VBS re­port throws KPMG back in dock

Firm faces claims for mil­lions after Re­serve Bank says a for­mer part­ner signed off fal­si­fied au­dits

Business Day - - FRONT PAGE - Genevieve Quin­tal and War­ren Thomp­son

KPMG, the au­dit­ing firm whose rep­u­ta­tion was gut­ted by as­so­ci­a­tions with the Gupta fam­ily and a flawed re­port that helped weaken the SA Rev­enue Ser­vice (Sars) amid state cap­ture al­le­ga­tions, is in the dock again.

The com­pany, which last week re­placed the CEO who was ap­pointed just a year ago to re­pair its rep­u­ta­tion, is fac­ing claims for mil­lions of rand after a SA Re­serve Bank re­port into the col­lapse of VBS Mu­tual Bank found its for­mer part­ner had signed off fal­si­fied au­dits.

In one of SA’s big­gest bank­ing scan­dals, the bank col­lapsed amid al­le­ga­tions that its ex­ec­u­tives looted al­most R2bn they were sup­posed to look after on be­half of mu­nic­i­pal­i­ties, stokvels and the el­derly in Lim­popo.

The scan­dal-scarred KPMG has lost high-pro­file clients in the past year, in­clud­ing the au­di­tor-gen­eral, the Gaut­eng govern­ment and the SA arm of Ger­man in­surer Mu­nich Re.

The Bank placed VBS into cu­ra­tor­ship in March after with­drawals by mu­nic­i­pal­i­ties — who are legally barred from de­posit­ing money with mu­tual banks — caused a cash crunch.

The Bank then ap­pointed law firm Werks­mans At­tor­neys and ad­vo­cate Terry Mo­tau to es­tab­lish rea­sons for the bank’s fail­ure. Mu­nic­i­pal­i­ties rep­re­sent­ing some of the poor­est ar­eas in the coun­try with shoddy ser­vice de­liv­ery had about R1.2bn de­posited at the bank when it went un­der.

The bank, formed in 1982 as a wholly black-owned bank in the for­mer Venda home­land, burst onto the na­tional scene in 2016, when it emerged that it had lent for­mer pres­i­dent Ja­cob Zuma more than R7m to pay back state funds used to up­grade his Nkandla home.

The foren­sic re­port de­scribes a crim­i­nal en­ter­prise per­pe­trated at the be­hest of ex­ec­u­tives, in­clud­ing chair­man

Tshifhiwa Ma­todzi, whom it rec­om­mended should face crim­i­nal charges.

An au­di­tor’s li­a­bil­ity claim should be in­sti­tuted by the Pru­den­tial Author­ity, the cu­ra­tor and the Trea­sury against KPMG for dam­ages, it rec­om­mended.

For­mer KPMG part­ner Sipho Mal­aba, who ap­proved the 2017 fi­nan­cial state­ments, re­ceived R34m from VBS, ac­cord­ing to the re­port.

“He re­ceived vast sums, and he was re­quired to do as his pay­mas­ters re­quired of him,” Mo­tau says in the re­port.

Mal­aba re­signed in March along with an­other part­ner, Dumi Tshuma.

Since 2017, KPMG has been try­ing to fix its im­age after the tranche of leaked Gupta e-mails threw it into the mid­dle of the state cap­ture project. It also found it­self hav­ing to back­track on work it had done for Sars on the so-called rogue unit, which led to key of­fi­cials be­ing forced out of the tax agency.

This saw sev­eral se­nior KPMG ex­ec­u­tives re­sign as clients started to drop the au­dit firm be­cause of the con­tro­versy.

KPMG said on Wed­nes­day it had noted the pub­li­ca­tion of the re­port and would co-op­er­ate fully with any in­ves­ti­ga­tion that flowed from it.

“Lessons have been learned and de­ci­sive ac­tion has been taken since” the scan­dal broke, KPMG ex­ec­u­tive chair­man Wise­man Nkuhlu said.

It also emerged that one of the big­gest bene­fac­tors of the largesse dis­trib­uted by VBS in its at­tempts to se­cure de­posits was Brian Shivambu, brother of EFF deputy pres­i­dent Floyd Shivambu. The EFF and Floyd Shivambu had not re­sponded to re­quests for com­ment by Wed­nes­day night.

R34m the amount for­mer KPMG part­ner Sipho Mal­aba al­legedly re­ceived

AFP

Truth be told: Mozam­bique’s pres­i­dent Filipe Nyusi casts his bal­lot for lo­cal elec­tions at a polling sta­tion in Ma­puto on Wed­nes­day. Mozam­bique holds polls that could re­veal cracks in its peace process after the Fre­limo party was ac­cused of vi­o­lence and in­tim­i­da­tion dur­ing the cam­paign. /

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