TAXMEN COMETH
Ex-SARS bosses take angry aim at KPMG
● Five former executives of the South African Revenue Service (SARS) are set to sue professional services firm KPMG South Africa as well as KPMG International in a large civil law suit. The five are also considering criminal charges in terms of South Africa’s anti-corruption laws.
All five are former leading SARS executives: deputy commissioner Ivan Pillay, executive Yolisa Pikie, spokesman Adrian Lackay, strategy head Peter Richer and high-risk investigations head Johann van Loggerenberg.
Lawyer Bernard Hotz of Werksmans Attorneys, who represents four of the five, said, “I hold instructions to institute appropriate proceedings against KPMG SA and KPMG International shortly.” The lawyer for the fifth executive also confirmed an imminent suit.
“We are not aware of any legal proceedings having been commenced in connection with the work performed by KPMG South Africa in preparing the SARS report,” said the auditor’s spokesperson, Nqubeko Sibiya.
The suit is against a 2016 KPMG report into an alleged rogue unit at SARS, which the firm subsequently partly retracted because of the poor standard of work. Last month, KPMG returned the R23-million fee it earned from SARS for the report after it had retracted its conclusions and recommendations.
But the executives want KPMG to retract the entire report, which they believe has impugned their reputations and continues to do so. The five are likely to ask the court to find that the whole report must be withdrawn, especially as it has been used in new charges laid against two of them last week.
“SARS wishes to categorically state that the allegations that the KPMG report was used as the basis for disciplinary actions as well as the institution of a criminal offence are at best false and at worse deceitful, and aimed at misleading the people of South Africa,” said KPMG’s Sibiya.
Pillay, Van Loggerenberg and Andries Janse van Rensburg were last week charged for their alleged role in bugging the National Prosecuting Authority, which they all deny. This latest charge sheet stems from the discredited KPMG report, which has added grist to the mill of the civil suit KPMG now faces.
The report refers to the so-called Project Sunday Evenings in which the offices of the National Prosecuting Authority were allegedly bugged to smoke out a mole. It is believed the report is the key source material for the shock charges issued for a court appearance the three are to face on April 9.
In September 2017 KPMG apologised to Public Enterprises Minister Pravin Gordhan because the report linked him to the estab- lishment of the alleged “rogue” unit.
KPMG International, which investigated both the SARS report as well as the firm’s work for the Gupta family, found that the South African office had not assessed risk properly, had failed to secure a second partner review on the KPMG report and had provided legal advice and opinions that were outside its mandate.
The firm also parted ways with Johan van der Walt who had written the report and made changes to its forensic practice. KMPG said: “The forensic practice has since made changes to certain of its controls and methodologies. For example, before accepting contentious engagements, discussion with, and approval by, the firm’s executive committee is required. In addition, prior to finalising an investigation report, engagement teams are required to provide anyone who is the subject of the report an opportunity to respond to the relevant findings.”
Despite this finding, KPMG has not yet given the SARS executives an opportunity to respond to the report, which still stands and is still being used as a battering ram.
“There are important and inherent limitations in KPMG’s work which are articulated in the SARS Report. KPMG undertook limited interviews but did not, for example, interview people who were the subject of the key allegations referred to in the report. The SARS report needs to be read with these limitations in mind,” said Sibiya.
While KPMG has met some of the executives, it has consistently refused to engage the former SARS executives on the methods it had used to draw up the report, which ultimately ended their careers. The firm has also refused access to information requests to provide the executives with the terms of reference for its work for SARS and to other documents.
KPMG South Africa was a willing participant in state capture Pravin Gordhan Public Enterprises Minister
KPMG has denied knowledge of access to information requests, but Business Times has seen a stack of submitted requests.
The KPMG team that drew up the report did not speak during the course of its investigation to any of the executives it alleged were responsible for rogue intelligence work at SARS, but it did take evidence from tax dodger Gary Porritt.
The former Tigon CEO is one of South Africa’s most notorious white-collar criminals who faces massive fraud, racketeering and tax-evasion charges. The Porritt investigation was one of the biggest carried out by the SARS high-risk intelligence unit.
Last year Gordhan said KPMG SA was a “willing participant in state capture” and its leadership had not fully grasped the magnitude of what they were involved in.
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