Gordhan charges legally flawed and factually unfounded - Johann Kriegler

FUL & HSF to approach High Court to put an end to 'nonsensical' prosecution of finance minister (with docs)



14 October 2016

Ordinarily one does not comment on the merits of pending court cases. But we cannot stand by while untold damage is being done to the reputation and stability of our country following the shocking allegations leveled at the Minister of Finance and the theatrical manner in which they were broadcast earlier this week.

For months now there has been a campaign of intermittent leaks to the effect that the Hawks were investigating SARS and/or the Minister, and now the Hawks have been joined by the NPA. Believing it would only make things worse if the Minister were to go cap-in-hand to the NDPP, our two organisations considered ways and means of putting a stop to this disastrous business.

We had the “charges” analysed and were pleased but not surprised to be advised that they are on the face of it legally flawed and factually unfounded. It is not for us to speculate who or what, if anything, lies behind the investigation and prosecution, but we have been advised that there is a basis upon which we can ask the High Court to examine the validity and viability of the charges with a view to cutting short the prosecution.

A letter (copy attached) has accordingly been delivered to the NPA this morning calling for the withdrawal of the charges against the Minister and, failing that, for delivery of certain documents and details with a view to urgent proceedings to stop the prosecution.

Statement issued by Judge Johann Kriegler, Freedom Under Law, 14 October 2016



Shaun Abrahams

National Director of Public Prosecutions

National Prosecuting Authority

Victoria and Griffiths Mxenge Building (Corner Westlake & Hartley) 123 Westlake Avenue

Weavind Park, Silverton Pretoria


JP Pretorius SC

Acting Special Director of Public Prosecutions

Priority Crimes Litigation Unit National Prosecuting Authority

Victoria and Griffiths Mxenge Building (Corner Westlake & Hartley) 123 Westlake Avenue

Weavind Park, Silverton Pretoria


By hand

By email

Dear Sirs

Summons in criminal case against, inter alios, the Honourable Minister of Finance Mr Pravin Gordhan: Summons 574/16; CAS: Brooklyn 427/05/2015

1. We act for Freedom Under Law NPC and the Helen Suzman Foundation, non­ governmental organisations concerned with, amongst other things, the promotion of the rule of law and the protection of our constitutional project ("our clients").

2. We address this letter on behalf of our clients acting in their own and in the public interest.

3. On 11 October 2016, summons no. 574/16 was served on, inter alias, the Honourable Minister of Finance, Mr Pravin Gordhan, MP. In terms of annexures A, B and E thereto ("the charge sheet"), the Honourable Minister is charged with:

3.1 fraud, alternatively theft, in relation to the alleged payment by the South African Revenue Service ("SARS") to the Government Employees' Pension Fund ("the Fund") of R1,141,178.11 on behalf of Mr Visvanathan Pillay, where such sum was allegedly a penalty payable by Mr Pillay to the Fund (count 1 and the alternative to count 1 of the charge sheet); and

3.2 fraud in relation to the re-hiring of Mr Pillay in or around April 2014 (count 4 of the charge sheet), (collectively, "the charges").

4. As prefaced in our previous correspondence, your conduct in pressing baseless charges against the Minister of Finance has, and continues to have, devastating consequences for the Republic and its economy. This is a matter of paramount public interest and our clients intend to review and set aside your decisions to institute the charges against the Minister of Finance, under the constitutional principle of legality and otherwise, unless you withdraw the decisions or furnish a cogent basis for the actions taken. It has been held in a long line of cases that our clients have standing and an interest to bring such proceedings.

5. The charges, such as they are, are unsustainable in law and fact, and may be actuated by conscious recklessness or ulterior purposes on the part of the National Prosecuting Authority ("NPA").

6. In respect of charge 1 (fraud, alternatively theft), we note the following:

6.1 Mr Pillay was clearly entitled under the relevant legislation governing public servants' retirement to retire from the age of 55. This was an integral part of his employment relationship with the South African Revenue Service ("SARS").

