IN THE DISCIPLINARY INQUIRY Before A Bham SC In the matter between: PRESIDENT OF THE REPUBLIC OF SOUTH AFRICA. SOUTH AFRICAN REVENUE SERVICES and TOM MOYANE FILING SHEET. DOCUMENTS: AFFIDAVIT IN SUBSTANTIATION OF CHARGES FILED BY: EMPOLYER’S ATTORNEYS STATE ATTORNEY, PRETORIA SALU BUILDING 316 THABO SEHUME STREET CNR THABO SEHUME AND FRANCIS BAARD PRETORIA PRIVATE BAG X91. PRETORIA Enq: AGF MOKGALE Ref: 1507/18/253/me Tel: (012) 309 1662 Fax: (086) 452 7073TO: ADVOCATE A BHAM SC CHAIRPERSON VICTORIA MXENGE GROUP WEST COURT SANDOWN VILLAGE COPY RECEIVED: DATE: TIME: AND TO: ATTORNEYS TO THE EMPLOYEE MABUZA ATTORNEYS 15" FLOOR 83 CENTRAL STREET HOUGHTON \e 2198 \ TEL: 011 483 2387/483 0476 FAX: 011 728 0145 E-MAIL: eric@mabuza.co.za REF: Mr E.T MABUZA COPY RECEIVED: DATE: TIME:IN THE DISCIPLINARY INQUIRY Before A Bham SC In the matter between: PRESIDENT OF THE REPUBLIC OF SOUTH AFRICA SOUTH AFRICAN REVENUE SERVICE and TOM MOYANE AFFIDAVIT IN SUBSTANTIATION OF CHARGES |, the undersigned PRAVIN JAMNADAS GORDHAN state the following under oath: 1 lam a Member of Parliament and the Minister of Public Enterprises. | am based at the Department of Public Enterprises at 1090 Arcadia Street, Pretoria 2 | am the former Minister of Finance, having been appointed to that Position on 10 May 2009 by former President Zuma. | served as Minister of Finance until 25 May 2014. On 14 December 2014 | wasreappointed as the Minister of Finance. | served in that capacity until 30 March 2017, when I was removed by former President Zuma. 3 | accordingly have personal knowledge of the facts relevant to this matter up until 30 March 2017. Furthermore, the documents and correspondence relevant to this matter were within my custody and control during that time. 4 In respect of the period after 31 March 2017, | refer to the confirmatory affidavit of officials, inter alia, from National Treasury and the South African Revenue Service who had knowledge of the relevant events and custody of the relevant documents from that time. 5 The facts contained in this affidavit fall within my personal knowledge, alternatively they appear from documents under my custody and control, or from copies of documents that | have seen. To the best of my knowledge and belief the facts are both true and correct, 6 Where | make legal submissions, | do so on the basis of advice received from my legal representatives which advice | believe to be correct. 7 Where necessary, | have obtained confirmatory affidavits from individuals referred to in this affidavit. Their affidavits will be filed together with my affidavit. INTRODUCTION10 " 3 On 2 May 2018, the President of the Republic of South Africa, President Ramaphosa, served the Commissioner of the South African Revenue Service ("SARS") Mr Moyane, with notice of a disciplinary inquiry. Mr Moyane was charged with having committed misconduct in violation of his duties and responsibilities as Commissioner of SARS in terms of the South African Revenue Service Act 34 of 1997 ("SARS Act’), the Public Finance Management Act 1 of 1999 (“PFMA”) and the SARS Code of Conduct, as well as his fiduciary duties and his duty to act in accordance with the prescripts of section 195 of the Constitution. ‘The charge sheet listed four counts of misconduct, namely: 10.1 Gross mishandling of the Financial Intelligence Centre (‘FIC’) Report of 17 May 2018; 10.2 Unauthorised bonus payments; 103 Misleading Parliament; and 10.4 Instructing a SARS employee not to co-operate with the KPMG investigation into the SARS High Risk Unit. The charge sheet set out the key averments in respect of each charge and stated that the inquiry into Mr Moyane’s misconduct would be conducted on paper and that an affidavit in substantiation of the charges would be delivered in due course. Le12 13 4 This is the affidavit envisaged in the charge sheet. Its purpose is to set ut the facts and evidence which form the basis of the charges against Mr Moyane. Mr Moyane is no ordinary employee. His position as Commissioner of SARS entailed a raft of duties and responsibilities in terms of legistation, the SARS Code of Conduct and the Constitution itself. These are set out below and itis in this context that the charges against Mr Moyane must be considered. THE DUTIES AND RESPONSIBILITIES OF THE COMMISSIONER OF SARS THE SARS ACT 14 Section 2 of the SARS Act establishes the SARS as an organ of state, within the public administration, but outside the public service. 15 _In terms of section 6 of the SARS Act, the President must appoint the Commissioner of SARS for an agreed term not exceeding five years. 16 Mr Moyane was appointed Commissioner of SARS by Presidential Minute dated 27 September 2014 for a period of five years. 