Ravele, also embroiled in the “rogue unit” scandal at SARS which cost him his job, based his finding almost entirely on the Defence submission.
In his rationale for ditching the case, he refers to “strained debate” between Naidu and Judge Blessing Msane; Naidu had “lashed out at the Defence” and Judge Msane had “reprimanded” the prosecutor. He said Naidu – a prosecutor with 22 years’ experience and a specialist in tax matters for 13 years – was “not sufficiently competent” and lacked integrity.
Ravele said SARS “cannot in good conscience associate itself with the continuation of the current trial”.
This was in contrast to an affidavit drafted by Van der Merwe, who said he was “personally of the view that the State docket made out a strong case against Zikhulise and Mpisane”.
Ravele said SARS would instead collect their dues from Shauwn and Zikhulise through the civil tax collection process, claiming these negotiations were “substantially advanced”.
Naidu was removed from the case on 2 September 2013, to be replaced by a veritable squad: NPA Advocate Arno J Rossouw, Advocate Jan Ferreira, Advocate Paul Louw (see noses56; 58; 60; 89 for more about him) and State prosecutor Adv David Broughton.
On 31 January 2014, making his first major – and possibly only decision as NDPP – Nxasana withdrew the charges in Pinetown and acquitted Shauwn and Zikhulise in the Durban Regional Court matter on the basis of Naidu’s “incompetent” prosecution.
“My responsibility is to ensure that all cases are prosecuted without fear, favour and prejudice. [We] will be working very hard to ensure that there is no reoccurrence of incidents similar to the one that has led to this decision,” said Nxasana.
A special tax court was then held at the five-star The Square Boutique Hotel in Umhlanga, where a final secret settlement was reached between SARS and the Mpisanes.
Just 15 days before Nxasana made his decision public, Shauwn Mpisane’s Durban Commercial Court matter was also withdrawn.
Asked whether the NPA would review the acquittal, Noko told Noseweek “the accused may legally never be charged again with the same charges”.
And asked whether Nxasana had erred in agreeing to Shauwn’s acquittal, she said: “No comment”.
When the Mpisanes’ tax problems began in 2008 their known assets totalled R68m. This included R30m in motor vehicles, six properties valued at R32m, and R5m in household goods and jewellery.
They had no serious creditors – just a R4m overdraft with Standard Bank.
The Mpisanes have since branched out into new fields of business; including national first division football club Royal Eagles and security firm Inyanga Protection Services.
Attempts to get comment from the Mpisanes were unsuccessful despite emails, calls made and SMSes sent.
Jimmy’s killer prawn bribe trap
SARS Alternative Disputes Resolution official Solomon Mthembu, tasked with handling the tax dispute involving Shauwn Mpisane and Zikhulise Cleaning Maintenance and Transport CC, declared in a written statement that Shauwn’s tax consultant Myesh Pillay had attempted to set him up with a bribe.
Pillay is COO of the LSP Group in Durban which offers tax advisory services. She was previously a senior manager at SARS. Her boss is Lazarus Pillay (not related), a pastor described by the Chatsworth Rising Sun newspaper in March 2015 as having a “close relationship” with former finance minister Nhlanhla Nene.
In a signed statement, Mthembu said he had known Pillay for three years, having met her when she acted as tax consultant for Balele Leisure Pty (Ltd), owned by Durban casino and development tycoon Vivian Reddy, a well-known fawner and funder of President Jacob Zuma.
In a written statement, Mthembu relates how, on 14 May 2010, in the midst of the dispute resolution proceedings with the Mpisanes, he was telephoned by Pillay, who asked him to meet her at the Shell garage on Dey Street in Pretoria.
Moments before they were to meet at 2.30pm, Pillay called him to say she could not make the meeting as she had another meeting “around Menlyn with lawyers”. She told him she had also been scheduled to meet another person at the Shell garage, and asked if, as a favour, he would collect a parcel of documents from that person and keep the parcel for her to collect later from his office. He was to collect documents from a person in a blue Toyota Conquest.
On arrival he found the car parked at the corner of Middle and Dey Street, in the parking lot of Jimmy’s Killer Prawns. “At this time I felt awkward, but I trusted Pillay,” he said.
There, an unidentified Indian male handed him a parcel wrapped in “A4 writing pad paper” saying he was “giving me cash for Pillay instead of documents”.
“I phoned Pillay and informed her that the occupant of the car wanted to give me money instead of documents. [She] said the occupant owed her money and that I should collect the money on her behalf and she will collect the same from me on Wednesday 19 May 2010. I informed her that I was not prepared to take the money on her behalf,” said Mthembu.
A short while later, back at the SARS office, he told his boss Jonas Makwakwa that he suspected the incident was connected to the Zikhulise case – the only high profile case under his control.
