KPMG, Sars, Illicit Tobacco Trade & Politics

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By Pinky Khoabane

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AUDITING FIRM KPMG “crumbled” last week, offering an apology, resignations of nine executives and promises to pay back the money – millions of it – for the “sub standard” work it produced for the South African Revenue Services (SARS) and Oakbay.

But hang on. Is this not the same firm that dumped the Oakbay account because of reputational damage?

But then again all the big auditing firms have done worse without having to worry about their reputations. In investigating the circumstances around the soft loans given to Bankorp/ABSA and an insolvent Cape Investment Bank by the Reserve Bank, Justice HC Nel found in 1997: “The standards set by the Reserve Bank, by its philosophy that the end justifies the means, and the apparent acceptance thereof by the auditors concerned, could only have had a negative influence on the auditing profession on South Africa.”

KPMG and Ernst & Young were the auditors involved in the ABSA deal. Nel listed their violations as follows:

  • auditors put signatures to false Absa and Cape Investment Bank’s accounts
  • they failed to report the discovery of material irregularities as required by the Public Accounts and Auditors Act
  • they backdated auditors’ reports, financial statements and letters
  • they failed to scrutinise minutes o f directors’ meetings and they actively assisted their clients in misleading the Receiver of Revenue.

This is illegal and unlawful practice. As we know the shareholders of ABSA which at the time were Sanlam, the Ruperts and the bank’s executives have gone on to become filthy rich.

But back to KPMG and SARS

The KPMG report into SARS intelligence which was dubbed “Rogue” Unit was to be the basis of almost two years of reporting by the Sunday Times in which former Finance Minister Pravin Gordhan and other executives – Johann van Loggerenberg and Ivan Pillay – were said to be allegedly running an illegal unit which among others, ran a brothel and spying on President Jacob Zuma.

The Sunday Times has since apologised for some of the articles it published saying it “got certain things wrong”. But before it did so, in an article directed at a former journalist who had been part of their investigative team, the newspaper stood by its articles saying: “Our stories on rogue SARS unit are backed by three probes,” which means the KPMG wasn’t the only probe on which the articles were based. The newspaper claimed to have gotten “some things wrong” which leads one to the conclusion that some were correct. And yet, KPMG has decided to retract the entire report. So who’s telling the truth? Who’s fooling who?

A SARS official I spoke to last year linked the Rogue unit stories to their investigation into South Africa’s R5bn a year illicit tobacco and cigarette trade and allegations of tax evasion by the major tobacco companies. Their investigation had unmasked the extent to which the tobacco industry influenced state apparatus – in other words, state capture.

In March 2015, KPMG was appointed as auditors for British American Tobacco (BAT).  This was a few months after it had been appointed to conduct a forensic audit into the SARS Rogue Unit in December 2014.

Well, would this not be a conflict of interest? SARS was investigating BAT and other tobacco companies for tax evasion and KPMG was then appointed to investigate SARS?

Reinet Investments, headed by Johann Rupert, holds shares in British American Tobacco (BAT) which it has sold over the years but BusinessDay in May last year, reported that the value of the remaining shares was at about R61 bn.

The SARS official I spoke to said this of British American Tobacco: “The fact of the matter is simple. We were onto them and they had to do everything possible to discredit us. And they succeeded because they had the right people in every single law enforcement agency who was compromised. And these aren’t junior people.”

In data leaked via a Twitter account, EspionageSA, last year, there were links to affidavits, reports, schedules etc all implicating BAT SA, BAT UK, Forensic Security Services, and others.

“So here you have one of the four largest JSE listed companies in SA, and their auditors do nothing? Their banks do nothing? Hawks, NPA, Financial Services Board (FSB) and South African Police Services (SAPS) do nothing? Amazing. This is more than prima facie evidence of corruption, fraud, state capture, influence over state officials, money-laundering and tax evasion. And yet, not a word from anyone,” the official said at the time.

The leaked data on Twitter further showed the intricate relationship between Forensic Security Services (FSS), Tobacco Institute of South Africa (Tisa) and the big tobacco corporations and how some of the agents work as double and even triple agents. FSS provides Tisa with investigative surveillance.

One such agent is former SANDF operative, Michael Pheega, who upon leaving the military joined SARS as an undercover agent but was fired when he was implicated in rhino poaching. He now works for the tobacco industry.

Another is attorney Belinda Walter, who in an interview with the Sunday Times’ Malcolm Rees said she was an agent for the State Security Agent (SSA) and that the then intelligence head, Gibson Njenje was her handler. She also confessed to have not only sold her clients information – who were alleged tobacco smugglers and smaller independent tobacco producers – to the SSA, but she had also sold it to British American Tobacco (for loads of money). In that interview she also dropped a bombshell that she was in a romantic relationship with SARS investigations head, van Loggerenberg.

So it’s easy to see how the Rogue Unit story links with the tobacco investigation.

Former SARS spokesperson Adrian Lackay in addressing Parliament following the much publicised report on the Rogue Unit, said he was aware of documentation that Walter “was a paid informant of the SSA (State Security Agency) and with the knowledge of her respective SSA ‘handlers’, she was also a paid informant for British American Tobacco UK Lc (BAT UK).

In their submissions to SARS and the Sikhakane panel, SARS officials Ivan Pillay and van Loggerenberg provided evidence implicating BAT UK (British American Tobacco), BAT SA and Walter in corruption and money laundering.

In addition, the leaks showed a handful of people from the Security Branch of the apartheid regime running a private intelligence network in southern Africa enjoying active support from the SSA and other law enforcement entities in order to help the big tobacco corporations in this massive illicit tobacco operation.  One of the emails I received from another source gave me these names from the apartheid security branch who now work in this intelligence network.

