KPMG admits partners took undisclosed loans from VBS

And ‘misled’ the firm when questioned about relationship.
The audit firm has committed to a large scale review of hundreds of files going back as far as 24 months. Picture: Reuters

KPMG South Africa on Sunday admitted that senior partners Sipho Malaba and Dumi Tshuma had misled them with respect to their relationship with VBS Mutual Bank. The audit firm that is still reeling from accusations around its “false” Sars rogue report, and the nature of work done for the Guptas, admitted that loans made to Malaba and Tshuma by VBS Mutual Bank had not been disclosed, and that the two men had attempted to mislead KPMG on the nature of the relationship when questioned regarding it.

KPMG did not disclose the terms of the loans made to Malaba and Tshuma by VBS Mutual as it had not yet established this.

Malaba was the engagement partner of the firm with VBS Mutual Bank and, as such, was responsible for conducting and signing off the audit. Malaba gave the bank an unqualified opinion when he signed off the annual financial statements to end March last year, in July (see below). The South African Reserve Bank placed VBS into curatorship four weeks ago, and announced the launch of a forensic investigation into the affairs of the institution on Friday.

Extracts of independent auditors’ report for VBS Mutual Bank, financial year ending March 2017

An investigation into the professional conduct of the two men was instituted by KPMG following a meeting with the curator of VBS Mutual Bank on March 27, this year. 

Both men resigned with immediate effect on Friday when presented with the disciplinary charges. Despite their resignation, the investigation by KPMG will proceed. “This has been a very disappointing episode for KPMG. There can be no tolerance, however, of any conduct that compromises our reputation and we have moved decisively to deal with the situation,” said KPMG South Africa CEO, Nhlamulo Dlomu. She added that the firm would not hesitate to inform law enforcement authorities should the need arise during the course of the investigation. 

Malaba was a member of KPMG’s executive committee, and was a senior partner for the work performed on a number of major audits of financial institutions that include Absa, Investec, Standard Bank and Nedbank. KPMG had not yet had the time to review the nature of his relationships with these institutions, but had been in touch with them to reassure them over the quality of those audits. 

The focus will now turn to whether Malaba and Tshuma were given loans on “soft” terms, whether they had in fact begun paying the loans back, and whether the quality of the audit had been compromised as a result of accepting the loans. 

KPMG is still reeling from accusations that it authored a report on a “rogue” unit of Sars for purely false and political purposes that gave President Zuma the basis with which to fire individuals he deemed as opposing his own nefarious aims. The firm was also embroiled in a scandal as the audit partner for the Guptas that saw money flowing from the Estina Dairy via Dubai and back into South Africa to fund the Gupta wedding in Sun City in 2013. 

Dlomu admitted KPMG had lost clients amounting to “less than 10%” of its client book as well as losing a number of partners that resigned to move on to other firms in the wake of the revelations that came to light in September last year. 

The firm will now undertake a review of hundreds of files going back as far as two years to reassure its clients of the quality of its audits. 


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and ZUMA said he is not the only one … … …

Just opnen (going back 14 years) the JCI Audit file as well !

I agree. In his book “The Kebble Collusion” Barry Sargeant devoted a whole chapter to the way in which this whole JCI/Rand Gold affair was handled by KPMG. At the time Danie van Heerden from KPMG described Barry’s book as “fiction riddled with inaccuracies”. If it were all lies and inaccuracies, why didn’t KPMG sue him and the publisher for defamation? Afterall, it is their professional reputation which was at stake here and they certainly had the means to do so. Is it perhaps because KPMG knew that witnesses would be called and undergo cross-examination and everything hidden will come to the fore?

What is the point? The IRBA does nothing, there is no criminal prosecution and no one goes to jail. The accounting profession carries on regardless.

Regulatory bodies are tied down by their mandates and relevant legislature which to a large extent leaves them with insufficient remedies in the case of large corporate scandals. Nonetheless civil and criminal remedies are available to affected shareholders. Criminal investigations are not likely to yield any results as our law enforcement does not have the necessary resources and/or skills. Thus civil action is route to follow however in South Africa this does not appear to be process that is appropriately spearheaded.

Kudos for the choice of the Reuters picture, including feral pigeons, to illustrate the piece.

Unfortunately this is the price you pay for BEE. Forcing those that don’t understand the protocol to take up positions of authority. It’s not fair on everyone involved.

Is that protocol large scale fraud and corruption whilst you occupy senior executive positions, as is the case in Steinhoff, JCI and Randgold (just to name a few that come to mind)?

@Bitiatus you can add African Bank, Fidentia, Resilient

A lot less to do with BEE and a lot more to do with KPMG corporate culture, or the corporate culture of all the big audit firms.

