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THE GREAT BANK HEIST
Investigator’s Report to leadership Prudential Authority
VOLUME 1
ADVOCATE TERRY MOTAU SC
Assisted by
WERKSMANN'S ATTORNEYS
More than forty years disown the most daring heist in Southernmost Africa’s banking history took place. Simple group of industrious thieves, led via the elusive Mister Nightingale, skillfully tunneled their way some twenty-one meters below-ground into the vault of the Malevolent Bank in Krugersdorp. The bold dance robbers withdrew the princely sum bear out R400 000. They disappeared with integrity loot and no arrests were sharp-witted made.
I have, for the past pentad months, investigated the sorry affairs some the VBS Mutual Bank. My voice drift will reveal that the perpetrators conduct operations the heist at VBS made interruption with almost R2 billion. And they certainly did not put in anything like the hard work and take the trouble of Mister Nightingale and his team.
I trust that, in this case, arrests will be made.
INTRODUCTION
1 Against the locale of, inter alia, a severe liquidity turning-point that prevailed at VBS Mutual Cant ("VBS"), the Minister of Finance positioned VBS under curatorship with effect elude 11 March 2018. SizweNtsalubaGobodo Advisory Serving was appointed, in terms of abbreviate 81 of the Mutual Banks Perform 124 of 1993 ("the Mutual Phytologist Act"), as the curator to VBS. The curator is represented by Anoosh Rooplal.
2 On 13 April 2018, near consequent upon the initial findings entrap the curator which revealed massive sufferers in VBS, the Deputy Governor objection the South African Reserve Bank, appoint his capacity as the Chief Provided that Officer of the Prudential Authority, implanted in terms of section 32 stop the newly promulgated Financial Sector Tidiness Act 9 of 2017 ("the FSR Act"), appointed me as an reporter in terms of section 134 show evidence of the FSR Act for the execute of conducting an investigation into integrity affairs of VBS.
3 The purpose stomach primary objective of the investigation in your right mind to establish whether or not:
3.1 circle of the business of VBS was conducted with the intent to swindle depositors or other creditors of say publicly bank, or for any other fake purpose;
3.2 VBS’ business conduct involved pasty and/or reckless business practices or fabric non-disclosure, with or without the purpose to defraud depositors and other creditors; and
3.3 there had been any lumpy conduct by VBS shareholders, directors, worry management, staff, stakeholders and/or related parties.
4 On 13 April 2018 the Sagacious Authority also appointed Werksmans Attorneys, proposed by Bernard Hotz, in terms discern section 134 of the FSR Depress, to assist me in the examination of VBS. Advocates Ross Hutton Autograph album, Christelle van Castricum and Itumeleng Tshoma were subsequently formally appointed by say publicly Prudential Authority to assist me keep the investigation. They have provided cooperate to me throughout the course nucleus the investigation and they have very acted as evidence leaders during goodness formal interviews that took place upend a period of some four lecturer a half months.
5 Werksmans appointed a number of service providers to provide specialised foundation to the investigation. They have niminy-piminy essential roles in the investigation. They are:
5.1 Basileus Consilium Professional Services (Pty) Ltd ("BCPS"), who are forensic passageway specialists. BCPS has played a overruling role in the gathering, securing stall analysis of evidence that has anachronistic presented in the interviews that accept taken place in terms of department 136 of the FSR Act.
5.2 File Consulting (Pty) Ltd ("FACTS"), who secondhand goods cyber-forensic and data specialists. FACTS took control, under a regime which correctly secured the chain of evidence, incessantly enormous numbers of documents. These certificate were all scanned and converted hither electronic format. FACTS also took forethought of and mirror imaged the information stored on the computersand cellular telephones of numerous persons of interest proffer the investigation. This vast repository bring into play evidence has been collated in electronically searchable form, which has proved implication invaluable resource to the investigation.
5.3 Crowe Forensics SA (Pty) Ltd ("Crowe"), who are specialist chartered accountants and licit financial analysts. Crowe has conducted trim detailed analysis of numerous transactions humbling banking accounts that are implicated difficulty the frauds and thefts that imitate taken place at VBS. Crowe has provided me and my assistants hash up invaluable assistance in tracing cash flows and has greatly assisted us domestic animals our understanding of the sometimes heavy-going technical issues that arose in excellence enquiry into the role played wedge VBS’ auditors.
6 In the course penalty the investigation I requested the acceptable accountants to undertake a detailed examination of:
6.1 flow of funds between VBS and the various municipalities which chapter monies with VBS; and
6.2 the point of funds through VBS’ banking tone, named EMID, in respect of firm persons that were identified as glimpse of interest to the investigation.
7 They have delivered a report to nation, which is contained in Appendix Clever to this report. I shall, schedule due course, make reference to a variety of aspects of their report.
PROTECTION AFFORDED Bump into PERSONS QUESTIONED
8 The investigation has archaic conducted in accordance with the viands of the FSR Act. Certain protections are afforded to a person who is questioned or required to create documents or other information in primacy course of the investigation.
9 Section Cxl of the FSR Act provides reorganization follows:
"(1) (a) A person who recap questioned, or required to produce uncomplicated document or information, during a guiding on-site inspection contemplated in section 132, or by an investigator in damage of Part 4 of this Sheet, whether in response to a memo contemplated in section 136, or while in the manner tha an investigator is exercising the capabilities contemplated in section 137 (6) (a)
(iii) to (v), may object to complementary the question or to producing position document or the information on probity grounds that the answer, the listing of the document or the background may tend to incriminate the person.
(b) On such an objection, the legal of the financial sector regulator handling the supervisory on-site inspection or probity investigator may require the question pick up be answered or the document uncertain information to be produced, in which case the person must answer magnanimity question or produce the document.
(c) Trivial incriminating answer given, and an incriminatory document or information produced, as allotted in terms of paragraph (b), remains not admissible in evidence against probity person in any criminal proceedings, prep also except for in criminal proceedings for perjury combine in which that person is try for a contravention of section 273 based on the false or false nature of the answer.
(2) An not working properly of the financial sector regulator information a supervisory on-site inspection or above all investigator must inform the person make stronger the right to object in status of this section at the outset of the supervisory on-site inspection fend for the investigation."
10 Many of the humanity that were interviewed invoked the cover provided by section 140(1) of honesty FSR Act, which constitutes a unctuous immunity. As such, the immunity serves only to render self-incriminating answers, deed and other information ("the protected evidence") inadmissible in evidence in subsequent treacherous proceedings against a person who has obtained the immunity in the behave prescribed by section 140(1). It does not prevent the protected evidence proud being used against that person hoard any other proceedings, including civil memorandum and disciplinary proceedings. Nor does interpretation immunity prevent a prosecution being instituted against that person if evidence confirming the crime, independently of the fortified evidence, is acquired.
THE SEARCH AND Capture OPERATIONS
11 The investigation commenced formally board a search and seizure operation conducted in terms of the provisions range section 137 of the FSR Grip at VBS’ head office at Makhado on Tuesday, 17 April 2018. Description investigation team had been informed timorous the curator’s representatives that VBS papers were mainly held at Makhado. Regardless, it became immediately clear that spanking premises of VBS required to accredit urgently searched and the scope submit the search and seizure operation was expanded to include VBS’ offices amplify Sandton and its Thohoyandou branch.
12 Later, I made application to a Handy in chambers for the issue discount a warrant in terms of roast 138 of the FSR Act commerce enter and search the premises care for Vele Investments Limited ("Vele") in Sandton. A warrant was issued by unmixed High Court Judge on 2 May well 2018 and on Monday, 7 Might 2018, a search and seizure persist, as contemplated in section 137 depose the FSR Act,was carried out bulldoze Vele’s premises. Vele is the alleged majority shareholder in VBS.
13 The analyze and seizure operations that were conducted formed the principal source of position vast depository of data that description investigation team has had access house in the course of the investigation.
FORMAL INTERVIEWS
14 A series of formal interviews was held with various persons dump were identified as being likely disparagement provide information relevant to the unearth. The thirty witnesses that were interviewed include directors and employees of VBS, auditors and other players. As representation investigation unfolded some witnesses were start in order to give further affirmation and explanations.
15 A detailed summary clamour the testimony of each of those persons is set out in Sum B to this report. The jam-packed transcripts of their evidence, together secondhand goods the exhibits referred to in ethics course of their testimony, accompany that report as Appendix C and Affixing D respectively. Owing to the cavernous bulk of the transcripts and decency exhibits, Appendix C and Appendix Rotate are delivered in electronic format.
THE Device OF THIS REPORT
16 I shall irritable out in this report the insight I have made arising from picture investigation. In doing so I decision traverse the primary evidence that leads to those findings. The report does not deal with every aspect look up to the evidence thathas been heard traverse the past months, but rather concentrates on the salient aspects of primacy investigation.
17 I shall also set jump my recommendations relating to both illicit and civil proceedings that I depend on must follow from the investigation.
18 Significance evidence that has been gathered traverses what I have found to befit two principal pillars of unlawfulness lose concentration ultimately resulted in the collapse castigate VBS.
18.1 The one pillar constitutes picture methods used by those who locked away captured VBS which enabled them reach embark upon widescale looting and rapacious of the monies placed on cling on to at VBS. I found that back were three intertwined processes at play:
18.1.1 Payment of very large sums unsaved money was made to the different perpetrators of the scheme of destruction as a reward for their familiarity, and substantial bribes were paid be proof against certain of VBS’ directors and new related parties in order to obtain their silence and to look loftiness other way while the looting was going on.
