TO: KPMG ATTENTION: MR JOHAN VAN DER WALT DRAWN BY MASHIANE MOODLEY & MONAMA DATE: 21 AUGUST 2015 Ex Parte SOUTH AFRICAN REVENUE SERVICE [Consultant] 1.3 MEMORANDUM TO KPMG INTRODUCTION The purpose of this memorandum is to provide KPMG with comments in fespect of the South African Revenue Service Report on allegations of irregularities and misconduct. The aim is to focus on substantive issues and not issues of language. faving perused the report, we recommend the following as Findings and Recommendations which may be incorporated at the very end of the report. The suggested findings and recommendations are already in the report; we suggest that for clarity and for avoidance of any doubt, it may assist to have ndings followed by Recommendations at the end of the report.2.1.10 2.4.11 2.1.12 On instructions of Mr. Pillay, the unit unlawfully monitored, intercepted communication, recorded and transcribed recordings at the NPA offices. The SARS intelligence gathering exercise at the NPA was known as “Project Sunday Evenings” and was aimed at gathering intelligence in the criminal investigation of Jackie Selebi. All the reports, transcription and recordings were handed to Mr. Pillay for his consideration. The members of the unit were permitted to use technical surveillance. SARS unlawfully engaged in the procurement of intelligence gathering equipment with the necessary interception capability. The equipment includes the following: 2.1.12.1 2.4.12.2 2.1.12.3 2.4.12.4 2.1.12.5 2.1.12.6 2.1.12.7 2.1.12.8 2.1.12.9 Pinhole lens cameras; GSM modules; SIGNET Mobile GSM phone detectors; SIGNET Advances Counter Intelligence equipment; Analyser; Signal Jammers; Pulse — tum remote desktops and laptops into audio and security camera surveillance devices where standard surveillance equipment cannot be deployed; NFAT — provides the ability to capture, decode and analyse network traffic in any network segment, rebuild particular traffic types, capture credentials used, VOIP conversations, images, documents and web activity; CAPS — Lock - advanced keystroke monitoring solution used to remotely monitor suspicious user actively and 323 224 2.22 2.2.3 2.24 The relationship between Mr Van Loggerenberg and Ms Belinda Walter (‘Walter’) caused conflict of interest. Mr Van loggerenberg disclosed taxpayer information, SARS confidential information including ongoing investigations and settlement negotiations and or agreements to third parties such as journalist and Walter. Mr Van Loggerenberg unlawiully interfered in the tax audit of Walter. Mr Van Loggerenberg's charity (Wachizungu) received donations from SARS officials, taxpayers who were the subject of previous and ongoing SARS investigations, service providers of SARS. It was irregular, extra ordinary and not in accordance with good governance. GOVERNANCE 2.34 2.3.2 2.3.3 Mr. Pillay and Mr Van Loggerenberg engaged in an irregular and potentially unlawful conduct when they attended a meeting arranged by the late Jackie Selebi and Glen Agliotti on behalf of a taxpayer (Gavin Varejes) for purposes of intervening in a dispute between two taxpayers who were subject of an ongoing investigation by SARS and the NPA. The meeting was held at a taxpayer's house. Mr. Pillay and Van Loggerenberg disregarded and or interfered with an ongoing / investigation conducted by a designated SARS official. The involvement of Senior SARS officials in operational matters created the risk that approval controls could be eroded. Mr. Pillay's decision to place Mr Loggerenberg on special leave instead of suspension was irregular, unlawful and contrary to SARS policies,3.1 2.4.3 244 245 246 247 24.8 As a result of Mr. Pillay conduct, SARS lost revenue by not recovering PAYE and VAT from Kesavan. SARS lost the sum of R348 600.00 in PAYE and R1 223 600.00 in VAT. Mr. Pillay was involved in the irregular appointment, approval, bypassing of procurement process and intervention on behalf of Kesavan when payments were delayed. As a result of Mr. Pillay conduct, SARS incurred wasteful and fruitless expenditure for the sum of R3 063 937.68 in respect of the settlement concluded with Mr. Janse Van Rensburg. Mr. Pillay was offered a contract of employment by SARS with the approval of Mr Gordhan for a period of almost 