Memorandum

To: From:

Subject: SARS investigation of Mr Date: 11 November 2017

Makwakwa and Ms Elskie

1. Corruption Watch has closely followed and intervened in corruption matters relating to Mr
Makwakwa and Ms Elskie and in respect of Mr Moyane’s failure to take requisite action in
respect of the serious allegations against the two employees. We have lodged criminal
charges1 against Moyane, Makwakwa and Elskie and have sought to obtain a response
from the Hawks2 and the NPA3 on the status of any investigation into them, to no avail.
We are considering our legal options in respect of the various aspects of our intervention.

2. However, we have recently noted recent media reports4 on law firm Hogan Lovells
concerning their investigation into Mr Makwakwa and Ms Elskie in which it is stated that:

“Hogan Lovells have placed on record that it did not directly investigate the R1,3
million in suspicious deposits into Makwakwa’s account and that of his partner,
Kelly-Anne Elskie…

In a statement on its website Hogan Lovells, which conducted the "independent

investigation" announced by Moyane late in 2016, said its scope was "limited" to
whether there was misconduct by the pair…

It [the investigation] did not seek to directly investigate the financial transactions
identified by the FIC [Financial Intelligence Centre]…

We understand that all criminal-related allegations arising from the FIC report were
referred to the relevant authorities for investigation," said Hogan Lovells in the
statement.”

1
See annexures “F”, “G” and “H”
2
See annexures “D”, “I” and “J”
3
See annexure “K”
4
www.businesslive.co.za/bd/national/2017-11-09-hogan-lovells-says-it-did-not-directly-probe-dubious-
transactions-by-jonas-makwakwa/
3. These statements, which emerge more than a year after the investigation was finalized
are concerning as it reveals a number of alarming contradictions as well as a deliberate
misleading of the Finance Standing Committee and the general public. In this regard,
SARS responded to a parliamentary question5 posed to the Minister of Finance on 16
October 2016 and clearly confirmed that:

The report was not referred to further investigation at that stage. SARS had adopted
a two-pronged approach towards handling this matter. The first part entailed
affording Mr Jonas Mashudu Makwakwa and Ms Kelly-Ann Elskie an opportunity to
respond in writing to the allegations against them. This was part of the internal
investigative process that SARS undertook. The second part involved engaging
the (“FIC”) for purposes of seeking technical guidance, co-operation and assistance
in relation to this matter, as per Section 4 of the FICA.

(a) SARS has appointed the law firm; Hogan Lovells to investigate this
matter, and to conduct disciplinary proceedings against the two employees on
behalf of SARS. The matter was referred to Hogan Lovells on 15 September 2016.

(b) SARS is aware, based on correspondence received from Directorate of Priority

Crime Investigation (“DPCI”) dated 15 September 2016, that the matter has been
reported to the (“DPCI”)…

3(b) Mr Makwakwas has been suspended… Mr Makwakwa has been suspended

pending the investigation into the allegations contained in the report referred to
above.”

4. In Mr Moyane’s response6 to our letter dated 25 October 2016,7 he stated the following:

“In my letter dated 20 May 2016, I acknowledge receipt of the Report from the
Financial Intelligence Centre (FIC) and unequivocally stated the seriousness and
sensitivity of this matter. I further confirmed SARS’ commitment to conduct an
investigation.

On 23 May 2016, I informed the two employees about the allegations contained in
the Report. I further informed the said employees of my intention to conduct an
investigation as directed by the FIC. I instituted a misconduct investigation into
allegations of impropriety, tax evasion, corruption, contravention of the Public
Finance Management Act 1 of 1999 (PFMA) and money laundering against the two
SARS’ employees.

