Dirty tricks to discredit me, says key witness against Zuma


Forensic auditor claims that despite KPMG apology there is good evidence that SARS rogue unit did exist.

A senior financial investigator lined up to be a key prosecution witness in the state’s forthcoming corruption trial against former President Jacob Zuma believes there is a political campaign under way to discredit him and get him off the case.

The investigator is forensic auditor Johan van der Walt, the highly-regarded former KPMG partner who led the 30-strong KPMG South Africa team which concluded that an illegal, covert and rogue intelligence unit had operated within the South African Revenue Service.

Last September KPMG International sensationally ordered the withdrawal of the report’s findings and conclusions and in the aftermath, nine of the firm’s senior South African executives, including CEO Trevor Hoole and head of forensics Herman de Beer, were forced to resign.

Forensic auditor Johan van der Walt

Van der Walt is also the author of an earlier 2005 KPMG report commissioned by the state into the nub of the pending case against Jacob Zuma – 783 alleged payments to the former president that were handled by Schabir Shaik, the businessman who acted as Zuma’s financial adviser. Most of these funds ultimately emanated from foreign companies associated with the arms deals concluded by the government in 1999. Zuma is accused of illicitly pocketing a total of R4,072,499 from these payments.

Van der Walt has told friends that the ongoing rubbishing of his KPMG report into the SARS unit is deliberate – and designed to discredit him as a prosecution witness. “It’s a political thing, to get me out of the prosecution of Zuma,” he told them. Van der Walt, who resigned from KPMG in January 2017, does not deny saying this, but refuses to repeat or elaborate on his fears to Noseweek. He declines to be interviewed.

Zuma’s next appearance in Durban’s High Court is provisionally set for 8 June. Van der Walt met state prosecutor Billy Downer last month to review the  evidence against the former president.

So what do we make of this new Byzantine twist to the Zuma and SARS rogue unit stories? A review of the available evidence suggests that Van der Walt is in all probability correct. 

His meeting with prosecutor Downer came within days of the publication of nose223, which recounted a host of covert intelligence operations conducted by the so-called rogue unit outside the legal framework and in violation of the SARS Code of Conduct. Noseweek’s report was based on SARS’s 2015 disciplinary charge sheets against two suspended employees, investigative unit manager Johann van Loggerenberg and his superior, Deputy Commissioner Ivan Pillay.

Both Pillay and Van Loggerenberg resigned on the eve of their disciplinary hearings; Van Loggerenberg’s had been scheduled for 27 January 2015, Pillay’s a month later, on 26 February – so the allegations in the confidential charge sheets were never tested. The list of 10 charges against Pillay was leaked at the time to the Sunday Independent, which splashed the contents in February 2015.

Noseweek has been unable to establish whether the charges against Van Loggerenberg were also previously published. However, when he resigned, Van Loggerenberg and SARS said in separate statements that the parting of the ways was amicable. “Van Loggerenberg has served SARS for a period of over 16 years, a degree of loyalty SARS appreciates,” said the revenue service.

Van Loggerenberg’s statement said that his resignation was done in good faith and in the best interest of SARS and the country. Recent disclosures by Van Loggerenberg about a confidential “whistleblower’s” report he compiled and submitted to his bosses (see Letters in this issue) suggest that much more was at stake which both parties preferred to keep under wraps.

Some of the nine charges against Van Loggerenberg, a one-time deep cover spy – Agent RS536 – in the police’s Organised Crime Intelligence Unit, concerned his relationship with Belinda Walter, an attorney and secret agent of the State Security Agency, who was chairperson of the Fair-Trade Independent Tobacco Association.

“I acknowledge that I erred in personal judgment concerning a matter in my private life and that this led to unforeseen consequences that were outside my control,” read Van Loggerenberg’s public statement issued at the time of his resignation. He apologised to SARS, its employees and the country.  

The introduction to the nose223 story described Van Loggerenberg as one of two architects of the special investigative unit when it was formed in 2007. Although his internal charge sheet states that he was involved in the management of covert intelligence operations since “about April 2007”, Van Loggerenberg only became head of the controversial unit the following year, when he took over from Andries “Skollie” Janse van Rensburg.

