Jonas Makwakwa. Picture: SARS
Jonas Makwakwa. Picture: SARS

The South African Revenue Service (SARS) has released law firm Hogan Lovells from its obligation to maintain attorney-client confidentiality in relation to the firm’s report on SARS’s former head of business and individual taxes, Jonas Makwakwa.

Hogan Lovells has agreed to the release of a redacted version of the report to the public, while members of Parliament’s finance committee have been given a copy of the full report.

Hogan Lovells SA chairman Lavery Modise said in a verbal statement to the committee on Wednesday that the firm had always wanted its confidential and privileged report on Makwakwa to be made public, but that it was for SARS to waive its attorney-client privilege. It was "relieved" that SARS has released the report to the finance committee.

Modise justified the role played by Hogan Lovells in its inquiry into Makwakwa, rejecting that it was a whitewash. He said it was "misleading and incorrect" that the Hogan Lovells investigation extended into allegations of criminal conduct or tax evasion on the part of Makwakwa, which arose from the report submitted to SARS by the Financial Intelligence Centre (FIC). This related to suspicious and unusual transactions of about R1m, which Makwakwa deposited into his bank account.

Modise said the Hogan Lovells inquiry was restricted to labour-related aspects and were focused on whether any of the suspicious, unusual or ad hoc payments identified in the FIC report were a breach of SARS’s internal policies and/or the Public Finance Management Act. The firm was required to determine whether this amounted to misconduct in the employment context.

Investigations into criminal conduct and tax evasion had to be undertaken by the Hawks and SARS, and were not matters that Hogan Lovells could legally attend to.

Modise said the Hogan Lovells report into the matter followed its letter of engagement. "The disciplinary inquiry itself was, therefore, a properly convened disciplinary inquiry at the time, consistent with labour laws, our letter of engagement, and the express recommendations contained in our report to address only the specific, labour-related matters that Hogan Lovells was legally permitted to investigate and address."

Hogan Lovells was not lawfully entitled to investigate the unusual and suspicious payments identified by the FIC as this was a criminal investigation for the Hawks, and a tax-evasion inquiry for SARS to undertake.

Modise rejected that the SARS letter of engagement, the Hogan Lovells report and disciplinary inquiry were part of a "whitewash plot" to ensure Makwakwa was permanently reinstated. The inquiry found Makwakwa not guilty of the charges and he returned to work, though subsequently resigned in the face of unrelated allegations of impropriety.

The disciplinary inquiry only dealt with the charges as covered in the letter of engagement and all these were put to Makwakwa.

"At the time of the disciplinary inquiry, there was no admissible evidence available to support any charge with any reasonable prospects of success at the disciplinary inquiry, based on the identity of the source of funds and/or any alleged criminal activities or tax-evasion activities," said Modise

SARS outsourced the tax-evasion investigation in relation to Makwakwa as a taxpayer to PwC, which was not able to establish the source of funds.

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