King (humble) Pie
After 13 years of tangled court battles, hundreds of millions of rand in legal fees on both sides, and with the persistent strain of f ighting some of the country’s most effective state agencies – Dave King has settled his long-running tax dispute with SARS.
The price: R706.7m to SARS, a public mea culpa, plus nearly R12m more in fines and other settlements to other state agencies.
Crucially for King, who is chairman of JSE listed MICROmega Holdings, there will be no criminal prosecution – l ong a st ic k i ng point bet ween t he National Prosecuting Authority (NPA), which vetoed an earlier deal with the businessman on the basis that it wanted to secure a conviction that would have prevented him from being a director of a listed company.
The deal allows him a chance to make a fresh start and to retain the vast majority of his fortune.
But the market has a long memory and many investors still bear a grudge against King, who made his money selling shares in Specialised Outsourcing using off-shore vehicles as the stock rocketed from a listing price of 50c to levels of 7 000c. The fairytale ended when then Investec analyst, Andrew Cuffe, questioned the company’s business model and the fact that it had just one major client: Umgeni Water. The share price collapse was even more spectacular than its meteoric rise and ordinary investors caught up in the hype lost a lot of money.
King however was sitting pretty – or so he thought until the late Charles Chipps – a SARS official in downtown Johannesburg – noticed the anomaly between his tax returns and his prof ligate spending. King’s tax returns ref lected an average income of just R60 000/ year, but he owned seaside homes, had knocked down several Sandhurst houses to build a Tuscan-st yle mansion
with a putting green in the garden, the wine estate he developed into the spectacular Quoin Rock (the failed sale of which to Wendy Applebaum in 2011 brought down Auction Alliance and destroyed the reputation of CEO Rael Levitt), a game farm and two football teams: AmaZulu and Glasgow Rangers. There was at least one Ferrari in the Sandhurst garage and a private Falcon 900 jet at his disposal based at Lanseria Airport. What pricked Chipps’ original interest was the fact that King had just paid a record R1.7m for an Irma Stern painting. Chipps set about investigating King and was instrumental in building the early case against him. Chipps worked at SARS until his death at age 83 last year.
King, who in interviews would regularly refer to himself in the third person to differentiate between his affairs and those of various legal entities, dug in his heels when SARS presented him with a R2.4bn bill to cover ta xes, f ines and interest it said he owed as a result of super-profits he made through selling shares in Specialised Outsourcing. King maintained that he was not l iable for taxes and that he was being persecuted by the State. The then SARS commissioner, Pravin Gordhan, became equally belligerent in his position that King should be held fully accountable for the bill and a stand-off ensued.
It was not unusual to attend court hearings where f ive legal entities linked to King would be represented by five different advocates – much to the frustra-