“[Makwakwa] mentioned that he would not be surprised if it is indeed the case, since the people involved were of the kind that one could expect such behaviour from. Makwakwa also mentioned that he knows Pillay and did not seem surprised by the fact that she was apparently involved,” said Mthembu.
Mthembu was removed from the case and instead a team was put in place to oversee the matter “so as to protect the identity of the individuals”.
Another tax consultant hired by Zikhulise – KZN-based Trevor Dalton – had similar suspicions about Pillay. He confirmed that Pillay worked for Shauwn Mpisane.
In a sworn affidavit, Dalton maintained that he only spoke to Pillay once in early August 2010, days before SARS abandoned the ADR process. He said Shauwn had handed him a phone to continue a conversation where Pillay told him she had “worked out an effective game plan to, in principle, mitigate, if not eliminate, the basis for the SARS assessment”.
“I simply listened as I was astounded that Myesh [Pillay] had gathered so much detailed information so quickly”. Pillay told Dalton she had spoken to senior SARS officials including “the Commissioner”, then Oupa Magashula.
“Subsequent to the conversation I advised Shauwn that I had no desire to interact with Pillay as I instinctively sensed that our characters and working styles were not compatible. Shauwn informed me that it had been her friend, Bheki Cele, (then National Police Commissioner), who had put Shauwn in contact with Myesh”.
Asked by Noseweek for comment, Pillay denied ever having worked for Shauwn . “No, no, no. We didn’t do any work for the Mpisanes. In fact we were given an instruction not to allow them into our office. I also have no interaction with Bheki Cele,”said Pillay. She maintained she and Mthembu were still friends.
Not according to Mthembu’s statement, where he declares: “I was shocked by the fact that a person I had known on a professional level for about three years could be involved in an attempt to set me up”.
Claims against Naidu spurious
Adv Meera Naidu’s disciplinary started two years after she had been withdrawn from the case. After a lengthy hearing she was cleared of all charges including failing to disclose the famed Ramharak report to the defence and coaching of her lead witness Waheeda Osman.
Represented by Durban lawyer Bruce Macgregor who was seconded by the Public Servants Association, Naidu also made the extraordinary claim that communications between SARS, the NPA and the SAPS were being monitored.
She had reason to believe that decisions from private meetings were somehow being leaked to the Defence.
Chairman of the disciplinary hearing, Advocate Justice Mnisi, called the hearing “very strange” and suspected that the charges had been formulated on the trot and were baseless.
“I have little hesitation in rejecting the allegations in the charge sheet as entirely unsubstantiated and spurious. To find the employee guilty of the above-mentioned charges in the light of oral and documentary evidence tabled before me, will be a guarantee that the employer will be found very wanting in any other forum.
“My finding in regard to these charges is that the employee is not guilty of all these charges. To find anything to the contrary would be a travesty of justice,” said Adv Mnisi.
Who else was charged?
Shauwn’s former accountant Kishal Reddy pleaded guilty to forgery and was handed a suspended sentence and a R30,000 fine, while turning State witness. He claimed that on Shauwn’s instruction he fabricated the invoices. There was no evidence produced of his having had any financial gain from the forgery.
Others charged but not prosecuted after the State’s case collapsed, included Durban-based project consultant DGW Consulting owner Dave Williamson, who was double dipping: he was “consulting” for Zikhulise, at approximately R145,000 a month, while in full-time employment with the eThekwini Metro’s Housing Unit from 2005 to 2010, earning a salary of about R47,000 a month.
Williamson approved and signed off payments on behalf of the city to Zikhulise for the period March 2007 to February 2008. An investigation found DGW Consulting was nothing but a shell and that it was impossible for Williamson, who claimed to work nine hours a day for the city, to be working simultaneously for Zikhulise.
Further evidence was obtained where Zikhulise issued a cheque dated 5 October 2007 to the value of R539,240 to Fordsdicks Motors for the purchase of a BMW X5, registered in the name of DG Williamson.
Docket four was for Lorna Williamson, Dave’s wife. She was the sole member of another company called Lezmin 1257 CC. An investigation revealed that Lorna failed to declare income of R3.3m for the 2008 tax year. This was the value of a property acquired by her, in one of Hillcrest’s exclusive estates, Le Domaine, and paid for with cheques issued by Zikhulise and Ukhozi Construction – both owned by the Mpisanes.
The fifth and final docket was for Preshan Ramdutt. He was accused of forging the invoices at his printing shop that purported to have been issued to Zikhulise by DGW Consulting, Eveready Brick and Block, Nelson Allopi and Associates, Tiger Plant Hire, NAC Inc and Afrisam.
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