17 Section 9 of the SARS Act sets out the responsibilities of the Commissioner. It provides that the Commissioner: 17.1. is responsible for the performance of SARS functions; 4A18 19 20 17.2 _ takes all decisions in the exercise of SARS’ powers; 17.3 is the chief executive officer of SARS; and 17.4 is the accounting authority of SARS. The responsibilities of the Commissioner, as chief executive officer of SARS, are set out in section 9(2) of the SARS Act. They include responsibility for, amongst other things, the formation and development of an efficient administration, the organisation and control of staff, the maintenance of discipline, and the effective deployment and utilisation of staff to achieve maximum operational results. The responsibilities of the Commissioner, as accounting authority of SARS, are set out in section 9(3) of the SARS Act. They include responsibility for all income and expenditure of SARS, all revenue collected by SARS, all assets and the discharge of all liabilities of SARS, and the proper and diligent implementation of the the PEMA, Section 22 of the SARS Act reinforces the Commissioner's obligation, as accounting authority of SARS, to comply with the PFMA in respect of all income and expenditure of SARS, all assets and liabilities and financial transactions and all revenue collected by SARS. THE PFMA APPLIES TO SARS A SCHEDULE 3A NATIONAL PUBLIC ENTITY Af Lea 23 6 Section 50 of the PFMA sets out the fiduciary duties of accounting authorities. They are required to act with utmost good faith, with honesty, fidelity and integrity and in the best interests of the public entity for which they are responsible. They are also required to disclose to the executive authority responsible for that public entity, all material facts which may influence the decisions or actions of the executive authority, Section 51 of the PFMA sets out the general duties and responsibilities of accounting authorities. They are required to ensure that the public entity for which they are responsible establishes and maintains effective, efficient and transparent systems of financial and internal control. In terms of section 83 of the PFMA, an accounting authority commits financial misconduct if he or she fails to comply with the requirements of sections 50 to 55 of the PFMA, which includes the failure to act in the best interests of the public entity concerned. Such financial misconduct is grounds for suspension and may be grounds for dismissal. SECTION 195 OF THE CONSTITUTION 24 In terms of section 4(2) of the SARS Act, SARS must perform its functions in the most cost-efficient and effective manner and in accordance with the values and principles set out in section 195 of the Constitution, 4b25 Section 195 of the Constitution sets out the basic values and principles underlying the public administration and provides that the public administration must be governed by, amongst other things, a high standard of professional ethics, accountability, transparency, and impartiality. THE SARS CODE OF CONDUCT 26 The SARS Code of Conduct is binding on all SARS employees, Its Purpose is to “express the set of values and behaviours expected of all SARS employees in their work endeavours and socialisation that may relate to their status as SARS employees.” 27 The SARS Code codifies the values and principles governing the public administration set out in section 195 of the Constitution. 28 The SARS Code states that it is ‘the integrity comerstone of the SARS governance model and is essential for the effective administration of a tax and customs system that is anchored on voluntary compliance.” 29 The SARS Code sets specific standards of conduct that represent SARS’ core values and the appropriate conduct expected of all SARS 8 LE employees. These are inter alia:30 29.1 29.2 293 29.4 29.5 29.6 Faimess; Accountability; Integrity; Respect; Trust; and Honesty. The SARS Code sets additional specific standards of conduct that the Commissioner and SARS management are required to follow. It states that the Commissioner, members of the SARS Executive Committee and senior managers should, as the leadership of SARS, lead by example and champion the Code of Conduct by adhering to, inter alia, the following standards and principles: 30.1 30.2 30.3 Perform their duties and exercise their powers with the utmost professionalism, diligence and honesty, and conduct themselves in a decent manner at all times; fulfil all the obligations imposed upon them by the Constitution and law; act in utmost good faith and in the best interests of good governance;30.4 30.5 30.6 30.7 9 at all times uphold the reputation of SARS and avoid in any form or manner causing reputational