Cape Town – A newly-released report by law firm Hogan Lovells into controversial former SARS chief executive for business and individual tax Jonas Makwakwa shows how he serviced payments for a Mercedes Benz for his colleague and partner Kelly-Ann Elskie using money that originated with a state department.
Fin24 got sight of the report into Makwakwa on Thursday morning, after a year and a half of speculation around suspicious transactions into Makwakwa's bank accounts first flagged by the financial watchdog the Finance Intelligence Centre in 2016.
He was suspended form the revenue service in September 2016 while Hogan Lovells conducted an investigation. Aspects of the investigation concerning financial transactions were investigated by PwC.
But the suspicious transactions probed by PwC and the FIC were not included in the evidence which was used as the basis of a disciplinary hearing, which found Makwakwa not guilty. He returned to SARS in November 2017, only to resign for good in March 2018.
He has repeatedly denied any wrongdoing.
A trail of transactions
The PwC report lays out how funds originating with the Department of Water Affairs and Forestry made their way via intermediary companies to Makwakwa's bank account in 2015.
The money trail consisted of at least nine transfers between seven companies before it landed with Makwakwa who used R200 000 of the R480 000 he eventually received to pay towards a Mercedes Benz for his partner Elskie.
According to the schemata created by PwC, the money that eventually made its way into Makwakwa’s account originated with the Department of Water Affairs and Forestry.
On February 11 2015 the department paid R17.8m to New Integrated Credit Solutions (NICS). Fin24 could not immediately find out what this payment was made for.
The Department of Water and Sanitation committed to look at questions from Fin24 but subsequent attempts to reach the department were unsuccessful. The department's comment will be added once received.
Pauli van Wyk from Scorpio reported earlier in the year that New Integrated Credit Solutions and seven other agencies were appointed by SARS in March this year to recover R16.6bn in order to boost revenue.
The PwC investigation, based on the earlier investigation carries out by the FIC, found that the money was then diverted the very next day (February 12 2015) to a company called Mahube Payment Solutions, which received R4.47m from NICS. In turn Mahube passed on R3.8m to a company called Arvomark on February 26 2015. On that same day, Arvomark sent R3.4m to Clipper Financial Services.
The fund transfers continued, with Clipper redirecting R3.1m to Mahube Payment Solutions, which then sent R1.2m back to Arvomark. Both these transactions occurred on March 4 2015.
A month later, on April 9, Arvomark then channeled R1.1m to a group called Street Talk Trading, which paid R600 000 to Biz Fire Worx, a company linked to Makwakwa. In three separate transactions Biz Fire Worx then paid Makwakwa a total of R480 000: R150 000 and R200 000 on April 9, and R130 000 on May 7.
“The FIC report states that on 13 May 2015, six days after the last payment was received from Biz Fire Worx, Mr Makwakwa made a payment in the amount of R200 000 to Mercedes Benz in favour of Ms Elskie,” the report read.
Despite the documents showing that NICS paid Mahube after receiving the R17.8m from the Department of Water Affairs and Forestry, NICS said in a statement that they “have not engaged nor contracted Mahube on any...service offerings to SARS”.
“We only contracted Mahube to work with NICS on a contract for the Department of Water and Sanitation since 2013 to date. We therefore reject any form of allegations of bribery in this regard, with the contempt it deserves,” the statement said.
NICS sales and marketing executive Sipho Luthuli told Fin24 on Thursday that its business relationship with the Department of Water Affairs was subject to a confidentiality agreement. He said the SA Revenue Service had issued NICS with a letter that clears the company of all wrongdoing in their business relationship.
Additional questions from Fin24 to NICS were referred to the statement.
Lawyers acting for Makwakwa during his suspension, meanwhile, argued there were no links between him and the Department of Water Affairs. In a letter to Hogan Lovellls Makwakwa's lawyers said their client had "no connection whatsoever' to the department and was anyway "not in any position to influence procurement at DWAF as insinuated by FIC".
Patrick Monyeki, a "good friend" of former SARS commissioner Tom Moyane by his own admission to MPs in Parliament, makes an appearance in the documents as the listed director of Mahube Payment Solutions.
Biz Fire Worx
According to the report, Makwaka stated that the payment made to him by Biz Fire Worx was for previous "financial assistance and ‘strategic support’ between 2009 and 2012". During part of this time the company was trading as BEE Fire Systems. He had resigned as a director of the company in 2012.
Makwakwa stated that he invested his time and resources in the company “with the aim of financially benefitting once the business became profitable”.
He also stated that he had provided a total of R550 000 as an interest free loan to Biz Fire Worx by the time he resigned as director, saying that this would be paid back “as and when funds become available”.
The R480 000 paid to him was then part of this loan, he said.
But PwC said it was unable to trace the amounts that Makwakwa said he had provided to Biz Fire Worx. It also said it was not provided with any documentation indicating that Makwakwa, who is still being probed by the Hawks, obtained approval to perform work for Biz Fire Worx with the intention of financially benefitting at a later stage.
PwC concluded that it needed further information and documentation to verify what Makwakwa said was true.
Hogan Lovells, meanwhile, which has come in for criticism about the way they conducted the investigation, has denied that their report into Makwakwa was a "whitewash", saying they were not retained to investigate the suspicious transactions.
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