10 years after Mr. Pillay’s retirement from SARS. After retirement, Mr. Pillay had two contracts of employment running simultaneously. Mr. Pillay irregularly and unlawfully facilitated the sum of R1t 258 345.99 to be paid into his pension fund under the pretext that he was taking early retirement whilst he intended to remain in the employment of SARS until December 2018. Mr. Pillay engaged in the recruitment and employment of sfaff in contravention of SARS policies. Mr. Pillay appointed Mr. Pikie in critical and higher positions without the requisites qualification. As a result, Mr. Pikie stood to earn salaries and bonuses which he would ordinarily not have earned. RECOMMENDATIONS We are of the view that in general, the Report should consider incorporating the following as part of the recommendations:(Including field worker travel allowance) « Kilometres claim refunds R1 293 492.89 ° Annual Leave Payments R1 649 767.55 « Performance Bonus Payments R6 201 949.21 3.1.5.2 Mr Pillay facilitated the sum of R1 258 345.99 to be paid into his pension fund under the pretext that he was taking early retirement whilst he intended to remain in the employment of the SARS until 31 December 2018, The payment into his pension fund constitutes fruitless and wasteful expenditure and thus should be recovered from Mr Pillay. 3.1.5.3 The sum of R3 063 937.68 from Mr. Pillay and Mr Janse Van Rensberg (jointly and severally liable) in respect of the settlement agreement concluded by SARS and Mr Pillay. The payment of the said amount to Mr Van Rensburg constitutes fruitless and wasteful expenditure as it was based on a stratagem to silence Mr Janse Van Rensberg from divulging activities of the unit and in particular project ‘Sunday evenings 3.1.5.4 SARS should consider instituting civil proceedings against Mr. Pikie to recover the wasteful and fruitless expenditure for an amount to be determined for salaries and bonuses paid to him. 3.1.5.5 ( SARS should consider instituting criminal proceedings with regard to fraudulent circumstances surrounding the approval of Mr. Pillay's contract wherein the Minister of — Finance approved 3 year period but the period was mysteriously changed to five years. The criminal proceedings should be levelled against Mr Pillay and Mr Magashula36 41 54 5.2 SARS should consider recovering ali amounts spent in the employment of Mr Pikie for having earned a salary fraudulently when he was appointed by Mr Pillay without the requisites qualifications. In light of the pending criminal proceedings against Mr Pikie, SARS should engage the National Prosecuting Authority with the possibility of recovering the money. THE FACTUAL INACCURACIES Pikie was dismissed. There was no settlement between Pikie and SARS. Pikie's dismissal was as a result of him having faked his qualifications and his misconduct pertaining to the theft of two cellphones. (page 28 the Report) ISSUES FOR CONSIDERATION The Report does not deal with the question of whether there was credible evidence to make a finding of guilt against Mr. Pillay or Mr Van Loggerenberg in respect of charges levelled against them. The Report does not deal with Mr Richer's dereliction of duty in failing to address Mr. Van Loggerenberg's declaration of his relationship with Walter and conflict of interest. In failing to deal with Mr Van Loggerenberg’s declaration, Richer exposed SARS to reputational risk. DATED AT SANDTON ON THIS THE 215’ DAY OF AUGUST 2015. JODLEY & MONAMA INt Suite 19, Second Floor Katherine & West Street 114 West Street Sandown, Sandton Tel: (011) 303 7900 Fax: (011) 303-7999 Ref: Mr. Maphakela/mz/1.2.1 Clause 8.2 of the Code of Conduct ("Code’) in that you felled to execute a lawful instruction by an official authorised to give such an instruction; and 1.2.2 Clause 18. 3 of the Code in that you failed to act in utmost faith and in the best interest of good governance. Charge 2 Abuse of SARS Resources 2.4. Onor about 4 December 2014 you instructed SARS’ employees to assist Johann with drawing @ response to SARS in dealing with his suspension and or an investigation. The instructions issued to employees were not 2.2. Within their course and scope of employment and not for authorised purposes. 