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Sars plans legal action against KPMG for reputational damage

We will also report the firm to various authoritative bodies and to the finance minister – Luther Lebelo.
Luther Lebelo says KPMG is trying to clean its tarnished image at the expense of Sars. Picture: Shutterstock

RYK VAN NIEKERK: I now speak to Luther Lebelo, he’s the group executive for employment relations at Sars. Luther, welcome to the show. Commissioner Tom Moyane was pretty aggressive on Monday morning, during the Sars press conference, against KPMG’s announcement that it’s reporting to the so-called Rogue Unit was flawed. This seems to be a very strange turn of events, what is your general position against KPMG’s withdrawal of that report?

Read: KPMG report is not flawed – Moyane

LUTHER LEBELO: Thanks so much for having us. Indeed, I think it was fair for Sars to be aggressive, so you go and commission some work, you go to an open tender, and people contest the tender and say they can do the work. You give them the work, they do the work and two years after they have done the work we checked and afterwards you realise that the internal control here and there was not done. We are not withdrawing the whole report, we are only withdrawing the recommendation, we don’t even know what that means. But what makes it worse is that you send this message at nine o’clock in the morning and by eleven o’clock you have already issued a media statement that is abuzz, you are getting media queries everywhere. Where is the decency from KPMG at least to meet with us as the client and say that the report that we gave you in 2015 we looked at it, here are the issues and this is the direction we want to take. They don’t do that, they just ambush us like that and, as our media statement shows, the contract that they have signed with us confirmed that by giving us the report and us giving them the money and finalising the transaction, they cease to have a right to that report, so the copyright lies with us. So they had no business to go to the report that now belongs to Sars and start making the comments that they have made. But we then concluded that their act was very immoral, unethical, inappropriate, and illegal. And as a result of that that is why we have decided to take the actions that we are going to take against them.

RYK VAN NIEKERK: What actions are you taking?

LUTHER LEBELO: The first one is that we are going to institute legal proceedings against KPMG for reputational damage to Sars. The second one is that we are going to report KPMG to audit statutory bodies, both internationally and locally. We are also going to report KPMG to the minister of finance, so that KPMG can be blacklisted for acting unethically, immorally and unlawfully. ] And we are further going to report them to the minister of finance to consider stopping all the work they’ve done so far in all government departments, so that we can investigate them. They come today and say “we have made a mistake on one report” – what about many other reports? And lastly, we are going to report them to parliament’s Scopa, and we are going to ask Scopa to investigate not only the issue about Sars, but to report their conduct everywhere else.

And maybe I must make this point that our concern is not about the KPMG report. I think that one was explained in our media statement – the relationship. But our worry is the conduct of KPMG in relation to the confidence in Sars, the confidence in the economy, what will the rating agencies say and many other considerations that affect the economy, because we are the custodians of the collection of revenue and as a result we are very interested to know that the people that we give jobs to do, do that job to the best of their ability – not to do a job and come back after 23 years and say: “Well, I did research, I realise that there is something wrong, I’m sorry, here’s the money back.” That money should have been for building schools and building roads. That is our concern.

RYK VAN NIEKERK: Why do you think KPMG withdrew their conclusions reached in that report?

LUTHER LEBELO: We are really stunned because I think the difficulty with KPMG is that they sent us an email and in two hours they start running the whole thing. They never had a conversation with us. Maybe if they had a conversation with us we would have understood who did what, and who was supposed to do what and where is the mistake, so that to questions like this, when you are asked, you can answer from a point of authority. But currently we do not know. We just think that KPMG is trying to clean its tarnished image at the expense of Sars, which is very regrettable. And for that we are going to tirelessly ensure that KPMG is blacklisted in South Africa and it must not do business in South Africa.

 

Unlawful conduct by KPMG

 

RYK VAN NIEKERK: You stated that some of the conduct was unlawful. In what sense do you believe it’s unlawful?

LUTHER LEBELO: The issue that they go and quote a report – because the right of the report now lies with Sars. They have no business to go and even tamper with the report that belongs to Sars. They have no right to go and even quote some aspects of a report that doesn’t belong to them. It’s like Sars going and quoting a report of KPMG and even going to a level of saying we don’t like this part, we are not happy with that part. You can’t do that. If you are assessed with your taxes and we give you a report, it belongs to you. We can’t come back and from time to time as and when we feel quote that report. So that is the unlawful and illegal part of it.

RYK VAN NIEKERK: A lot has turned on that report, and it was one of the key pieces of information towards the dismissal of Pravin Gordhan as finance minister. Do you believe there is any political interference involved in their decision to withdraw those conclusions?

LUTHER LEBELO: It would be unfair to say that but we are not ruling that out. We believe that indeed KPMG might have fallen into the political space, but maybe just to correct, I’m not so sure – and I don’t want to keep quiet as if I agree – I’m not so sure whether the dismissal of the former minister of finance was due to KPMG. But what I know is that the people that we disciplined in Sars and the criminal case that we opened against some people in Sars was not done because of the KPMG report; it was done because of the Sikhakhane report, which is the report that came before that. So I’m not so sure. But we suspect that KPMG might have read the political climate and might have thought that maybe the best way was to come and compromise Sars. We find that very, very unprofessional. I think our “unethical and immoral” version is based on those conclusions.

RYK VAN NIEKERK: Will you make the whole KPMG report that you have, will you make that public?