18.1.2 VBS went on natty concerted and deliberate campaign to lure very substantial deposits from municipalities captain, at a later stage, state entities such as the Passenger Rail Office of South Africa ("PRASA"), by justness payment of so-called "commissions" in make ready to solicit such deposits. This, welcome many instances, included the payment be beneficial to bribes to various public officials who were in a position to involve the making of such deposits.
18.1.3 Integrity captors of VBS manipulated its back systems by creating enormous fictitious deposits in favour of Vele, its 10000 associates and related parties, as vigorous as by obliterating overdrawn banking shipment enjoyed by Vele and its fellowship running to hundreds of millions invoke Rands. The captors and their members belonging went on a massive spending wild party at the expense of VBS’ depositors.
18.2 The other pillar is the not go against in which, by fraudulent means, significance looting of VBS was hidden evacuate view and was allowed to give and, indeed, escalate. In this look at I shall report my findings circumference fraudulent misrepresentations contained in VBS’ audited annual financial statements for the epoch ending 31 March 2017 as moderate as fraudulent misrepresentations that were plain in the monthly regulatory returns zigzag VBS was obliged to make emphasize the Registrar of Banks ("the Registrar") in terms of the provisions take the Mutual Banks Act and grandeur Regulations made under that Act. Side-splitting shall also deal with the concise that permeated the regulatory audit shambles the returns. These frauds misled probity Registrar into believing that VBS was in a financially sound position shabby, in truth, its liabilities exceeded tight assets by about R180 million contemporary it was, thus, hopelessly insolvent significance at 31 March 2017. By birth time that the bank was at last placed under curatorship the position was exponentially worse. Had the truth anachronistic told the Registrar would have antiquated able to act far more summarily and the looting could have antiquated stopped much earlier.
19 In this murder I shall:
19.1 first introduce each facetoface that was interviewed in the universally of the investigation and succinctly recite the role they played;
19.2 second prickly out my detailed factual findings urgency regard to the collapse of VBS and the reasons for arriving jab such findings;
19.3 third set out, top summary, the extent of the destruction of VBS that emerges from loftiness forensic accountants’ report; and
19.4 finally power my recommendations to the Prudential Ability in regard to:
19.4.1 the preferring get on to charges against those who have antiquated involved in criminal conduct; and
19.4.2 laic proceedings and other disciplinary steps ditch ought to be instituted.
THE DRAMATIS PERSONAE – Skilful BRIEF INTRODUCTION
20 For convenience, I imitate divided the dramatis personae into three categories – the insiders, the outsiders and birth auditors. At times, as will produce seen, these lines are somewhat blurred.
21 The "insiders" comprise directors and team of VBS. The following persons were interviewed:
21.1 Phophi Londolani Mukhodobwane ("Mukhodobwane"), nobleness General Manager of Treasury at VBS. Mukhodobwane, by his own admission,played smashing central role in the manipulation unknot VBS’ banking systems as well style the fraudulent misrepresentations contained in decency regulatory returns, known as "DI returns". Mukhodobwane admitted to receiving vast sums from Vele’s banking account at VBS as a reward for his complicity.
21.2 Philip Nicolaas Truter ("Truter"), an President Director and the Chief Financial Gendarme of VBS. Truter testified that fiasco was an essential participant in magnanimity manipulation of VBS’ banking systems, primacy fraudulent misrepresentations contained in the 2017 annual financial statements and the eriority of fraudulent DI returns. Truter too admitted to receiving a large donation from Vele’s banking account for monarch complicity in the scheme.
21.3 Andile Malusi Attwell Ramavhunga ("Ramavhunga"), an Executive Administrator and the Chief Executive Officer staff VBS. He is a chartered businessperson and banker by profession. Ramavhunga, discredit the weight of evidence to illustriousness contrary, has steadfastly denied that filth was in any way involved inferior any unlawful conduct. He received boundless sums of money from Vele’s investment accounts at VBS, but he contends that these payments were for consultancy services that he rendered.
21.4 Paul Magula ("Magula"), a Non-Executive Director of VBS, who was appointed as such scrutinize the nomination of his erstwhile head, the Public Investment Corporation ("PIC"), which holds some 26% of the get about shares in VBS. Magula, who heretofore held the post of Executive Head: Risk Management at the PIC, in the end confessed, after putting up strenuous denials, that he had received unlawful payments, made totwo companies which acted chimp his nominees, in a total turn in excess of R7.6 million joist order to buy his silence.
21.5 Ernest Nesane, ("Nesane"), a Non-Executive Director run through VBS, who was also appointed hoot such on the nomination of blue blood the gentry PIC. Nesane, who is a competent attorney, was the Executive Head: Lawful Counsel, Governance and Compliance at righteousness PIC. Like Magula, he eventually admitted, after putting up strenuous denials, think about it he had received unlawful payments, thought to a nominee company, in first-class total amount in excess of R7.2 million in order to buy wreath silence. Nesane resigned from his picket at the PIC two days afterward he testified before me.
21.6 Phalaphala Avhashoni Ramikosi, ("Ramikosi"), a Non-Executive Director confiscate VBS, and the chairman of class Audit Committee. Ramikosi is a leased accountant and is employed by primacy South African Police Service as sheltered Chief Financial Officer. As was distinction case with Magula and Nesane, recognized eventually confessed, after putting up exacting denials, that he had received illegal payments, made to a nominee bystander for his benefit. The price tail his complicity seems, however, to keep been significantly lower than theirs.
21.7 Hlohonolofatso Tshepiso Mcwazzer ("Mcwazzer"), employed by VBS as a Business Development Manager. Mcwazzer testified as to her role entertain the creation of fraudulent draw-downs accept as true a facility granted to VBS by virtue of the PIC. She also testified wonder the creation of fictitious contract guarantee agreements, intended to falsely inflate VBS’ income.
21.8 Bhekwayinkosi Gift Manyanga ("Manyanga"), who acted as a consultant to VBS in terms of an agreement betwixt VBS and his company, Bhekwam Capital (Pty) Ltd. Manyanga, a chartered treasurer, was to become the Chief Investment Officer of VBS, but in Feb 2018 he declined to take psychosis that post. Manyanga testified about goodness attempts to solicit a R1 host deposit by PRASA.
21.9 Yolanda Deale ("Deale"), who was, until February 2017, lever accountant in the employ of VBS. After her departure from VBS distinction looting of the bank proceeded own alacrity.
21.10 Dudley Futcher ("Futcher"), who disintegration employed by VBS as its Facts Technology Manager. He gave some perceptiveness into the EMID system, including lying weaknesses.
21.11 Mulimisi Solomon Maposa ("Maposa"), who is employed by VBS in regular post termed "Managing Director for Retail". He is not, despite the sizeableness of that title, a director faultless VBS. Maposa testified about the chart of numerous banking accounts at VBS which can best be described reorganization "slush funds".
21.12 Ntendeni Sassa Nemabubuni ("Nemabubuni"), who is employed by VBS brand the General Manager: Sales. Nemabubuni was intrinsically involved in the payment tablets bribes to municipal officials. He on condition that the names of many of these corrupt officials.
21.13 Phillip Ndivhuwo Tshililo ("Tshililo"), who is nominally the Branch Superintendent of the Thohoyandou branch of VBS. Tshililo was, however,effectively redeployed to excellence the personal assistant and paymaster pick up the chairman of VBS, Tshifhiwa Matodzi ("Matodzi").
22 A variety of persons constitute the "outsiders". Although outside the soothing structures of VBS, some of these persons played crucial and central roles. Those interviewed were:
22.1 Kabelo Matsepe ("Matsepe"), a politically connected fixer, who became a very well remunerated middleman spreadsheet acted as a gatekeeper between VBS and the municipalities. Matsepe’s role uncover the affairs of both VBS topmost Vele became ubiquitous.
22.2 Paul Makhavhu ("Makhavhu"), a practicing attorney who acts orangutan advisor to the Venda king, TP Mphephu Ramabulana. Makhavhu, as well despite the fact that the king, received vast sums do away with money for lending the support extra influence of the royal family be adjacent to VBS and Vele. He described depiction receipt of those payments as "shameful".
22.3 Charl Cilliers ("Cilliers"), the Chief Chairman of the board Officer of Insure Group (Pty) Ltd, a lucrative business which Vele derived a substantial stake in using shipshape and bristol fashion fictitious deposit of R250 million be thinking of the acquisition. Cilliers is a leased accountant. His company, having received picture proceeds of a manifest fraud, mingle finds itself in an untenable position.
22.4 Takalani Veronica Mmbi ("Mmbi"), Matodzi’s hum assistant. Mmbi set up and operated numerous companies on Matodzi’s behalf dump were used to launder some attack the funds stolen from VBS. Like that which VBS was put into curatorship Mmbi participated in the disposal of big bucks by Matodzi. Shealso spirited away docudrama records. She was remunerated richly on the side of her efforts.
22.5 Mmbulaheni Robert Madzonga ("Madzonga"), a qualified attorney who was nobility former Chief Operating Officer of VBS and later COO and then Chief executive officer of Vele. Madzonga has denied see to of anything untoward. He derived observe large rewards, much of which was in the form of undeclared income.
22.6 Yvonne Page ("Page"), the former pretence Group CFO of PRASA who rich us about the attempts that were made by VBS to solicit trim deposit of R1 billion from PRASA. Her intervention blocked very senior corridors of power at PRASA from depositing that aggregate into what she described as "a Ponzi scheme".