2.3. _Inacting in this manner, you contravened the following: 2.3.1 Clause 9.7 of the code in that you failed to utilise SARS resources effectively, efficiently and only for authorised purposes; 2.3.2. Clause 12.3 of the Code in that you engaged in an action that may give rise toa conflict of interest in the execution of your official dutios; 2.3.3 Clause 15.8 of the Code in that you exposed yourself to a situation involving the risk of a conflict between your official responsibility and your private interest; 2.3.4 Clause 15. 3 of the Code in that you failed to act in utmost faith and in the best interest of good governance; and 2.3.5 Clause 15.5 of the Code in that you failed to act in a manner that is consistent with the integrity of your office or SARS. Charge 3 Dishonesty 3.1 On or about 8 December 2014 you acted in a dishonest manner by representing to SARS’ officials that the two cellphones were personal property of Mr Pilay. In doing so, you represented or gave the impression that you were authorised by Mr Pillay to take the two cellphones. 3.2 By acting in this manner, you contravened the following: 3.2.1 Clause 4.4 of the Code in that you made misleading statements to a colleague namely, Takaleni Mosekwa; 3.2.2 Clause 15.1 of the Code in that you failed to act in utmost faith and in the best interest of good governance; and 3.2.3 Clause 15.5 in that you failed to act in a manner that is consistent with the integrity of your office or SARS. TOKISO-3849-Geylard-201804320-DH-jm-Wv Page 3 Yrgkise6.2.2 Clause 15.1 of the Code in that you failed to exercise your power with the utmost professionalism, diligence, honesty as well as to conduct yourself in @ decent manner, 6.2.3 Clause 15.3 of the Code in that you failed to ect in utmost good faith and in the best interest of good governance; and 6.2.4 Clause 15.5 of the Code in that you feiled to act in @ manner that is consistent with the integrity of your office. Charge 7 Fraud or alternatively attempted fraud 7.1 On 8 December 2014, you unlawfully and intentionally made misrepresentation to SARS officials and thereby appropriated the two cell phones with EME! number 354 249 06054 1492 and 354 249 06054 1617. Your misrepresentation with regard to the ownership status of the two cell phones caused actual or potential prejudice to SARS. 7.2 By acting in this manner, you contravened the following. 7.21 Clause 8.3 of the Code in that you failed to co-operate with fellow SARS officials to advence SARS’ interest; 7.2.2 Clause 8.4 of the Code in that you failed to deal fairly, professionally and equitably with fellow employees in the widest sense possible; 7.2.3 Clause 9.7 of the Code in that you failed to be honest and accountable in dealing with SARS’ property; 7.2.4 Clause 15.1 of the Code in that you failed to exercise your power with the utmost professionalism, diligence, honesty as well as to conduct yourself in a decent manner. 7.2.5 Clause 15.3 of the Code in that you failed to act in utmost good faith and in the best interest of good governance; and 7.2.6 Clause 15.5 of the Code in that you feiled to act in a manner that is consistent with the integrity of your office. Charge 8 Fraud 8.1 In that during June 2009 and August 2011 at or near SARS, Head Office, you being an official in the employment of SARS, made misrepresentation(s) to SARS by submitting and/ or allowing the submission of a Curriculum Vitae and application for a transfer form containing false and/or misleading information to SARS that you have completed e BCom degree in 1995 with the University of the Western Cape EOKISS ToKISO.5648.aylrs 201604800 Hime PagesMr Modise conducted interviews with members of Mr Pikie’s team, Xolile Majjja and Nokuthula Mogiba. Hé referred to the affidavits that were made. Mr Modise stated that Mr Pikie had abused SARS’ resources in that he had instructed these SARS employees (his subordinates) to assist Mr Van Loggerenberg to draw up a response to SARS in dealing with his suspension Mr Modise stated that Mr Pikie had been issued with an instruction not to communicate with Mr Van Loggerenberg In addition Gene Ravele and Michelle Steenekamp were interviewed Mr Modise received instructions from his manager to investigate and verify the authenticity of the qualifications declared by Mr Pikie in his curriculum