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KPMG clears out top leadership over Gupta scandal

Firm’s CEO apologises, says will donate R40 million in fees earned from Gupta account to charity.
KPMG's incoming CEO Nhlamu Dlomu says the firm has fallen short of the standards it set for itself. Picture: Moneyweb

Global auditor KPMG cleared out its South African leadership on Friday after damning findings from an internal investigation into work done for businessmen friends of President Jacob Zuma.

KPMG’s investigation into its work for the Guptas, accused by a public watchdog of improperly influencing government contracts, did not identify any evidence of illegal behaviour or corruption. But it did find that work done for Gupta family firms “fell considerably short of KPMG’s standards”, the auditor said in a statement.

It became the third global firm to be damaged by work carried out for the Indian-born brothers, after public relations agency Bell Pottinger – whose British business collapsed this week – and consultancy McKinsey.

Both Zuma and the Guptas deny wrongdoing and say they are victims of a politically motivated witch-hunt. The Guptas and their companies have not been charged with any crime, but the scandal is one of many that have dogged the Zuma presidency.

“This has been a painful period and the firm has fallen short of the standards we set for ourselves, and that the public rightly expects from us,” KPMG’s new South African CEO Nhlamu Dlomu said.

“I want to apologise to the public, our people and clients for the failings that have been identified by the investigation.”

KPMG said it would donate the R40 million  ($3 million) it earned in fees from Gupta-controlled firms to charity and refund 23 million rand it earned compiling a controversial report for the South African tax service.

South African chief executive Trevor Hoole, chairman Ahmed Jaffer, chief operating officer Steven Louw and five senior partners all resigned.

“I absolutely understand that ultimate responsibility lies with me,” Hoole said in a statement.

KPMG is also seeking to take disciplinary action to dismiss Jacques Wessels, the lead partner on audits of Gupta-linked firms, it said. Wessels did not answer a call to his mobile phone seeking comment.

Andrew Cranston, former CEO of KPMG in Russia, has been appointed as interim chief operating officer.

Mmusi Maimane, the leader of the opposition Democratic Alliance, called for a criminal probe.

“While I welcome these resignations, anyone who is involved in state capture must be criminally prosecuted,” said Maimane, using a term denoting illicit outside influence on government decision-making.

“KPMG must be subject to a full investigation both locally and internationally,” he told Reuters.

The audit firm is still under investigation by South Africa’s IRBA, the auditors’ regulatory body. Its lightest sanction is a caution or reprimand; the heaviest would be removal from the auditors’ register, which would have a devastating impact on KPMG’s African business.

‘Good riddance’

The three Gupta brothers, Atul, Ajay and Rajesh, came to South Africa in the early 1990s and built a commercial empire stretching from computers to mining and media.

The family has employed Zuma’s son Duduzane as a director of one of its subsidiaries. The brothers have rejected the public watchdog’s accusations of corruptly influencing Zuma.

The turmoil at KPMG follows the placing into administration of the British arm of Bell Pottinger on Tuesday, after clients deserted it because of a backlash over a racially charged political campaign it ran for the Guptas.

Global consultancy McKinsey is also being investigated by South Africa’s parliament over whether it knowingly let funds from state power utility Eskom be diverted to a Gupta company as a way of securing a $78 million contract to advise Eskom.

McKinsey is carrying out its own investigation, but has denied wrongdoing.

The Gupta scandals have piled pressure on Zuma and opened a deep divide in the ruling African National Congress, the party that has ruled since Nelson Mandela swept to power at the end of apartheid in 1994. It is due to elect a new party leader in December.

David Lewis, chief executive of Corruption Watch, an NGO that has been at the forefront of efforts to expose alleged wrongdoing by the Guptas and those around them, said he doubted that KPMG had really turned over a new leaf.

“Good riddance – it’s great they’ve gone,” he said. “But it’s got to go to the culture of the firm, quite frankly. I doubt that people of that seniority were conducting themselves in a manner that doesn’t reflect the culture of the firm.”

($1 = R13.19) 

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A friend of mine worked at KPMG and he told me that before every job, they had to fill in “these stupid client take-on forms” which took hours and was laborious. Supposedly this helped the firm to determine if a client was a risk or not. I guess then that the Gupta form slipped through hey? Naahh even if there was a risk, the prospect of charging billable hours squashed any objections they might have had about the Guptas. At the end of the day, it is all about billable hours and partner profits. That is the only thing that matters. Ask me I know.

So true.

The loss of these CASAs: couldn’t have happened to a nicer bunch of people.