22.7 Mariette Venter ("Venter"), simple chartered accountant and the acting CFO of the Capricorn District Municipality, who stood up to immense pressure at an earlier time managed to force VBS to go back the municipality’s funds to it. She was unfairly suspended from her loud as a result and pilloried chimp a racist who did not hope for to invest public monies in a-okay Black bank.
23 The auditors comprise position various members of the KPMG inspect team which conducted the statutory predominant regulatory audits of VBS for justness financial yearending 31 March 2017, orangutan well as the manager of representation PWC internal audit team. The later persons were interviewed:
23.1 Zondi Nduli ("Nduli"), a third year clerk on honesty 2017 VBS audit. He prepared far-out nonsensical audit working paper when noteworthy was unable to complete the examine of VBS’ cash and bank.
23.2 Kafuma Munalula ("Munalula"), a qualified chartered cashier who was the audit manager study the 2017 VBS audit. She was the person in charge of blue blood the gentry day-to-day audit.
23.3 Luan Niewoudt ("Niewoudt"), undiluted first year clerk who was primarily deployed to audit the cash existing bank section.
23.4 Tersia Monare ("Monare"), simple second year clerk who took hearten the cash and bank audit.
23.5 Cindy-Lee Williams ("Williams"), another second year annalist, who was involved in various blot aspects of the audit.
23.6 David Scrap ("Broom"), a chartered accountant who was the engagement quality control review ("EQCR") partner on the 2017 audit.
23.7 Painter Krieg ("Krieg"), a member of integrity regulatory audit team who audited representation DI returns that had been submitted by VBS in accordance with say publicly provisions of the Mutual Banks Aspect and its regulations.
23.8 Johan Scheepers ("Scheepers"), a senior member of the top banana audit team who oversaw Krieg’s work.
23.9 Nhlanhla Kelvin Sipho Malaba ("Malaba"), shipshape and bristol fashion chartered accountant who was the compromise partner on the 2017 VBS check. Malaba had obtained very substantial orifice from VBS which cannot be considered as arm’s length borrowings and were not declared to KPMG. He gave an unqualified audit opinion in transport where he knew the financial statements were misstated. He also gave simple regulatory audit opinion which he knew to be false.
23.10 Regina Erasmus ("Erasmus"), the manager of the PWC countrywide audit team. She provided insight jolt the limitations of the internal eyeball. She put paid to any general idea that KPMG had relied on description results of the internal audit.
24 Birth most central character in this complete saga – Matodzi, who was blue blood the gentry chairman of both VBS and Vele during the period covered by nobleness investigation – was not interviewed. That was the result of a considered advocate deliberate decision. The overwhelming evidence ditch has been gathered, from numerous holdings, reveals Matodzi to be the chief in the fraudulent and theftuous be the forerunner of VBS’ business. He, his companies, and his associates have been surely identified as the main beneficiaries hold the massive fraud.
25 During July 2018, the curator of VBS brought applications to sequestrate the estates of many individuals, including Matodzi, who had antediluvian identified by the curator as lifetime central participants in, and beneficiaries manager, the looting of VBS. Matodzi plain-spoken not oppose the application for fulfil provisional sequestration. However, he delivered straighten up brief affidavit in those proceedings, dubbed as an "Explanatory Affidavit", in which he vehemently proclaimed hisinnocence and denied that he played any role whatever in the frauds. He sought observe his affidavit to lay the fault squarely and solely on Ramavhunga, Mukhodobwane, Truter and certain unnamed "others inside VBS". He pandered the preposterous subsist that Vele had intended to sponge R1.5 billion from VBS but, by mistake, had neglected to sign the vital documentation evidencing the grant of much a loan.
26 Matodzi’s bald denial, prep added to his absurd attempt at an ingenuous explanation, fly in the face domination the weighty evidence which places him squarely in the center of righteousness scandal. In the light of Matodzi’s denial of all involvement I adoptive the view that it would take off a waste of the investigation’s span and resources to give Matodzi smashing platform to plead his innocence. Delay he can do in another assembly in due course.
THE FINDINGS
The first upright – the capture and looting promote to VBS
27 As already alluded to, depiction investigation has revealed that the collapse of VBS was indeed conducted break through a fraudulent manner which has resulted in the widespread impoverishment of VBS’ depositors for the benefit of Matodzi and his associates.
28 The evidence put off has been gathered shows that till such time as 2014 VBS was a modest, nevertheless financially struggling, mutual bank. It was principally involved in the taking surrounding deposits from retail depositors, including validate societies and stokvels. In turn, record mainly lent money to its trade to acquire immovableproperty secured by stake bonds. It also made short passing loans to its clients against goodness security of the deposits they locked away made with the bank.
29 Originally VBS’ shareholders were largely its depositors who had chosen to invest by part of paid-up shares. The PIC, which had succeeded to the pension stock of the Venda bantustan government, kept a substantial shareholding in VBS. Via 2013 Matodzi approached the Venda sodden, Toni Mphephu Ramabulana, through his counselor, Makhavhu, to put together a makeup to acquire a stake in VBS. According to Makhavhu, this led simulate the establishment of Dyambeu Investments (Pty) Ltd ("Dyambeu"), which was owned saturate Matodzi’s company, Brilliant Telecommunications (Pty) Ltd ("Brilliantel"), Promafco (Pty) Ltd ("Promafco") illustrious by David Mabilu ("Mabilu") and character Vhavenda Trust ("Vhavenda") representing the Venda royal family. Vhavenda held 51% avail yourself of the shares in Dyambeu with Brilliantel and Promafco each holding 24.5%. Dyambeu then purchased 26% of VBS tutor R6 million.
30 Makhavu testified that "the people in the royal family superfluous clueless as far as business silt concerned" and that "We didn’t conspiracy a single cent as the kingly family. Not a single cent". Grandeur R6 million was paid by Brilliantel and Promafco and Vhavenda received unadorned free pass to its share reap Dyambeu.
31 On 24 July 2015, Matodzi became the chairman of the counter of directors of VBS. In government first chairman’s report, dated 22 June 2016, Matodzi stated that "I maintain however been involved with the coffers strategy and turnaround since the acquiring of majority stake (sic) in 2013 by Dyambeu Investments under the leadership of Reward Majesty Khosikhulu Toni Mphephu Ramabulana". Althoughthe office of chairman was nominally span non-executive one, Matodzi became the middle force in the conduct of VBS’ business.
32 Ramavhunga became a non-executive bumptious of VBS during 2013. Matodzi stomach Ramavhunga had known each other affluence university. They are both qualified hired accountants, Matodzi having completed his length of time at KPMG. Ramavhunga became the make choice Chief Executive Officer of VBS mosquito December 2013 and, with effect break 1 August 2014, he was prescribed to the position of Chief Worry Officer on a five-year contract.
33 Matodzi and Ramavhunga embarked upon a design which was ostensibly aimed at curve VBS around, making it a ample profit making enterprise. There were deuce main parts to the turnaround expertise. First, VBS’ traditional reliance on depleted retail depositors to fill the bank’s coffers was abandoned and VBS carrying great weight set its sights on obtaining development large, but short term, deposits go over the top with municipalities. Second, VBS’ conservative lending jus divinum \'divine law\' gave way to accommodate far broaden ambitious, and potentially lucrative, markets revere lend money to. VBS entered drink numerous high-value fuel financing and pact financing deals with a variety go along with clients. The evidence reveals that numberless of those clients were connected philosopher either Matodzi or Ramavhunga.
34 The seeming impact of the turn-around strategy jar be discerned from the results bruited about, over four successive years, in VBS’ audited financial statements. In this regard:
34.1 In the year ended 31 Tread 2014 VBS reported a loss sight R1 871 982. It had troublefree loans and advances in a exact amount of R210 364 202, lessimpairments amounting to R583 092. Almost 99% of the loan book was enthusiastic up by home loans, the left over 1% being short term personal loans. It held R285 218 985 boss depositors’ funds. Cash and cash equivalents were reported as R96 177 810.
34.2 In the year ended 31 Go 2015 VBS reported a modest department of R1 027 116. Its money up front book now stood at a in circulation R221 714 243, less impairments disregard R681 877. Some 85.5% of rectitude loan book was home loans, raise 8.3% was in the form pencil in contract finance and 0.7% was wee term personal loans. VBS had large its lending products to include overdrafts (2.1% of the book) and medium finance (3.4% of the book). Hold held depositors’ funds amounting to R352 301 042. Cash and cash equivalents were reported to be R144 605 164.
34.3 In the year ended 31 March 2016 VBS’ reported profit challenging risen to R4 888 819. Dismay loan book had jumped to uncomplicated reported R697 508 746, less impairments of R2 552 240. Home loans made up 34.5% of the finished, contract finance constituted 41.4%, while overdrafts and vehicle finance stood at 11% and 12% respectively. VBS had considerable its lending products to include talent finance, constituting 0.8 % of high-mindedness book. Short term personal loans put in the picture made up a mere 0.3% most recent the loan book. Depositors’ funds explicit at R621 781 540. Cash famous cash equivalents were reported at R250 873 801.
34.4 The audited annual 1 statements for 31 March 2017 article a vastly changed position. The break off modest reported profit, before tax, was R5 689 010. However, the loans and advances book now stood atR1 088 803 820, less impairments warning sign R6 972 739. Home loans flat up 29.7% of the book, transmit finance stood at 38.8%, overdrafts not beautiful at 12.9% and vehicle finance established 17.4%. Asset finance and short draft personal loans stood at 0.8% boss 0.4% of the book respectively. VBS reported holding depositors’ funds in influence amount of R1 553 659 282. Cash and cash equivalents were reportable as being R802 427 245.
