Why King agreed to R718m for a new start

Shareholders celebrate as 11-year battle with taxman finally ends

CONTROVERSIAL businessman Dave King, who famously arrived in South Africa in 1976 with R170 in his pocket and ended up in a decade-long war with the SA Revenue Service (SARS), says he is now looking forward to “an exciting couple of years” building MICROmega, the JSE-listed services company he founded.

This week, King finally settled the 11year case by agreeing to pay R706.7million to SARS and nearly R12-million to the National Prosecuting Authority (NPA) to settle his tax affairs and clear him of any criminal charges.

MICROmega, which has seen its share price fall 5% over the last year partly due to the uncertainty concerning King, is expected to be the largest beneficiary of this week’s settlement.

SARS attached King’s shares in MICROmega, which has operations in information technology, financial, occupational health and safety, and labour supply services. Its action raised uncertainty over ownership and weighed on the share price. “I don’t think people were sceptical about doing business with me [while this was hanging over my head]; they downright wouldn’t do business with me,” King told Business Times on Friday.

“All the energy I’ve spent on the SARS matter, which has been quite considerable, can now go into MICROmega. We have some exciting projects in the pipeline, and hopefully shareholders will be rewarded for their patience,” he said.

This appeared evident from the fact that after the settlement was announced on Thursday, MICROmega’s share price shot up 27%.

As his outstanding debt of about R306-million will be paid from cash held by an offshore trust, the family will keep the mansion in Sandhurst, estimated to be worth R85-million, and holiday homes in Plettenberg Bay and Fancourt, the luxury golf estate near George.

SARS has already received about R400-million through the sale of other King assets, including Quoin Rock wine farm near Stellenbosch for R85-million and a Falcon jet for about R100-million.

Last year, SARS won a court order allowing it to sell King’s assets to pay his tax bill of R2.7-billion, including penalties of 200% and interest.

“SARS had to take into consideration the recoverability of outstanding taxes from assets in South Africa and over- seas that are currently available and measure that against the settlement offer of R706.7-million,” said SARS spokesman Adrian Lackay.

The often ugly and public battle with SARS did not impact on his day-to-day lifestyle “in terms of paying the bills”, though the freezing of his international assets, particularly his private jet, was an “inconvenience”, King said.

In 2011, he asked a court in Guernsey, where his assets were frozen in line with a request from SARS, for a monthly stipend of R2.2-million, including R1million for legal expenses in South Africa, R800 000 for debts on his homes in Sandhurst, Plett and Fancourt, R200 000 for expenses on these homes, R23 000 for gardeners and R40 000 for horticultural services.

King’s troubles with SARS began in 2001, when SARS investigator Charles Chipps wondered how King, with a declared income of only R60 000 a year,

On Thursday, MICROmega’s share price shot up 27%

could afford to pay R1.76-million for an Irma Stern painting after reading about the purchase in a magazine. Chipps pursued the King matter doggedly and worked for SARS until his death last year aged 83.

King made more than R1-billion in profit when he sold his shares in the now defunct Specialised Outsourcing. The share tanked when his sale became public knowledge, causing other investors huge losses. This led to accusations that he defrauded investors and lied to the JSE.

In 2009, a R636-million settlement agreement between Sars and King fell through after the NPA refused to approve it. At the time, the NPA was still hoping to get a criminal conviction against King, who was facing 322 charges including fraud, money laundering, racketeering and tax evasion.

The NPA also pursued 37 charges of fraud and racketeering against him related to the Specialised Outsourcing case. Finally brought to court last year, the Specialised Outsourcing case turned out to be hugely embarrassing for the NPA, which called only five of 71 expert witnesses. The judge acquitted King and slammed the NPA for failing to put up a case.