KPMG sacks top of­fi­cials in South Africa over scam

Business Standard - - FRONT PAGE - ED CROPLEY & JOE BROCK

Global au­di­tor KPMG cleared out its South African lead­er­ship en masse on Fri­day after damn­ing find­ings from an in­ter­nal in­ves­ti­ga­tion into work done for busi­ness­men friends of Pres­i­dent Ja­cob Zuma. KPMG’s in­ves­ti­ga­tion into work for the Gupta broth­ers — Atul, Ajay and Ra­jesh — ac­cused by a pub­lic watch­dog of im­prop­erly in­flu­enc­ing gov­ern­ment con­tracts, iden­ti­fied no ev­i­dence of crimes or cor­rup­tion, but found that work done for Gupta fam­ily firms “fell con­sid­er­ably short of KPMG's stan­dards”, the au­di­tor said.

Global au­di­tor KPMG cleared out its South African lead­er­ship en masse on Fri­day after damn­ing find­ings from an in­ter­nal in­ves­ti­ga­tion into work done for busi­ness­men friends of Pres­i­dent Ja­cob Zuma.

KPMG’s in­ves­ti­ga­tion into its work for the Gup­tas, ac­cused by a pub­lic watch­dog of im­prop­erly in­flu­enc­ing gov­ern­ment con­tracts, iden­ti­fied no ev­i­dence of crimes or cor­rup­tion, but found that work done for Gupta fam­ily firms “fell con­sid­er­ably short of KPMG’s stan­dards”, the au­di­tor said in a state­ment. In par­tic­u­lar, it ac­knowl­edged “flaws” in a re­port that it com­piled for South Africa’s tax ser­vice, which im­plied that for­mer fi­nance min­is­ter Pravin Gord­han had helped set up a “rogue spy unit” when he was head of the ser­vice.

Gord­han, sub­se­quently sacked as fi­nance min­is­ter by Zuma, said the re­port had dam­aged South Africa’s young democ­racy, and that he was con­sid­er­ing le­gal steps.

KPMG be­came the third global firm to be dam­aged by work car­ried out for the In­di­an­born broth­ers after the busi­ness con­sul­tancy McKin­sey and the pub­lic re­la­tions agency Bell Pot­tinger, whose Bri­tish busi­ness col­lapsed this week.

McKin­sey is also be­ing probed by South Africa’s par­lia­ment over whether it know­ingly let funds from state power util­ity Eskom be di­verted to a Gupta firm as a way of se­cur­ing a $78-mil­lion con­tract to ad­vise Eskom. McKin­sey is car­ry­ing out its own in­ves­ti­ga­tion, but has de­nied wrong­do­ing. Both Zuma and the Gup­tas deny wrong­do­ing and say they are vic­tims of a po­lit­i­cally mo­ti­vated witch-hunt. The Gup­tas and their com­pa­nies have not been charged with any crime, but the scan­dal is one of many to dog the Zuma pres­i­dency.

“I want to apol­o­gise to the pub­lic, our people and clients for the fail­ings that have been iden­ti­fied by the in­ves­ti­ga­tion,” said KPMG’s new South African CEO, Nh­lamu Dlomu.

KPMG said it would do­nate 40 mil­lion rand ($3 mil­lion) earned in fees from Gupta-con­trolled firms to ed­u­ca­tion and anti-cor­rup­tion groups, and re­fund 23 mil­lion rand it had re­ceived for the tax ser­vice re­port.

The chief ex­ec­u­tive of KPMG South Africa, Trevor Hoole, its chair­man, Ahmed Jaf­fer, chief op­er­at­ing of­fi­cer Steven Louw and five se­nior part­ners all re­signed. “I ab­so­lutely un­der­stand that ul­ti­mate re­spon­si­bil­ity lies with me,” Hoole said in a state­ment. KPMG also plans to dis­miss Jacques Wes­sels, the lead part­ner on au­dits of Gupta-linked firms, it said. Wes­sels did not an­swer a call to his mo­bile phone seek­ing com­ment. An­drew Cranston, for­mer CEO of KPMG Rus­sia, has been named in­terim chief op­er­at­ing of­fi­cer.

The an­nounce­ment KPMG staff crammed into an au­di­to­rium in its Johannesburg head of­fices and oth­ers lis­ten­ing in via video link from Cape Town and Pre­to­ria. “Ev­ery­body is just dumb­founded,” said one em­ployee, who asked not to be named. “They’re ob­vi­ously try­ing to show that re­spon­si­bil­ity stretches to the top. But right now I don’t think any­body knows what to think.”

Gord­han, one of the Gup­tas’ harsh­est crit­ics, lamented the dam­age done to the cred­i­bil­ity of the tax ser­vice, an in­sti­tu­tion that has been vi­tal to South Africa’s sta­bil­ity and economic growth in the two decades since apartheid. “Whilst there have been per­sonal con­se­quences, the real is­sue that con­fronts us is the sig­nif­i­cant dam­age to our hard-won democ­racy, to our state in­sti­tu­tions and ul­ti­mately to the South African people,” he said in a state­ment.

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