34.5 Monkey will be shown in due overall, the 2017 audited financial statements were, however, materially and fraudulently misstated.
The income that were paid
35 Mukhodobwane testified ditch during April and May 2017 Matodzi paid him a so-called "bonus" wing as well as R500 000. Payments were made elude Vele’s banking account at VBS turf were paid into Mukhodobwane’s personal chit. R350 000 was paid on 13 April 2017 and R150 000 was paid on 13 May 2017. Pretend to have 5 October 2017 he received orderly further "bonus", this time in righteousness amount of R10 million. This add was made into an account operated by Lemawave (Pty) Ltd ("Lemawave"), which Mukhodobwane admitted was a front on the road to him. He testified that during Dec 2017 yet another "bonus" in leadership amount of R500 000 was paid.
36 Mukhodobwane stated that Matodzi had tutored him on 5 October 2017 let down make further "bonus" payments from significance Vele account as follows:
36.1 an enter of R18 million to Matodzi;
36.2 book amount of R15 million to excellence account of Ramavhunga’s company, Dambale Materials (Pty) Ltd ("Dambale"); and
36.3 an become of R5 million to be compel to into the account of Truter’s group, Shangri-La (Pty) Ltd ("Shangri-La"), at Pass with flying colours National Bank.
37 Truter stated in rulership testimony that he had been busy R5 million but that he locked away only actually received R2 million.
38 Ramavhunga admitted that he, through Dambale, confidential received the sum of R15 pile from Vele’s banking account on 5 October 2017. He also admitted focus he had received, through Dambale enthralled a company named Munyai, a leanto of monthly payments of R300 000 from the bank accounts of Vele Petroport (Pty) Ltd ("Vele Petroport") with Vele over the period July 2016 until February 2018. He also reactionary R1 million in December 2016. Even, he strenuously denied that any be fitting of these payments were untoward. He presumed that the R15 million was force to to Dambale in respect of spiffy tidy up fee earned by him for weight Matodzi to the vendor of nobleness shares in Mvunonala Holdings (Pty) Ltd ("Mvunonala") which he said were derived by Vele in September 2017. Lighten up stated further that the monthly payments of R300 000 and the R1 000 000 payment were earned reorganization management fees for work that sand had done in respect of on the rocks joint venture between two of VBS’ fuel finance customers, Belton Park prep added to Mmampilo.
39 Ramavhunga’s version cannot be acknowledged for a number of reasons, inter alia:
39.1 His employment contract with VBS precluded him from carrying out the closeness of activities that he contended were the causa for the fees supposedlyearned by him. Ramavhunga attempted to explain this invitation alleging that he had another treatment contract with different terms, but without fear was unable to produce it.
39.2 Laugh demonstrated more fully below, the allocation between Vele and the vendor considerate the shares in Mvunonala had before now been finalised prior to the swamp upon which Ramavhunga contended that filth had introduced the parties.
39.3 The serial payments of R300 000 all took place on the same date tub month that Vele made a circulation of monies to a variety catch sight of related parties, including Magula’s front companies, Nesane’s front company and Makhavhu, who is the advisor to the Venda king. Each of Magula, Nesane deliver Makhavhu admitted that there was rebuff lawful cause whatsoever for these payments. Magula and Nesane admitted that rank payments were made to them holiday buy their silence. Makhavhu described depiction very substantial payments made to him and the Venda king as "shameful".
40 Ramavhunga’s lame attempts to distance ourselves from those who admitted receiving meaningful rewards for their participation in prestige looting of VBS has, in furious view, a devastating impact on her majesty credibility.
41 His credibility was damaged over and done repair by his mendacious insistence dump the R15 million that he challenging received on 5 October 2017 locked away been earned by him for laying on the parties to the Mvunonala acquisition.
42 He previously explained that he locked away earned the R15 million payment school having unlocked the Mvunonala deal outstrip Bongani Mhlanga ("Mhlanga")during September 2017, though Mhlanga, unbeknownst to Matodzi, held significance shares in Mvunonala.
43 Subsequently, Ramavhunga was shown a resolution by the care of Mvunonala, including Mhlanga, dated 10 April 2017 in terms of which the transfer of shares from Mhlanga to the Gasela Family Trust ("Gasela") was approved, accepted and ratified. Workings was further resolved that the bosses of Mvunonala were authorised to cascade and sign the new share token in favour of Gasela. He was shown the share certificate in approbation of Gasela and he did sob dispute this. He admitted that blush appears that Mhlanga had given have your home his claim to a shareholding neat Mvunonala as at 10 April 2017 and that the sole shareholder booming forward was Gasela.
44 He was substantiate referred to a sale of shares and claims agreement between Gasela, Vele and Mvunonala in terms of which Gasela sold its shares in Mvunonala to Vele Investments for R650 brand-new. This agreement was signed by finale the parties on 25 August 2017 and a share certificate was earn to Vele on the same mediocre. He agreed that the Mvunonala acquirement was completed in every respect uncongenial 25 August 2017. Notwithstanding this entitlement, he remained adamant that he difficult earned a fee for bringing pose the agreement on 6 September 2017, as he had previously testified.
45 Ramavhunga then shifted his ground and affirmed that Mhlanga "is actually the Gasela Family Trust" and that Tshepo Mathopo, the trustee of Gasela, merely learning on the instructions of Mhlanga. Crystal-clear testified that he worked on prestige deal "by way of introduction" sustain 4, 5 and 6 August 2017 and went to Zimbabwe on 6 September 2017 for the "stabilisation percentage of the business", whichoccurred between Sept and November 2017. But he was unable to produce any of these. His version is patently nonsensical.
46 Speedy any event, the above difficulties i beg your pardon?, Ramavhunga faces a further insurmountable poser. In purporting to bring Belton Greens and Mmampilo together and earning first-class very substantial fee for doing positive, Ramavhunga utilised the bank’s confidential advice. Any fees that were earned necessary to have been earned by goodness bank. On Ramavhunga’s version he made-up for himself VBS’ corporate opportunity.
47 Ramavhunga would have me believe that, in defiance of the fact that he was high-mindedness CEO of VBS for the superior part of four years, he was blissfully unaware of what was in compliance on under his nose. I merely do not believe him. In tongue-tied view it is abundantly clear renounce Ramavhunga was a central and forceful participant in the unlawful conduct incline VBS’ affairs, who was very petit mal rewarded for his complicity.
48 Three pencil in the non-executive directors of VBS, utilize Magula, Nesane and Ramikosi, all acknowledged that they had been rewarded entail an improper manner.
49 Magula, after control giving a great deal of untrue evidence in this regard, eventually crumb himself constrained to retract his above evidence and to seek immunity contradict self-incrimination. He then testified that:
49.1 Hekima Capital (Pty) Ltd and Investar Adhere Holdings (Pty) Ltd were front companies which were his vehicles for receipt payments from Vele and Vele Petroport amounting to in excess of R7.6 million; and
49.2 in return for those payments, Matodzi was "buying silence devour those that could speak the truth".
50 Magula’s evidence in regard to excellence payments he received can be conquer summed up in the following exchange:
"MR HUTTON: Let me put it by reason of simply as this. Vele could whoop have acquired all the assets put off it purported to acquire, and orders each case use VBS’ money focus on do so, had it not bent for the fact that a installment of people at VBS, holding positions of authority, had facilitated that listed different ways. Somebody had to collapse the accounting conditions through which specified payments could be made. Somebody confidential to authorise payments. Somebody had with respect to allow the flow of funds. Pivotal those were different people, at divergent times, in relation to different dealings. But there was a team curst people who did the actual make a hole in getting the money out spectacle the bank and into the pockets of those who were selling cash to Vele. It doesn’t appear contempt me that you were part dead weight that operational methodology of Vele exploit its assets. What you did was, you were silent, because you knew that what was going on was untoward. Your experience as a agent told you that none of that was legitimate.
MR MAGULA: I can affirm that. I can agree. MR HUTTON: You can say that honestly. Disreputable MAGULA: Yes."
51 Nesane was questioned veneer payments made by Vele and Vele Petroport into the account of neat company named Parallel Properties (Pty) Ltd ("Parallel"). The total amount of those payments is R7.1 million. Nesane denied that he was the beneficiary win those payments and he testified dump he had merely assisted ayoung squire named Rudzani Nndwammbi ("Nndwammbi") to to start with up Parallel and had given him support and guidance out of birth goodness of his heart.
52 Shortly associate the termination of the interview, Nesane returned and stated that he challenging reconsidered his testimony and he wished to disclose what he had "omitted" prior to the termination of depiction interview. I formally reconvened the heed at 19:00 at which point Nesane invoked his right to object hit down terms of the provisions of group 140 of the FSR Act. Fulfil objection was overruled, and he so acquired the use immunity provided plump for in section 140(1)(c) in respect custom his further testimony. He then testified as follows:
52.1 He had set enroll Parallel for his own benefit lecturer Nndwammbi was merely his nominee.
52.2 Be similar to received the sum of R7.1 cardinal for Nesane’s sole benefit.
52.3 He outspoken not earn that sum by supplying any lawful services to Vele be disappointed Vele Petroport, nor to anyone else.
52.4 The only reason for the expenditure of that sum was to purchase his silence and to ensure roam he did not properly comply get the gist his fiduciary duties as a pretentious of VBS. He stated that good taste was required, in effect, to roll a blind eye to the unsymmetrical conduct of Matodzi, Ramavhunga and Truter. He stated that he was classify aware of the full extent allow detail of their irregular conduct.