harm to SARS; in all respects act in a manner that is consistent with the integrity of their office; not use their position or any information entrusted to them to enrich themselves or improperly benefit any other person; and not use information received in confidence in the course of their duties otherwise than in the discharge of their duties. ‘THE EXECUTIVE AUTHORITY RESPONSIBLE FOR SARS 34 32 While the Commissioner is appointed by the President, he is accountable to the Minister of Finance (‘the Minister’) as the Executive Authority responsible for SARS. As the Executive Authority responsible for SARS the Minister has the following powers under the SARS Act: 32.4 Under section 7(1) the Minister may designate a SARS employee to act as Commissioner when the Commissioner is absent or unable to perform the functions of office, or when the position is. vacant.33 10 32.2 Under section 11 the Minister may appoint one or more specialist committees to advise the Commissioner and the Minister on any matter concerning the management of SARS’ resources, including asset management, human resources and technology. 32.3 Under section 13(1) the Minister may assign specific powers to the members of a specialist committee for the purposes of performing the functions assigned in terms of section 11. 32.4 Under section 18(3) the Minister must approve the terms and conditions of employment for employees in the management structure of SARS In terms of the PFMA, the Commissioner is subject to the authority of the Minister, as Executive Authority of SARS, in the following respects: 33.1 Under section §3(1) and (2) of the PFMA, the Commissioner must submit a budget of estimated revenue and expenditure for the financial year to the Minister for approval. Under section 53(4), once the Minister has approved the budget, the Commissioner must ensure that expenditure in SARS is in accordance with the approved budget. 33.2 Under section 55(1)(d), the Commissioner is required to submit SARS audited financial statements, an annual report on SARS’ activities during the financial year, and the report of the auditors1 on those financial statements to the Minister within five months of the end of a financial year. 34 Furthermore: 34.1 In terms of section 76(4) of the PFMA, National Treasury may make regulations or issue instructions to organs of state, including SARS, that are regulated by the PFMA. 342 The Minister, as head of National Treasury may make regulations or issue instructions to SARS concerning all matters listed in section 76(4) of the PFMA, financial management and intemal control, and the administration of the PFMA. CHARGE 4 THE FACTS Financial Intelligence Centre Report of 17 May 2016 35 By way of a letter dated 17 May 2016, the director of the Financial Intelligence Centre (‘FIC’), Mr Murray Michell, informed Mr Moyane, in his capacity as Commissioner of SARS that the FIC had flagged two ‘SARS employees for suspicious financial transactions. Sis36 37 38 39 40 12 The first employee was Mr Mashudu Jonas Makwakwa, Mr Makwakwa was a senior member of the SARS executive. He held the position of Chief Officer for Business and Individual Tax. As such he was tasked with controlling SARS’ biggest revenue streams, income tax from corporates and individuals including high net worth individuals in South Africa. He was widely known to be Mr Moyane's second in command, ‘The second employee was Ms Kelly Ann Elskie. She was employed as a junior consultant in the Alternative Dispute Resolution division of SARS’ Legal Department. Mr Michell provided Mr Moyane with a report compiled by the FIC, which detailed suspicious and unusual cash deposits and payments made into the accounts of Mr Makwakwa and Ms Elskie ("the FIC Report’). The FIC Report is a confidential document and may not be released publicly without the approval of the Director of the FIC. Given its relevance to Charge 1, | am in the process of making the necessary arrangements to obtain the approval of the Director of FIC for the Report to be made available to the Presiding Officer on the understanding that he will maintain its confidentiality. The FIC Report flagged a number of suspicious transactions in respect of Mr Makwakwa, including a number of substantial cash deposits into his personal bank account and irregular ad hoc payments from SARS and other entities, including an entity known as Biz Fire Worx (Pty) Ltd.4a 42 43 13 The FIC Report noted that the volume and value of the deposits and payments was highly unusual given that Mr Makwakwa was permanently employed. The FIC Report flagged several suspicious cash deposits into the personal bank account of Ms Elskie and noted that the source of these funds was