Especially incensed by our report is Jacques Pauw, author of The President’s Keepers, who insists in his recent book that there had never been a “rogue” unit in SARS. Pauw tells us he has an interest because our report in nose223 “directly rebuts the facts in my book” [Pauw’s book was not at issue; we simply published what was stated in the charge sheets, for better or for worse. – Ed.]

Ignoring the fact that the Noseweek article merely lays out SARS’s 2015 internal charges against Pillay and Van Loggerenberg, Pauw said our story was “riddled with factual mistakes” and was “probably the worst piece of journalism I have encountered in my life”. He insisted that “there was nothing secret about the unit and members were treated like ordinary SARS personnel”.

Why the vehemence? A journalist’s sources are, of course, sacrosanct and in the normal course it would be improper to inquire where Pauw picked up his inside information that vindicated Pillay, Van Loggerenberg & Co. When The President’s Keepers was launched in Cape Town last December the Sunday Independent reported that Pauw had had no intention to write the book until he was approached by an influential group led by former finance minister Pravin Gordhan. And the newspaper said that “impeccable sources” had told them the book came about after several meetings between Pauw and  Gordhan, former intelligence head Mo Shaik and, yes, Ivan Pillay and Johann van Loggerenberg. “Sources say virtually all information regarding affairs at SARS was provided by Gordhan, Pillay and Van Loggerenberg,” reported the newspaper.  

When Pauw expressed concern at possible lawsuits, “he was given the assurance that he would be provided with sufficient budget to cater for all litigation”, ran Steven Motale’s story. Confronted at the time, Gordhan denied playing any role in the book. Pillay said: “I do not and did not have contact with the author. I am not aware of how the author got his information.” Van Loggerenberg’s lawyer said his client considered allegations against him “false, malicious, spurious and defamatory”.

According to the Sunday Independent, those who have so far instituted legal action against Pauw for his book are former intelligence operative George Darmanovich (who has described Pauw as “a serial liar”) and the family of State Security Agency Director-General Arthur Fraser.

In December 2015 the Press Ombudsman ordered The Sunday Times to retract its repeated stories suggesting that there had been an illegally-established “rogue” unit at SARS, and to apologise to Pillay and Van Loggerenberg.

Former SARS investigator Johann van Loggerenberg

In his 92-page complaint to the Press Ombudsman, Van Loggerenberg claimed that the investigation processes (against him) at SARS were flawed and he had no opportunity to put his side of the case.

The ombudsman’s panel concluded that The Sunday Times reportage “has unnecessarily tarnished Van Loggerenberg’s dignity and reputation”. To rub it in, after publication of The President’s Keepers last year Pauw publicly blasted Sunday Times reporter Stephan Hofstatter on Radio  702 for “not checking his sources”.

Pauw lives in Riebeek Kasteel in the Western Cape, where he runs a restaurant called the Red Tin Roof. Former spook Van Loggerenberg has a house nearby and the pair are close.

Despite abject apologies by KPMG to SARS and the refund of the R23m it received for its now-denigrated and “withdrawn” report, feelings still run high within the KPMG team that conducted the audit. There is ample convincing evidence, they say, in the 850,000 emails and 1.36m documents they scrutinised over 13 months, that SARS had indeed harboured an illegal spy unit.

“The documents are all there, on the machines at KPMG,” says one team member, who has since left the firm. “Because of confidence and privacy etc we weren’t allowed to take anything with us. But if there are legal processes we can get access to them, on discovery.”

Although the audit team leader Johan van der Walt refuses to speak to Noseweek, we have established that last month a reporter for the New York Times called him, keen to unravel the SARS rogue unit riddle. Nose223 had just hit the streets and Van der Walt told the journalist he couldn’t oblige, but urged him to read Noseweek’s article, which he told the reporter is “one of the most accurate, in my view, because it’s based on fact, as opposed to the rest of the press that is lopsided towards a narrative that my report was used to fire people.”

In recent developments, Auditor-General Kimi Makwetu has ordered the termination of all government contracts with KPMG. Sasfin and Barclays Africa are among the host of other clients who have abandoned the auditing giant. One member of the KPMG team on the rogue unit project believes that the exodus and threat to the future of KPMG South Africa following the debacle is “unfair, but our leaders played the wrong game”. He said, “As opposed to doing their jobs and the right thing, they apologised to people they didn’t owe an apology, and withdrew bits of the report that put Pravin Gordhan in a bad light.”