LUTHER LEBELO: Let me put it this way, KPMG almost to an extent came to the same conclusion that the Sikhakhane report came to. The only difference with KPMG is that let’s say, for instance, Sikhakhane will interview you and ask you questions and then you’ll say I was here on this day, I sent an email to Peter and Peter responded back to me and stuff like that. KPMG went forensically to verify the facts that were orally put to the Sikhakhane report. That’s why when you look at KPMG in context they came to the same conclusion that the Sikhakhane report came to. The Sikhakhane report has been made public, it’s on the website, so there is nothing extraordinary about KPMG. We haven’t made a decision as to whether we are going to release it or not. But I’m just emphasising that there is nothing extraordinary as compared to what is in the Sikhakhane report.

RYK VAN NIEKERK: But there are some allegations that the report is actually not very professional, there were some sections cut and pasted from other documents with typing errors, are you happy with the standard of that report?

LUTHER LEBELO: What normally happens is the client will do the work, bring the report back to you and say look at the report. Then you look at the report, you look at the names, or whatever. That process went, it came back and they verified and made it final. From where we were sitting we were happy with the report, we couldn’t pick up any material thing that would make us come back. It’s very unfortunate because people are making allegations, who, unless KPMG are saying that, who are saying that there was copy and paste, copy and paste of what? The only people who do copy and paste and who will know about the copy and paste are the ones who are writing the report. So there are a lot of gossip there, which I think is unfortunate. I don’t think it is fair to conclude that that report has got copy and paste because you can’t say that unless you have got the report.

RYK VAN NIEKERK: But I’m asking you was it the case or are you happy with the standard of that report?

LUTHER LEBELO: We are happy with the standard of the report.

 

Sars investigates without fear or favour

 

RYK VAN NIEKERK: KPMG also made statements regarding the audit of the Gupta companies and the whole executive has resigned. Some serious claims are made, especially against a company called Linkway Trading and that obviously has tax implications, are you investigating these other claims they have made?

Read: KPMG clears out top leadership over Gupta scandal

LUTHER LEBELO: Unfortunately, in terms of the Tax Administration Act, Section 6, even if we do or we don’t we can’t comment on the names of the taxpayers. But I think the assurance that South Africans have and always had about Sars is that we investigate without fear or favour. It doesn’t matter who you are, if there are issues with tax we will always investigate. Unfortunately, we can’t mention names about this one particularly.

RYK VAN NIEKERK: You’ve also stated that you will terminate other work KPMG is doing for Sars, what other work are they doing?

LUTHER LEBELO: I don’t have it on hand, but KPMG is on our database, so they went through a procurement process and they were confirmed as one of the auditors on our database. So from time to time we use them for forensic work. One of the things I just informed now is that they even have tax practitioners coming from KPMG and one of the things we are going to do as we go deeper is to also check the work they are doing with the tax practitioners. I think the mistake that KPMG has made and they are not aware of it is they have cast suspicion on their own work and I don’t know why they think anybody would give them work when they have cast suspicion on their own work. I think that is the damage they have done. That’s why as Sars we are going to go back and look at all the parts of the work and see whether it was quality or not, because if someone has been doing work for you, a plumber or someone and he comes to you and says “On this work I didn’t do well”, you start to worry whether the other work he has done has been done well, especially when it comes to quality. That is the crisis that I think KPMG does not appreciate with this very immoral and unethical conduct of theirs.

RYK VAN NIEKERK: But that’s exactly the point, they’ve done this research, you say it is pretty close to what the Sikhakhane report revealed and it says virtually the same thing. If it is not credible, if it is not accurate is it maybe not an opportune time to get another independent body in to investigate exactly what transpired because it is such a critical development within Sars and so much turned on it?

LUTHER LEBELO: Yes, remember what KPMG said, KPMG said we are not withdrawing the report in entirety, we are only withdrawing the recommendation. So let’s assume that we accept their decision, it then means that the evidence that they have provided to us remains, so it doesn’t take that away. So we can take the evidence and still interpret it if we want to interpret it. But, remember, we are still saying that for us there is nothing wrong with that report, there is nothing unreliable in that report. The evidence that has been left there came to the very same conclusion. For instance, they went and viewed some equipment that was allegedly used by this Rogue Unit to intercept people, that equipment is illegal to have except if you are in the intelligence community and the minister of intelligence has said that some other time. So they have used that and when they come and say this is what we have used, here are the pictures, therefore, as a result we are saying this was an illegal thing. We see the relationship between the evidence and the outcome, so we don’t know what is their issue because they haven’t met with us and that’s why I’m saying if they had the general decency to meet with us and take us through their issue, it’s going to be better, because as we are sitting we don’t see anything wrong with the report.

RYK VAN NIEKERK: So apart from being informed two hours before they issued their press release you have had no interaction with KPMG?

LUTHER LEBELO: Not at all. Since the last time when they verified the report in 2016 that was the last time KPMG spoke to us. We received an email on Monday morning, two hours after that, whatever after that, the thing was thrown in our face. I think it’s unethicalness and inappropriateness that KPMG demonstrates, the arrogance that it demonstrates because they went through a tender process, they won a tender. Another company could have won that tender and done a better job. They sit with this thing and they come with arrogance and say well if you want a refund we’ll give you the R23 million and if you don’t want it we will donate it somewhere. That arrogance, how do you treat a client like that and you still think you have got morality for other people to give you business.

RYK VAN NIEKERK: Luther Lebelo is group executive for employment relations at the South African Revenue Service.

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Methinks they doth protest too much! (Apologies to Shakespeare). I suppose a captured, gutted SARS has to find a scapegoat to divert attention from themselves and their own shenanigans.

So now they are worried about the ratings agencies?
What about Zuma firing the finance minister and causing a credit downgrade…..
O what a tangled web we weave
When at first we set out to deceive!

What reputation would that be? Stealing from productive taxpayers to finance crooked cadres?

End of comments.

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