unknown and that the value of these deposits was suspicious and unusual given Ms Elskie's financial profile. The Financial Intelligence Centre Act 38 of 2001 (‘the FIC Act’), per section 40 thereof, requires the FIC to make information reported to or obtained by it available to, amongst others, SARS, if it believes that the information is required in order to investigate suspected unlawful activity. ‘The FIC Report was referred to SARS in terms of section 40 of the FIC Act for investigation to determine: 44.1 Whether Mr Makwakwa and Ms Elskie had committed acts of tax evasion and/or other contraventions of the Tax Administration Act 28 of 2011 (‘the TA Act’), 44.2 Whether the funds received by Mr Makwakwa and Ms Elskie constituted payment of the proceeds of crime arising from corrupt activities as defined in the Prevention and Combating of Corrupt Activities Act 12 of 2004 (‘PRECCA’)45 14 Whether Mr Makwakwa and Ms Elskie effected payments in contravention of intemal policies and/or the PEMA. Whether Mr Makwakwa and Ms Elskie were guilly of money laundering as defined in section 1 of the Prevention of Organised Crime Act 121 of 1998 (‘POCA’). Importantly, section 41 of the FIC Act prohibits the disclosure of information held by or obtained from the FIC except in certain narrowly defined circumstances, namely: 45.4 45.2 45.3 45.4 45.5 within the scope of that person's powers and duties in terms of any legislation; for the purpose of carrying out the provisions of the FIC Act; with the permission of the FIC; for the purpose of legal proceedings; or In terms of an order of court. On 20 May 2016, Mr Moyane acknowledged receipt of Mr Michell’s letter of 17 May 2016 together with the FIC Report, in writing, In his letter, Mr Moyane stated: “| have taken note of the report, seriousness and sensitivity of the matters it refers to from your letter and hereby confirm SARS will do a further investigation into the matter.”15 47 Acopy of Mr Moyane’s letter to Mr Michell is attached, marked "FA1" Mr Moyane's actions in response to the FIC Report 48 On Friday 20 May 2016, Mr Moyane forwarded a copy of the FIC Report to Mr Makwakwa. He asked Mr Makwakwa to peruse the FIC Report and to meet with him first thing on Monday moming 23 May 2016. A copy of Mr Moyane's letter to Mr Makwakwa is attached, marked "FA2”. 49 On or about 20 May 2016, Mr Moyane also forwarded a copy of the FIC Report to Ms Elskie. 50 On or about 30 May 2016, Ms Liesel David came on record as the attomey representing Mr Makwakwa and Ms Elskie. Mr Moyane had requested Mr Makwakwa and Ms Elskie to provide him with their written responses to the FIC Report by 1 August 2016. In response, Ms David requested extensions of time on behalf of her clients. 51 Ina letter from Ms David to Mr Moyane dated 10 August 2016, almost three months after Mr Moyane had been furnished with the FIC Report, Ms David recorded that Mr Moyane had agreed to the following extensions of time: 51.1 30 August 2016 for Ms Elskie to provide her written response to the FIC Report; and Sig16 51.2 30 September 2016 for Mr Makwakwa to provide his written response to the FIC Report. In the same letter, Ms David demanded a raft of information and documentation from the FIC in order for Mr Makwakwa and Ms Elskie to produce their written responses to the FIC Report. This was the following: 52.1 whether the FIC's personnel conducting the investigation had the requisite security-screening certificate as required in terms of the provisions of section 12 of FICA. If so, copies of such certificates were requested; 522 whether the FIC personnel who examined and made copies of bank accounts held by Mr Makwakwa and Ms Elskie obtained copies thereof under a warrant properly issued by a Magistrate or a Judge in terms of section 26 (1) and (2) of FICA. If so, copies of such warrants were requested. 62.3 the reports filed in terms of section 28 and 29 of FICA. 52.4 details as to when the enquiry fo the tax affairs of Mr Makwakwa and Ms Elskie commenced;525 52.6 82.7 52.8 52.10 7 details pertaining to the first suspicious transaction in respect of Mr Makwakwa and Ms Elskie; full particulars relating to each suspicious transaction involving Mr Makwakwa and Ms Elskie; full particulars of suspicious transactions in respect of which Mr Makwakwa allegedly received payments from SARS; whether the FIC was aware of any disclosure, in contravention of its Act by any of its personnel, of information pertaining to the Report being referred to unauthorised third parties. If so, the FIC was required to provide details as to when, full names and designation of the FIC’s employees involved in making such disclosure, to whom and circumstances under which this