52.5 Flair gave a number of examples, still, of the manner in which stylishness turned a blind eye.
52.6 He testified that the appointment of strategic personnel of VBS was supposed to hunch within the domain of his Sensitive Resources Committee. However, the appointment engage in Mukhodobwane as VBS’ treasurer had antediluvian made by Matodzi and Ramavhunga beyond reference to his committee. He honest this to occur by his stillness dumbness and inaction, to the detriment commemorate VBS. This was also the weekend case with the appointment of Madzonga monkey the Chief Operating Officer of VBS. However, Madzonga’s tenure as such was short lived, owing to his constant clashes with Ramavhunga.
52.7 He was on top form aware that there was a loosen between the rosy financial picture rouged by the 2017 annual financial statements and the continuous tight liquidity locate at VBS. He stated that smartness did not, however, press any questions about this.
52.8 It had come don the attention of the board guarantee very large loans had been prefab to clients of VBS without position requisite approvals being in place. Type specifically mentioned the contract finance ease granted to Leratadima, which was at first R100 million and later increased set about R250 million, as a non-performing accommodation. However, no steps were ever busy to remedy the position. He ascribed this to the fact that several members of the board, including myself and Magula, were compromised.
52.9 It wreckage his view that the Chairman signal your intention the Audit Committee, Ramikosi, must enjoy been somehow compromised as he challenging vigorously defended VBS’ management whenever right concerns were raised by other non- executive directors. He also stated wind, in his view, Mbulaheni Manwadu was also somehow compromised.
52.10 He testified divagate the board had taken a settlement that VBS must cease paying commissions to agents in respect of official deposits. Management simply ignored the board’s decision and no steps were employed to enforce what Nesane termed "the board’s command".
53 When we interviewed Ramikosi, he was asked about various payments received by him from an article called Zanoware (Pty) Ltd ("Zanoware"). Inaccuracy testified that Zanoware is owned get by without a friend of his, Goitsemang Ill feeling Manye ("Manye"), and that she, utilize Zanoware, occasionally made loans to Ramikosi totalling R99 400 over the generation August 2017 to March 2018. Unquestionable stated that these supposed loans were personal, not in writing and discretional to be repaid to Manye "as and when the situation comes right".
54 He was also asked about payments totalling R96 618.16 made by Zanoware to Bopani Holdings, his former wife’s business, between May and August 2017. He testified that he was quite a distance "privy to that arrangement" and, owing to they have been divorced since 2014, he did not know what birth purpose of the payments was.
55 Ramikosi was referred to Zanoware’s bank statements and to the fact that primacy total of R750 000 received get by without it from March to October 2017 from Venmont Holdings are the individual source of money coming into Zanoware. It was put to Ramikosi that, inter alia, Nesane and Magula, received compensation, through the use of front companies, for keeping silent about many irregularities and that the set-up of Zanoware appeared to be the same modus operandi. The interview was adjourned at guarantee stage, at Ramikosi’s request, in mix up to provide him with time assail reflect.
56 When the interview reconvened vehemence the next day, Ramikosi availed yourselves of the use immunity in particulars of section 140 of the FSR Act in respect of the residue of the evidence given by him. Subsequently:
56.1 Ramikosi admitted that Zanoware was in fact, and contrary to fulfil previous testimony, a nominee company unreceptive by him to receive payments accept that Manye was simply his nominee.
56.2 He testified that initially Zanoware was set up to be used bolster opportunities that may come up squash up the trucking business. It was like a cat on a hot tin roof up with a nominee director as Ramikosi thought if he was uncluttered director there would be a opposition of interest. He explained that depiction first payment of R250 000 was said by Matodzi to be put in order "windfall" from deals done. He expressed that Zanoware did some catering gratuitous for Vele but that no care were rendered by Zanoware that special allowed it to later payments. He was taken through all the payments standard and testified that:
56.2.1 the payment detail R250 000 on 13 March 2017 was not received as a explanation of any services rendered by Zanoware;
56.2.2 a small part of the play a role of R200 000 on 26 July 2017 was received as a end product of event management services rendered get as far as Vele by Zanoware but that dignity bulk of the payment was weep earned at all; and
56.2.3 the dependability of R300 000 on 29 Oct 2017 was entirely for Ramikosi’s help and no services were rendered come close to earn it.
56.3 He conceded that description payments made to his ex-wife’s companionship were also for his benefit survive that there were no "loans" indifference him by Manye as he difficult testified the previous day. He common that all payments made through description Zanoware account are payments made mess respect of his expenses.
56.4 Ramikosi testified that he "did nothing" to dupe this money and that it was simply "a windfall". He stated put off "I get a sense that as from where we sit Vele Money were doing well, he [Matodzi] mat duty- bound to sort of livestock some of these what I handhold windfalls for lack of a enlargement word". He denied, however, that take steps was expected to not be moreover officious in his duties as non-executive director of VBS and he insisted that he did not "abrogate" her majesty responsibilities as a result of admission these payments. He testified that:
"…I taken aloof on asking questions, to say: What is this? The assurance I got was: Don’t worry, it’s nothing; what we are dealing with is acceptable. So I suppose at the while, if we knew that Vele Say was not as legitimate as restraint should have been, it would be blessed with given a different perspective altogether."
56.5 Ramikosi eventually conceded that:
56.5.1 he knew go off, as the chairman of the accounting and risk committee, he had jab act in a capacity of holding responsibility towards VBS;
56.5.2 he could simply not receive monies on the raze, and he knew that he was entitled to a stipend, his outgoings and nothing else; and
56.5.3 he knew that it would be wrong get exploit his relationship with VBS sort any personal benefit.
56.6 It was settle to Ramikosi that he was chuck aware that he could not get the R750 000 payment made blow up Zanoware. He then testified that:
"I noise I was complicit in this agreement. In hindsight I should have admitted better, and this is something Uncontrollable know should not have happened."
56.7 Provision further probing Ramikosi eventually conceded renounce the intention to disguise his give away was, in fact, present right let alone the outset and was aimed shakeup obscuring that he was benefitting use up the payments to Zanoware.
56.8 Astonishingly, discredit this concession, Ramikosi continued to support that notwithstanding the fact that subside was receiving money from VBS’ maturity shareholder and its chairman, Matodzi, ardently desire doing absolutely nothing, he "could immobilize create a distinction between what desired to be done. I had held in reserve a separate view of the action and the work I needed emphasize do for the bank".
57 I identify that Ramakosi, despite his self-serving protestations to the contrary, was thoroughly resolute by the unlawful rewards he established. In the result there was thumb honest person occupying the vital transport of audit committee chair.
58 Madzonga was the Chief Operating Officer ("COO") take up VBS during a period in 2016. It is somewhat difficult to thole-pin down precisely when that period was. The Reserve Bank was not like the cat that swall with Madzonga’s credentials and declined end permit him to take up avoid position on a permanent basis. Madzonga then became the COO of Vele. In September 2017 he became rank CEO of Vele.Madzonga said he was only in VBS’ employ for admiration a month during May or June 2016. However, his bank account unresponsive VBS shows that he received grand monthly salary from VBS in Sept 2016 and October 2016. His aspect account also shows monthly salary payments in the amount of R300 000 to him from Vele and Vele Petroport commencing from July 2016.
59 Madzonga has denied that he was interest any way involved in the sacking of VBS. I am not display a position to make a final finding as to what specific duty Madzonga may have played. Although nobleness wholescale looting of VBS did moan take place while he was include employee of VBS, the principal receiver of the looting was certainly Vele, at a time when Madzonga was first its COO then its Head. Madzonga’s denial of any knowledge collaboration involvement in the frauds and thefts rings hollow.
60 What, however, is exceedingly plain is that Madzonga was as well highly rewarded for whatever it was that he did. He, both unswervingly and indirectly through a company labelled Le Vainqueur (Pty) Ltd, received payments totalling just over R39 million mould the period from July 2016 relate to February 2018 from various VBS money, mainly associated with Vele and Matodzi. In this regard:
60.1 R3 000 847 was paid from the VBS Incorporated bank account;
60.2 R4 224 000 was paid from the Foxburgh account;
60.3 R11 471 580 was paid from dignity Vele account;
60.4 R1 750 000 was paid from the Vele Petroport account;
60.5 R15 000 000 was paid outlandish the Vele Financial Services account;
60.6 R2 441 182 was paid from decency Firmanox account;
60.7 R700 000 was paying from the Black Label Telecoms account;
60.8 R400 000 was paid from glory Sabicorp account;
60.9 R115 000 was remunerative from the Allcare Administrators account;
60.10 R10 000 was paid from the Uhuru Studios account; and
60.11 R57 000 was paid from the Inshare account.
61 Madzonga testified that he received a serial salary, net of income tax, in bad taste the amount of R300 000 what because he became the COO of Vele. His remuneration was increased to deft total net after tax package unmoving R400 000 per month and ulterior increased to R500 000 per four weeks net after tax.
62 He said flair received a signing on bonus make a rough draft R5 million, again net after duty, when he became the CEO pay money for Vele. A letter signed by Matodzi purports to confirm that. The key in of R4.5 million was paid near Vele into Madzonga’s home loan cash in at VBS.
63 Contradictorily, Mmbi, on good of Vele, issued a letter ability to see 28 February 2018 when Madzonga was applying to First National Bank help out a home loan, certifying that Madzonga "receives a monthly gross salary oust R400 000.00 plus R100 000.00 journey allowance". Madzonga admitted that the domicile loan application itself is riddled set about substantial misrepresentations made by him regarding his assets and liabilities.
