Au­di­tor faces dam­ages claim

Eth­i­cal con­duct un­der spot­light af­ter the scale of VBS Bank cor­rup­tion is un­cov­ered

Sunday Tribune - - KZN BUSINESS REPORT -

SOUTH Africa should seek dam­ages from global au­di­tor KPMG for the role it played in a cor­rup­tion scan­dal that saw at least R1.9 bil­lion stolen from lo­cal bank VBS, a cen­tral bank in­ves­ti­ga­tion pub­lished on Wed­nes­day said.

The probe, car­ried out by a team of lawyers and foren­sic in­ves­ti­ga­tors on be­half of the South African Re­serve Bank (Sarb), is the lat­est headache for KPMG, which has lost more than a dozen clients as ques­tions have been raised about its eth­i­cal con­duct in the coun­try.

The Sarb com­mis­sioned the in­ves­ti­ga­tion into VBS af­ter it was placed un­der cu­ra­tor­ship in March.

KPMG, which au­dited the bank’s fi­nan­cial re­sults, said it had noted the in­ves­ti­ga­tion’s pub­li­ca­tion.

Ear­lier this year it an­nounced changes to its cor­po­rate gov­er­nance to try to re­store the rep­u­ta­tion of its South African busi­ness.

“We will only be in a po­si­tion to com­ment once we have stud­ied the full con­tents of the re­port,” the au­di­tor said in an emailed re­sponse to ques­tions.

KPMG South Africa has al­ready cut jobs and lost busi­ness over work done for a com­pany owned by the Gupta fam­ily, friends of scan­dalplagued for­mer pres­i­dent Ja­cob Zuma, who were ac­cused of un­duly in­flu­enc­ing the award of bil­lions of rand in gov­ern­ment con­tracts. Zuma and the Gup­tas deny wrong­do­ing.

Ad­vo­cate Terry Mo­tau, who led the VBS probe, rec­om­mended that crim­i­nal charges be brought against the more than 50 in­di­vid­u­als and en­ti­ties who or­ches­trated and ben­e­fited from the VBS theft.

His in­ves­ti­ga­tion re­port, ti­tled “The Great Bank Heist”, was pub­lished by the Sarb on its web­site, an un­usual step which sug­gests the reg­u­la­tor wants ac­tion to be taken on its find­ings.

“I rec­om­mend fur­ther that an au­di­tor’s li­a­bil­ity claim be in­sti­tuted by the Pru­den­tial Au­thor­ity, the cu­ra­tor and Na­tional Trea­sury against KPMG for re­cov­ery of their re­spec­tive dam­ages,” Mo­tau wrote in the re­port.

Two KPMG part­ners who had deal­ings with VBS, Sipho Mal­aba and Dumi Tshuma, re­signed af­ter fail­ing to dis­close fi­nan­cial in­ter­ests in VBS.

Mo­tau said the scale of the loot­ing from VBS would not have been pos­si­ble had KPMG not signed off on the bank’s fi­nan­cial re­sults.

“Mal­aba was aware that there was a cash hole when, on July 17, 2017, he gave his au­dit opin­ion in re­spect of the an­nual fi­nan­cial state­ments for the year ended March 31, 2017,” he wrote in the re­port. “I ac­cord­ingly find that Mal­aba com­mit­ted fraud.”

Mal­aba did not re­spond to a re­quest for com­ment sent via his Linkedin so­cial me­dia ac­count.

Dur­ing the in­ves­ti­ga­tion, Mal­aba blamed fail­ures in the VBS au­dit on an­other au­di­tor, and said he could not be held re­spon­si­ble for reck­less lend­ing by VBS, ac­cord­ing to Mo­tau’s re­port.

The VBS saga has prompted a pub­lic outcry in South Africa, partly be­cause many mu­nic­i­pal­i­ties had de­posits with the bank.

VBS was also in the spot­light when it gave Zuma a R7.8m loan to re­im­burse the state for up­grades to his per­sonal home. |

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