Knives out for KPMG

Firm sued by ex-Ithala CEO for R9m over re­port which ‘cost him his job and health’ Court pa­pers ac­cuse the com­pany of is­su­ing a fac­tu­ally in­cor­rect find­ing in case

The Sunday Independent - - FRONT PAGE - NOKUTHULA NTULI

DIS­GRACED au­dit­ing firm KPMG, still reel­ing from the mass ex­o­dus of clients over its business re­la­tion­ship with Gupta-linked com­pa­nies, now has to deal with a law­suit over an­other of its ques­tion­able re­ports.

Former Ithala Limited chief ex­ec­u­tive Vi­jay Misra is su­ing the be­lea­guered firm for more than R9 mil­lion over a re­port which al­legedly cost him his job and af­fected his health.

In pa­pers filed at the Dur­ban High Court, Misra ac­cused KPMG of is­su­ing a fac­tu­ally in­cor­rect foren­sic re­port in 2009 to Ithala which re­sulted in his dis­missal for his al­leged role in grant­ing un­se­cured loans to the po­lit­i­cally con­nected.

“KPMG had plenty of op­por­tu­nity to pub­licly with­draw the re­port when the charges brought against me were found to be base­less but they didn’t and in the end it cost me my job and rep­u­ta­tion,” he said.

KPMG was con­tracted by Ithala in 2008 to carry out a foren­sic in­ves­ti­ga­tion in re­la­tion to pos­si­ble ir­reg­u­lar­i­ties in its loan book. Misra said he was shocked when a KPMG re­port re­sulted in him be­ing sus­pended and im­pli­cated in 41 charges of mis­con­duct and neg­li­gence re­lat­ing to some of the loans that had not been paid back.

After a year-long dis­ci­plinary hear­ing, he was found guilty on 11 charges re­lat­ing to three trans­ac­tions, which re­sulted in his dis­missal from an or­gan­i­sa­tion he had worked for longer than a decade.

These in­cluded R5 mil­lion loaned to Fa­tel CC to train ar­ti­sans to work on low-cost hous­ing, an R85m loan for the failed Dol­phin Whis­pers de­vel­op­ment which re­port­edly in­volved con­tro­ver­sial busi­ness­man Jay Singh and former pres­i­dent Nel­son Man­dela’s grand­daugh­ter Nandi, and a loan of about R12m to Cedar Falls Prop­erty be­long­ing to Dr May Mkhize, the wife of the ANC trea­surer-gen­eral and former KZN pre­mier Dr Zweli Mkhize.

A Com­mis­sion for Con­cil­i­a­tion, Me­di­a­tion and Ar­bi­tra­tion (CCMA) marathon ar­bi­tra­tion, which ran from 2012 to 2015, found the charges against Misra base­less and Ithala was or­dered to re­in­state and pay him R6.5m. However, he could not be re­in­stated be­cause his five-year con­tract as the chief ex­ec­u­tive had ended in De­cem­ber 2014.

“KPMG played pol­i­tics at best and were neg­li­gent and or un­eth­i­cal at worst. This seems to fol­low the same pat­tern as has oc­curred in the SA Rev­enue Ser­vice re­port which KPMG has now with­drawn,” said Misra.

He said mil­lions of rand of tax­pay­ers’ money were wasted be­cause KPMG had been ad­vised by a se­nior coun­sel, re­tained by Ithala, that there was no valid case, but the au­dit­ing firm still pro­ceeded, charg­ing Ithala to fin­ish the in­ves­ti­ga­tion, and to tes­tify at the dis­ci­plinary hear­ing and at the CCMA ar­bi­tra­tion.

“Dur­ing cross-ex­am­i­na­tion on May 27, 2014, at the CCMA, a lawyer from the third set of lawyers put to me that the costs to date of the in­ves­ti­ga­tions and at­tor­neys and chair­per­sons fees amounted to R45m,” Misra said.

He re­sponded that he was un­aware of the costs in­volved. Misra used as an ex­am­ple the then KPMG se­nior man­ager Philip Bur­ring, who he claimed billed Ithala R160 000 for two-and-a-half days of at­ten­dance at the CCMA. His lawyer Bruce Macgre­gor, of Macgre­gor Eras­mus At­tor­neys, told of how his client suf­fered two heart at­tacks be­cause of the stress – one of which oc­curred while he was be­ing cross-ex­am­ined at the CCMA, re­sult­ing in the at­tor­ney hav­ing to rush him to hos­pi­tal.

“He was talk­ing and then sud­denly turned grey. The whole thing re­ally took its toll on him,” Macgre­gor re­called. Misra’s med­i­cal ex­penses, in­clud­ing surgery, cost him at least R370 000.

He said the dam­age to his rep­u­ta­tion and health to­gether with the lost years of his life could never be re­cov­ered.

“As a char­tered ac­coun­tant, my rep­u­ta­tion is ev­ery­thing in this ca­reer but what was worse was hav­ing my chil­dren be­ing asked by their friends if I was a rogue after I was fired,” he said.

KPMG spokesper­son Nqubeko Sibiya said the firm was “de­fend­ing the mat­ter as the action is with­out merit”. In its re­spond­ing pa­pers, filed last month, KPMG de­nied there were mis­rep­re­sen­ta­tions in the re­port and that Misra was “sus­pended, dis­ci­plined and dis­missed by Ithala solely on the strengths of the re­port”.

The firm also de­nied that the state­ments made by its of­fi­cials be­fore the CCMA de­famed Misra as they were “quasi-ju­di­cial pro­ceed­ings which are gen­er­ally closed to the public” and the com­mis­sioner made no rul­ing to make them public.

May Mkhize said she had no com­ment on the mat­ter and Singh could not be reached at the time of going to print.

To date, KPMG SA has lost 14 clients as a re­sult of the fall­out from its connection to Gupta-linked com­pa­nies and its ill-ad­vised Sars rogue unit re­port, which the firm has since with­drawn, with Par­lia­ment the lat­est to an­nounce that it was aban­don­ing the firm.

Among the firms which have re­viewed their re­la­tion­ship with KPMG are the JSE-listed Deneb In­vest­ments, Sas­fin Bank, en­ergy in­vest­ment com­pany Hulisan, Absa Bank, African Oxy­gen, Bid­corp, DRD-Gold, Esor, Gaia In­fra­struc­ture Cap­i­tal, In­ter­waste Hold­ings, In­vestec, Lon­min, Rand­gold & Ex­plo­ration, Sibanye Stillwater, Vu­nani and We­sizwe Plat­inum.

The demise of the au­dit­ing firm lo­cally could have a neg­a­tive im­pact on em­ploy­ment and the econ­omy, however, as the com­pany em­ploys about 3 600 peo­ple.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.