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EDINBURGH — South African anti-apartheid campaigner Lord Peter Hain is on a mission to rescue the country again – this time from the claws of the corrupt and the captured who have tampered with the fledging democracy in the name of personal greed. South African-born Hain earned the moniker ‘Hain the Pain’ for encouraging sanctions against the National Party government. He played a key role in applying political pressure in the international arena to force seismic change in South Africa. Peter Hain is fast becoming a Pain for UK corporates tainted by graft in the ‘new’ South Africa. He has taken aim at HSBC for facilitating moneylaundering and has called on the authorities in the UK and European Union to investigate Gupta-linked bank accounts. UK firms linked to misconduct by the Guptas have included disgraced PR agency Bell Pottinger – which collapsed after a dirty tricks campaign was exposed – auditor KPMG and management consultancy McKinsey. Hogan Lovells stands accused of a white-wash in a so-called independent investigation into shenanigans at the South African Revenue Service. Here, Lord Peter Hain explains to the House of Lords why the spotlight is on Hogan Lovells. He has also written to Britain’s law watchdog, the Solicitors Regulation Authority, requesting an inquiry into Hogan Lovells’ conduct. – Jackie Cameron
Lords Money Laundering Bill January 2018
It should be a matter of shame that companies headquartered here in the UK have aided and abetted money laundering, corruption and state capture in South Africa – including Bell Pottinger, KPMG, McKinsey, SAP, and Banks such as HSBC, Standard Chartered and Baroda – in total betrayal of Nelson Mandela’ legacy.
I have just referred to the Solicitors Regulation Authority (SRA) Hogan Lovells, the international law firm headquartered here in London, for enabling a corrupt money-launderer to be returned to his post as second-in-command of the critically important South African Revenue Service (SARS).
I have asked the SRA to withdraw Hogan Lovells’ authorisation as a recognised body; and to examine what other disciplinary action can be taken against its leading Partners including withdrawing their permission to practise as a solicitors.
Hogan Lovells spared two of the most notorious perpetrators of state capture in South Africa – Tom Moyane, head of SARS and his deputy, Jonas Makwakwa – from accountability for their complicity in, and cover up of, serious financial crimes. In so doing, Hogan Lovells was complicit in undermining South Africa’s once revered tax-collection agency, and thereby effectively underpinning President Jacob Zuma and his business associates, the Gupta brothers and others, in perverting South Africa’s democracy, damaging its economy and robbing its taxpayers.
When Hogan Lovells was engaged by the corrupt Moyane in September 2016, it was well-known that he and Makwakwa were synonymous with President Jacob Zuma’s capture of the state. Hogan Lovells could therefore not plead ignorance as they walked right into that web of corruption and cronyism for a fat fee.
To help protect himself from 783 counts of corruption, fraud, racketeering and money laundering levelled against him when he came to power in 2009, Zuma systematically dismembered and manipulated the once highly functional South African Revenue Service and National Prosecuting Authority.
Zuma’s key man in this process was his long-time comrade Tom Moyane, whom he appointed as SARS commissioner in 2014 and who, from day one, loyally set about obliterating all its investigative capacity, with the assistance of his deputy Jonas Makwakwa. These two turned the institution, which under the leadership of highly respected Pravin Gordhan had consistently over-delivered on revenue collection, into one now facing a R51-billion (about GBP3-billion) revenue shortfall.
But Makwakwa’s unethical behavior was quickly exposed in May 2016 when South Africa’s financial crime regulator, the Financial Intelligence Centre, ordered SARS to establish whether several “suspicious and unusual cash deposits and payments” into the accounts of Makwakwa and his lover, a low-level SARS employee, Kelly-Ann Elskie, were the “proceeds of crime and/or money laundering”. About R1.7 million (about £200,000) had been paid into their bank accounts over a six-year period. The FIC noted that the amounts flowing out of Makwakwa’s account “…are of concern as they originate from unknown sources and undetermined legal purpose”.
But when the FIC reported these suspicious transactions to Moyane, he tried to ignore the request by keeping it a secret. At the same time, the FIC reported the suspicious transactions to the police (known as the Hawks) to investigate the alleged criminality associated with the transactional flows. They opened a case.
Four months later, in September 2016, news of the FIC’s report to Moyane was exposed by investigative journalists and he begrudgingly suspended Makwakwa, and later Elskie.
This is when Hogan Lovells entered the picture. Moyane appointed the law firm to conduct an “independent investigation” into the Financial Intelligence Centre’s allegations to ensure “transparency, independence and integrity”, and then to recommend and independently facilitate necessary action, including disciplinary action. Hogan Lovells was therefore appointed to investigate the allegations contained in the FIC report and to conduct disciplinary proceedings against Makwakwa on behalf of SARS.
— Natasha Marrian (@NatashaMarrian) November 9, 2017
To that effect, Hogan Lovells drafted the terms of reference for the engagement, a seven-page roadmap, signed and adopted by SARS.
