Pravin's pal scores on early retirement

Former finance minister Pravin Gordhan allegedly cost taxpayers millions by forcing the South African Revenue Service to bend the rules to clinch a cushy retirement deal for his buddy, Ivan Pillay.

A Sunday Times investigation has established that Gordhan approved deputy commissioner Pillay's early retirement with full benefits and allegedly immediately instructed SARS to rehire him on a three-year contract.

Internal memos show Pillay was retained for his "critical skills, experience and leadership", although he has no formal academic qualifications.

His contract has since been extended twice, most recently in March, just before Gordhan moved from finance to co-operative governance and traditional affairs following the elections.

Government rules say officials who go on pension early for personal reasons will have their benefits slashed unless they pay a penalty.

But the memos show that SARS chipped in R1.2-million so that Pillay could take early retirement with full benefits.

If SARS had not paid this penalty, Pillay's monthly pension of R53303 would have been reduced by R4 740 and his lump-sum payout of R2.36-million reduced to R2.12-million, the memos show.

Former SARS commissioner Oupa Magashula this week told the Sunday Times that Gordhan ordered him to give Pillay the contract after he asked for early retirement.

"I was instructed by Pravin to give Ivan a contract," Magashula said.

Gordhan is seen as close to Pillay, whom he recruited to SARS during his tenure as SARS commissioner between 1998 and 2009.

The pair enjoy a long-standing relationship dating back to their time in an ANC intelligence structure known as Operation Vula during the struggle against apartheid.

Gordhan hired Magashula as the SARS commissioner soon after his appointment by President Jacob Zuma as finance minister after the 2009 elections.

Pillay planned to retire in 2010 at the age of 56 for "personal reasons" after spending a decade with SARS.

He had already sold his house and relocated his wife and children to the Netherlands, where they still live.

Gordhan and Magashula signed off Pillay's deal in a memo dated August 12 2010, seen by Sunday Times reporters.

In the memo, Magashula points out that the government pension fund approved thousands of requests for early retirement with full benefits, and that Gordhan and his predecessor, Trevor Manuel, "approved at least five such requests over the past two years".

However, in the same memo SARS immediately rehired Pillay on a three-year contract at "the same cost to company as his current package".

The documents show that a year later he signed a five-year contract due to expire at the end of next year.

On March 26, shortly before he was moved, Gordhan extended Pillay's contract for another three years, to 2018.

Two senior SARS officials, who spoke on condition of anonymity, said the circumstances of Pillay's contracts were odd, because he was immediately retained in the same capacity and his contract was extended before it expired - amid rumours in the ANC and government circles that Zuma would replace Gordhan with a new finance minister.

A senior SARS official said most managers viewed the deal as irregular. "The first problem is that SARS paid his [Pillay's] penalty of R1.2-million.

"The second problem is that when you say you want to take early retirement, it means you are tired and must retire.

"But they approve early retirement plus retention in the same capacity with the same package, not even as a consultant. Then, the deal gets backdated," he said.

The memos show that Pillay was retained due to his "critical skills, experience and leadership".

But SARS declined to provide proof of the "critical" skills that made Pillay indispensable.

Asked whether SARS did not consider it a waste of taxpayers' money to bankroll Pillay's R1.2-million pension shortfall, spokesman Adrian Lackay said this was allowed by government rules.

"It is not uncommon for the [government pension fund] to approve retirement before the age of 60 with full pension benefits, and 3000 similar requests from various government departments were approved between 2005 and 2010," he said.

Lackay declined to provide any explanation as to why Pillay was immediately rehired and why his contract was extended twice.

The Sunday Times reported last week that a former National Intelligence Agency operative, known as "Skollie", allegedly extorted R3-million from SARS in exchange for his silence.

The operative had threatened to blow the whistle on the illegal activities of the service's rogue intelligence unit.

These allegedly included the unit breaking into Zuma's home in Forest Town, Johannesburg, and planting listening devices ahead of the ANC's conference in Polokwane in 2007.

Newly appointed SARS commissioner Tom Moyane has now ordered an investigation into the unit's illegal activities.

He said the Sunday Times report "dented our image and reputation" to the South African taxpayer.

In a memo addressed to staff on Monday, Moyane said he had summoned high-ranking officials "to discuss these stories and the wider issues".

"I want to assure all of you that, under my watch, I will not allow a culture of flouting laws and rogue activities in whatever form or shape. We must conduct our activities within the parameters of the laws of our country," Moyane said.

He announced that a task team headed by SARS executive Gene Ravele had been formed and would submit a report on the matter within five days.

Three sources said the covert unit was hastily disbanded this week, an inventory of its equipment sought and its Gauteng members told to report at SARS Pretoria premises.

"The unit has been dismantled with immediate effect," a SARS official said.

"The guys were integrated into the normal offices during the course of the week.

"We saw the guys - they had to report to the offices where we are stationed [in Riverwalk].

"I spoke to a wife of one of the guys and she said the unit has been dismantled.

"They have been informed that the unit has ceased to exist with immediate effect."

SARS did not respond to questions about the disbanding of the rogue unit.

Gordhan did not respond to repeated requests for comment, despite initially offering to do so.

investigations@sundaytimes.co.za