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Publication

BUSINESS DAY

Page

1-2

Date

Thurs 11 Oct 2018

AVE (ZAR)

47165.26

VBS report throwsKPMG back in dock®Firm faces claims for millions after Reserve Bank says aformer partner signed offfalsified audits

Genevieve Quintaland Warren Thompson

KPMG, the auditing firm whosereputation was gutted by associations with the Gupta family anda flawed report that helpedweaken the SA Revenue Service(Sars) amidstate capture allegations, is in the dock again.

The company , which lastweek replaced the CEO whowas appointed just a year ago torepair its reputation, is facingclaims for millions of randafter aSA Reserve Bank report into thecollapse of VBS Mutual Bankfound its former partner hadsignedoff falsified audits.

In one of SA's biggestbankingscandals, the bank collapsedamid allegations that its executives looted almost R2bn theywere supposedto look after onbehalf ofmunicipalities, stokvelsand the elderlyin Limpopo.

The scandal-scarr ed KPMGhas lost high-profile clients inthe past year, including theauditor-general, the Gautenggovernment and the SA arm ofGerman insurer Munich Re.

The Bank placed VBS intocuratorship in March after withdrawals by municipalitieswho are legally barred fromdepositing money with mutualbanks- caused a cash crunch.

The Bank then appointed lawfirm Werksmans Attorneys andadvocate Terry Motau to establish reasons for the bank's failure. Municipalities representingsome of the poorest areas in thecountry with shoddy servicedelivery had about RL2bndeposited at the bank when itwent under.

The bank, formed in 1982 asa wholly black-owned bank inthe former Venda homeland,burst onto the national scene in2016, when it emerged that ithad lent former president JacobZuma more than Rim to payback state funds used toupgrade his Nkandla home.

The forensic report describesa criminal enterprise perpetrated at the behest of executives,_ including_ chairman

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FROM PAGE 1

KPMG back in the dockTshifhiwa Matodzi, whom itrecommended_ should- facecriminal charges.

An auditor's liability claimshould be instituted by the Prudential Authority, the curatorand the Treasury against KPMGfor damages, it recommended.

Former KPMG partner SiphoMalaba, who approvedthe 2017financial statements, receivedR34m from VBS, according tothe report.

"He received vast sums, andhe was required to do as hispaymasters required of him,"Motau says in the report.

Malaba resigned in Marchalong with another partner,Dumi Tshuma.

Since 2017, KPMG has beentrying to fix its image after thetranche of leaked Gupta e-mailsthrewit into the middle of thestate capture project. It alsofounditself having to backtrackon work it had done for Sars on

+R34mthe amountformerKPMGpartnerSiphoMalabaallegedlyreceived

the so-called rogue unit, whichled to keyofficials being forcedout of the tax agency.

This saw several seniorKPMG executives resign asclients started to drop the auditfirm because of the controversy.

KPMG said on Wednesdayithad noted the publication of thereport and would co-operatefully with any investigation thatflowedfrom it.

"Lessons have been learnedand decisive action has beentaken since" the scandal broke,KPMG_ executive- chairmanWiseman Nkuhlu said.

It also emerged that one ofthe biggest benefact ors of thelargessedistributed by VBS in itsattempts to secure deposits wasBrian Shivambu, brother of EFFdeputy president Floyd Shirambu. The EFF and Floyd Shivambu had not responded torequests for comment byWednesdaynight.