City law firm Hogan Lovells has been drawn into the growing corruption scandal in South Africa amid allegations it produced a “whitewash” report into claims of money laundering at a government agency.
Lord Peter Hain, the former Labour minister and anti-apartheid campaigner, wrote to Britain’s law watchdog the Solicitors Regulation Authority (SRA) on Friday requesting an inquiry into Hogan Lovells’ conduct.
Lord Hain is expected to raise his concerns in the House of Lords on Monday.
The move threatens to drag the international law firm into the political storm swirling around South Africa’s president Jacob Zuma and close associates the billionaire Gupta family.
British firms linked to misconduct by the Guptas have included disgraced PR agency Bell Pottinger – which collapsed after a dirty tricks campaign was exposed – KPMG, which has subsequently cleared out its South African management, and management consultancy McKinsey.
Lord Hain has separately referred London-based lenders HSBC and Standard Chartered to the Financial Conduct Authority.
The allegations against Hogan Lovells centre around a controversial investigation it conducted for the South African Revenue Service (SARS) into allegations of financial misconduct against two of its staff, Jonas Makwakwa, its deputy chief, and his lover Kelly Ann Elskie, who was a low-level employee.
It was alleged around R1.7m (£100,000) was paid into their bank accounts over a six-year period.
Allegedly suspicious transactions were identified by South Africa’s Financial Intelligence Committee, leading to Hogan Lovells’ investigation.
Hogan Lovells’ report recommended disciplinary action against Mr Makwakwa, but it has none the less been criticised by campaigners and politicians in South Africa for being too soft.
Hogan Lovells had to account for the way it conducted its SARS investigation to a South African parliamentary committee last month. After Hogan Lovells’ investigation, Mr Makwakwa was later acquitted by an internal SARS inquiry and reinstated as its deputy chief in October last year following a suspension.
No action was taken against Ms Elskie and nor was any recommended by Hogan Lovells.
Lord Hain is understood to have evidence from South Africa substantiating allegations of corruption against SARS, which he believes should have been uncovered by Hogan Lovells and reflected in its report.
In the Lords this week, he will claim Hogan Lovells was “complicit” in undermining SARS and this in turn helped bolster President Zuma and his associates the Guptas.
Lord Hain has asked the SRA to consider sanctioning Hogan Lovells or its leading partners.
Possible sanctions could include striking off individual lawyers or referring the firm to a disciplinary tribunal. Lord Hain was a leading campaigner against South Africa’s apartheid regime. He led opposition to tours by the South African tennis, rugby and cricket sides.
In response to previous criticism of its investigation into SARS, Hogan Lovells has said its scope was “limited to identifying whether any misconduct had been committed by Mr Makwakwa and Ms Elskie as employees of SARS”.
“It did not seek to directly investigate the financial transactions identified by the FIC. We understand that all criminal-related allegations arising from the FIC report were referred to the relevant authorities for investigation,” it added. Hogan Lovells said SARS conducted its own internal disciplinary procedures after its report, which acquitted Mr Makwakwa of all charges.
An SRA spokesman said: “We take all complaints seriously and will look at any evidence given to us about alleged misconduct.”
The Gupta brothers and Mr Zuma have repeatedly strongly denied wrongdoing and said they are the victims of a “politically motivated witch-hunt”. Last week, Coca-Cola’s South African businesses and energy giant Sasol said they would not award new business to McKinsey until a corruption inquiry into its work was concluded.
McKinsey has previously apologised for making “several errors of judgment” in its work with firms linked to the Gupta family but said it has found no evidence of corruption or bribery.
HSBC and Standard Chartered said they had shut accounts they believe are linked to the Guptas and are committed to combating financial crime.