Former KPMG partner admits failing to disclose VBS interests, loans from bank

A former KPMG partner who resigned in 2018 amid allegations of misconduct involving loans from VBS Mutual Bank, has admitted guilt.

The Independent Regulatory Board for Auditors (Irba) found Dumisani Tshuma guilty of misconduct for failing to disclose his interests in VBS, and fined him R200,000. Tshuma and another partner, Sipho Malaba, faced a disciplinary hearing for their shared role in a facility granted to Betanologix where their wives were directors.

Malaba failed to disclose loans from VBS, which was placed in curatorship in March and is the subject of a Reserve Bank-instituted forensic investigation. KPMG company policy required employees to disclose where they held loans with financial institutions.

VBS was formed as Venda Building Society in 1982, and became a mutual bank in 1992.

By 2016, the bank reportedly had about 30,000 depositors and deposits in the bank totalled R800m. In 2018, VBS was declared insolvent and bankrupt. It was placed under curatorship. SA citizens and taxpayers were defrauded out of roughly R2bn. A report for the Reserve Bank by advocate Terry Motau said that VBS conducted business in a fraudulent and reckless manner, resulting in the widespread impoverishment of its depositors to the benefit of its senior managers, politicians and some board members.

At the Irba hearing, it was disclosed that in 2016 and 2017 VBS was an audit client of KPMG. Malaba was a member of its VBS audit team and also the engagement partner.

“During March 2016, Tshuma and Malaba, on behalf of Betanologix, applied for and were granted a facility by VBS. The facility was not made under normal lending procedures: there were no repayments on the Betanologix facility since the account was opened, the facility increased regularly and resulted in an outstanding amount of R9.6m by February 28 2018 (days before VBS was put in curatorship),” according to the settlement document.

When the firm asked Tshuma for clarity, he denied the existence of such an arrangement with VBS, that Betanologix was his company and that he operated a property business. He denied a R200,000 withdrawal was for himself, saying it was for his wife who did not have a bank account. Several transactions were made in the bank account on his and Malaba’s behalf.