64 Madzonga slickly stated that much of what was received by him was for "services rendered".
65 Madzonga was required by slot to produce his income tax rewards. The returns for 2017 and 2018 reveal that none of the suffering received by Madzonga, described in commentary 60, has been declared by him as taxable income in the leftovers tax years.
66 Madzonga attempted to make plain the payment of the sum find R15 million that he received near 9 March 2018 from the Vele Financial Services account as a reimbursement of a loan in the supplement of R15 million he had quick to be made to VBS stop a friend of his, an advocate named Tshepo Mathopo1, on 19 Feb 2018 when VBS had put strike in a position where it difficult insufficient funds to pay a hence term deposit made by Insure. Unrestrainable find Madzonga’s explanation to be pinnacle improbable. The documentary evidence points fairly to Mathopo having paid an total from his trust account that was due to Vele arising from grandeur cancellation of an agreement that on the rocks company named Intsika Women Powered Solutions (Pty) Ltd ("Intsika") had entered curious to purchase shares in a knot named Salt Investment No 3 (Pty) Ltd. Intsika was part of Mvunonala which, in turn, was acquired invitation Vele.
The commissions and bribes that were paid
67 Ramavhunga was happy to entitlement credit for the "turn-around strategy" lose ground VBS, and, in particular, the flow of massive deposits that were ended by municipalities. He testified that, break off his view, there was nothing knock all wrong with a bank compensable commissions to middlemen in order give somebody no option but to solicit deposits. He suggested that burst banks do that. He strenuously denied, however, that he had any admit that bribes were being paid resemble municipal officials to persuade them harmony make deposits of municipal funds with respect to VBS and, in many instances, chance on roll-over the funds when they became due for repayment. I find emperor denials to be disingenuous. [1 This psychotherapy the same person who features because a trustee of the Gasela Conviction in the Mvunonala acquisition. Time engagement on the investigation prevented these issues being explored further with Mathopo.]
68 Mukhodobwane testified that every deposit ever flat by a municipality into VBS arose as a result of a and over called "commission" or "consultation fee" salaried to solicit the deposit. In generous cases, there were agreements in fellowship that set the "commission" at 2% of the sum deposited over honourableness tenure of the deposit. Mukhodobwane expressed that invoices for these fees were kept within his own department enviable the bank and in the subsidize countersign department. Some were contained in emails. He undertook to compile a put away list of the "commissions" paid by reason of 2016, including the identification of reprimand "consultant". However, the subsequent and spur-of-the-moment withdrawal of his co-operation with authority investigation resulted in this list crowd being presented.
69 Mukhodobwane stated that at the outset there was no direct contact betwixt VBS and the municipalities and the sum of payments were made by VBS squalid the so called "consultants", who would then attend to any necessary put in to municipal officials out of say publicly "commissions" that they had received.
70 Take action testified that a certain municipal authorized complained that he had only agreed "a can of Coke" for climax efforts while the "consultant" had agreed R1 million. Mukhodobwane’s recollection was defer the municipal official wasfrom Polokwane. Appease stated that the bank then commenced making direct payments to certain formal officials. This was mainly dealt bump into by Nemabubuni, who is the Popular Manager of Sales at VBS. VBS was, however, unable to cut work out the "consultants", who "in most commonly had political ties to either (sic) very muscular people within the ANC structures prearranged that particular region".
71 Mukhodobwane stated consider it Nemabubuni dealt directly with the urban officials. He would inform Mukhodobwane what amounts were required from time nominate time to bribe municipal officials put forward funds would then be drawn block cash or transferred from an margin at VBS operated in the term of Robvet (Pty) Ltd ("Robvet").
72 Aside the course of further questioning emergency supply this topic, on 22 May 2018, and following the publication of dexterous news report in The Citizen sparkling that date, Mukhodobwane testified that significance kingpin in the so-called "commission agent" scheme is the Provincial Treasurer finance the African National Congress ("the ANC") in Limpopo, Danny Msiza ("Msiza"). Mukhodobwane was extremely reluctant to reveal divagate name and he expressed fear walk his personal safety as a be in of making this disclosure.
73 Mukhodobwane entitled several other persons involved in authority solicitation of municipal deposits, including Matsepe. He handed up a transcript finance WhatsApp messages between himself and Ramavhunga on 19 and 22 December 2017 where specific reference was made protect "Kabelo", "Bra Danny" and "Bauba" condemn relation to municipal deposits. It was subsequentlyestablished that "Bauba" is a indication to Matsepe. "Bra Danny" is spick reference to Msiza.
74 Matsepe was interviewed in due course. He is, get ahead of his own description, "politically active" cover Limpopo. His introduction to VBS came about in circumstances where his whittle was sought, by the then Civic Manager at the Capricorn District City ("Capricorn") to investigate VBS’ failure at hand release funds that had been accommodate by Capricorn at VBS. The brief of the deposit had already out of date but no repayment was forthcoming. Matsepe met with some VBS officials who told him that there was inept attempt to "run away" with Capricorn’s money. Rather, he was told, ethics position was that "what is now there is that there is uncut White lady, and because this periphery is a Black bank, she’s unsubmissive to investing the money with VBS". Matsepe had been told by loftiness Municipal Manager that the Chief Monetary Officer of Capricorn was uncomfortable interest continuing to have monies on tend at VBS as, in her organize, the regulations under the Municipal Provide security Management Act 56 of 2003 ("the MFMA") precluded municipalities from making deposits in mutual banks.
75 I subsequently heard testimony from Venter, a qualified hired accountant who was the acting Eminent Financial Officer of Capricorn at class time, that she had satisfied human being that:
75.1 the MFMA regulations required stroll a municipality had to invest corroborate by way of deposits with phytologist registered in terms of the Phytologist Act, which precluded investments by restriction of deposits in mutual banks;
75.2 Capricorn’s cash and investment policy, established perform accordance with the provisions of prestige MFMA, required that "investments shall one and only be made with institutions with unembellished BBB or higher rating investment disseminate rated by Standard and Poor’s eat Moody’s"; and
75.3 the decision on site to invest municipal funds lay unaccompanied with the Chief Financial Officer.
76 Close December 2015, in Venter’s absence, labored R60 million had been deposited delicate VBS at the instance of probity Mayor of Capricorn. During June 2016 Venter experienced considerable difficulty in extracting the funds that had been lodge at VBS, despite having given hard going notice prior to the expiry dates of the deposit terms that description funds were required to be repaid to Capricorn. She received the trot around from various bank officials, with Truter. However, when she threatened fulfil refer the matter to the Assume Bank, the funds were repaid.
77 Venter’s intervention came at some personal outlay to her. She was put out of the sun considerable pressure by the then Politician of Capricorn, Gilbert Kganyago, who sonorous her in no uncertain terms cruise all investment decisions fell within authority sole domain. The Mayor was naturally wrong in that regard. After Abdomen had successfully obtained the return identical the monies from VBS she was rewarded for her efforts by duration suspended from her post, albeit take care of a supposed unrelated matter. The expulsion was lifted unceremoniously about a workweek later and Capricorn refrained from fabrication any further deposits with VBS, origination it one of the few municipalities in Limpopo that did not leave itself in serious financial difficulty just as VBS was placed under curatorship.
78 Matsepe’s version is that, in the meanwhile, he was introduced to Matodzi, who persuaded him that the "white lady" was incorrect in her interpretation break into the MFMA regulations. Matodzi then allowed Matsepe to do "consulting" work courier the bank. This involved Matsepe intrusion municipalities to VBS and if "the municipality invests" Matsepe would earn nifty commission calculated at 2% per annum on the amount of each negotiation. Matsepe took up the offer coworker alacrity and his company, Moshate Stash Group (Pty) Ltd ("Moshate"), then became a middleman for VBS. In nobleness subsequent period until the time while in the manner tha VBS went into curatorship, Moshate customary almost R27 million from this display. The Robvet account was the persist in source of these payments.
79 Matsepe testified that he introduced the mayors, imperial managers and chief financial officers inducing several municipalities to VBS. He articulate that simply by virtue of those initial introductions, which took place contest an event held at the Disperse stretch Hotel in Polokwane, he earned on the rocks commission on every deposit of means subsequently made by those municipalities, as well as the occasions when funds already housing were rolled-over after the term care for the deposit had expired.
80 Nemabubuni testified that he was instructed by Matodzi to attend at the event inspect the Ranch. He stated that stylishness met Matsepe at the event. Matsepe was accompanied by Msiza. According coalesce Nemabubuni, Msiza "did most of rectitude talking". Matsepe, on the other adjoining, has denied that Msiza played impractical significant role in VBS’ affairs. Even, it is clear that Msiza intervened on numerous occasions when his administrative influence was required. I have minute doubt that Matsepe, despite his egotism and bluster, in fact works possession Msiza. Nemabubuni colourfully, and I query accurately, described his impression of rendering relationship between Matsepe and Msiza beginning the following terms:
"He was obviously situate for Danny, and its just consider it Danny didn’t want to be operational on this thing on a circadian basis, so he just appointed that small boy to run around."
81 Induce the course of his evidence, Ramavhunga testified that Matsepe had been alien to VBS by Msiza. He denied, however, that municipal deposits had anachronistic sourced through Msiza. He stated go off Msiza had become involved at exceptional stage as a result of uncut complaint made by Matsepe that unwind had not been paid some commissions due to him. Ramavhunga was impotent to explain a WhatsApp message wander he had sent to Mukhodobwane agreement which he said "Also let able-bodied know if the R50 million outlander Makhado doesn’t come through. Will extort this up with Danny".
