Two former Public Investment Corporation (PIC) officials who received millions to keep mum about the insatiable looting at the now-defunct VBS Mutual Bank have been declared delinquent directors by the Pretoria High Court.
The court order seen by Moneyweb was handed down on August 20 in favour of the PIC against its former executive head of legal Ernest Nesane and executive head of risk and compliance Paul Magula.
The news comes as the PIC’s interim board work’s to restore the institution to its former glory.
In a statement sent out on Monday the interim board welcomed the court’s decision saying it would send out “an important message to all directors to take their fiduciary responsibilities seriously and emphasises the point that unethical behaviour on the part of leadership should not be without consequences”.
Nesane and Magula served as the PIC’s delegated directors on the board of VBS until the bank was placed under curatorship by the South African Reserve Bank (Sarb) in March 2018.
The PIC manages R2 trillion in funds, mainly on behalf of the Government Employees Pension Fund (GEPF), and owned 26% of VBS through the GEPF.
The PIC had invested R180 million in VBS and lent it R350 million as part of a revolving loan facility.
Deployments were strategic
Former PIC CEO Dan Matjila earlier told the PIC Commission of Inquiry that VBS was not the institution’s largest investment, but that it had plans to grow the bank into “something significant”, which is why it deployed its most senior executives to drive the strategy.
But instead of driving the growth of the bank, Nesane and Magula were found to have been part of a group of 53 individuals – including the bank’s executives, directors and auditors, as well as politicians – who drove the bank into the ground, leaving it “hopelessly insolvent” after raiding it of just under R2 billion.
Sarb Deputy Governor Kuben Naidoo appointed advocate Terry Motau to conduct an investigation into the affairs at VBS ,which included interviewing both Magula and Nesane.
From denials to confessions
In his report, Motau said both men began with strenuous denials of any involvement in the criminality at the bank but eventually admitted to receiving bribes of over R7 million each to “buy their silence”.
A report by Daily Maverick revealed that an ancillary report to Motau’s Great Bank Heist linked bribes of at least R16.4 million to Nesane and R12.89 million to Magula.
Nesane resigned two days after confessing to Motau’s investigators, while Magula was dismissed by the PIC after being found guilty of incompetence through a disciplinary process.
When Magula appeared before the PIC commission he attempted to distance himself from the pillaging of municipal, stokvel and pension funds at VBS, despite having admitted to Motau’s investigators that there was “no lawful cause” for the payments made to him by VBS.
“I have never participated in any illegal, fraudulent activities during my tenure as a VBS board member,” he told the commissioners.
“Some of the things like fictitious deposits, fraudulent withdrawals, bribes etc. that are said to have happened at the VBS I got to know about when I went before the prudent authority’s [sic] forensic investigators,” he added.
The court order is a continuation of the steps the PIC vowed to take against the two officials in a statement in October 2018 when the report was released revealing the extent to which they had been complicit in VBS’s demise.
Nesane and Magula have also been debarred from the financial services sector by the Financial Sector Conduct Authority after they were found to be unfit and improper in terms of the standards of the Financial Advisory and Intermediary Services Act.