6.2 In terms of the Rules of the Government Employees Pension Fund ("GEPF"), however, a retirement before 60 years of age constitutes retirement prior to the pension retirement date and a penalty (by way of a deduction) would normally be applicable to the payout on such early retirement.

6.3 All the relevant legislation, however, provides for that penalty or deduction to be paid by SARS or the Government of the Republic of South Africa:

6.3.1 Rule 20 of the Rules to the Government Employees Pension Fund Law, 1996, ("GEPF") states that "Compensation to the fund on retirement or discharge of a member prior to attainment of the member's pension retirement date. Without detracting from the generality of section 17(4) of the Law, the Government or the employer or the Government and the employer shall, if a member, except for a reason in rule 14.1.1(a), retires, becomes entitled in terms of Rule 14.8 to the pension benefits in terms of a severance package, referred to in that Rule, or is discharged prior to his or her pension retirement date and at such retirement, entitlement or discharge in terms of the rules becomes entitled to the payment of an annuity or gratuity or both an annuity and a gratuity in terms of the rules, and any of these actions result in an additional financial liability to the Fund, pay to the Fund the additional financial obligations as decided by the Board acting on the advice of the actuary. Such payment to the Fund, with interest to account for any delay in payment, shall be in accordance with a schedule approved by the Board."

6.3.2 Section 17(4) of the Government Employees' Pension Fund Law, 1996, which states that: "If any action taken by the employer or if any legislation adopted by Parliament places any additional financial obligation on the Fund, the employer or the Government or the employer and the Government, as the case may be shall pay to the Fund an amount which is required to meet such obligation";

6.3.3 Government Employees Pension Fund Members' Guide, page 34, which reads " Where the employer granted permission for your early retirement, your benefits will not be scaled down. However, your employer will pay an additional liability."

6.4 In light of the above alone, the charges are unsustainable.

6.5 The position is simply reinforced by the following contemporaneous documentation related to the retirement of Mr Pillay:

6.5.1 The interoffice memorandum dated 27 November 2009 from Mr Pillay to the then Commissioner of SARS (annexed marked "A");

6.5.2 The Legal and Policy Division memorandum dated 17 March 2009 (annexed marked "B");

6.5.3 The memorandum dated 12 August 2010, and approved by the Minister on 18 October 2010 referred to in count 1 (annexed marked "C").

6.6 The above correspondence not only references the relevant legislation, but also:

6.6.1 sets out cogent reasons for Mr Pillay's circumstances; and

6.6.2 cites the fact that over 3000 government employees have taken early retirement with full benefits.

6.7 It is plain from the legislation that the retirement of Mr Pillay did not require the Minister's approval at all: SARS and the government would be liable to pay any early retirement penalty. But to the extent that the Minister gave his approval, it was clearly in line not only with a raft of legislation but also ample precedent.

6.8 The allegation that the NPA could ever prove fraud or theft in those circumstances in relation to the payment of the penalty is preposterous.

7. In respect of charge 4 (fraud), we note the following:

7.1 The charge is inchoate and incomprehensible.

7.2 It is initially alleged that SARS was not authorised to employ Mr Pillay as Deputy Commissioner for a period of four years from 1 April 2014 to 31 December 2018. The alleged issue is thus authority. There is nothing in law or fact, however, which states that SARS was not empowered to hire Mr Pillay as Deputy Commissioner for this period.

7.3 Under the relevant legislation, SARS is, in fact, empowered to employ its Deputy Commissioner. Section 5(1)(a) of the SARS Act empowers SARS to "determine its own staff establishment, appoint employees and determine their terms and conditions of employment in accordance with section 18" .

7.4 In respect of senior management SARS employees, the Minister of Finance is statutorily charged with approving the terms and conditions of their employment (under section 18(3) of the SARS Act).