disclosure was made; whether the FIC had over the past three years received any report concerning any suspicious transaction involving a SARS employee, and if so, whether this has been reported to SARS. in this regard, full particulars were requested; an explanation of the legal procedure followed by the FIC in obtaining Mr Makwakwa’s January 2016 payslip;53 54 55 56 18 2.11 an explanation of the legal procedure followed by the FIC in obtaining copies of Mr Makwakwa and Ms Elskie's uncertified identity documents; 52.12 an explanation of the legal procedure followed by the FIC in obtaining copies of photo footage from banks (FNB and ABSA) pertaining to Ms Makwakwa and Ms Elskie; 52.13 an explanation of the legal process followed by FIC in obtaining ‘the bank statements of Mr Makwakwa and Ms Elskie’s personal bank accounts from FNB and ABSA. A copy of the letter from Ms David to Mr Moyane is attached, marked “FAS.” On 22 August 2016, Mr Moyane wrote to Mr Michell of the FIC requesting, verbatim, the information and documentation requested by Ms David on behalf of Mr Makwakwa and Ms Elskie. A copy of this letter is attached, marked “FA.” On 7 September 2016, Mr Moyane wrote a further letter to Mr Michell, again requesting the information and documentation set out above and Fequesting that it be provided by no later than close of business on 12 September 2016. A copy of this letter is attached, marked “FAS.” When the information was not forthcoming on 12 September 2016, Mr Moyane wrote a further letter to Mr Michell on 13 September 2016 in87 19 which he expressed his disappointment that the information and documentation had not been fumished. He did so in the following terms: “The purpose of this correspondence is to duly communicate my sincere disappointment at the fact that, to date, your office, has not deemed it necessary to respond, substantively or otherwise, to the request for information’ and or documentation as per these two letters.” A copy of this letter is attached, marked “FA6.” On 13 September 2016, Mr Michell responded to Mr Moyane in writing.* Mr Michell expressed grave concem over the manner in which the FIC Report was being handled by SARS. He took particular issue with the fact that the FIC Report had been disclosed to Mr Makwakwa and Ms Elskie and with the fact that the SARS was requesting information, to which Mr Makwakwa and Ms Elskie were clearly not entitled, on their behalf. The relevant portions of Mr Michell’s letter read as follows: “I am gravely concerned about the approach followed by the South African Revenue Service (SARS) in the pursuit of this matter. It is clear to me from the content of your letter dated 22 August 2016, in particular the detail of the request for information from Mr Makwakwa's and Ms Elskie's legal representatives, that the referral made to your office in terms of section 40 of the [FIC Act] was made available to the objects of the referral, Mr Makwakwa and Ms Elskie, or at the very least brought to their attention, subsequent to being handed over to your office. The FIC has been providing SARS with financial intelligence since 2003. SARS' employees are well aware of the access, handling and terms and conditions of use of such sensitive information. | point out that the conduct mentioned above constitutes a serious criminal offence under section 60 of the FIC Act.20 The process followed by SARS in this matter also appears to be inconsistent with investigative practice and tradecraft. It is the FIC’s experience that SARS does not give affected taxpayers copies of informer information when people blow the whistle on an errant taxpayer ~ a practice that would amount to ‘tipping off the taxpayer as to the possibility of a pending investigation against him or her. If such conduct was normal practice it would undermine the whistle blower mechanism and result in the collapse of whistle blowing as a source of information to enforce tax collection. Against this background it should be clear that the legal representatives for Mr Makwakwa and Ms Elskie are not entitled to receive any of the information they have requested and providing them with any such information would exacerbate the contraventions of the FIC Act which have already occurred.” 59 Mr Michell concluded his letter as follows: “I strongly recommend you undertake a formal investigation into the gross mishandling of the FIC's referral to your office in this matter and take the necessary steps to restore confidence in the professional legal and investigative services within SARS so as to ensure that future co-operation between the SARS and the FIC is not jeopardised.” 