5
Question NW1894 to the Minister of Finance: Whether the SA Revenue Service received a report concerning
alleged suspicious and unusual payments to a certain person (Jonas Makwakwa). If not, why not. If so, (a) which
organ of state produced the specified report; and (b) when was the specified report received; 2) whether the
specified report was referred for further investigation; if not, why not; if so (a) when was the specified report
referred for further investigation and (b) to which organ of state was the specified report referred to; 3) whether
the specified person was suspended; if not, why not; if so (a) when was he suspended and (b) why was he
suspended; 4) whether he will make a statement on the matter.
6
See annexure “B”
7
See annexure “A”
 I adopted a two-pronged approach in dealing with this matter. Firstly, I afforded
Jonas and Kelly an opportunity to respond to the allegations in writing. This was part
of the SARS internal investigation into the allegations contained in the Report.”

5. In the same letter but under a heading entitled, the disciplinary investigation against the
two SARS employees, Moyane states as follows:

“I confirm that Hogan Lovells (South Africa) has been appointed to conduct an
investigation into impropriety, tax evasion and other contraventions of the Tax
Administration Act 28 of 2011, breach of the PFMA and SARS internal policies.
Further, the firm is instructed to investigate allegations of impropriety on the part of
Jonas in relation to settlements concluded from the time he was appointed as an
Acting Chief Operating Officer and subsequently as Chief Officer for Business and
Individual Taxes (BAIT); until the date of his suspension on 15 September 2016.

After the investigation, the firm is instructed to initiate proceedings against the
aforementioned two employees. Commented [Office1]: Did Hogan Lovells ever investigate?
Also: initiate proceedings against the aforementioned
6. We also confirm that we wrote8 to the FIC on 31 October 2017 and that they indicated9 the employees. What happened to Elskie?

following in respect of what SARS was required to investigate:

“On the matter relating to the steps that the FIC required SARS to undertake in
response to the report mentioned in your letter of 31 October 2016, any referral of
financial intelligence to a law enforcement agency or any other entity prescribed in
the FIC Act, places a responsibility on the agency to conduct an investigation in line
with that agency’s national legislative mandate. While the FIC indicated the nature
of matters that may be investigated, it does not instruct agencies to investigate any
particular matter.

Consequently, SARS is required to investigate in terms of the South Africa Revenue

Service Act No. 34 of 1997 (“SARS Act”), the Public Finance Management Act No 1
of 1999 (“PFMA”) and the Tax Administration Act 28 of 2011 (“TAA”) and in doing so
also take into account other national legislation that may have a bearing on its
investigation such as the Prevention of Organised Crimed Act No 121 of 1998
(“POCA”), the Financial Intelligence Centre Act No 38 of 2001 (the FIC Act”) and the
Prevention and Combating of Corrupt Activities Act No 12 of 2004 (RECCA).” Commented [Office2]: Duty of Sars to investigate

7. Having regard for the various statements made by SARS and Mr Moyane, it is clear that
Hogan Lovells was required to investigate the findings of the FIC report and that
Makwakwa and Elskie were suspended pending the outcome of the investigation and any
disciplinary inquiry. This appears particularly, from the SARS response to the
parliamentary question highlighted above. It therefore appears that Moyane deliberately
set about to mislead the Finance Standing Committee, ourselves and the general public
in relation to the Hogan Lovells investigation. These actions, in light of the significant

8
Annexure “C”
9
Annexure “E”
 position of trust and authority which he occupies are egregious and he should be
suspended for such conduct.

8. In respect of the conduct of Hogan Lovells, Corruption Watch views their statement and
admissions as being exceptionally dilatory given the public interest in this matter, which
involves millions of rands of tax payer money and which implicate the individuals involved
in serious fraud and corruption. We have written 10 to SARS and the Minister of Finance
and Finance Standing Committee11 to request a copy of the Hogan Lovells report as well
as the findings of the disciplinary inquiry but not been provided with a response. We have
also noted the request made by the Finance Standing Committee to SARS for a copy of
the report and have noted SARS lack of response to the Finance Standing Committee.

10
Annexure “L”
11
Annexure “M”