*Story updated with emailed comment from Hogan Lovells
Lord Peter Hain who has made it his business to expose the Guptas and institutions he alleges assisted them capturing the South African state, accused Hogan Lovells on Monday during a speech to the House of Lords of “propping up state capture, corruption, cronyism and money laundering in South Africa.”
He also referred the international law firm headquartered in London, to the Solicitors Regulation Authority for allegedly enabling Jonas Makwakwa to return to his post as “second-in-command of the critically important South African Revenue Service (SARS)”.
Hain alleges Hogan Lovells spared what he alleges are “two of the most notorious perpetrators of state capture in South Africa – Tom Moyane, head of SARS and his deputy, Jonas Makwakwa – from accountability for their complicity in, and cover up of, serious financial crimes. In so doing, Hogan Lovells was complicit in undermining South Africa’s once revered tax-collection agency, and thereby effectively underpinning President Jacob Zuma and his business associates, the Gupta brothers and others, in perverting South Africa’s democracy, damaging its economy and robbing its taxpayers”.
Hogan Lovells describes Lord’s Hain’s accusations as unfounded “reflecting a lack of understanding of the work we were asked to carry out for the South African Revenue Service. We are disappointed that he ignored the evidence which we provided to him and the other committee members earlier today. He did not contact us in advance of making his statement to the House of Lords and instead appears to have relied on inaccurate press reports in South Africa.”
“We have fully reported the details of our engagement with SARS to the independent South African Parliament Standing Committee on Finance and we are very confident in its accuracy and probity. Anyone who wants to take the time to understand our limited role in this matter can very easily read about it on the Parliament’s website or our own.”
“We have a fundamental duty to uphold the rule of law with integrity and professionalism, and have been strong advocates of that in South Africa. If Lord Hain does have evidence of corruption then that should be reported to the appropriate authorities in South Africa. We look forward to working closely with the SRA on any complaint made to them by Lord Hain.”
Hain has called on the SRA to withdraw “Hogan Lovells’ authorisation as a recognised body; and to examine what other disciplinary action can be taken against its leading Partners including withdrawing their permission to practise as a solicitors”.
In a previous statement sent to CNBC Africa by SARS it expressed its deep concern at media reports spreading the allegation that there has been impropriety on the part ofMoyane in dealing with the disciplinary investigation into Chief Officer: Business & Individual Taxes, Makwakwa.
In its statement SARS said:
Firstly, it is not true that Hogan Lovells did not investigate the Financial Intelligence Centre (FIC) suspicious transactions. Neither is it true that Hogan Lovells issued a media statement to that effect.
All transactions as per the FIC suspicious report were put to Mr Makwakwa to respond and he did. It was those responses which lead to Hogan Lovells concluding that an act of misconduct could not be found from the transactions and their sources.
SARS wishes to assist with a factual and chronological account of events. Mr Moyane received the Financial Intelligence Centre (FIC) Report in May 2016.
After seeking advice, he placed Mr Makwakwa on precautionary suspension on 15 September 2016 so as to investigate whether or not any possible misconduct may have been committed by Mr Makwakwa relating to the FIC report.
The firm Hogan Lovells, an international and renowned law firm, was appointed to conduct this investigation.
In essence, their mandate which clearly reflects in their terms of reference was to determine whether any misconduct had been committed by Mr Makwakwa and/or Ms Kelly-Anne Elskie in their capacity as SARS employees.
Whilst on suspension, Mr Makwakwa committed what SARS believed to be a breach of his suspension conditions. This arose from a telephone call he made on 13 January 2017 to a SARS employee regarding an active tax matter.
On 20 January 2017, whilst the main investigation was still ongoing and whilst on suspension, disciplinary charges were served on Makwakwa relating solely to this breach of his suspension conditions.
Hogan Lovells concluded its investigation based on the mandate stated above and delivered an investigation report to Mr Moyane in June 2017. The Hogan Lovells report concluded that there was no prima facie evidence that Mr Makwakwa had committed any misconduct in relation to the financial transactions emanating from the FIC report.
However, the recommendation was that Mr Makwakwa be charged for violating the SARS Conflict of Interest disclosure provisions as well as the SARS Code of Conduct.
A decision was then taken to expand the existing charges already served on Mr Makwakwa in January 2017 to include charges relating to the allegation of non-disclosure.
Mr Moyane appointed Advocate Terry Motau, SC, a senior counsel from the Johannesburg Bar, to chair the disciplinary enquiry with the guidance and assistance of Hogan Lovells.
The expanded enquiry concluded on 15 August 2017 and the outcome was received from the chairperson on 13 October 2017.
Accordingly, Mr Makwakwa was found not guilty of all charges. Contrary to media reports spreading the allegation that the processes were tainted and that Mr Moyane had a hand in allegedly tainting the processes, the above clearly demonstrates a patently fair, unbiased and independent process.
SARS is concerned that wide spread media reports seem to suggest that SARS erred by allowing Mr Makwakwa back into his employ given that there is a criminal matter pending. This assertion displays a lack of understanding of the difference between a misconduct investigation by an employer and a criminal investigation.
It is common knowledge that FIC – not SARS – referred the matter to the South African Police Service for an investigation on possible criminal acts.
Thus in September 2016, upon enquiry, Mr Moyane was advised by the Directorate for Priority Crime Investigation (DPCI) that an enquiry into Mr Makwakwa and Ms Elskie, arising from the FIC report, was on-going under enquiry number 03/06/2016.
In law, disciplinary proceedings and criminal proceedings are distinct and are governed by different legislation.
As an employer, Mr Moyane’s jurisdiction only goes as far as determining whether or not there is any misconduct related to the employment relationship. The responsibility to pursue criminal charges in a court of law lies with the National Prosecuting Authority based on investigations by the SAPS or DPCI.
Given the outcome of the SARS disciplinary process and the fact that no decision had been taken by DPCI on whether or not Mr Makwakwa should be criminally prosecuted at that time, Mr Moyane was advised that there was no legal justification for SARS not to lift Mr Makwakwa’s suspension.
As a result, he was allowed to resume his duties with effect from 1 November 2017. Any other action would have amounted to a violation of Mr Makwakwa’s legal rights as an employee.
It is important to be aware that SARS’s rights have been reserved to initiate possible new internal disciplinary proceedings should the outcome of the criminal process dictate so.
SARS notes that the media reports seem to insinuate incorrectly that SARS has refused to release the report by Hogan Lovells.
Mr Moyane has sought legal guidance regarding the release of the FIC and Hogan Lovells investigation reports. The advice he has received suggests that a crime would be committed should these reports be made public.
Similar observations were made by the chairperson of Standing Committee of Finance (SCOF), Mr Yunus Carrim in his letter addressed to the Commissioner Moyane dated 6 November 2017, in which he noted the possibility that legal reasons may exist for the non-release of the reports.
To reach consensus and ensure closure on this matter, Mr Moyane has written to SCOF chairman Mr Carrim, making the following proposal:
* That a team consisting of legal representatives from SARS, the National Assembly, Treasury and FIC meet urgently to collectively engage and agree on a seasoned Senior Counsel to deliver an opinion on the legal permissibility of disclosing the reports
* That the National Assembly facilitate the process bearing in mind the urgency to get clarity on this matter.
The above detailed background and the process we are requesting of SCOF demonstrate our willing to always be transparent to the public so that we are forever beyond reproach.
In previous speeches Lord Hain has accused companies headquartered in the UK – including Bell Pottinger, KPMG, McKinsey, SAP, and banks such as HSBC, Standard Chartered and Baroda – of aiding and abetting money laundering, corruption and state capture in South Africa