60 A copy of this letter is attached marked, “FAT.” ‘The Sunday Times Article and its aftermath 61 On 11 September 2016, the Sunday Times newspaper published an article titled: “Revenue Services number 2 probed for R1.2 million in suspicious cash deposits’.62 63 64 65 2 The Sunday Times article reported that Mr Makwakwa had been flagged by the FIC for suspicious and unusual cash payments into his bank account, and that a report compiled by the FIC had been handed to SARS commissioner Mr Tom Moyane. The article stated that sources had confirmed that the FIC Report had been handed to Mr Moyane in May 2016 and that, despite this, four months later, Mr Makwakwa and Ms Elskie remained in their positions at SARS. SARS spokesperson Mr Sandile Mamela had declined to comment. A copy of the Sunday Times article is attached, marked “FA8.” Mr Moyane had not informed me of the existence of the FIC Report. | ‘only became aware of the existence of the FIC Report upon the Publication of the Sunday Times article 11 September 2016. | was shocked at the allegations contained in the FIC Report and at the fact that Mr Moyane had not informed me thereof. On 12 September 2016, the day after the publication of the Sunday Times article, two things happened: 65.1 Mr Moyane gave Mr Makwakwa notice of SARS’ intention to suspend him; and 65.2 | called Mr Moyane to an urgent meeting to account for his actions in light of the Sunday Times’ revelation of the FIC Report. A, ie66 67 68 22 | recorded the events of the meeting on 12 September 2016 in a letter to Mr Moyane dated 14 September 2016. This included Mr Moyane's account of the steps he had taken in response to the FIC Report. A copy of this letter is attached, marked “FAQ.” FAS records, amongst other things, the following: “On 12 September 2016, only after the matter had become public on the front page of the Sunday Times, you gave Mr Makwakwa a letter inviting him to provide reasons as to why he should not be suspended.” “You have not reported the matter to any law enforcement authority but state that you will do so in what you describe as due course.” “You indicated that you will initiate a disciplinary process against Mr Makwakwa in line with SARS policy.” “You undertook to provide me with a proper chronology of events, accompanied by all the relevant supporting documentation, by 13 September 2016, or the latest Wednesday 14 September 2016, FAQ also recorded my extreme concem and dissatisfaction over Mr Moyane’s handling of the FIC Report expressed at the meeting “I further wish to record that | expressed my serious concern and dissatisfaction with the following: 1. You made no effort to alert me of the serious allegations made against a senior member of the SARS executive responsible for an important SARS portfolio. Common courtesy and the integrity of our entire financial system, of which revenue collection is a vital part, require that such a serious matter (especially having regard to the reputational damage to the organisation) should have been reported to me as the responsible member of the Executive, accountable to Parliament, as soon as you became aware of it.69 70 1" 23 2. The long delays and apparent lax manner in which this matter has been handled, given that it has taken almost four months for you to issue the letter of intention to suspend, 3. The public perception that you have only done so because the matter has become public.” As stated above, Mr Moyane gave Mr Makwakwa Notice of Intention to Suspend on 12 September 2016. The Notice is attached, marked “FA10", As is evident therefrom, the allegations of suspicious and unusual cash deposits and payments into Mr Makwakwa's personal bank account, made in the FIC Report, formed the basis of SARS’ intention to suspend him. The Notice of Intention to Suspend gave Mr Makwakwa until 13 September 2016 to provide reasons why he should not be suspended. This period was extended to 16 September 2016. Mr Makwakwa did not challenge his suspension. In fact, it appears from the Notice of Suspension, issued on 15 September 2016, that Mr Makwakwa conceded that, given the seriousness of the allegations against him, his continued presence at SARS, in the absence of his name being cleared, would be prejudicial to the reputation of the institution. The Notice of ‘Suspension is attached, marked “FA11.” It is noteworthy that despite this, Mr Makwakwa had for a period of four months after the FIC Report was provided to SARS, continued in his position and continued to participate in the senior management structures of SARS. He had moreover, during this period, accompanied72 73 74 75 24 Mr Moyane to meetings with me and to the parliamentary Standing Committee on Finance on 24 August 2016. SARS suspended Ms Elskie on 20 October 2016. On 15 September 