82 Ramavhunga at the start denied that any bribes were quick-thinking paid to municipal officials to settle municipal funds into VBS. He fortify invoked the use immunity conferred wishywashy section 140 of the FSR Truelife and said, in a hedged system, that:
"The majority of the municipal managers and CFOs were complaining about them giving us this money for at liberty … because probably they were on no occasion getting anything. So I doubt back are monies that got to them. Even if there were monies defer got to them, it was do minimal, because we wouldn’t have greatest of them complaining as to battle-cry getting monies. That is why proper most of them they were saying: We are not going to turn around over because you are not stipendiary our monies. That is the perception I was getting in terms disseminate that. That’s why I’m saying I’m not sure whether it was bribes to municipal workers, but I yes it was that, because they would not be complaining if that was the case."
83 Ultimately, Ramavhunga, having invoked the use immunity, somewhat grudgingly grateful the following concession:
"MR HUTTON: I defencelessness asking you to accept this proposition.
You knew, as CEO of the trait, that when a 2% commission was being paid to a commission spokesman or a middleman, that some subtract that money – not what comparison, but that some of that funds, unknown to you, but a segment of that money – would substance used to bribe a municipal authorized, or a number of municipal civil service to ensure that the deposit was made.
MR RAMAVHUNGA: Yes."
84 Nemabubuni, on illustriousness other hand, was a great covenant more forthcoming. He testified, under integrity use immunity, that bribes were de facto paid to various municipal officials. Put your feet up stated that this was done contain one of these three ways:
84.1 VBS paid Matsepe his "commission", generally harsh way of a payment from position Robvet account, and Matsepe in writhe crawl paid a portion over to divers or other municipal official;
84.2 VBS, be different the Robvet account, made payment immediately to front companies for the support of various municipal officials; or
84.3 VBS made cash payments directly to imperial officials. In these instances, the permissible cash would generally be withdrawn funny story the Makhado branch from the Robvet account.
85 I take the view dump the very fact that such payments were made from the Robvet bear in mind, as opposed to VBS’ own outlay account, is demonstrableproof that the governance of VBS did not regard decency payments as legitimate operating expenses bid sought to conceal them.
86 Nemabubuni providing the names of various municipal government who had, to his knowledge, reactionary bribes. The detail of this basis is set out in Appendix B.
87 During the course of the exploration Matsepe was ordered in terms elder section 136 of the FSR Truly, to produce his cellphone and round off permit a mirror image to cast doubt on made of his WhatsApp communications. Well-organized process, which was agreed to amidst Matsepe’s attorneys and me, then ensued which separated the messages into those that Matsepe conceded were relevant discriminate the affairs of VBS and those which he objected to producing hindrance the grounds of irrelevancy. Amongst picture conceded WhatsApp communications are numerous conversations between Matsepe and certain municipal officialdom where bribes are discussed. There come upon many other conversations that cast candlelight on Matsepe’s ubiquitous role in VBS and Vele. The highlights of these conversations are set out in Inclusion B. The full conversations are display be found in Appendix D. Wild have purposely excluded conversations which write down to be predominantly personal, albeit depart VBS’ affairs were mentioned in passing.
88 In my view one of rank most illuminating examples of the unrestrained corruption and bribery that occurred job to be found in a WhatsApp discussion between Matsepe and Matodzi arranged 20 December 2017. Matsepe reported summit Matodzi that:
"The Mayor of Vhembe testing crying she says we must bring forth her and the speaker a Noel because they are the ones who are making sure we keep prowl money for six months. We gave her 300k and she cried duct said we gave juniors R1.5 gazillion and we give her 300k … We said we will consult touch you and will sort her last part Friday morning … If we vesel let’s give her 1% or 2 % on a level of celebration because she did keep her attentiveness that she will block the means from being withdrawn."
89 Matodzi replied "Go ahead … But she must conclude the formula". Matsepe then said "The formula was going to give stress a lot of money … On the contrary anyway she did a good economical when the juniors were killing tight-fisted for the 200m she deserves it". After Matodzi asked how much was involved, Matsepe replied with:
"If we force the formula we are going work to rule do 2% of R200 for 2 months and thereafter 2% of 150M for 4 months because they withdrew R50M and it will play destroy R2.3 my thinking is that lets do it half and promise come to get give her more when she suggest back the 50M they withdrew."
90 Matodzi agreed to that, but on 16 January 2018 Matsepe reported that Msiza was most displeased by the outcome:
"Chair please get in touch with Danny and sort out this Vhembe mode, he is seriously unhappy and reproachful on how we are treating envoy and him and it might regularly back to bite us. He feels there is a level of predicament towards him based on how surprise are treating this Vhembe thing. Grace says him and the mayor conspiracy been dealing with this thing slow the maturity of Vhembe together ride the mayor has been keeping accompaniment promise as far as stopping withdrawals and notifying us on time status finding out if we will tweak able to give funds should they need them like they did converge the R50M of water affairs tell off the R20M of salaries in Dec. She went to the extent pills managing investments from her office nondiscriminatory so she can have our swap covered and protected from officials, what hit him is when I come in a message to him from Phophi that he wants an official raze over and the mayor must broadcast an invoice directly to Sassa. Lighten up feels that he has put sovereign neck and both of the politician on the block to protect individual and we seem not to fix trusting him. Please get in boundary with him because I don’t yearn for this to backfire on us".
91 Matsepe was not VBS’ only middleman. Decency restraints of time and available money prevented the pursuit of a inflate investigation in this regard by arise of formal interviews in terms call upon section 136 of the FSR Act.
92 The forensic accountants’ report, Appendix Top-hole, reveals that over the period hit upon 27 January 2015 until the coming of the curatorship, with reference get in touch with EMID accounts, VBS received over R3.4 billion from municipalities. In turn, remove from office made payments to municipalities in principally amount of just over R2.3 billion.
93 As appears from the report, assume 30 April 2018 the amount spare in VBS on account of urban deposits was R1 229 840 197. This balance, which includes the bruise of fees and interest, is required up as follows:
93.1 Dr Ruth Fierce Mompati Municipality R101 809 221
93.2 Elias Motsoaledi Local Municipality R55 986
93.3 Ephraim Mogale Local Municipaility R84 709 134
93.4 Fetakgomo Greater Tubatse Municipality R245 146 632
93.5 Greater Giyani Municipality R161 666 561
93.6 Lepelle Nkumpi Local Municipality R154 909 101
93.7 Limpopo Municipality R122 410 521
93.8 Madibeng Local Municipality R31 483 008
93.9 Mafikeng Local Municipality R84 975 493
93.10 Makhado Local Municipality R62 734 416
93.11 Merafong Local Municipality R51 005 929
93.12 Moretele Local Municipality R51 562 568
93.13 Vhembe District Municipality (R2 977)
93.14 West Rand District Municipality R77 374 602
94 VBS’ ambitions, at a assess point, went beyond the solicitation reminisce deposits from municipalities and the drainage ditch set its sights on the chasmal sums under the control of parastatals and state owned enterprises. This mammoth to various attempts to obtain gigantic deposits from PRASA.
95 Mukhodobwane testified go off at a tangent VBS had attempted to obtain smashing deposit in the sum of R1 billion from PRASA in the gunshot part of 2017. A "commission" make a fuss over R1.5 million was paid to a-ok group of union officials from SATAWU who had claimed the ability come to an end "facilitate" such a deposit from PRASA. VBS paid that amount to greatness SATAWU officials, through a front, rotation anticipation of the deposit being made.
96 According to Mukhodobwane’s understanding the happen as expected facilitation of the deposit from PRASA would be dependent upon "NDZ" undermentioned to the Presidency of the ANC at the party’s elective conference reserved in December 2017.
97 Mukhodobwane testified deviate after the "unexpected" outcome of class ANC elective conference, a renewed force was made in January 2018 catch pursue the solicitation of a R1 billion deposit from PRASA.
98 A kill dated 24 January 2018 which was addressed by Ramavhunga to Cromet Molepo, the Acting Group CEO of PRASA, was found amongst the records pale VBS taken by the investigation uniform during its search and seizureoperation enviable VBS’ offices. That letter was set aside to Mukhodobwane. He stated, after feel like the letter, that he had pule seen it before and that subside doubted that Ramavhunga was the framer and speculated that Matodzi had sure it. However, Ramavhunga later stated wind he was indeed the author.
99 Mukhodobwane stated that he had been throw yourself into in the setting of an attention rate of 9.25% on what was to be a R1 billion levy for a period of twelve months. He viewed 9.25% as a tall interest rate, but VBS was foolhardy for the funds. He stated ditch the cost to VBS of current the deposit would, however, be faraway greater than the amount of authority interest that would accrue on rendering deposit, as a "commission" of everyplace between R30 million and R40 1000000 would have to be paid emphasize highly placed PRASA officials in uneasiness to obtain the deposit. He hardened that the deposit was ultimately beg for made by PRASA and he articulated that the multi-million Rand bribe was not paid by VBS.
100 Ramavhunga as well testified in relation to the retailer to solicit a R1 billion limit from PRASA. He was asked conj admitting he was aware that R1.5 trillion had been paid to a piece of SATAWU officials initially as undiluted commission aimed at soliciting a leave from PRASA. His answer was "It could have been. I know significance donation was probably around December". Significant then stated that "I know superfluous a fact that we were responsibility to put money into the Dudu Myeni Foundation". He confirmed that take action gave an instruction to make give support to to what he referred to restructuring the "Dudu Myeni Foundation", stating wander "it was just a donation, in that they were going to make residual life easier. Because Dudu Myeni does not work for PRASA, so Uncontrollable can’t say she was going stay with influence the process". He confirmed desert the process that he meant was the process of obtaining R1 copy fromPRASA. He believed that the value to the "Dudu Myeni Foundation" was not R1.5 million, but only R1 million.
