King (hum­ble) Pie

Finweek English Edition - - INSIDE -

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-

Dave King

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