Blow for KPMG as former partner fingered for VBS Bank fraud

The report into VBS Bank has found that former KPMG partner Sipho Malaba knew the bank was R1 billion in the red, but nevertheless signed off on VBS’s financials and pocketed roughly R28 million.

The report has recommended that the embattled audit firm, which was left reeling after its discredited investigation into the so-called Sars “rogue unit”, be held liable for damages incurred by the VBS curator, National Treasury and the Prudential Authority.

Advocate Terry Motau recommended that Malaba face criminal charges, saying he defrauded the SA Reserve Bank.

He also called for charges against the bank’s former executives and at least 50 individuals who benefitted from the looting at the bank, including the executives of Vele Investments, its largest shareholder.

The report’s allegations against Malaba are damning: “Malaba had obtained very substantial facilities from VBS which cannot be regarded as arm’s length borrowings and were not declared to KPMG. He gave an unqualified audit opinion in circumstances where he knew the financial statements were misstated. He also gave regulatory audit opinion which he knew to be false.”

The benefits extended to Malaba included an overdraft of R11 million and a bond of nearly R8 million, of which little was repaid.

The report further found Ihaawi Lesizwe Trading (ILT), a company owned by Malaba’s wife, Jacqueline, was granted a R2 million overdraft, which was gradually increased to R11 million.

Motau believes Malaba intentionally manipulated the VBS audit to conceal irregularities, while fraudulent deposits were used to siphon more than R1 billion out of the bank.

He allegedly overlooked the bank filing fraudulent monthly and quarterly reports to the Prudential Authority, which allowed it to skirt oversight of its risk profiles.

“I have already reached the conclusion that Malaba was aware there was a cash hole when, on July 17 2017, he gave his audit opinion in respect of the annual financial statements,” Motau wrote in the report. “I accordingly find Malaba committed fraud by approving and signing the … DI 100 return for the month ended March 31 2017.”

Motau has advised that the National Prosecuting Authority’s Asset Forfeiture Unit step in to recover some of the assets.

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