Bringing KPMG to book will not solve our problems
Blacklisting will harm professionals who had nothing to do with any of the sordid sagas
OVERNMENT or business sector? That was the choice a Gfather gave his son who was “considering a career in organised crime”. The problem with crime is that a patsy gets sacrificed while the mastermind remains untouched.
KPMG, while not innocent in the SA Revenue Service rogue unit report it has since retracted, was but an accomplice in an economic order that keeps steering us to the same grimy place.
Every scam, racket, including those that rip off Africans in resource-rich but poor countries through conflict minerals fuelling civil wars, has a clean-looking multinational enterprise or business celebrity at its core. Wheelers and dealers who thrive on their criminal schemes, these highflyers do so with the help of corrupt government officials.
Their fraudulent business activities continue inside enterprises audited and advised by the likes of KPMG, EY, PWC and Deloitte – the big four. We can name a few examples of multimillion rand settlements, way higher than the R23 million paid to KPMG by Sars for a non-report; which KPMG is willing to pay back to the client or to a charity.
We must ask why Sars needed an external professional services firm to prove the existence of its own rogue unit. The answer is: such firms are respected, rightfully so, for their depth of professional expertise and integrity.
They hire professionals, from chartered accountants, tax lawyers, IT to actuarial and forensic specialists, who can find a needle in a haystack when nobody knows where the haystack is. They use years of professional training, experience, fancy data mining tools, paper trails, interviews and literature to uncover stuff that sent Al Capone to jail. Still, some of them get compromised. When a partner of a firm such as KPMG delivers a report to the client, they are commonly already eyeing an opportunity to cross-sell and on-sell. The partner will be thinking: Due to the gaps I detected in doing my work, what other service can I sell to the client? This usually happens even before the first assignment is accepted, so that the relationship can be massaged to render the client amenable to a further sales pitch afterwards.
High stakes, this professional services industry is. Some executives or directors in organisations such as Sars or their political principals, manipulate the combination of the firm’s appetite for more work to feed their greed or to settle personal scores by corrupting professionals within firms like KPMG.
In February, Citibank agreed to pay R69.5m for forex rigging. This, as big construction companies agreed to a R1.5 billion mea culpa settlement for ripping us off building Fifa World Cup 2010 venues.
Arcelor Mittal agreed to pay R1.5bn in August last year for price-fixing. For its hand in bread price and milling cartels, Tiger Brands paid R98.7m in 2007. German car maker Volkswagen, which also owns Audi, was fined $4.3bn (R57bn) for falsifying its carbon emissions data. Two weeks ago, Petra Diamonds was bust at the Julius Nyerere International Airport trying to siphon $25.9bn of diamonds – their value was underdeclared – out of Tanzania.
Global Witness estimates that the Democratic Republic of Congo loses more than a $1bn a year in unpaid taxes and royalties.
All these companies have external and internal auditors, tax advisers and consultants from the big four in one form or another.
All the anti-competitive, fraudulent and corrupt practices went undetected (no, they were overlooked by some partner in these firms) to protect their professional business interests.
Did we call for their suspension or blacklisting? No, because that would mean blacklisting ourselves for being beneficiaries and passive onlookers.
Blacklisting KPMG will simply punish thousands of its innocent professionals who had nothing to do with the Sars saga when we know that the real issue is not the R23m.
KPMG is not blameless; its international boss said so, and its top South African leadership has resigned. But it is dishonest to pretend closing one professional services firm will solve our problems. Arthur Andersen closed in 2002 after the Enron scandal, yet we are still where it left us.
Kgomoeswana is author of Africa is Open for Business; media commentator and public speaker on African business affairs and a weekly columnist. @Victorafrica
Fraudulent activities continue to be identified inside enterprises audited and advised by KPMG.