KPMG UNDER FIRE

South Africa should seek damages from global auditor KPMG for the role it played in a corruption scandal in which at least 1.9 billion rand (Dh477.4 million) was stolen from local bank VBS, a central bank investigation published this month said.

Lawyers and forensic investigators were commissioned on behalf of the South African Reserve Bank to investigate 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.

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

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. Mr Zuma and the Guptas deny wrongdoing.

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

“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,” Mr Motau wrote in the report.

He did not specify how much money the state should seek in damages from KPMG.

Mr 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.

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

“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 31 March 2017,” Mr Motau wrote in the report. “I accordingly find that Malaba committed fraud.”

During the investigation, Mr 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 Mr Motau’s report.

Mr Motau’s investigation found that VBS actively sought to attract deposits from municipalities and other state entities and that bribes were paid to solicit the money. Bribes were also paid to people who became aware that money was being stolen for them to keep silent, it also found.

VBS was also in the spotlight when it gave Mr Zuma a 7.8m rand loan to reimburse the state for upgrades to his home.