South African cor­rup­tion scan­dal hits City law firm

The Sunday Telegraph - Money & Business - - Front page - By Iain Withers

THE City law firm Ho­gan Lovells has been drawn into the grow­ing cor­rup­tion scan­dal in South Africa amid al­le­ga­tions it pro­duced a “white­wash” re­port into claims of money laun­der­ing at a gov­ern­ment agency.

Lord Peter Hain, the former Labour min­is­ter and anti-apartheid cam­paigner, wrote to Bri­tain’s law watch­dog the Solic­i­tors Reg­u­la­tion Au­thor­ity (SRA) on Fri­day re­quest­ing an in­quiry into Ho­gan Lovells’ con­duct.

Lord Hain is ex­pected to raise his con­cerns in the House of Lords on Wed­nes­day.

The move threat­ens to drag the in­ter­na­tional law firm into the po­lit­i­cal storm swirling around South Africa’s pres­i­dent Ja­cob Zuma and close as­so­ci­ates the bil­lion­aire Gupta fam­ily.

Bri­tish firms linked to mis­con­duct by the Gup­tas have in­cluded dis­graced PR agency Bell Pot­tinger – which col­lapsed af­ter a dirty tricks cam­paign was ex­posed – KPMG, which has sub­se­quently cleared out its South African man­age­ment, and man­age­ment con­sul­tancy Mck­in­sey.

Lord Hain has separately re­ferred Lon­don-based lenders HSBC and Stan­dard Char­tered to the Fi­nan­cial Con­duct Au­thor­ity.

The al­le­ga­tions against Ho­gan Lovells cen­tre around a con­tro­ver­sial in­ves­ti­ga­tion it con­ducted for the South African Rev­enue Ser­vice (SARS) into al­le­ga­tions of fi­nan­cial mis­con­duct against two of its staff, Jonas Mak­wakwa, its deputy chief, and his lover Kelly Ann El­skie, who was a low-level em­ployee.

It was al­leged around R1.7m (£100,000) was paid into their bank ac­counts over a six-year pe­riod.

Al­legedly sus­pi­cious trans­ac­tions were iden­ti­fied by South Africa’s Fi­nan­cial In­tel­li­gence Com­mit­tee, lead­ing to Ho­gan Lovells’ in­ves­ti­ga­tion.

Ho­gan Lovells’ re­port rec­om­mended dis­ci­plinary ac­tion against Mr Mak­wakwa, but it has none the less been crit­i­cised by cam­paign­ers and politi­cians in South Africa for be­ing too soft.

Ho­gan Lovells had to ac­count for the way it con­ducted its SARS in­ves­ti­ga­tion

to a South African par­lia­men­tary com­mit­tee last month. Af­ter Ho­gan Lovells’ in­ves­ti­ga­tion, Mr Mak­wakwa was later acquitted by an in­ter­nal SARS in­quiry and re­in­stated as its deputy chief in Oc­to­ber last year fol­low­ing a sus­pen­sion.

No ac­tion was taken against Ms El­skie and nor was any rec­om­mended by Ho­gan Lovells.

Lord Hain is un­der­stood to have ev­i­dence from South Africa sub­stan­ti­at­ing al­le­ga­tions of cor­rup­tion against SARS, which he be­lieves should have been un­cov­ered by Ho­gan Lovells and re­flected in its re­port.

In the Lords this week, he will claim Ho­gan Lovells was “com­plicit” in un­der­min­ing SARS and this in turn helped bol­ster Pres­i­dent Zuma and his as­so­ci­ates the Gup­tas.

Lord Hain has asked the SRA to con­sider sanc­tion­ing Ho­gan Lovells or its lead­ing part­ners.

Pos­si­ble sanc­tions could in­clude strik­ing off in­di­vid­ual lawyers or re­fer­ring the firm to a dis­ci­plinary tri­bunal. Lord Hain was a lead­ing cam­paigner against South Africa’s apartheid regime. He led op­po­si­tion to tours by the South African ten­nis, rugby and cricket sides.

In re­sponse to pre­vi­ous crit­i­cism of its in­ves­ti­ga­tion into SARS, Ho­gan Lovells has said its scope was “lim­ited to iden­ti­fy­ing whether any mis­con­duct had been com­mit­ted by Mr Mak­wakwa and Ms El­skie as em­ploy­ees of SARS”.

“It did not seek to di­rectly in­ves­ti­gate the fi­nan­cial trans­ac­tions iden­ti­fied by the FIC. We un­der­stand that all crim­i­nal-re­lated al­le­ga­tions aris­ing from the FIC re­port were re­ferred to the rel­e­vant author­i­ties for in­ves­ti­ga­tion,” it added. Ho­gan Lovells said SARS con­ducted its own in­ter­nal dis­ci­plinary pro­ce­dures af­ter its re­port, which acquitted Mr Mak­wakwa of all charges.

An SRA spokesman said: “We take all com­plaints se­ri­ously and will look at any ev­i­dence given to us about al­leged mis­con­duct.”

The Gupta broth­ers and Mr Zuma have re­peat­edly strongly de­nied wrong­do­ing and said they are the vic­tims of a “po­lit­i­cally mo­ti­vated witch-hunt”. Last week, Coca-cola’s South African busi­nesses and en­ergy gi­ant Sa­sol said they would not award new busi­ness to Mck­in­sey un­til a cor­rup­tion in­quiry into its work was con­cluded.

Mck­in­sey has pre­vi­ously apol­o­gised for mak­ing “sev­eral er­rors of judg­ment” in its work with firms linked to the Gupta fam­ily but said it has found no ev­i­dence of cor­rup­tion or bribery.

HSBC and Stan­dard Char­tered said they had shut ac­counts they be­lieve are linked to the Gup­tas and are com­mit­ted to com­bat­ing fi­nan­cial crime.

Lord Hain has asked the Solic­i­tors Reg­u­la­tion Au­thor­ity to con­sider sanc­tion­ing Ho­gan Lovells

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