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Mpisane testifies in R4.7m tax fraud case

Friday, 16 November 2012   (0 Comments)
Posted by: SAIT Technical
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By Tania Broughton (Business Report)

Executive summary (SAIT Technical)

Shauwn Mpisane, owner of Zikhulise Cleaning Maintenance and Transport CC, has claimed that she only discovered that invoices submitted to SARS were forgeries when her bookkeeper, Kishal Reddy, pleaded guilty to the crime. Mpisane and her CC face 119 counts of tax fraud involving R4.7m for submitting fake invoices

Full article

Tax fraud-accused Shauwn Mpisane has claimed that she had only discovered that invoices submitted to Sars were forgeries when her bookkeeper pleaded guilty to the crime.

"We knew [from a Sars official] that they were not right,” she told Durban regional court magistrate Blessing Msani on Thursday. "But I only knew they were forgeries when [Kishal] Reddy pleaded guilty.”

Mpisane and her company, Zikhulise Cleaning Maintenance and Transport, are on trial on 119 counts of fraud involving R4.7 million for submitting the fake invoices.

She has pleaded not guilty, blaming Reddy for having generated the invoices. In his plea last year, however, Reddy said he had generated the invoices on her instructions to reduce her tax exposure.

Apart from shifting the blame, Mpisane was also attempting to keep the fake invoices out of evidence and has brought an application claiming they that were inadmissible because they had been produced to Sars during an alternative dispute resolution process, the rules of which state that nothing said or produced can be used in any subsequent proceedings.

The state argued that the documents were part of the company’s accounting records which, according to tax laws, have to be produced when asked for and are not privileged.

The court is considering this issue in a "trial within a trial” – and Mpisane took the stand for the first time on Thursday, testifying that she had twice gone to Sars "for help” with her tax matters and had volunteered information only to find herself in criminal trouble and being prosecuted.

She described how she had gone for help in 2003 about VAT issues and had "made disclosures about everything” to a Sars official.

"I got the impression that he was helping me. But suddenly I was told to go to the National Prosecuting Authority offices and I was prosecuted. I was told to pay the money [owing to Sars] and plead guilty,” she said, referring to her previous conviction for fraud.

She said that, in 2008, following a "media frenzy”, her husband, former metro police officer S’bu Mpisane, had been audited by Sars.

At the same time, because business had been booming, she had asked the auditors to look at the company’s books "to make sure that it was all proper and I was in good [accounting] hands”.

She had asked a lawyer to draft a letter to ensure that she had "protection” because she had not wanted " history repeating itself”.

It was agreed that the auditors would look at the books for 2008, but the financials were not ready and they looked at the drafts. She [auditor Waheeda Osman] raised a huge amount as owing. It was not proper, and I thought the audit was questionable,” she said.

"Maybe she did this so that she looks good… I don’t know. But she found that we had made a profit of 61 percent. There is no ways you can make a profit like that in the construction industry. Everyone knows it’s between 10 and 25 percent.”

At that stage, she did not have any invoices from suppliers and Osman had disallowed this.

Of the R33m Sars said she owed, she had paid R20m in full and had launched into negotiations and into the alternative dispute resolution process regarding the balance. It was at this stage that Reddy provided her with the invoices and they had been submitted to Sars.

"I understood then that the documents would be sent to Osman for verification. But I also understood that they would be confidential and not used against me.”

Under cross-examination by State advocate Meera Naidu, Mpisane conceded that she had a diploma in accounting, but said: "I learned as I went along what Sars required, and I am still learning”.

Naidu suggested to her that the audit had been an "inevitable result” of her husband’s audit because he had appeared to be receiving income from the company and that it had not been a voluntary process.

Mpisane responded: "You are putting words in my mouth”. She conceded that she had re-engaged Reddy after he had resigned from the company to help her with queries on the financial statements he had prepared.

Asked if she had approached Osman as a "professional auditor from Sars”, Mpisane said: "Well, she was not my friend.”

She conceded that Osman had acted within the law in her audit findings, "but wasn’t expecting it”.

The trial is expected to be adjourned on Friday to a date still to be arranged. - The Mercury



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