In a bizarre twist, VBS Mutual Bank’s liquidators are blaming KPMG for the “fraudulent” ransacking of the bank’s billions, saying the auditing firm’s “negligence” spawned the alleged looting.
These claims are contained in a lawsuit for more than R863-million, which liquidators said was owed to VBS by KPMG for signing-off a March 2017 financial statement, which ratified “a fraudulent scheme being perpetrated upon [VBS] between 17 July 2017 and 10 March 2018”.
In court documents filed at the Johannesburg high court, which the Mail & Guardian has seen, liquidators also contend that former KPMG employee Sipho Malaba received a more than R20-million windfall as the auditor who approved the allegedly fraudulent statement.
The filed papers were certified by the high court on Tuesday.
The evidence liquidators relied on in their case against KPMG also forms part of the fraud, corruption, racketeering, theft and money-laundering criminal court case against Malaba and the six other accused.
The other accused are Tshifhiwa Matodzi, the former VBS chairperson; Andile Ramavhunga, the former chief executive; Phophi Mukhodobwane, the former treasurer; Lieutenant-General Avhashoni Ramikosi, who was a non-executive director; and Ernest Nesane and Paul Magula, both of whom were representing the Public Investment Corporation as non-executive directors on the board.
In its indictment against the accused, the National Prosecuting Authority (NPA) detailed an alleged two-year looting spree totalling more than R2.3-billion that ran from April 2016 to March 2018.
Malaba, at the time of the 2017 audit, was allegedly conflicted because of the more than R20-million in his various VBS accounts held through his two companies, Ihawu Lesizwe Trading and Betanologix.
It is this alleged negligence of not dealing with Malaba’s apparent conflict that liquidators claim KPMG is liable for. They assert that, had the auditor conducted his work in line with the laws governing audits, the “fraudulent scheme” that took place from July 2017 to March 2018 would have been prevented.
“The registrar of banks, on the irregularities being reported to him, would have taken immediate steps to have VBS placed under curatorship by the minister of finance, in accordance with the provisions of section 81 of the Mutual Banks Act (read with section 69 of the Banks Act), which would have brought the ongoing perpetration of the fraudulent scheme on VBS, and the damages suffered by it in consequence thereof, to an end,” the documents read.
“VBS would have been placed under curatorship by no later than 17 July 2017, and its ongoing losses arising from the fraudulent scheme, between 17 July 2017 and 10 March 2018 when VBS was placed under curatorship, would have been avoided.”
All the accused have indicated that they would plead not guilty to the charges against them in the criminal matter, and that the state had a weak case.
The M&G reported last month that NPA spokesperson Sipho Ngwema said the authority scheduled to begin the trial in the last quarter of 2021, with three-more accused expected to be added.
All the accused are out on bail.