The official reason for former ABSA director Piet Liebenberg’s hasty exit last month from his job as head of the SA Revenue Service was said to be “irreconcilable differences” between himself and Finance Minister Trevor Manuel, over who should be in charge of the day-to-day running of the department.
NoseWEEK has received a fax which suggests another, more likely, reason why Bible Pete quit his cushy R900 000 a year [Who says prayer breakfasts don’t help? – Ed] civil service job, less than a year into his three-year contract: like the legendary Flying Dutchman, the ghost of ABSA’s secret billion-rand lifeboat had risen from the depths to haunt the preaching banker from Pretoria.
After taking a handsome R2m early retirement package from ABSA, Mr Liebenberg filled in for some years in the gentlemanly occupation of Banking Ombudsman.
Then, last year, he emerged into the limelight once more as South Africa’s chief tax collector.
Quite what qualified him for this post is not clear; until then he had specialised in raking in the loot from the government, not for it. But our sources tell us that he was content in his latest job – until, in the second week of March, an unusual letter arrived on the desk of the Revenue Service’s chief investigator, Hein Heydenrych, to spoil it all.
In the letter, maverick lawyer Peter Soller alerted revenue-office investigators to the existence of an enormous tax fraud. Soller had written it on behalf of his son – and client in the matter – Lance, who naturally expects to be paid the customary ten per cent recovery fee offered by the Receiver to such rats.
The tax fraud in question was so big, Soller claimed, that, if the tax inspector did his job properly, the government stood to collect hundreds of millions of rands in tax, plus double that amount again in penalties.
The deal on which young Soller had reason to believe taxes had not been paid related to a 1992 transaction with which the Head of Revenue Services, Mr Liebenberg, was very well acquainted. It was concluded between the S A Reserve Bank and Sanlam’s banking division, Bankorp, of which Liebenberg was chief executive at the time.
Some indication of the huge sums of money on which taxes had not been paid was contained in the balance sheet of Bankorp’s parent company, ABSA, where some of it appears, described as “extraordinary income”.
Soller also sent evidence in the form of copies of pages from Reserve Bank governor Chris Stals’ submission to the secret inquiry into the Tollgate drama, in which Stals officially confirmed the deal.
The mechanics of the transaction on which the tax fraud was perpetrated were quite simple. The Reserve Bank, headed by Stals, was persuaded by Liebenberg to jail out Bankorp/ABSA with a secret gift of over R200 million per year, for five years. Since it is not legal for the Reserve Bank to give such gifts, it was disguised as a “loan” to ABSA which, when it was “lent” back to the Reserve Bank, just happened to generate the required amount of interest for ABSA each year.
While this was dishonest and probably a fraud on the Reserve Bank, it was also most unfortunate from a tax point of view: interest earned is taxable; so are gifts exceeding R20 000 in a year.
According to one version of these secret events, ABSA’s income from this source totalled R1,37 billion. According to our calculations the amount is more likely to exceed R3 billion because, in the end, ABSA got to keep not only the interest over five years, but also the loan capital, as a reward for good behaviour and, ostensibly, to compensate ABSA for taking over Bankorp’s huge bad debts – which had, of course, already been written off as losses against tax. So, in effect, the public paid up twice: once via the Receiver, and again, via the Reserve Bank, making lousy business management a most profitable business for ABSA’s controlling shareholder, Sanlam. (For a fuller account of the lifeboat scam, see nose 14.)
Now, in theory at least, thieves and fraudsters must, by law, declare their ill-gotten gains to the Receiver for tax purposes. If ABSA was profiting from fraud, then the Receiver was entitled to his usual 45% cut, at normal company tax rates.
It is at least a fair assumption on Sollers’ part that, amidst all the financial verneukery – he accuses the parties to the ABSA “lifeboat” of breaking almost every accepted norm and standard of banking practice – the good old boys at ABSA forgot to tell the taxman about their unusual and secret source of income.
So it is reasonable to assume that once the issue was formally tabled, Liebenberg suddenly found playing taxman taxman not nearly as much fun as before. Not even for R900 000 p.a. plus Merc, golf club fees and housing allowance. He was both one of the architects and one of the beneficiaries of the lifeboat scheme – a scheme which, it is now suggested, may not only have been a fraud on the currency, but also a massive case of tax evasion.
