Jul.04, 2010, 12:00 AM

Investigators believe a Pakistani syndicate with alleged terror links has looted hundreds of millions of rands from state and private sector coffers, sending some cash to foreign accounts and using the rest to fund lavish lifestyles in South Africa.

A key component of their fraud was registering fake companies at the Companies and Intellectual Property Rights Office (Cipro) to divert vast sums in tax refunds.

Cipro is charged with protecting the integrity of all corporate records in the country.

But controls at Cipro are so poor that the Sunday Times easily cloned a multibillion-rand bank listed on the JSE. With our Cipro registration certificate, we could theoretically open a company bank account and siphon off tens of millions in tax.

This would require the collusion of a bank and SA Revenue Service official but, as court papers related to Pakistani syndicate members on trial next month show, if you're dishing out millions in bribes, accomplices are not hard to find.

The ease with which we were able to penetrate Cipro contradicts its assurances that security gaps have been plugged.

Asked for comment this week, minister of trade and industry Rob Davies said his department would "energetically pursue any incident that comes to our attention, whatever its motive or 'justification', and will seek the maximum penalty allowable under the law".

Court papers allege that the same modus operandi was used by the Pakistani syndicate members. The seven suspects are accused of defrauding SARS of tax refunds worth R78-million.

SARS is focusing on only five fraudulent refunds in this case but investigators expect to link many more to the syndicate. "This is something much bigger. I don't even want to speculate how much money is involved," said an investigator.

He said the SARS scam was rife, perpetrated either by crime syndicates or individuals with inside accomplices.

SARS has confirmed the syndicate has government and private sector accomplices.

"Collusion between Cipro and SARS is very important (in accomplishing this fraud)," SARS said. "We expect at least one Cipro official to be arrested."

A recent forensic report, seen by the Sunday Times, points out various frauds that corruption at Cipro facilitates - VAT fraud, cross-border smuggling, money laundering and tender manipulation, where rival companies are temporarily deregistered.

Police cracked open the syndicate while investigating the murder of Asad Abbas Naqvi, who the Pakistan government calls "a very dangerous terrorist".

Naqvi is suspected of benefiting from a macabre insurance scam whereby illegal immigrants were provided with false papers, issued life insurance in a syndicate member's name, then murdered. Naqvi benefitted from a R15-million payout in life assurance for one of the murdered immigrants, police believe.

THE SYNDICATE

Among the seven syndicate members arrested in the past year are Naqvi's brother, Aliraza Naqvi, the alleged syndicate leader.

He was picked up at OR Tambo airport carrying three cellphones, five SIM cards and a notebook with PINs, passwords and numbers of 11 bank accounts linked to the fraud.

His lawyer, Hugo van der Westhuizen, declined to comment, saying the case was "profoundly sub judice".

Others arrested include SARS auditor Audeya Makhubu; Samuel Gouwe from JSE-listed Gijima AST; and Mazhar Raza Sayed - who also goes on trial in September for allegedly buying land along Gautrain's route and reselling it to the provincial Department of Transport by falsifying property descriptions and payment authorisations.

According to an affidavit in the SARS case, the suspects "fraudulently registered" a company called SBC International Management Services CC - a name almost identical to the real SBC International Services Incorporated that was due for a large tax refund.

The fake company then opened an Absa bank account, which received a tax refund of R31-million on October 13, 2008. The same procedure was followed with IT company Sun Microsystems, which had a R19-million refund diverted to the syndicate's accounts.

The scam was only possible through collusion with corrupt officials.

The papers allege Makhubu gave the syndicate a digital certificate which allowed them to "unlock" the SARS system and swap the real SBC's account for the fake one.

This money was laundered through at least nine different shelf companies using fake invoices for anything from 300 leather armchairs worth R570000 to a consultancy fee of R3.2-million for a bogus company called Serva Engineering.

On other occasions, money was paid directly from the fake SBC's account into accounts controlled by syndicate members, who made regular and large cash withdrawals.

LIVING LARGER

Syndicate members used the cash to live large.

Though Makhubu's salary slip shows her taking home R8338 per month, she paid R1.6-million in cash for a luxury home in Floracliffe last year, registered in the name of her 16-year-old son.

The Sunday Times visited the premises, boasting sweeping vistas over the West Rand and an entrance guarded by Greek statues.

THE CRACKDOWN

The extent of the hijacking has alarmed authorities, who put together a task team led by the Hawks to target the syndicate.

Hawks spokesman Musa Zondi confirmed the police's commercial crimes and crime intelligence units, SARS and the Department of Home Affairs were investigating how the syndicate managed to infiltrate SARS, Home Affairs and Cipro. "We haven't touched the tip of this whole thing," he said.

Further crackdowns resulted in the arrest of nine Home Affairs officials and a raid in Brits that uncovered a passport-and ID-forging facility and led to the arrest of six Pakistanis.

The Pakistani government had extended "full co-operation to the South African authorities", spokesman Tajammal Aftab told the Sunday Times this week.

Corruption in the Department of Home Affairs has been crucial to the syndicate's success. Aliraza Naqvi already has a conviction for owning a false passport, while suspected syndicate member Mohammed Ansar is being investigated for "human trafficking, (which) is clearly indicative that the syndicate has easy access to fraudulent passports", an investigator's affidavit said.

Home Affairs spokesman Ronnie Mamoepa said his department had beefed up its anti-corruption unit.

"Unless we nip crime and corruption in the bud, it will continue to pose a threat to the stability of our hard-won democracy," he said.