Now where are those pillars of society, SAICA and the IRBA? Yep boys those ethical claims are just propaganda. Maybe time to rethink (yet again) your training and education.

PS: do not believe this is only KPMG.

How does a CA change a lightbulb?
Very simple, he just inserts the bulb and holds it still – he doesn’t have to turn it because the world revolves around him.

Brilliat Bruce

No Jnrb, rather ”ask me I know”!

is this an ethical gesture, acknowledgement of wrong doing? Is there any criminality involved?

KPMG has taken a good remedial action.

There should be full disclosure of a) partners in crime at SARS and government b) monies exchanged c) all underhand dealing they a privy to.

reading latest news, reports etx. it seems they can be criminally charged. they however created allot of damage already.

My views (based on reports in the public domain)

Will KPMG also repay shareholder that lost billions in the Kebblegate and Investecgate sage?
I don’t think this could have happened to a nicer company in SA now.

JCI’s latest ‘’Group Financial Statements’’ were not compliant with the law as they were not prepared according to International Financial Reporting Standards (IFRS) or in accordance with the Companies Act.
The document did not contain a Statement of Financial Position or a Statement of Comprehensive Income, instead it contained what it called a Group Statement of Net Assets.

Investec and especially KPMG must now start realising that the Randgold minority shareholders (which was delayed for many years by them) must now be very close to ‘’their day in court’!

I think the minority shareholder should first go after the KPMG auditors that worked on the JCI audit!

The KPMG bureaucracy must come to an end now!

‘’Guidelines for bureaucrats: When in charge; ponder; when in trouble; delegate: When in doubt; mumble’’ James Boren (1925)

Just pay up R40 million and everything is forgotten and forgiven?

Sorry, in this line of business the only fix is to close down.

Surely, the correct thing to do by law, if KPMG “has fallen short of the standards we set”, is to advise relevant authorities such as SARS of these shortcomings, and of the parties that unduly benefited from these ‘shortcomings” in order for them to be rectified?
Or can we all now go a cheat and stel, and afterwards make a ‘donation’ that is probably not even 10% of the total revenue over the past 10 years from the Gupta firms, and all is forgotten?
I would have much had much more respect if they made a statement that they will assist the relevant authorities in rectifying the ‘shortcomings’ in order for the country/state to get 1. Greater clarity and 2. justice.
At least I know of 2 companies that have started to cut ties with the ‘auditing’ firm

All companies and individuals should cut ties with this lot.

My question. Is SARS now going to start a witch hunt into every client of theirs?

the fall out is going to be huge and ugly. maybe the Zupta gang that started this should have thought about the unintended consequences.

People need to clear out top consultancy firms for their disingenuous dealings.

How can an apology, R63m and firing a few ever be enough? Do these people realise the devastation that has taken place? Do they realise the impact on the SA economy? Do they realise they were enablers? Are there any attorneys out there to take on mass litigation at risk? What is IRBA & SAICA public statement? Who is going to ask SARS for a statement? Will they even tell the truth about what really happened? Surely we are entitled to who told what to say in that SARS report? SA is bleeding and 9 people take the fall? I have so many choice words but try and contain myself.

http://www.gaaaccounting.com/a-new-auditor-liability-regime-for-south-africa
“Section 19 (3) of the Companies Act 71 of 2008 has the impact of ensuring that audit firms and auditors in South Africa operate as unlimited liability companies in which all assets of the auditing firm, as well as personal assets of the partners/proprietor, are at risk if the firm were found to be liable in a court of law. Steven Louw of KPMG states: “In respect of a partnership this has the effect that a “rogue” auditor can bring down not only an entire firm but an entire firm network, as innocent partners are held accountable for the actions of guilty colleagues”
Wonder why KPMG wanted this section changed?

What I find really interesting is that nobody has turned their attention to the Gupta’s current auditors, SizweNtsalubaGobodo. How are they ethically continuing their relationship with the Guptas while all of this is coming out?

Its called money $ $ $ $

A shocking indictment on the state of ethics in the sa business world. KPMG is a top 4 auditing & accounting everywhere in the world. The “PM” in its name stands for “Peat Marwick” that set the standard for auditing standards after WW2. There is no doubt that greed & corruption played a massive part in this disaster for the country. Each & everyone of its partners should be sued for the damage the firm caused. They should be struck off the list of registered auditors. Guess what – nothing will happen!

KPMG clears out in Pravin Gordhan and SARS setting up a spy unit for spying on politician.

End of comments.

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