A confidential note by one of the senior auditors involved lists their bosses’ failings: “The so-called ‘withdrawal’ of aspects of the SARS report by KPMG International seem to relate to differences in approach between KPMG SA and KPMG International with regard to certain internal and risk management processes, and partly to KPMG International not having adequately reviewed the pertinent facts,” it begins.

The author points out: “None of the factual findings contained in the report have been withdrawn or called into question. And the factually inaccurate narrative regarding the SARS investigation continues to do the rounds in the media.” The document quotes from a piece in Daily Maverick: “After all, the KPMG report into an alleged ‘rogue’ unit had catastrophic consequences. Almost the entire top executive at the revenue service was purged as a result.”

The document records some of the findings of the forensic report:

• “Under the guidance of Ivan Pillay, a covert and rogue intelligence unit in contravention of the rule of law was established in SARS.

• “We found no evidence that [Pravin] Gordhan was informed about the existence of the unit. However, considering his position as Accounting Officer, it is reasonable to expect that he ought to have known. This aspect requires further investigation.

• “The members of the ‘rogue’ unit had exited SARS before the completion of the first draft KPMG report.

• “KPMG did not intend to provide legal advice as that did not form part of the scope of our agreement. It is suggested that our recommendations, insofar as it may be construed to be legal advice, be considered by the SARS legal advisers.”

The confidential document points out that KPMG International concluded that there had been inadequate risk oversight, and specifically that their standards required a second partner to review the work done; however, the final “deliverable” was not subjected to second-partner review.

Response: “The assignment was always on the agenda of the Risk Oversight Committee. Initially its risk rating was a 1. During the course of the assignment JvdW (Johan van der Walt) raised this to a 3, due to the contentious subject matter.

“The SARS report was the subject of Risk Oversight Meetings and was internally reviewed by senior KPMG partners independent from the investigation on an on-going basis. A second reviewing partner (head of forensics Herman de Beer) was formally appointed. The reports were made available to De Beer, and after required changes had been discussed these were signed off by him. KPMG, including the then CEO, Trevor Hoole, publicly defended the report.”

The document points out that on completion, the project was subjected to a Quality Performance Review overseen by a non-local reviewing partner and reviewed both as regards content and process.

“The project received a Green review rating. A Green QPR rating would not have been possible if there had not been an adequate second partner review and/or other risk management shortcomings.”

The author hits back at KPMG SA and KPMG International’s joint “desire to undermine its auditors’ report and factual findings” by:

• Failing to refute the “cut and paste” allegations regarding the draft report and to refute that its findings were dictated by the SARS lawyers;

• Failing to refute allegations that its team’s report found complicity on the part of, and thereby compromising, Minister Gordhan;

• Failing to refute that the report resulted in the dismissal of senior SARS officials;

• Failing to challenge the legitimacy/authenticity of the “leaked” executive summary;

• For falsely alleging that no second partner reviewer was appointed and that the report was not subject to risk oversight;

• For falsely alleging that the increased risks had not been appreciated, when the risk rating of the project had in fact been raised;

• For falsely alleging that inappropriate legal opinions had been provided and made no reference to the report’s specific disclaimers and caveats in the report;

• For stating in the context of the SARS report, that JvdW (Johan van der Walt) was “no longer with the firm”, thereby intentionally creating the impression that his resignation (on 10 January 2017) was related to the report;

• For meeting/apologising to then finance minister Gordhan, deputy minister Mcebisi Jonas and senior SARS ex-officials, given that the report did not implicate Gordhan or Jonas in the activities of the rogue unit and the officials resigned of their own accord before KPMG produced any findings.

Readers can find the full 2015 SARS disciplinary charge sheets against Pillay and Van Loggerenberg here:

PILLAY CHARGE SHEET

VAN LOGGERENBERG CHARGE SHEET

 

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Submitted by : Lumen on 2018-05-27 17:01:56
Confusion supreme: here is hoping that judge Nugent will clear it
 
Submitted by : Rogue Accountant on 2018-05-27 09:29:39
The rogue unit had a name: TCEI - Preliminary Investigations and Enquiries. Believe me this is not BS. They had or still have 2 tasks: Investigate any tax related fraud and covering up for anything their senior officials are involved in.

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