Johannesburg – The collapse of VBS Mutual Bank continues to haunt one of the big four accountancy firms KPMG, with the Public Investment Corporation (PIC) the latest to take the embattled firm to the cleaners.
KPMG was VBS’s external auditor, with the lead partner being disgraced former KPMG senior partner Sipho Malaba.
The PIC, Africa’s largest asset manager, in the summons seen by Sunday World, wants KPMG to pay back R144-million it lost when the bank went belly up following the looting spree involving Malaba.
The asset manager’s claim is centred on the rights issue and a revolving credit facility it participated in at VBS. In November 2016, the PIC participated in the first rights issue valued at R12-million.
The PIC then participated in another rights issue in October 2017 where it bought a total of 9-million shares in the bank for R90-million.
“PIC, on behalf of the GEPF, bona fide relied on the VBS annual financial statements for the year ended 31 March 2017, as duly audited by KPMG and the audit opinion provided, and based on same, exercised its rights to the second and third rights issue in the sum of R90-million in December 2017,” the papers read in part.
“On 30 September 2018, the VBS Investigation Report was released and uncovered material errors, inaccuracies and misstatements relating to the VBS audited annual financial statements, as at 31 March 2017, audited by KPMG and relied upon by the PIC. The said financial statements were false and grossly misleading.”
In another leg of the claim, the PIC said on June 30 2015, it concluded a revolving credit facility (RCF) with VBS. The agreements meant that the PIC would provide a RCF to VBS for a maximum value of R350-million.
PIC said VBS made a total of seven drawdowns on the RCF during the period 2015 to 2017. The asset manager takes issue with the last drawdowns, which happened on November 9 2017 for the sum of R54-million.
The PIC said it allowed the transaction to go through based on the false statements approved by KPMG. “At the time when the PIC approved the seventh drawdown, the representation was, to the knowledge of KPMG and VBS, false as the purported audited annual financial statements were filled with material errors, inaccuracies, false and grossly misleading information.”
VBS, which was established in 1982, was placed under curatorship in March 2018 after experiencing a severe liquidity crisis. The bank’s curator immediately withdrew VBS’s audited financial statements for the year ended March 2017, “as they contain material misstatements and are no longer considered to be reliable”.
The bank, which was registered with the South African Reserve Bank as a mutual bank, shot to fame after providing a R7.8million loan to former president Jacob Zuma for Nkandla. Advocate Terry Motau’s 148-page report titled VBS Mutual Bank – The Great Bank Heist released in October 2018, blew the lid on the looting that characterised the bank, which saw nearly R2-billion siphoned off in less than five years.
Several people are facing criminal charges over the looting.
These include former VBS executives Tshifhiwa Matodzi, Andile Ramavhunga, Phophi Mukhodobwane and Philip Truter, Ernest Nesane and Paul Magula, who both came from the PIC; and Malaba. Malaba, who headed financial services auditing, KPMG’s biggest division, was found by Motau to have pocketed nearly R34-million from the bank.
Motau further found that Malaba was aware that there was a cash hole when he gave his audit opinion in respect of the annual financial statements for the year ended March 31 2017, thus committing fraud.
KPMG is also facing a nearly R1-billion lawsuit from the liquidator of VBS, citing the auditor’s negligence.
PIC spokesperson Sekgoela Sekgoela said: “The PIC notes the query but has no comment at this stage.” KPMG said it was not aware of any claim having been brought by the PIC against it in regard to VBS.
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