7.5 That is precisely what happened in this case. SARS appointed Mr Pillay and the Minister of Finance approved his terms and conditions. The employment agreement is attached marked "D".

7.6 Thus the alleged representation (if it occurred at all) is correct in law and is in no way unlawful.

7.7 There is also no basis for the alleged prejudice. Mr Pillay, with a proven track record and years of exemplary service to SARS, would be rendering services as the Deputy Commissioner for the amounts which would be paid to him under the employment agreement. In any event, Mr Pillay's employment with SARS could be cancelled on one month's written notice - accordingly, if SARS ever felt aggrieved or prejudiced by Mr Pillay's employment, this could have been remedied on one month's notice.

7.8 The fraudulent intention is allegedly grounded in the fact that the Minister of Finance knew that SARS was under no obligation to enter into a new employment agreement. But the alleged misrepresentation is that the Minister of Finance stated that SARS was empowered (not obliged) to hire Mr Pillay, and so this intention is irrelevant to the alleged fraudulent conduct.

7.9 Ultimately, the charge of fraud is nonsensical, is bad in fact and law, and cannot be sustained.

8. In respect of both charges, even if it is assumed (contrary to the dispositive analysis above) that the conduct of the Minister of Finance was not strictly in accordance with the law, there is no basis for imputing a fraudulent or furtive intention to him and none has been suggested.

9. Indeed, in previous correspondence from the Directorate for Priority Crime Investigation, it has never been alleged that Minister Gordhan committed fraud or theft. Rather, the allegations were breaches of the Prevention and Combating of Corrupt Activities Act, 2004, Public Finance Management Act, 1999 and National Strategic Intelligence Act, 1994.

10. In light of the above, please confirm, in writing and by no later than 16:00, 21 October 2016, that the charges against Minister Gordhan will be withdrawn.

11. Should you refuse or fail to withdraw the charges as set forth above, then, for the purposes of assessing their position and the breaches of your constitutional and statutory obligations, our clients require you to furnish the following information and reasons, by no later than 16:00, 21 October 2016:

11.1 the record of decision in respect of the decision to issue the summons and prefer the charges against Minister Gordhan ("the Decisions");

11.2 full written reasons, and substantiating documents, which support the Decisions;

11.3 without derogating from the above, all reasons explaining why, despite the factual matrix in relation to the charges being known (and being in the public realm) for many years, the Decisions were taken now;

11.4 without derogating from the above, the evidence (alternatively a summary thereof) proving:

11.4.1 the unlawful intention required successfully to prosecute the charges;

11.4.2 that Minister Gordhan made any misrepresentation as required for the purposes of establishing fraud and that such misrepresentation induced the persons cited in counts 1 and 4 of the charge sheet to act to their prejudice;

11.4.3 the act of appropriation (or contrectatio) attributed to Minister Gordhan in respect of the alternative charge of theft.

11.5 whether any other instances of State employees taking early retirement with full pension (without any penalty payment being paid by the employee) are I have been investigated and are being considered for criminal prosecution on the basis of fraud or theft;

11.6 whether any other instances of State employees being hired after taking early retirement are I have been investigated and are being considered for criminal prosecution on the basis of fraud;

11.7 a list of all cases which have been or are being criminally prosecuted, or are being considered for criminal prosecution, which relate to State employees taking early retirement with full pension (and no penalty payment by such employee); and

11.8 a list of all cases which have been or are being criminally prosecuted, or are being considered for criminal prosecution, which relate to State employees taking early retirement and being rehired.

12. Should you not unconditionally withdraw the charges against the Minister or furnish the information sought within the time periods set forth above, our clients will assume that no reasons for the Decisions, and no documents other than the documents annexed to this letter, exist in support of the charges.

13. Our clients may then, without further notice, seek to exercise their rights in law on an urgent basis.

Yours faithfully


V Movshovich



Internal Memorandum

Dear Oupa


The purpose of this memorandum is to explain that I have decided to take early retirement as well as to request you to consider to recommend for possible approval by the Minister certain related matters that will flow from my decision to take early retirement.