1. Craig Williamson – the notorious apartheid informant, spy and assassin. He’s the killer of political activists including Ruth First, Jeanette Schoon and her six-year old daughter Katryn. He sent the bomb that blew off the hand of Judge Albie Sachs.

2. “Lt Colonel Hennie Niemann of SAPS Crime Intelligence who is himself a former Security branch official.

3. Stephan Botha of FSS was notorious in Durban as Security Branch official.

4. Both the Vosloo brothers of FSS were Security Branch officials.

5. The SSA handlers of Ms Walter were both from the old NIS”.

BAT has over the years denied all allegations saying it complies with all regulations.

The story of KPMG has had a life of it’s own. It was seemingly about tobacco and it’s state capture but has turned out to be state capture by the Guptas from what I understand former Finance Minister Pravin Gordhan. Whatever the truth, it has far reaching implications not only for this case but for the many investigations it and other auditing firms have undertaken. The KPMG report for which almost R40m was paid by SARS has always been secret. Now it is being withdrawn. Questions still remain – what is it in it that was true? There were other probes which led to it – were they all false? Will they be withdrawn? In our country, anything is possible…

11 Comments on "KPMG, Sars, Illicit Tobacco Trade & Politics"

  1. The only problem for the ordinary people is we will never know the truth given how muddied the waters are. The people we trusted and have given the mandate to govern have been taken over by monies interests.

    Its every man for himself. There is no government.

    • Jeff Koorbanally | September 18, 2017 at 7:40 pm | Reply

      There is hope Fish Monger!

      “Tom Moyane is that hope”

      One down KPMG!

      We now busy with SARB!
      Watch this space….

      • Jeff Koorbanally | September 19, 2017 at 6:34 am | Reply

        The withdrawal of Sars investigationson Rogue Unit was a declaration of war that KPMG will never survive, as its nothing but a protection of Trevor Manual,PravinGordhan & rest of the mafias

  2. I wonder who is we. Tom Moyane is just one individual in a sea of raw sewage. Try another one.

  3. It is quite interesting that the same KPMG Investigator, who did the SARS Investigation Report, whose credentials were being questioned yesterday at a SARS Press Conference, was the Investigator responsible for investigating President Jacob Zuma for corruption. How credible was that investigation against Zuma if the current SARS Investigation Report’s credibility is being questioned? Furthermore, the involvement of former NPA Prosecutor Gerrie Nel in the covert collection efforts by the SARS Rogue Unit puts into question his independence regarding the future private prosecution endeavors by Afriforum. Most particularly the alluded to possibility that he might lead the private prosecution of President Zuma on corruption charges if the NPA refuses to institute any charges against the former. This follows the Supreme Court of Appeals hearing on the “irrational” withdrawal of charges against President Zuma by the former National Director of Public Prosecutions Mokotedi Mpye.

    • Incredible for me is how the original views of the SARS officials I spoke to – who were right at the top of the investigations unit of SARS – have allowed the state capture narrative to drastically change to focus on Guptas when it was all along state capture by the tobacco multinationals and their illicit trade and tax evasion. It’s quite astounding.
      There’s something quite troubling about this story. And we must question and challenge its veracity. We must demand to see what was in that KPMG report.

      Kindest

      PK

  4. Really incredible sis Pinky its like reading a spy novel..the saddest thing in this drama is the involvement of the media and the journalists in pushing the Gupta state capture narrative…still believe we have a chance to right the wrongs with people like Moyane and the SARS communication director Mathebula,Godi,Booi and the others….in these past months I believe there has been a push against WMC the silence from the lackeys,the NGOs and the public speech from the boss(Rupert)..seems like there is panicking..

  5. Jeff Koorbanally | September 20, 2017 at 8:16 am | Reply

    KPMG from Hero to suicide Bomber.

    We are yet to see who the casualties will be…

    Interestingly, to play with our minds they immediately go transformation route, appoint a black female as Ceo

    Nhlamulo Dlomu is a qualified HR Executive, with Masters Degree in Clinical Psychology from the University of Witwatersrand.

    As a former HR Executive for one of the largest banks in South Africa (Nedbank), Nhlamu’s experience spans culture transformation, change management and other people management practices.

    “I am very proud to have been named the new CEO of KPMG in South Africa,” Nhlamu said. “KPMG has a long and distinguished record of service in South Africa. Ethics and integrity are fundamental values of KPMG and these will be the guiding principles of my leadership.”

    There is no way in hell she can reverse this damage, its beyond repair.

    • Oh gosh Jeff. I’ve had a rough few days and you just made my day. “I am very proud to have been named the new CEO of KPMG in South Africa,” Nhlamu said. “KPMG has a long and distinguished record of service in South Africa. Ethics and integrity are fundamental values of KPMG and these will be the guiding principles of my leadership.”

      Im DEAD.

    • Jeff Koorbanally | September 20, 2017 at 8:40 am | Reply

      These are the people that resigned

      1.Trevor Hoole (Ceo)

      2.Steven Louw ( Chief Operating Officer and Country Risk Management Partner.)

      3.Ahmed Jaffer (Chairman of the Board).

      4.Mike Oddy( Head of Audit and Board member)

      5.Muhammad Saloojee (Head of Tax and Board member)

      6.Herman de Beer, (Head of Forensic and Board member)

      7.John Geel (Head of Deal Advisory) 

      8.Mickey Bove (Risk Management Partner for Deal Advisory.)

  6. And somewhere deep in those murky waters PG is a shareholder of BAT! ….this kitchen is now super hot!!!

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