The back and forth between Finance Minister Pravin Gordhan and the Hawks has finally come to a head with Major General Ledwaba instructing Gordhan to provide a warning statement this afternoon and Gordhan effectively saying, no.
Given the protracted nature of this particular issue as well as the shifting focus, it is difficult to follow exactly what Gordhan is being accused of, or if he is even being accused of anything. A good place to start, in attempting to understand what is unfolding, is to look at what is being requested by the Hawks.
What is a warning statement?
Warning statements get their name from the statement of rights read to a suspect prior to arrest. The statement – derived from the Miranda rights of the USA – informs a suspect that he or she has the right to remain silent and the right to counsel. Individuals only need to be informed of these rights when they are suspects being questioned or detained by the police. Usually, a suspect has the option to remain silent, consult counsel or make a statement.
If the Hawks are instructing Gordhan to provide a statement, it is more likely than not that Gordhan has gone from being a person of interest to a suspect.
If Gordhan is a suspect then, legally speaking, he is not obliged to appear or to provide any statement since he is protected under section 35 of the Constitution. The only way that Gordhan can be compelled to appear before the Hawks is if he is arrested. There are a number of reasons, however, why an arrest may not be happening in the near future. One reason may be that there are not sufficient grounds for a warrant to be issued. Another may be that the Hawks do not want the case brought before a court just yet.
In any event, legally speaking, Gordhan can elect not to respond, not to appear or even just respond to the extent he wishes, for as long as he is not under arrest. However, despite his cooperation, Gordhan seems to have become a suspect in the Hawks’ investigation.
What is he suspected of doing?
The first accusation is that he approved the early retirement and then rehiring of a Deputy Commissioner and the second is that he facilitated the creation of a unit that was involved in the gathering of intelligence.
These actions don’t appear to be criminal.
The ‘Rogue’ Unit
This primary Hawks’ allegation against him appears to be that the so-called ‘Rogue Unit’ was engaged in collecting covert intelligence and this was illegal.
Gordhan admits that he oversaw the creation of a unit to investigate organised crime relating to tax and customs legislation. In 2007, the Unit was set up to penetrate and intercept the activities of tax and customs crime syndicates. As Gordhan describes it, the work of the unit was to investigate non-compliance with tax legislation. In his words:
“Non-compliance could include non-submission of a tax return, incorrect information on a tax return, different types of debt collection, aggressive tax avoidance, abuse of trusts, tax evasion, smuggling across borders, cigarette and other forms of illicit trade, trafficking of drugs, round-tripping to avoid excise duties and VAT etc.”
It does look as if some of the intelligence gathered by this unit was gathered ‘covertly’. Is that illegal?
The Sikhakhane Panel thought that the actions of this unit were a contravention of Section 3 of the National Strategic Intelligence Act which reads as follows:
“3. (1) If any law expressly or by implication requires any department of State, other than the Agency or the Service, to perform any function with regard to the security of the Republic or the combating of any threat to the security of the Republic, such law shall be deemed to empower such department to gather departmental intelligence, and to evaluate, correlate and interpret such intelligence for the purpose of discharging such function: Provided that such department of State-
other than the National Defence Force when employed for service referred to in section 227(1)(a), (b) or (e) of the Constitution or when discharging the counter-intelligence responsibilities entrusted to its Intelligence Division; and
other than a police service established under any Act of Parliament, when a member of such service is investigating any offence relating to the security of the Republic or is performing any other function relating to the security of the Republic, shall not gather departmental intelligence within the Republic in a covert manner:”
It is not a simply worded section but if you read it carefully, it essentially states that a department may investigate and gather intelligence relating to the security of the Republic as outlined in subsection 3(1) except when it comes to gathering intelligence within the Republic in a covert manner. In terms of subsection 3(1)(b), only the police service has the power to gather intelligence in a covert manner but only if the intelligence relates to the security of the Republic.
So, does the intelligence gathered by the Unit relate to the security of the Republic?
While abalone poaching and smuggling syndicates are big problems, particularly for SARS, they do not specifically relate to the security of South Africa. In particular, it is clear that the Unit gathered intelligence relating specifically to contraventions of tax and customs legislation which clearly falls outside of area of security of the Republic.
Even if we were to accept, however, that the investigations of the Unit did contravene the National Security Act, that contravention falls on the Department, not just the Minister. More importantly, it is not a criminal offence.
The letter by Gordhan’s attorneys to the Hawks states:
“Your interpretation suggests that it is unlawful for anybody to engage in
the covert gathering of crime intelligence. But such an interpretation is
clearly absurd. Very many public bodies engage in the covert gathering
of crime intelligence such as most metropolitan local authorities, SAA,
Eskom and Prasa to name but a few.”
It’s not clear what the Hawks are attempting to rely on in attaching criminal liability to Gordhan’s involvement in the Unit but the links are tenuous, if not non-existent.
Then there’s the other thing…
Rehiring the Deputy Commissioner, Ivan Pillay
In Gordhan’s 23 August 2016 statement to the Hawks, he admits that he received a memo requesting his approval for Pillay to take early retirement and be re-employed as a fixed-term employee. As a consequence, Pillay would obtain access to his pension fund but also retain his job.
Gordan approved the proposal and alleges that this approval was based on his belief that the arrangement was above board.
In certain respects, this action seems a little strange, but that would not be enough for an arrest. The Hawks have to charge Gordhan with specific contraventions and criminal acts.
One of the key issues the Hawks rely on is that SARS paid an early-retirement penalty for Pillay. It is stated further, in Ledwaba’s letter of 22 August 2016, that ordinarily this penalty is payable by the employee. As a consequence, the payment of this penalty amounts to an unauthorised expenditure under the Public Finance Management Act (the PFMA) and so Gordhan is guilty of an offence.
The starting point of the problems here is that the PFMA doesn’t apply to SARS. If the act is not applicable, it would be impossible for Gordhan to contravene it. However, even if the PFMA was applicable, contravening it is not a criminal offence, so this allegation fails on the law alone.
It is further contended by Ledwaba that the approval contravened the Prevention and Combating of Corrupt Activities Act which, to put it politely, seems to be a last-ditch attempt to nail Gordhan on something. The offence of corruption is a pretty broad one (it is called the ‘General Offence of Corruption’ after all) so it makes sense for the Hawks to try to tack that accusation on as a kind of catch-all. But at the end of the day, catch-all charges also need to be proven.
Broadly speaking, it will need to be shown that (a) there was an acceptance or giving of some kind of gratification and (b) that this influenced someone to act in an improper way. While one may be able to stretch SARS paying the early retirement penalty for Pillay into ‘gratification’, it’s difficult to see how that would imply Gordhan influencing Pillay – or anyone else – to act in some improper manner. At the end of the day, Pillay returned to SARS on the same salary he had before he took early retirement and continued performing the same duties, so we are in the dark about what influence resulted.
What happens now?
It’s clear that the Hawks don’t have much of a legal basis to successfully prosecute Gordhan on any of the allegations outlined in their letter of 22 August 2016, but these allegations are not set in stone. The danger is that the Hawks may reformulate the charges, and next time around, the legal arguments may not be as shaky.