2016 Mr Moyane responded to Mr Michell’s letter of 13 September 2016, Annexure “FA7”, quoted above. Mr Moyane stated as follows in the penultimate paragraph of his letter: “Furthermore, | intend to urgently refer this matter to the South African Police Service ("SAPS") for criminal investigation against the aforesaid employees, as | am required by section 34 of the Prevention and Combatting of Corrupt Activities Act 12 of 2004 (‘PRECCA’). In order to avoid duplication, kindly advise if FIC has already made the referral to the SAPS.” A copy of this letter is attached, marked “FA12.” Itis apparent from the above that, as at 15 September 2016, Mr Moyane had not referred the information contained in the FIC Report to the South African Police Service. ‘The Hogan Lovells Investigation 76 On 16 September 2016, Mr Moyane responded to my letter dated 14 September 2016, Annexure “FA9” quoted above. In his letter, Mr Moyane stated as follows: “| have initiated a formal disciplinary enquiry in respect of the allegations contained in the Report. In this regard, SARS has appointed an independent and reputable international law firm, Hogan Lovells to draw a project implementation plan (‘plan’) with time lines and milestones with regard to the administration of the envisaged78 79 80 81 82 25 disciplinary proceedings. | will avail the plan to the Minister as soon as possible, and after receipt of same from Hogan Lovells. | hereby reiterate my commitment to conduct a thorough and credible investigation into the allegations of impropriety, tax evasion, corruption, contravention of Public Finance Management Act and money laundering against the two employees. As an Accounting Authority vested with the responsibility to ensure the proper and diligent implementation of the PFMA, | am particularly obligated by section 84 of the PFMA to investigate allegations of financial misconduct against the aforesaid employees,” A copy of this letter is attached, marked “FA13.” It was not correct that Mr Moyane had initiated a formal disciplinary inquiry in respect of the allegations contained in the FIC Report. Mr Moyane had at this stage merely requested Hogan Lovells to conduct an investigation into the allegations contained in the FIC Report. It appears, from Annexure “FA17” below, that Mr Moyane had made this request at a meeting held with Hogan Lovells on 15 September 2016, There is however no written record of this meeting. On 29 September 2016, Hogan Lovells wrote to SARS setting out the scope of the investigation that could be conducted by it in respect of allegations contained in the FIC Report. A copy of this letter is attached, marked “FA14,” Hogan Lovells began in FA14 by defining the matters identified for investigation in the FIC Report as Requests A, B, C and D respectively: LA83 26 “Whether the funds received by Makwakwa and Elskie constitutes Payment of proceeds of crime arising from corrupt activities as defined in the Prevention and Combating of Corrupt Activities Act 12 of 2004 (PRECCA) (Request A’); Whether Makwakwa and Elskie have committed acts of tax evasion and other contraventions of the Tax Administration Act (Tax Administration Act) (‘Request B’); Whether Makwakwa and Elskie effected payments in contravention of intemal policies and/or the Public Finance Management Act 1 of 1999 (PFMA) (‘Request C’); and Whether the aforementioned conduct of concealment and disguising the true source of these funds constitute acts of money laundering as defined in section 1 of the Prevention of Organised Crime Act 121 of 1998 (POCA) (‘Request D’)" Hogan Lovells then defined the scope of the investigation that could be conducted by it in respect of each of these Requests as follows. Requests A and D 84.4 In respect of Requests A and D, Hogan Lovells noted that the investigation of criminal offences ordinarily falls within the jurisdiction of the SAPS. It stated that “In our view, criminal aspects of the allegations against these two employees (with the exception of offences in terms of tax legislation which Consultant would ordinarily investigate) should be referred to the SAPS for criminal investigation.” Hogan Lovells noted that it appeared from correspondence from Colonel Heap of the DPCI’s Serious Corruption Investigation Component dated 15 September 2016, that an investigation was27 already underway and recommended that SARS co-operate with the DPC! in this regard Hogan Lovells stated that in the event that it was established that the employees had committed criminal offences then disciplinary action should be taken against them and ‘at the appropriate stage the Firm shall assist with all disciplinary action subject to compliance with the Consultant's procurement policies.” 