Nedbank hints at litigation linked to state capture
Nedbank has hinted it may get drawn into litigation and possible regulatory action over transactions it was involved in that were found to be potentially corrupt at the Zondo commission of inquiry into state capture.
Though the commission made no findings against Nedbank, it recommended further investigation of its involvement in certain transactions — in which the Gupta-backed firm Regiments Capital acted as a financial adviser to Airports Company SA (Acsa).
The commission’s first instalment of a three-part report on state capture mentioned Nedbank more than 50 times, and in at least one instance described its involvement in certain deals as “disturbing ”.
Nedbank also featured in an amaBhungane report in February 2021, which alleged it had formed a “pact” with Regiments in which the Gupta-linked company brokered loans with stateowned enterprises (SOEs), including Transnet, in exchange for tens of millions of rand in fees. This occurred while it saddled the public entities with hundreds of millions of rand in additional costs.
At the time, Nedbank denied acting unlawfully.
“Nedbank continues to cooperate with various further inquiries and investigations that are under way in respect of these transactions — these engagements may result in Nedbank entering into negotiations or, failing which, becoming involved in litigation and associated regulatory proceedings, with various parties,” the bank said in its integrated report for the year to end-December 2022, which was released on April 20. “Given that there is no evidence of any wrongdoing, collusion, or corruption on the part of Nedbank, we will strongly defend any litigation against us.”
Nedbank had a formal business relationship with Regiments dating back to 2009 in which the Gupta-linked company acted as a black-owned advisory firm that earned fees for transactions it facilitated for the bank. The deal Regiments struck with Acsa more than a decade ago involved the stateowned airport operator buying R3.5bn in unnecessary interest rate swaps backed by Nedbank so that it could extract tens of millions of rand in extra fees. Interest rate swaps are derivative contracts that switch one stream of future interest rate payments for another.
The Zondo commission recommended in January 2022 that the Asset Forfeiture Unit of the National Prosecuting Authority investigate the possibility of recovering money from Nedbank over the interest rate swap contracts. While the commission acknowledged it did not have time to hear Nedbank’s version of events at the time, it said the relationship between two of the bank’s dealers — Mario Visnenza and Moss Brickman — and Regiments director Eric Wood, appeared to have contravened the Prevention and Combating of Corrupt Activities Act.
Business Day asked Nedbank on Friday for clarity on the vague reference to potential litigation in its latest integrated report, but was told that CEO Mike Brown and other senior executives were not reachable as they were away for a corporate breakaway at a game lodge for the weekend.
While little further detail on potential litigation and regulatory scrutiny was contained in the bank’s integrated report, it did say that its forward-looking estimates could be affected by “current and future litigation”.
However, on Sunday afternoon, Brown responded to say its board had previously requested and approved comprehensive legal reviews of the implicated transactions, which found no evidence of any Nedbank staff involvement in dishonesty, corruption, collusion or unlawful conduct. He also played down the potential litigation, saying the bank was satisfied that its internal governance procedures were followed.
“It has subsequently emerged
that there was wrongdoing by other parties. All we are referring to here are these subsequent investigations and the discussions we have been having for some time in relation to these transactions with related parties,” Brown said.
“The contents of these discussions are confidential by mutual agreement. As a matter of transparency, Nedbank was merely advising shareholders of the possibility of litigation in the event that these discussions do not bear fruit.”
Nedbank ’ s latest integrated report also disclosed that Deloitte would cease providing it with audit services at the conclusion of its services for the financial year ending December 31 as per the mandatory audit firm rotation rules of the Independent Regulatory Board for Auditors. That will see KPMG join EY, which was appointed by Nedbank in 2019, subject to shareholder approval at the bank’s annual general meeting. /
NEDBANK WAS MERELY ADVISING SHAREHOLDERS OF THE POSSIBILITY OF LITIGATION ... [IN CASE] ... DISCUSSIONS DO NOT BEAR FRUIT