VBS report throws KPMG back in dock
Firm faces claims for millions after Reserve Bank says a former partner signed off falsified audits
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