South Africa should seek damages from global auditor KPMG for the role it played in a corruption scandal that saw at least R1.9 billion ($130 million) stolen from local bank VBS, a central bank investigation published on Wednesday said.
The probe, carried out by a team of lawyers and forensic investigators on behalf of the South African Reserve Bank (SARB), is the latest headache for KPMG, which has lost more than a dozen clients as questions have been raised about its ethical conduct in the country.
The SARB commissioned the investigation into VBS after it was placed under curatorship in March.
KPMG, which audited the bank’s financial results, said it had noted the investigation’s publication. Earlier this year it announced changes to its corporate governance to try to restore the reputation of its South African business.
“We will only be in a position to comment once we have studied the full contents of the report,” the auditor said in an e-mailed response to questions.
KPMG South Africa has already cut jobs and lost business over work done for a company owned by the Gupta family, friends of scandal-plagued former president Jacob Zuma, who were accused of unduly influencing the award of billions of rand in government contracts. Zuma and the Guptas deny wrongdoing.
Advocate Terry Motau, who led the VBS probe, recommended that criminal charges be brought against the more than 50 individuals and entities who orchestrated and benefited from the VBS theft.
His investigation report, entitled “The Great Bank Heist”, was published by the SARB on its website, an unusual step which suggests the regulator wants action to be taken on its findings.
“I recommend further that an auditor’s liability claim be instituted by the Prudential Authority, the curator and National Treasury against KPMG for recovery of their respective damages,” Motau wrote in the report.
He did not specify how much money the state should seek in damages from KPMG.
Two KPMG partners who had dealings with VBS, Sipho Malaba and Dumi Tshuma, resigned after failing to disclose financial interests in VBS.
Motau said the scale of the looting from VBS would not have been possible had KPMG not signed off on the bank’s financial results.
“Malaba was aware that there was a cash hole when, on 17 July 2017, he gave his audit opinion in respect of the annual financial statements for the year ended 31 March 2017,” he wrote in the report. “I accordingly find that Malaba committed fraud.”
Malaba did not respond to a request for comment sent via his LinkedIn social media account. During the investigation, Malaba blamed failures in the VBS audit on another auditor and said he could not be held responsible for reckless lending by VBS, according to Motau’s report.
The VBS saga has prompted a public outcry in South Africa partly because many municipalities had deposits with the bank.
Motau’s probe found that VBS actively sought to attract deposits from municipalities and other state entities and that bribes were paid to solicit the money. Bribes were also paid to people who became aware that money was being stolen for them to keep silent, it also found.
The finance ministry, which placed the bank under curatorship, did not immediately respond to a request for comment on Motau’s findings.
VBS was also in the spotlight when it gave Zuma a 7.8 million rand loan to reimburse the state for upgrades to his personal home.