Move past the identity politics. There have been more than enough recent examples of “white” fraud – notably Steinhoff, perpetratred by white CA’s.

I am so fed up with everything being defined by skin colour, nationality sexual orientation or gender. People act corruptly because they are corrupt, not because they are black or male or gay.

@Mactheknife – your comment is so wrong and the fact that 19 people and counting support your statement is very disturbing. White colar crime has nothing to do with BEE as Batiatus and Shaokhan correctly point out.

Methinks you will have to go back to the biggest, un-prosecuted fraud in South African business history (some ZAR 35 billion) – the only reason why JCI and Investec so far got away with it, is because KPMG had to use their own ‘’shenanigans’’ – to cover it up!

In the process, you contravened a couple of acts – like the Companies Act and the FIC Act, by not publishing compliant signed off financial statements, for more than a decade on JCI the thief, and by not exposing the shocking money laundering that was done through brokers like T-Sec. Some Randgold minority shareholders to this day are trying to bring people like Investec to book.

Almost all this information has been out in the public domain for years, and methinks your inaction and shrewd tactics, accommodated JCI and Investec, which then kept the NPA, FSB, JSE etc., at bay…You are the real reason why people lost billions, and I for one, cannot wait for the wheel to turn…as people like Gold Fields bought the Western Areas toxic book, and lost millions. These guys will come after people like you, Investec and JCI.
KPMG, your incompetence and inaction allowed various ‘’delinquent directors’’ at Tsec, Investec, Randgold, JCI, Western Areas etc., to oversee and profit from the biggest unprosecuted fraud in SA history. These skeletons will remain in your cupboards, but they will eventually ‘’come out’!
I suggest you get one Danie van Heerden on the carpet as well – suspend him , and appoint forensic investigators to investigate the “TSec, Investec, JCI shenanigans starting some 15 years ago, with Brett Kebble!

PS: Barry Sergeant in detail gave his views in his Book ”The Kebble Collusion” – which has to be a very good reference pertaining to this!

KPMG should lose its FSB licence for operations in SA and be fined.

Am I a genius??? for saying “Follow the money”???
No, I am just a concerned investor who has learnt a lot in the past few years about business in the ‘new’ SA.

It was worse in the old SA. They traded with a government that ran a system declared a CRIME against HUMANITY.

The motion which the UN accepted to declare apartheid a “crime against humanity” was actually put forward by the then Soviet Union and many Western countries like the USA and the UK abstained from voting. Author Stéphane Courtois argues that Communism was responsible for the murder of almost 100 million people in the 20th century in its many dictatorial one-party states ruled by Communist Parties. These include forced relocations, labour camps, famines, purges and warfare resulting in deaths far in excess of previous empires, capitalist or other regimes. Of course, the Soviet Union had their own aims with Southern Africa in Angola and Mozambique, so I would take the whole “crime against humanity” thing with a pinch of salt.

In those days fewer people were doing it so that fewer organisations were brought down.

BEE at work again, people in positions called an ethnic appointment.

Really? Last I checked Trevor Hoole was white? So was Brown(Fidentia), Leon Kirkinis(African Bank), Marcus Jooste(Steinhoff) etc…what is at work in these cases?

I am referring to the two turkeys who have just resigned.

Instead of critiquing the issue at hand you critique the colour of the individuals. I’m sure you do the same about women as well and people with disabilities.

You are actually creating a very fertile ground for people like Juju to un/justifiably attack corporates and push a socialist pro-black agenda

It reaqlly is time for SAICA to step up to the plate. The CA(SA) brand has lost a lot of respect. Negligence in not picking up on the fraud of others – bad as it is is one thing – but this is just terrible.

There is nothing SAICA can do that will have a lasting difference. Real change has to come from customer/client activism. KPMG have only lost 10% of the clients despite numerous shortcomings in their ethics and professional competence. The real question is thus why have the audit and/or finance committees of their clients not considered terminating their appointment? Is it due to historic networks or the potential risk of of their own skeletons coming to light?

SAICA doesn’t care. The Ntsebeza Inquiry has yielded nothing thusfar apart from some spin produced by an unknown law firm. Members pay >R200m per year in membership fees. Where does it go? 90% (R180m) is used to fund bursaries, 3.5% (R7m) goes to the CEO’s pay packet and that leaves only 6.5% to deal with the real issues. Don’t believe me, see for yourself. Source: 2016 SAICA annual report (latest currently available)

KPMG clearly needs to work on their controls over acceptance of gifts and the like. How this kind of thing can go unnoticed is beyond me.

End of comments.





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