SARS demands R110m from Pillay over rogue unit

The South African Revenue Service has accused Ivan Pillay, its deputy commissioner, of paying a bribe and demanded he pay back more than R110-million.

The demand is the latest salvo in the conflict between Pillay and his boss, Tom Moyane, over the establishment of a rogue unit in the revenue service.

In a letter of demand sent to Pillay on January 26, SARS accuses him of "fruitless and wasteful expenditure" in establishing and operating the unit.

Pillay is accused of "paying a bribe" after he "facilitated an approval for the payment" of R3-million to get the first commander of the unit, a former intelligence operative known as Skollie, to go quietly.

The payment was made under the "pretext of a settlement as his retirement package in a bid to silence the employee from divulging the illegal and covert activities of the unit".

Pillay also stands accused of having "facilitated an approval that SARS pays" R1.2-millioninto his own "pension fund account under the pretext that Pillay was taking an early retirement while he remained in the employment of SARS until December 31 2018". This amounted to "fraud and/or corruption".

Senior SARS sources said that Pillay, in a letter sent to the revenue agency on Thursday, offered to resign on condition he was paid for the four years remaining on his contract.

They said Pillay demanded his ally, suspended SARS strategy chief Pete Richer, first be paid for the two-and-a-half years left on his contract and Yoliswa Pikkie, the suspended senior manager in Pillay's office, be given a settlement offer.

The sources said SARS' anti-corruption head, Clifford Collins, requested early retirement and left five days after it was granted. The sources said Pillay last month approached Moyane through lawyer Michael Hulley and offered to quit if charges against him were dropped and he was allowed to hand over the reins within six months. SARS spokesman Luther Lebelo said Pillay's offer had been rejected outright.

"We can confirm that Pillay's letter was sent to us, but we rejected the proposal as we believe the allegations against him are too serious and he must be given an opportunity to respond," said Lebelo.

Pillay declined to comment.

Johann van Loggerenberg (above), the group executive for risk and enforcement, who headed the rogue unit until he resigned from SARS this week, was slapped with a R1-million bill for expenses SARS incurred fighting his legal battles.

Van Loggerenberg is understood to have quit days after receiving his charge sheet and letter of demand - and a day after he dropped nine complaints against this newspaper.

In letters and disciplinary charge sheets sent to Pillay and Van Loggerenberg and seen by the Sunday Times, SARS admits for the first time that the unit subjected a number of taxpayers to "surveillance, investigation and interrogations using covert and illicit methods".

SARS also reveals for the first time that the unit used "intelligence equipment" including:

• Thermal-Eye X200xp - a pocket camera used for covert surveillance;
• Armasight Discovery 3x-SDi Gen 2+ - military-style night-vision binoculars;
• Cellphone jammers;
• Eavesdropping equipment;
• Vehicle trackers; and
• Recording equipment implanted in car keys and pens.

In Pillay's charge sheet, SARS claims he "initiated or supported" the unit and "solicited and acquired" this equipment "for use by the unit".

"By so doing you contravened the constitution, the Electronic Communications Act, the National Strategic Intelligence Act and SARS code of conduct," the letter concludes.

Under the heading "Factual Matrix", the SARS charge sheet says the existence of the unit was kept secret and its members were recruited based on their experience as undercover agents. They were paid out of "special SARS accounts".

Their identity "was kept secret from other SARS employees and the public at large".

The unit used methods typical of spy agencies.

To ensure absolute secrecy, they had to work from home and operate in cells, were "given false SARS identity documents'', set up front companies as a cover and developed "opportunistic relationships with informants and suspects".

They used the spy equipment to "monitor the movements of individuals, track vehicles, bug conversations, tap telephones and cellphones, scan electronic equipment, intercept and block communications and utilise and exploit sources and informants".

Because the unit operated covertly without a legal mandate, the information it gathered could not be used in court. This meant it was useful only "to secure settlements that, given its compromised status, were frequently weighted in favour of the taxpayer".

Prominent people let off the hook for a fraction of their tax bills include billionaire businessmen Dave King and Christo Wiese (above) and Economic Freedom Fighters leader Julius Malema.

Wiese, who allegedly owed SARS R2-billion, settled for an undisclosed sum. King owed SARS R2.7-billion and settled for R700-million, and Malema settled his R16-million bill for an undisclosed amount.

Pillay's disciplinary charge sheet outlines the genesis and evolution of the spy unit.

It says he "sought and obtained" permission from then finance minister Trevor Manuel to fund a special investigation unit within the National Intelligence Agency.

"Several days later this decision was overtaken by a decision initiated or supported by you, authorising the establishment of a unit ultimately termed the National Research Group (NRG) under the leadership first of Andries van Rensberg ("Skollie") and then Johann van Loggerenberg."

By doing so, Pillay "misled the minister of finance and SARS".

After former rogue unit operative Mike Peega was arrested on charges of rhino horn trafficking, the unit was disbanded and replaced by "a more streamlined version", headed by Van Loggerenberg.

Legality

The legality of the new unit was a sham as it continued to "conduct its intelligence-gathering operations in complete and continuous secrecy".

The documents spell out why the National Research Group and its subsequent incarnations were illegal.

The National Strategic Intelligence Act expressly forbids any state entity other than the intelligence services from gathering covert intelligence - information that cannot be collected openly.

Moreover, tax laws make no provision for SARS officials to "subject persons, at any rate in the absence of their knowledge and consent, to the bugging and tapping of phones, the monitoring and evaluation of electronic information, the tracking of vehicles and individuals, the use and payment of informers, the recording and filming of events and activities or similar acts of surveillance".

SARS says Van Loggerenberg must repay more than R1-million it wasted on his legal fees when he was fighting Pretoria-based lawyer Belinda Walter.

His charge sheet says he "pursued an intimate relationship" with Walter when she headed a tobacco organisation whose members he was investigating, spied on her "or at least led her to believe" he did, and divulged confidential taxpayer information to her.

Van Loggerenberg declined to comment on the terms of his departure from SARS, referring this newspaper to a statement he issued earlier in the week.

In the statement, he admitted he had "erred in personal judgment concerning a matter in my private life". He said that leaving the revenue service was "in the best interests of SARS and the country as a whole".

Criminal Charges

Lebelo said the tax authority could still lay criminal charges against Pillay and Van Loggerenberg. "We reserve all our rights, but for now we haven't preferred criminal charges."

Van Loggerenberg this week abandoned nine complaints he had laid before the Press Ombudsman against the Sunday Times. In an e-mail marked "Not for publication in any way or form", he unconditionally withdrew complaints about stories ranging from his relationship with Walter to the shenanigans of the rogue unit.

After an acrimonious break-up, Walter laid a complaint against Van Loggerenberg with SARS, including the allegation that he had shared confidential taxpayer information with her.

An investigation into her complaint made no finding against Van Loggerenberg, but WhatsApp messages they exchanged indicated that the unit was intercepting the phone calls of people under investigation by SARS.

Advocate Muzi Sikhakhane, who investigated the rogue unit, found "prima facie evidence" that SARS operated a covert unit that illegally spied on taxpayers it was investigating.

investigations@sundaytimes.co.za