In return for alerting the Revenue Office to the tax evasion, Soller told the Receiver, his client Lance is entitled to a reward, calculated as a percentage of the outstanding tax bill, which, he suggests, amounts to R1 367 200 000 – excluding interest and penalties.
The tax office clearly found Soller’s – understandably acute – interest in the progress of their investigation – if they intended doing one at all – most uncomfortable. Why it should be so is a puzzle which requires an explanation. That it is so, is certain, because only days after sending his fax, Soller got an extraordinary reply, signed by the deputy commissioner in charge of special investigations, Mike Milner.
Milner thanked Soller for taking the trouble to report the matter to the Revenue Service, and commended him for his interest and “patriotic spirit” displayed in combating tax evasion. But then Milner digressed from the topic at hand to deliver what can only be understood as a peculiar, veiled threat to the effect that should Lance Soller pursue the matter, his own tax affairs might be subjected to closer official scrutiny.
Further, he was told that informer’s commission would only be paid for information that the tax office was “not aware of and is not likely to become aware of in the ordinary course of its activities”, a point Soller took to imply that the Receiver may have known all along about the tax implications of the ABSA lifeboat, but had nevertheless failed to act.
Milner ended his carefully worded letter with a refusal to divulge any details of “any” investigation which may – or may not – have taken place, on the grounds that all tax affairs and tax investigations are actually one enormous secret. But, he solemnly concluded, the investigative division was “looking into” the matter, and it was “under consideration” – this, presumably, to assure Soller that his letter was not immediately destined for the office shredder.
Soller, concerned at what appeared to be – at the very least – a brush-off, addressed his next fax to the Chief Executive, Piet Liebenberg, to get assurances that the investigative team would probe the whole question of non-payment of taxes surrounding the lifeboat issue.
Being a streetsmart lawyer, Soller also wanted to know whether the contents of Milner’s letter were meant as a threat and, further, whether the department’s attempt to hide behind secrecy clauses in the Income Tax Act was not an attempt to bury the matter.
Besides, he wrote, all this secrecy goes against the new spirit of openness and constitutional rights.
Because the public’s interest was at stake insofar as tax has to be seen to be levied on all taxpayers, equally, and without discrimination, he argued, the department was not justified in withholding information or keeping the issue under wraps by retreating behind the secrecy clauses contained in Section 4 of the Income Tax Act. Most particularly, it was in Lance Soller’s interest, as he stood to receive a substantial sum on recovery of the tax.
Such was his client’s interest – calculated at roughly R6 million – and that of the public in the Receiver’s investigation being completed expeditiously, that Soller was prepared to take the matter to the constitutional court as a matter of extreme urgency.
Investigative chief Heydenrych hastily reassured Soller that the tone of his deputy’s letter “could never have been intended to intimidate”. He proceeded to advise Soller that, with regard to his constitutional court action, “under the circumstances your client must take whatever steps and decisions he feels appropriate”. [Eighties Pretoria “civil” service jargon for “go get fucked”. – Ed.]
It was at this stage that Soller – wisely – decided to cut the crap and phoned Liebenberg to arrange a meeting at which they could discuss the matter man to man. They agreed to meet at Liebenberg’s office at 4pm on Wednesday 15 May.
Soller was pleased and just a little curious when Liebenberg, at the end of their telephone conversation, courteously told him: “All your suspicions, Mr Soller, will be allayed at the meeting.”
Which was to prove quite poignant, really, since on May 15 – before 4pm – Liebenberg resigned and left without keeping his appointment with Soller.
All things being equal, it is probably better that the Minister, rather than Liebenberg, is left in charge of the Revenue Service. But then it remains to be seen whether Manuel is any less beholden to the men at Sanlam than is Liebenberg. Especially since Sanlam has become the major financial backer of men like Cyril Ramaphosa and that smooth-talking millionaire from Soweto, Dr Nthatho Motlana.
Watch this space. n
Copyright © 2019 www.noseweek.co.za