KPMG-VBS settlement is confidential
KPMG and liquidators of the defunct VBS Mutual Bank have reached a confidential out-ofcourt settlement in their longrunning dispute.
The liquidators initially wanted nearly R900m from KPMG over shoddy work done in auditing Terry the Motau books’of s the 148-page bank. report “VBS Mutual Bank: The Great Bank Heist”, released in October 2018 blew the lid off the looting that characterised the bank, from which nearly R2bn was siphoned in fewer than five years.
One of the auditors involved in looking at VBS’s books has already found Dumisani Tshuma guilty of misconduct for failing to disclose his interest in VBS. Tshuma and fellow erstwhile KPMG auditor Sipho Malaba failed to disclose loans held with VBS. Malaba had obtained very substantial facilities from VBS which cannot be regarded as arm’ s length borrowings and were not declared to KPMG.
“He gave an unqualified audit opinion in circumstances where he knew the financial statements were misstated. He also gave a regulatory audit opinion which he knew to be false,” the Motau report stated.
Ignatius Sehoole, KPMG SA CEO, said: “The liquidators of VBS and KPMG SA confirm they have reached a confidential, outof-court settlement. The conclusion of this legacy matter relates to the KPMG audit of the bank for the financial year ended 31 March 2017.”
The secrecy of the deal raises questions about whether the liquidators got anything close to their initial R864m claimed from the accounting firm.
The Public Investment Corporation (PIC) had also launched R144m lawsuit against KPMG over the demise of VBS.
The PIC participated in the first rights issue launched by VBS, buying shares worth R12m at the time.
The PIC also participated in another rights issue in October 2017, when it snapped up altogether 9-million shares in the bank for R90-million.
“The PIC, on behalf of the GEPF, bona fide relied on the VBS annual financial statements for the year ended 31 March 2017, as duly audited by KPMG and the audit opinion provided, and based on same, exercised its rights to the second and third rights issue in the sum of R90m in December 2017,” the PIC said in its papers.
“On 30 September 2018, the VBS investigation report was released and uncovered material errors, inaccuracies and misstatements relating to the VBS audited annual financial statements, as at 31 March 2017, audited by KPMG and relied upon by the PIC.
“The said financial statements were false and grossly misleading.”
Apart from the rights issue, the PIC had in 2015 concluded a revolving credit facility with VBS. According to the PIC’s affidavit, VBS made a total of seven drawdowns on the facility in the period 2015-17.
The money manager has taken umbrage at the last drawdowns, which happened on November 9 2017 for the sum of R54m, which it is claiming back.
“At the time when the PIC approved the seventh drawdown, the representation was, to the knowledge of KPMG and VBS, false as the purported audited annual financial statements were filled with material errors, inaccuracies, false and grossly misleading information.”