As you know, I have been working in the Public Sector for the past 15 years, 10 years which have been spent with SARS. For the most part of this period, especially my tenure with SARS, I was expected to perform at a very high level accompanied by the accountabilities that go with the performance of such a high level job. This exacted its toll from me in the sense that my health condition is slowly deteriorating. Added to this, my family responsibilities, for a long time, suffered on account of the dedication required by my job. With the aforementioned in mind, although still not easy, I have decided to take early retirement

However, I am still enthusiastic about SARS and the tremendous contribution it makes towards the establishment of an even better South Africa for all its citizens. With a view thereto, I am willing to serve in SARS in a different capacity where the demands of such a job will positively support the reasons why I am in the first instance taking early retirement.

Should you favorably consider my proposal to serve SARS in a different capacity, such service will have to be subject to that I be appointed as a contract employee .This will allow me more flexibility in terms of making a decision to finally part ways with SARS, should I come to such a decision. The second condition will be that my early retirement is approved in terms of the provisions of section 16(6)(a) and (b) of the Public Service Act, meaning that the Minister, in terms of the provisions of the aforementioned section approve that the penalty imposed on my pension benefits per Rule 14.3.3 (b) of the GEPF Rules, be paid by SARS to the GEPF. The GEPF has indicated that the penalty amount on my pension benefits that the employer has to pay on my behalf is R1 292 732.68.


My recommendations are that you please:

- Take note that I intend to take early retirement

- Consider to approve that I be reappointed in a different capacity in SARS on a contract basis; and

- Consider to recommend to the Minister that he approves that the penalty on my pension benefits be paid on my behalf to the GEPF by the employer.


Ivan Pillay




Memorandum – SARS

To: Commissioner

From: Vlok Symington

17 March 2009


Dear Commissioner,


Mr Ivan Pillay requested me to consider certain elements that form part of his decision to apply for early retirement from the Government Employees Pension Fund (the GEPF).

These elements are:

1. His application for early retirement from the GEPF;

2. His application to the Minister of Finance to waive the early retirement penalty; and

3. His request to be appointed on contract after his early retirement from the GEPF.

The technical position

Approached individually, all three elements are technically possible under the rules of the GEPF read together with the employment policies of SARS. Mr Pillay has reached the required age for early retirement, he is entitled to request the Minister to "waive" the early retirement penalty, and no technicality prevents SARS from appointing him on a contract after his retirement from the GEPF.

Financial risk

I am not a registered financial advisor and my views in this document is therefore not intended to be financial advice and should not be construed as such.

Mr Pillay opted for the early retirement package to be paid in the form of a monthly pension and a once-off gratuity. Because of the current global financial turmoil and his personal adversity to risk his choice in favour of a pension and gratuity split is prudent.

However, the financial soundness of his decision to apply for early retirement is dependent on whether the Minister approves the SARS payment of the benefit penalty to the GEPF as well as whether SARS contracts with him for a period of post-retirement employment. This is so because of the relatively young age at which he will be retiring vis-a-vis his projected life expectancy.

If the Minister does not approve his request or if SARS does not contract with him after his retirement, the financial risk of his decision will increase substantially and my advice then would be for him to review his application for early retirement and to possibly withdraw it.


Mr Pillay's application for early retirement should be considered together with his application for the Minister to approve the benefit penalty payment by SARS as well as his request for post retirement contract employment at SARS. If his application is approved as a package the financial risks in the context of his circumstances are probably minimal. However, if the Minister is unable to approve his request relating to the penalty or if SARS is not in a position to contract with him after retirement, then his decision to apply for early retirement should probably altogether be withdrawn.