vitae. He engaged Zanele Zamxaka of the Employee Service Division. When he perused Mr Pikie's personnel file he found that there were no copies of educational qualifications certificates in the file and he questioned Ms Zamxaka about this. Mr Modise referred to Mr Pikie's curriculum vitae where it is stated that he has a Bachelor of Commerce (BCom Degree) obtained at the University of the Western Cape in 1995. He contacted Vanitha Naidoo at the University of the Western Cape. According to University transcripts, Mr Pikie was registered between 1991 and 2001 and he studied towards a BCom degree, however he did not complete the degree, His academic transcript showed that he had actually failed dismally. In addition, he has not completed his LLB through UNISA. Mr Modise referred to an application for transfer made by Mr Pikie in 2009. In the application Mr Pikie states that the “appointment to the Legal and Policy Division would be in line with my future career aims. | am currently studying towards a degree in law (LLB) and due to complete it in 2010". At this juncture the degree has not been completed. Moreover in 2009 Mr Pikie did not arrive for his examinations at UNISA. Mr Modise outlined the positions that Mr Pikie has held at SARS: Senior Revenue Analyst, Media Relations Manager, Senior Manager Integration, Senior Researcher and Senior Manager of Governance. These positions are all senior positions and in terms of these positions, Mr Pikie did not meet the basic qualifications for the positions. In his position as a Senior Analyst for example, Mr Pikie had represented SARS on the SACU Customs Technical Liaison Committee. Mr Pikie through his actions had exposed SARS to possible risks and in Mr Modise’s view Mr Pikie has “misrepresented himself for thirteen years" resulting in an irreparable breach of trust. TOKISO-3849-Goylard-201504920-DHjm-tv Page 7terms of SARS’ ongoing investigations. Mr Mosekwa stated that the sim cards were destroyed but the cellular phones’ memories had also been wiped clean. Helgard Lombard is employed in SARS’ Technical Physical Security Unit. He explained that on 21 August 2014 he was asked by Rita Hayes an Executive in the Finance Section to assist her with the purchasing and activation of four sim cards to be used in new cellular phones bought for her office. Ms Hayes gave Mr Lombard R2000,00 for purchasing the phones and he proceeded to Menlyn mall where he purchased and registered the sim cards. He took pictures of the sim cards and IMEI's, Mr Lombard stated that the phones had been bought for Ms Hayes’ department and not for Mr Pillay. Xolile Majija is a legal specialist in the Governance Division of SARS. Mr Pikie is his direct line manager. He stated that on 4 December 2014 Mr Pikie came into the first floor boardroom and posed a hypothetical question to his colleague Nokuthula Mogiba. The scenario was about a person who has received a letter from his employer that was a follow up to a letter of suspension. The question was whether or not the policies provided for such. Mr Pikie informed him to look into the policy dealing with discipline and the letter and the role it played in the disciplinary process. In his response Mr Maja stated that the letter doesn't mean anything; maybe the employer wanted to keep the employee informed of the process. Mr Pikie said he would e mail the letter. The e mail had an attachment to it, a SARS letter to Mr Van Loggerenberg. When he received the e mail he asked Mr Pikie “doesn't JVL have a labour expert to assist him with his case?" Mr Pikie replied that he did. He felt uncomfortable with Mr Pikie’s instruction and he asked Mr Pikie why they were advising and dealing with the issue. When Mr Pikie was leaving the boardroom he asked why he had to know. Mr Majija stated that he had a clear conflict (of interest); he had been given an instruction by his manager but the instruction was not lawful, it was clearly wrong. He explained that as an employee of SARS he could not be expected to assist Mr Van Loggerenberg. As a result of Mr Pikie’s actions he does not think he would be able to trust him again. Mr Pikie placed him in an uncomfortable position. TOKISO-3840-Gaylard-201504320-DHm4v Page 9Mr Lombard explained how the purchase of