Real estate adviser Betapoint sues KPMG over payment after downsizing project
Fresh from settling a multimillion-rand lawsuit launched by the defunct VBS Mutual Bank over shoddy audits, professional services firm KPMG is engaged in a legal battle with a contractor that helped it downsize its office space in 2018, after it lost several big-item clients.
Johannesburg-based Betapoint was appointed by the accounting firm as its strategic real estate advisory and implementation partner across its then 75,000m² national commercial office portfolio in 2018.
In the downsizing process, the KPMG office portfolio was streamlined from 13 properties to five. However, Betapoint has dragged KPMG to the South Gauteng High Court, claiming the firm short-changed it.
Business Day could not establish the amount demanded by the firm.
COST SAVING
A KPMG spokesperson confirmed the legal dispute but would not be drawn to reveal the specifics. “This matter is still subject to ongoing litigation, therefore we are unable to comment further at this time,” the spokesperson said.
Betapoint’s mandate was to help KPMG save costs after it bled clients such as Nedbank, the office of the auditor-general, Absa, Sasfin and DRDGold.
In terms of the written agreement between the parties, Betapoint was to review KPMG’s existing leases at its offices throughout SA and recommend appropriate interventions to reduce the costs associated with the leases, such as exiting or renegotiating it, conducting subleases or mothballing the premises. Betapoint would be paid 10%-15% of the cost savings generated by the deliverables.
Business Day understands that the company claims it was not paid savings it said it generated for KPMG in rightsizing its Johannesburg, Pretoria and Polokwane offices. The matter is still to be heard in court.
After the process, KPMG closed its regional offices, letting go about 400 workers.
WATERSHED
The accounting firm now operates four hubs, in Johannesburg, Cape Town, Durban and Gqeberha. It has won back some of the clients it lost in 2018.
One of KPMG’s former offices in Johannesburg is now occupied by Old Mutual Insure.
The years 2017 and 2018 were watershed ones for KPMG after its work was found wanting.
KPMG’s lead auditor in the R1.8bn scam at VBS Mutual Bank, Sipho Malaba, played an active role in covering up the fraud and was rewarded with a handsome R34m, according to a forensic audit that looked into the collapse of the mutual bank.
“Malaba had obtained very substantial facilities from VBS Mutual Bank, 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 forensic report reads.
The VBS Mutual Bank liquidator sued KPMG for nearly R900m but last week settled out of court for R500m, according to a report by Daily Maverick.
Malaba has since left the employ of KMPG but is still facing disciplinary processes from the Independent Regulatory Board for Auditors.
KPMG was also entangled in the Gupta state capture web. The audit firm came under heavy criticism in 2017 for its role in the audit of Linkway Trading, which was allegedly used to channel taxpayers’ money to fund the Guptas’ lavish 2013 wedding.
GUPTA FAMILY
The money was meant to be used for the upliftment of indigent farmers in the Free State. KPMG donated the R47m paid to it by Linkway to civil society as part of its moves to atone and clean its image.
Irba told Business Day in January that it planned to complete its investigations into the auditing of the companies linked to the fugitive Gupta family by end2024, buoyed by additional investigators at its disposal.
KPMG also admitted it lacked the competence to investigate the so-called rogue unit in the SA Revenue Service.
Those scandals and admissions caused a number of the group’s top brass to resign, accompanied by a client exodus, which forced the firm to relook its national footprint, a situation that necessitated the appointment of Betapoint.
Founded and run by Adam Sargent, Betapoint has been part of some big office construction and optimisation projects, including Sasol’s headquarters in Sandton.
Exxaro also appointed Betapoint as its strategic facilities management advisory and implementation partner when it began a process to move into its new headquarters in Centurion.