Kind regards

Vlok Symington



From: Office of the Commissioner, SARS

To: Mr Pravin Gordha, Minister of Finance

Dear Minister



The purpose of this memorandum is to request approval from the Minister for the early retirement of Deputy Commissioner Ivan Pillay with full retirement benefits from the GEPF as contemplated in Rule 14 3.3(b) of tile Government Employees Pension Law, 1996, read with section 19 of the SARS Act and section 16(2A)(a) of the Public Service Act, 1994 as amended, with effect from 1 September 2010.

In addition, approval is requested to retain Mr Pillay as Deputy Commissioner of SARS on a three year contract with effect from 1 September 2010


Ivan joined the Public Service in January 1995 and has been in the employ of SARS for more than 10 years For the majority of this period, especially during his tenure in SARS, he has held a very senior position with the accompanying accountabilities that go with such a high level job .

Ivan has always excelled at his job and made a significant contribution towards the establishment of SARS as the highly respected organisation it is today.

For personal reasons, he has requested to take early retirement with effect from 1 September 2010. He is currently 56 years old.

Given Ivan's critical skills, experience and leadership, he has agreed to remain in the employ of SARS as Deputy Commissioner after early retirement on a three year contract to assist with the on-going leadership transition.


In the light of Ivan's exemplary service and sacrifice in the service of the people of South Africa it is requested that he be granted early retirement with full retirement benefits as provided for in section 19 of the SARS Act 1997, read with section 16(2A)(a) of the Public Service Act, 1994.

Over the past 5 years the GEPF has approved over 3000 requests from various government departments for staff members to retire before the age of 60 with full benefits. The statistics are attached to this memorandum as received from the GEPF (Appendix A)

In addition, the former and current Minister of Finance have approved at least five such requests over the past two years (see Appendix B)


Ivan's wealth of knowledge and experience within SARS and his leadership position as Deputy Commissioner is an invaluable asset to the organisation. This is particularly important given the on-going leadership transition within the organization following the departure of the Minister and the recent restructuring of the top leadership of the organization as part of the revised Operation Model.

Ivan's continued guidance, leadership and knowledge over the next three' years will provide critical continuity as well as playing an important mentoring role in developing the next generation of SARS leaders

In addition, it should be noted that there is precedent for the termination of employment and immediate rehiring of the same person under different conditions of employment within the public sector.

In this regard, advice was sought from the Acting Director-General of the Department of Public Service and Administration (DPSA) M, Kenny·Govender regarding the proposed early retirement of Mr Pillay and his retention on a three year contract. He confirmed that there is no restriction on the appointment to the public service or to the same department of a person who has left on an Employee Initiated Severance Package ([ISP) and that he was aware of previous such cases.


The financial implications of early retirement with downscaled benefits for Ivan will be considerable as his lump sum benefit will decrease by R241 605 to R2 121 443 and his monthly pension by R4 740 to R48 563.

The financial implications for SARS, should approval be granted to allow Ivan to take early retirement with full retirement benefits, will be an amount of R 1 258 345.99 which SARS will be liable to pay the GEPF in terms of the provisions of section 17 (4) of the GEPF Law, 1996.

Should the Minister approve this submission, the  authorization and allocation for this payment will follow the normal governance processes within SARS including engagement with the SARS Human Resources Committee and the SARS EXCO.

[Note: The above figures reflect the costs as at 1 August 2010 These costs reduce each month which elapses]


It is recommended that the Minister approve Mr Pillay's early retirement from SARS with effect from 1 August 2010 without downscaling of his retirement/pension benefits as provided for in GEPF Rule14.3.3 as well as section 19 of the SARS Act. 1997, as amended, read with section 16(2J(a) of the Public Service Act , 1994, as amended.

In addition it is recommended that the Minister approve the retention of Mr Pillay as Deputy Commissioner of SARS on a three year contract with effect from 1 August 2010. The remuneration of Mr Pillay in terms of the contract will be .at the same cost to company as his current package.



12 August 2010


18 October 2010