But, Hogan Lovells failed to investigate the very reason the firm was appointed for – the allegations contained in the FIC report. Hogan Lovells deviated so materially from its own Terms of Reference, allowing itself to be blindly led by Moyane who redefined the Terms of Reference as and when it suited him, to an outcome which a respected investigative journalist described as being “so tailored that it borders on the realm of being cooked”: what an indictment of Hogan Lovells’ role.
The allegations against Makwakwa involved layers of possible transgressions, these being 1) tax law breaches (linked to whether he declared the transactions) 2) criminal breaches linked to whether the suspicious transactions were predicated on corruption or money laundering, and 3) whether internal SARS policy breaches had occurred. Moyane also mandated Price Waterhouse Coopers to analyse Makwakwa’s tax compliance, with regards to the “suspicious and unusual” money flows through his accounts. The Hawks were simultaneously investigating the criminality.
Hogan Lovells’ mandate was, according to their Terms of Reference, to institute an independent investigation, partly using the findings of these other processes, to assess the veracity of the FIC allegations against labour and administrative law and institute a disciplinary process.
But then two things happened: first SARS declined to provide Hogan Lovells with Price Waterhouse Cooper’s investigative report into Makwakwa, citing taxpayer confidentiality, an inaccurate interpretation of the law, which Hogan Lovells accepted without question; and second Hogan Lovells never made contact with the Hawks to assess the status of their investigation, information which would logically be crucial to their assessment of Makwakwa’s fitness as a senior SARS employee.
Equally puzzling is that around this time, South Africa’s Parliament got interested in Moyane’s puppet mastery of Hogan Lovells, prompting a parliamentary question about the nature of the engagement between the two organisations.
In Moyane’s reply, which is a matter for public record, he said that Hogan Lovells had been mandated to investigate contraventions of tax laws and money-laundering allegations, and that they would assist the criminal authorities where necessary in investigating these transgressions. They would also deal with the SARS disciplinary process. In a press statement, released weeks later, Hogan Lovells toned down this interpretation, saying that the scope of the investigation conducted by the firm was “limited to identifying whether any misconduct had been committed by Makwakwa and Elskie as employees of SARS. It did not seek to directly investigate the financial transactions identified by the FIC.”
My Lords, if you’re confused, it is because you should be. This obfuscation is precisely what Moyane set out to achieve, and to which purpose Hogan Lovells was either a willingly gullible or malevolent accomplice.
The end result is that the law firm issued an incomplete, fatally flawed whitewash of a report, which ultimately cleared Makwakwa, despite reams of evidence to the contrary. Most damning of all, Hogan Lovells failed to include crucial evidence – from the PwC report and the status of the Hawks investigation – in their own report. That meant that Makwakwa has only answered to a fraction of the allegations levelled against him, a serious deviation from Hogan Lovells’ mandate.
It is beneath contempt that Hogan Lovells subsequently tried to justify its work by hiding behind various complex legal provisions, sections, and sub-sections – explanations which have been described by legal experts as “utter nonsense”.
Hogan Lovells’ cover-up led directly to the corrupt Moyane exonerating his corrupt deputy Makwakwa and welcoming him back on 30 October 2017 to continue their looting and dirty work of robbing taxpayers.
Hogan Lovells must stand indicted by the Solicitors Regulatory Authority which should seek and publish answers to the following questions:
- Why did Hogan Lovells accept this mandate, whilst knowing about Tom Moyane’s corrupt Zuma/Gupta agenda?
- Why did Hogan Lovells allow itself to be controlled by Moyane, including allowing him glibly to alter the Terms of Reference to suit his agenda, at various points in this sorry saga?
- Why has Hogan Lovells failed to release their documents – including the original Terms of Reference, their final report, and any other relevant documentation which would help clear their name – to the South African Parliament? What have they got to hide?
- How much money did Hogan Lovells get from SARS for this investigation?
- Will Hogan Lovells pay back that fee, if not to SARs then at least to South African charities combating the poverty they have helped deepen?
- What is the relationship between the South African Chair of Hogan Lovells, Lavery Modise, and the Commissioner of SARS, Tom Moyane?
- Why has Hogan Lovells allowed itself to be used to undermine South Africa’s revenue collection agency?
- Some of the suspicious transactions received by Makwakwa were in US dollars. What onus does this place on regulatory authorities in the US – and indeed Hogan Lovells as also a US based firm – to report and investigate?
Hogan Lovells have ducked and dived over their responsibility and complicity in propping up state capture, corruption, cronyism and money laundering in South Africa.
I trust the SRA will sanction them, and that the British Government will issue an edict that no British based firms should do any business whatsoever with any member of President Zuma’s family, or with any member of the Gupta brothers’ family, and that any work for any state agency or state-owned enterprise in South Africa must only be undertaken with total integrity, not connivance in criminality like Hogan Lovells have been guilty of.
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