KPMG the rogue in the story of SARS’s debasement
When news of an alleged “rogue unit” at the South African Revenue Service (SARS) surfaced in 2014, no one could have anticipated how wholly discredited that story would be just two-and-a-half years later.
In 2014, this newspaper reported extensively on the two narratives in the public domain.
One was about a sterling example of government excellence sinking under the weight of long-hidden scandals — the central skeleton was a murky covert unit that spied on the president and ran a brothel.
The other was that political forces were trying to discredit SARS and key officials in order to capture institutions in the financial cluster to promote self-accumulation and looting.
Now, it is clear that SARS was the first institution captured by those bent on looting — and if we connect the dots, we see that next in line was the Treasury, then the South African Reserve Bank. And now, the Financial Intelligence Centre and the Public Investment Corporation are also at risk.
KPMG was at the heart of the capture of SARS and its now wholly discredited report on the rogue unit was the fodder for charges against former finance minister Pravin Gordhan and the continued harassment of former SARS officials by the Hawks.
It was a narrative that set comrades against each other. But its ramifications were not only felt in the halls of power — journalists, media houses, media owners and editors all buckled beneath its weight.
And now, KPMG would like SA to think that it did nothing wrong in the probe into the alleged rogue unit, that it simply failed to “appropriately apply our own risk management and quality controls”.
The public relations waffle in its statement is weak and meaningless and makes no mention of the fact that it played a central role in the capturing and destruction of SARS, which will affect every taxpaying South African. It is far from enough and every taxpayer should demand more from the private firm that enabled the impotence of the tax agency.
Its statement refers only to the finding against Gordhan, which, let’s be honest, the auditing firm sucked out of its thumb. There was not a shred of evidence in the report to support the finding.
Judging by the latest findings on refunds by the tax ombudsman, the evidence of the destruction wrought by KPMG on SARS and other organisations is beginning to bear fruit. KPMG did not simply provide a report that caused individuals to be kicked out of an institution, it enabled a complete overhaul of the institution and it did so intentionally.
It does not explain why recommendations that made their way into the final report had been sent to the firm from SARS’s attorneys, which instructed KPMG what findings and recommendations to make.
The memorandum instructed the auditors to make clearer findings of guilt against certain individuals. This does not sound like poor quality control, but fraud.
The recommendations and findings of the report quote verbatim from the memorandum, which is a rather dubious state of affairs.
Nowhere does KPMG admit its conflict of interest when taking up the SARS contract. A tobacco company that formed part of the sordid mess was also a KPMG client at the time. The firm failed to mention this during and after the submission of its final report, which was leaked to the Sunday Times in December 2015.
A further question to ask is whether KPMG has made its newly found disclosure on “risk management and quality controls” available to the government, which relied on the report when Gordhan received 27 questions on the eve of the 2016 budget.
State Security Minister David Mahlobo and then police minister Nathi Nhleko relied on information about equipment procured by the alleged unit that was contained in the KPMG report when briefing the media on the Hawks investigation into the so-called rogue unit in 2016.
SARS commissioner Tom Moyane also laid charges against people implicated in the alleged unit using the KPMG report as a basis.
The report not only damaged SARS irreversibly but also led to investigations into former commissioners Gordhan and Oupa Magashule and other key officials. It was the source of information about the pension payout to former SARS deputy commissioner Ivan Pillay, for which charges against Gordhan, Magashule and Pillay were lodged and then dropped in 2016.
The KPMG report is also the source of the version of the allegations on the bugging of the National Prosecuting Authority offices, for which Gordhan, Pillay and others may yet be charged.
The findings and recommendations on “Project Sunday Evenings”, as the alleged bugging was dubbed, were literally cut and pastes, spelling errors and all, from the memorandum from the SARS attorneys on the final report.
So much for independent forensic investigation — which leads to yet another way KPMG sought to sidestep questions about why it failed to interview anyone implicated in its report. It had changed its mandate from a “forensic investigation” to a “documentary review”.
In December 2014, after the suspension of key officials at SARS based on the findings of an internal investigation headed by advocate Muzi Sikhakhane, Business Day asked the tax agency why certain officials were suspended when there were no findings against them in the internal probe.
Then spokesman Luther Lebelo replied that the officials had been suspended based on findings by KPMG as well as SARS senior counsel.
It is clear that from the beginning there was an acute awareness from the new leadership of SARS that KPMG would do their bidding — Lebelo’s response was received just as the firm was beginning its investigation.
We also now discover that KPMG had an 18-year relationship with the Gupta family — its usefulness was well established by the family and its allies. It cannot therefore say it “had no political motivation or intent to mislead”, as it did in the statement last week.
Its actions had far-reaching political ramifications for which it has yet to answer.