the sim cards had come about. He explained that he was asked by Rita Hayes to assist her with the purchasing and activation of four sim cards to be used in new cellular phones bought for her office. Mr Lombard stated that the phones and SIM cards had been bought for Ms Hayes’ department and not for Mr Pillay. The phones and SIM cards were SARS property. He stated that Mr Pikie would have no legitimate reason to destroy the SIM cards or to eradicate the cellular phones’ memories. ‘When the above submissions of the witnesses are considered, | conclude that Mr Pikie is guilty of Charge 3 (dishonesty) in that he represented to Mr Mosekwa that the cellphones were the property of Mr Pillay and gave the impression that he was authorised to take the two cellphones. Moreover, the submission of Mr Mosekwa was clear that Mr Pikie not only removed the cell phones but also destroyed the two SIM cards to "prevent interception’. Mr Lombard further stated that Mr Pikie would have no reason to wipe the phones clean or to destroy SARS SIM cards. Thus Mr Pikie is guilty of Charge 4, of tampering with an investigation and of destroying material evidence and of Charge 5; of malicious damage to property in that the submissions of Mr Mosekwa was that Mr Pikie destroyed two SARS SIM cards in order “to prevent interception’. Itwas SARS’ case that Mr Pikie had been expressly informed not to communicate with Mr Van Loggerenberg (as Mr Van Loggerenberg had been suspended and the communication role had been taken over by Luther Lebelo). However Mr Mosekwa stated that the note signed by Mr Pikie on 10 December 2014 indicates that he had been communicating with Mr Van Loggerenberg. | considered SARS’ submissions in this regard, In addition to Mr Mosekwa's submissions, the chairperson’s attention was drawn to Mr Ravele's affidavit as well as correspondence that was forwarded from Mr Pikie to Mr Van Loggerenberg. While I did not have Mr Pikie's submissions before me, it appears that Mr Pikie was informed that he should not communicate with Mr Van Loggerenberg. In the e mail that appears to have been written by Mr Pikie to Mr Van Loggerenberg, Mr Pikie informs him that he will ‘no longer be the liason jon or the media”, Thus it between Johann and SARS on matters related to the inves appears that Mr. Pikie is guilty of charge 1, gross insubordination, I move now to the submission of Mr Majija. Mr Maja stated that Mr Pikie asked him and a colleague to consider a scenario of a person who received a letter from his employer that was a follow up to a letter of suspension and whether or not the policies provided for this. He was instructed to look into the policy dealing with discipline and the letter and the role it played in the disciplinary process. Mr Pike then e-mailed him the letter and he noted that it was a letter from SARS to Mr Van Loggerenberg. This resulted in him feeling uncomfortable as there was ¥ IQK!so TOKISO-3849-Gaylard-201504520-0H mtv Page 11key role to play within the South African economy. Given SARS' role and its expectations of its employees it would nat be appropriate for 2 sanction short of dismissal to be applied in this instance, ‘The courts view fraud as a very serious form of misconduct. This is elucidated in the case of Hoch v Mustech Electronics (Pty) Ltd (2000) 21 ILJ 365 (LAC), where the Labour Appeal Court has upheld the dismissal of an employee who falsely claimed qualifications and persisted with the lie, Mr Pikie's misrepresentation of his qualifications was very serious and | am of the view that on this charge alone, dismissal was justified However in this case there are a plethora of charges against Mr Pikie. The charges relating to the cellular phones and the SIM cards are serious. In addition, Mr Pikie's actions on Charge 2, the Abuse of SARS Resources demonstrated a clear conflict of interest but also an abuse of his position of authority. | am of the view that he placed his subordinates in an invidious position by instructing them to assist a person who had been placed under suspension by SARS. On this charge on its own, dismissal was also justified. For the above reasons my decision is that Mr Pikie must be summarily dismissed. anneGaylard Chairperson ‘TOKISO-3849-Gaylard-201504320-DH-imtv Page 13