85 Request B 85.2 85.3 In respect of Request B, Hogan Lovells recommended that this investigation be undertaken by SARS, in the context of Mr Makwakwa and Ms Elskie as taxpayers, rather than employees. Hogan Lovells noted that “as part of its overall function and responsibilities, there exists a duty on Consultant to comply with the first request by the FIC and determine whether the alleged deposits and payments made and received by Makwakwa and Elskie have resulted in contravention of tax legislation and constitute a tax offence.” Hogan Lovells stated that in the event that the investigation established that tax offences had been committed, then this would constitute misconduct and it would assist with the institution of disciplinary proceedings in relation thereto.28 86 Request C 86.1 In respect of Request C, Hogan Lovells recommended that this investigation too be undertaken by SARS. This was because, according to Hogan Lovells, the basis of the payments made by Mr Makwakwa and Ms Elskie as set out in the FIC Report had to be established and this was best done by SARS. 86.2 Hogan Lovells stated that ‘once the basis of the payments made is established, our offices will be in a position to determine if there has been a breach of Consultant's internal policies and/or the PFMA and recommend the manner in which the findings should be addressed." 87 Mr Moyane accepted the scope of the investigation proposed by Hogan Lovells by signing FA14 on 4 October 2016. 88 On 12 October 2016, Mr Moyane addressed a letter to Ms Refiloe Ramaphakela, SARS Group Executive: Internal Audit instructing that the tax affairs of Mr Makwakwa and Ms Elskie be audited. This instruction appears to have been given in order to give effect to “Requests B and C” which were, as per Annexure FA14, to be investigated by SARS. Thus, this letter makes reference to the FIC Report and the “terms of reference” entered into between SARS and Hogan Lovells in terms of90 29 which SARS was required to independently conduct an internal investigation in order to determine: 88.1 whether Mr Makwakwa and Ms Elskie had committed acts of tax evasion and/or contraventions of the TA Act; and 88.2 whether Mr Makwakwa and Ms Elskie had effected payments in contravention of internal policies and/or the PFMA. The letter stated further that: 89.1 As administrator the TA Act, SARS had an obligation to obtain full information in relation to anything that might affect the liability of a person for tax in respect of a previous, current or future tax period; determine the liability of a person for tax and investigate whether a tax offence had been committed. 89.2 As part of its overall functions and responsibilities, SARS had a duty to comply with the request by the FIC and determine whether the alleged deposits and payments made and received Mr Makwakwa and Ms Elskie amounted to contraventions of the tax legistation or a tax offence. In this regard, Mr Makwakwa and Ms Elskie were to be treated as taxpayers, and not employees. A copy of this letter is attached, marked “FA15."30 91 Notwithstanding this letter, as will become apparent below, SARS did not conduct an internal investigation into Requests B and C in respect of Mr Makwakwa and Ms Elskie. 92 On 19 October 2016 | wrote to Mr Moyane recording that | had since 20 September 2016 been requesting the terms of reference for the investigation to be conducted by Hogan Lovells. | was eventually provided with Hogan Lovells letter of 29 September 2016, Annexure “FAIA” 93 My letter of 19 October 2016 is attached as Annexure “FA16.” In it, 1 expressed my concern both over the manner in which the “terms of reference” had been formulated and their adequacy: “On 16 September 2016, you advised me that you have appointed HL. as investigator. You have not furnished me with the terms of reference you presumably provided to HL to underpin their appointment. Instead, it now appears that you requested HL to draft their own terms of reference as outlined in their letter dated 29 September, and you only did that after my request for the terms of reference on 20 September 2016. It appears that you accepted the terms of reference as determined by HL; and there is no indication to me as to whether you applied your mind to the full scope of what needs to be investigated, which appears to have been determined by HL. In this regard, one of the aspects | am particularly concerned about is whether or not there are any settlements approved by Mr Makwakwa that may be affected by his alleged conduct and the current situation.” 94 On 27 October 2016, Mr Moyane responded to my letter of 19 October 2016. The salient portions of his response are the following: if 4 LA