JOHANNESBURG - The South African Revenue Service has been hit by a massive scam, costing it at least R51m. VAT refunds due to some prominent companies, including Sun Microsystems (South Africa), were diverted to the accounts of phony duplicate companies. Investigators are trying to unravel the full reach of the syndicate - which was able to penetrate at least four state institutions.
One suspect, Aliraza Syed Naqvi, 29, a Pakistani national was arrested in June this year on fraud and theft charges relating to the scam. He is due to appear in the Wynberg Magistrates Court (Johannesburg) for a bail hearing on August 8. His older brother, Asad Abbas Naqvi was murdered in December last year in an apparent assassination.
According to court documents in Moneyweb's possession the way the scam worked was as follows: Duplicates of well-known companies were set up on the CIPRO system. Bank accounts were then set up in the duplicates' names by individuals using fraudulent company and identity documents.
Members of the syndicate then somehow accessed the central SARS system. The bank account details of the legitimate companies were changed to those of the duplicates. When SARS paid out tax refunds these went to the accounts of the duplicate companies, not the real ones.
According to CIPRO records a duplicate of SBC International Management Services was registered on July 10 2008. In October 2008 R31,6m was paid into its bank account. A duplicate of Sun Microsystems South Africa Pty Ltd was registered on November 5 2008. In December R19,3m was paid out into that bank account.
The syndicate also unsuccessfully attempted to divert a further R7,5m owed by SARS to All Pay Western Cape in February 2009, and R9,6m due to Boston Scientific South Africa in March 2009.
In a statement issued on late Friday afternoon (see here) SARS stated that they had been "investigating the matter since January 2009 when our warning systems indentified the risk. We immediately handed the matter to the SAPS. SARS' investigations is focussing on internal collusion and we have already suspended an official as part of the investigation."
Senior manager of Corporate Communication and Marketing, Dr Elsabé Conradie, said that CIPRO is aware of the case and is busy investigating the possible involvement of CIPRO employees. The organisation has taken steps to eradicate the problem by installing better controls and mechanisms to rectify the old legacy systems.
So far there has been one person arrested in the case: Aliraza Syed Naqvi. In an affidavit in support of his bail application Naqvi (born 3 December 1979) describes himself as "adult male commodities trader, with principal place of business situated in Pakistan, trading under the name of Naqvi Trading along with three partners, Mr's Hassan, Kashif and Afan." He was schooled in Lahore, Pakistan, where he completed a two year diploma course in Information Technology at Park Polytech College.
Naqvi claims that his Sandton based older brother kept him at arms length in business dealings. But he did require him to "open a number of accounts with several commercial banks in South Africa, assume directorship of companies and even apply for travel and identity documents." He complied with these demands, without question.
Naqvi states that he will be pleading not guilty to all charges. "I did not have any knowledge as to the business dealings of my brother, nor did I conspire with any person to commit and offence or further the common goal or purpose of any criminal enterprise or syndicate."
Naqvi had been red flagged as a person of interest on the immigration system and on his return to South Africa from Pakistan on June 8 he was briefly detained at OR Tambo International Airport. According to a statement by Inspector Maseko he was questioned and searched. Police found 2 ABSA bank cards, Nedbank cards, 3 cellphones and six sim cards in his possession. He also had a notebook, carried in a bag around his waist, "which had a lots of notes in it like names bank details, pin numbers etc." Naqvi was extremely reluctant to hand the notebook over. According to Maseko's statement "Mr Naqvi also threatened me saying 'I must now listen to you but when I am out you will have to like me."
After questioning, Naqvi was released. He was arrested a few days later at his lawyer's office. He remains in jail pending his bail application.
The court documents suggest that Naqvi was able to acquire fraudulent South African identity documents and passports almost at will (see images). He states in his affidavit that he first entered South Africa in 2000. He acquired a fraudulent South African passport in 2003 on his "brother's insistence." After this was seized by the South African police he acquired another in 2006 and 2008.
In 2008 he acquired South African identity book and passport under the name Desai Qadeer. Under this false identity he became a director, along with his brother and certain other individuals, of two companies: Tiespro 112 and Tiespro 102.
According to an affidavit by Willem Vorster, an assistant director in the department of Home Affairs, Naqvi's was first registered on the population registration system on September 18 2003 when he was almost 21 years of age. His place of birth was given as Johannesburg, South Africa. "He was issued with five passports between 2004 and 2008, one which was a Temporary Document that had expired and one was reported lost. The others are all still valid and there is no indication why they were issued to him."
In Naqvi's Pakistan passport there is a South African visitor's permit issued in Maputo on May 27 2009 and allowing for multiple entries into South Africa before August 26 2009. Vorster states that according to the control number this visa label "was dispatched to the RSA mission in Mexico. This means that the visa was stolen between the [Government Printing Works] and Mexico, either at the [Department] of Foreign Affairs or from the Diplomatic Bag."
Update - company responses:
Sun Microsystems South Africa: When asked for comment Financial Director Steven Stalley said he was unable to comment until he had consulted with Sun's legal team. The consultation was still ongoing by late Friday afternoon.
SBC International Management Services: Thus far Moneyweb has been unable to find this company. According to some news sources, this company was involved with Telkom. Moneyweb contacted Reuben September's office, which is in the same building as SBC, according to its registration documents, and they were unaware and unable to identify the company.
Boston Scientific South Africa: Financial Manager Nadia Nel confirmed there is a fraud case ongoing but was unable to give further details. The country director and financial director were unavailable for comment but were going to call Moneyweb back as soon as possible.
All Pay Western Cape: Currently the identity of this company is not clear. Moneyweb contacted the Absa All Pay chief financial officer but she was not aware of this case, she couldn't provide contact details for the managing director nor could she provide the company's registration number. Due to this Absa AllPay could not be linked to the All Pay Western Cape company involved in the fraud case.
- Chris Blaine
Email: [email protected]
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