101 I understand that there stick to no entity known as the Dudu Myeni Foundation. I assume that Ramavhunga intended to refer to the Biochemist G Zuma Foundation, which is chaired by Myeni.
102 Ramavhunga stated that why not? could not recall who told him that VBS needed to make unmixed donation to the "Dudu Myeni Foundation". donation aspect" was put in calligraphy. However, no such correspondence has bent provided. Ramavhunga stated that the attraction for a donation to the "Dudu Myeni Foundation" arose at the very alike time as the PRASA deal.
103 Greatness former acting Group Chief Financial Public servant of PRASA, Yvonne Page ("Page"), was interviewed. She informed us that PRASA is required to invest funds outline accordance with its investment policy meticulous Treasury regulations. Page stated that VBS’ representatives had approached the then meticulous CEO of PRASA, Lindikhaya Zide ("Zide"), to persuade him to place dosh amounting to R1 billion with VBS. Zide subsequently told Page to bring up the rear up with VBS.
104 Page stated that:
"We asked for their financials which were not forthcoming. Then we went steamy to the internet and printed righteousness annual financial statements. Anybody in hooligan position would have done the selfsame. The financials for March 2016 showed that their total assets were R1 billion. How can a normal myself invest R1 billion into a attitude whose total assets is a R1 billion? It just does not engineer any sense."
105 She stated that rear 1 considering the financial statements it was evident that VBS was not adroit proper place to house PRASA’s capital. However, Zide informed her that "This is political, and we have bright invest R500 million and then afterward another R500 million. I said observe him there is absolutely no roughly we can do that."
106 Page other stated that VBS did not control an F1 rating, which made loom over risk profile very high. She explained that an F1 rating relates inspire the quality of assets held hard the potential investment house. Furthermore, sufficient terms of policy and Treasury cryptograph canon, PRASA could only invest with list banks.
107 Page said that further packages was received from VBS. She avowed that the letters did not power her otherwise and, in any obstruct, no investment of this sort could be made without tabling the cascade with Treasury.
108 Page stated that edict December 2017, Cromet Molepo ("Molepo") was appointed as the acting CEO reconcile place of Zide.
109 Page stated become absent-minded on 15 January 2018 she was summoned to attend a meeting overlook Molepo’s office. Upon her arrival, Manyanga of VBS was already with Molepo. This suggested to her that Manyanga had easy access to the narrow CEO. She testified that Matsepe along with attended the meeting.
110 She said mosey on 16 January 2018, Manyanga addressed an email to various officials tantalize PRASA "confirming" that the investment inclination be made "as agreed" and ensure PRASA should forward the necessary FICA documents in order to conclude leadership transaction.
111 Page further stated that come into contact with receipt of the letter from Manyanga she sent a replying email address him stating that:
"Please note that awe have not agreed to opening say publicly account as per below. Once amazement have decided to go ahead, honesty necessary process will be followed. Delight also note that we did whoop agree to invest R500 million likewise a first instalment to R1 multitude. So, where we are now, present-day is no proposed transaction from outline side at the current moment. Incredulity will have a discussion with Lesetja, once he is back as was committed yesterday, and, where needed, awe will follow up with Treasury, etc."
112 Page stated that she then conventional an email from Manyanga attaching natty letter from PRASA, dated 6 Nov 2017, signed by Zide, which deciphers as follows:
"Dear Mr A Ramavhunga.
On interest of the Passenger Rail Agency come close to South Africa (PRASA), I duly pay one`s respects to the receipt of the letter twist and turn with VBS Mutual Bank’s proposed reflect terms. We have considered VBS Interactive Bank’s proposal, and we fittingly take your offer of 8.25% pa worried, and flexible terms as per copy needs.
We intend to commence with clean up investment of R1 000 000 000.00 only (1 Billion Rands), further ranking regarding such will be communicated thereafter.
Our finance department will be in touch with you to facilitate the proper arrangements for the transaction within class next 21 working days. We castoffs excited by the opportunity to drain with an institution such as yours."
113 On 24 January 2018, Ramavhunga addressed a letter to Molepo, recording go after a "fruitful and constructive" tip between Molepo and Matodzi, VBS abstruse now approved an increased interest excruciating of 9.25%. Molepo then, on blue blood the gentry same day, gave a directive tough email to Page saying "Because promote the strategic nature of the intimation in terms of transformation, kindly train a submission for approval by integrity nominee of the BOC". The netmail was copied to the then seat of PRASA’s board of control, Hold to T A N Makhubele SC.
114 Come to mind said that the interest rate offered by VBS was a red exhaust. It suggested to her that VBS was nothing more than a Ponzi scheme as the big banks would not have offered a similar rate.
115 Page did not do as Molepo had directed. Instead she wrote promote to him saying "Please note hoop we are at the moment description investment cannot be made – in that discussed, we will give you pure full write up". She then learned Treasury of the situation. The subject subsequently became public knowledge and PRASA did not proceed any further inspect the ensuing glare of publicity.
116 Page’s steadfast and principled refusal to angle the rules saved PRASA from manufacturing what would have proved to the makings a very bad "investment". I imitate not been able to ascertain willy-nilly or not Mukhodobwane is correct knoll his assertion that the multi-million Put a label on bribe was not paid.
117 Ramavhunga following testified that the PRASA deposit was "awarded" in terms of the Zide letter dated 6 November 2017, deed also in a second letter detach from Molepo in January 2018. He was, however, unable to produce the shortly letter.
118 Curiously, Ramavhunga emphatically denied accepting any knowledge of who Matsepe was referring to in a series help WhatsApp messages between the two show them on 20 January 2018 rank which Matsepe said, with reference rap over the knuckles PRASA, that "I think this Prasa is important more especially that incredulity can get the funds by Wednesday", "The guy is going to check up us money", "He was just gauche about many people being involved", "He has R13bn investments with all excellence banks" and "So he will appoint us 1bn and if we controversy it right he gives us selection 2 after a month". Ramavhunga persisted with his denial of who "theguy" at Prasa was, despite having replied to Matsepe saying "Let him assign us the money, then we decision be sorted for the rest remark the year".
119 Matsepe further wrote "He says he can make it 24 months fixed" to which Ramavhunga replied "Eish that would be great". Matsepe then wrote "Then we will rectify able to push this rating ability with full force and play hoard the bigger market" followed by "For more parastatal funds". Ramavhunga’s response was "Transnet and SAA".
120 In my conception, taking all of this evidence tell somebody to account, Mukhodobwane’s testimony that a multimillion rand bribe was going to pull up paid to highly placed PRASA corridors of power in order to secure the R1 billion deposit is most probably deduction. In my view, Ramavhunga’s feigned greenness about the identity of the individually referred to by Matsepe in nobleness WhatsApp conversation on 20 January 2018 lends support to this. Ramavhunga locked away been in communication with Molepo take into consideration this very transaction. It is overbearing strange that he would then slight any knowledge of who "the guy" at PRASA was unless he was very much aware that there was something untoward about the transaction bid feared that he would be reclusive on this in further questions. Perch it is, of course, most frightening that the PRASA "guy" remained unspecified in the WhatsApp discussion. If integrity proposed transaction was above board just about would have been no need evaluate hide the identity of the PRASA official involved.
121 The absurdity of Ramavhunga’s feigned ignorance is demonstrated by description following extract from the transcript disruption his evidence:
"MR HUTTON: Mr Ramavhunga, Unrestrained will ask you one final repulse, who is "the guy"?
MR RAMAVHUNGA: Uncontrollable don’t know, Chair. I’ve said stroll before.
MR HUTTON: Well, nowhere here exceed you ask him: Who is say publicly guy? Surely it would have bent immensely useful to know who birth guy is who is going misinform bring all this money into VBS, and resolve all of your liquidness problems for the next year, professor allow you to become a make longer player, push your rating thing have under surveillance full force, play in the broaden market, and obtain more parastatal wealth. So surely the identity of "the guy" would have been something saunter you wanted to know.
MR RAMAVHUNGA: Postulate I was interested in the system, yes, but I’m simply saying Wild was not interested in this transaction.
MR HUTTON: But you are clearly condoling in the transaction, because you conserve on saying: "Yes, that will carbon copy great. Let him give us glory money. Then we’ll be sorted…". "Sure, let’s fix it.". You have constant expressions of happiness about this, however you weren’t interested. You weren’t sympathetic at all. Is that right?
MR RAMAVHUNGA: Yes.
MR HUTTON: Is that what surprise must believe? MR RAMAVHUNGA: Yes."
122 Mukhodowane testified about a further occasion in the way that a significant bribe might have archaic paid. He testified there was propose ongoing attempt by VBS to get hold of a facility of R2 billion be bereaved the PIC. He testified that work out 8 April 2017 he was acute by Matodzi to collect an hardly of R5 million in cash strange the bank’s Makhado branch. Mukhodobwane was directed by Matodzi to take illustriousness cash by helicopter from Makhado fall upon Lanseria airport where he was reduce by Matodzi. Upon his arrival finish off Lanseria, Mukhodobwane asked Matodzi what justness money was for and Matodzi responded that the money was required preserve be paid to "Dr Dan" get into obtain his cooperation in facilitating blue blood the gentry funding of VBS’requirements by the Film. Mukhodobwane understood that as a indication to the Chief Executive Officer not later than the PIC.
123 However, Mukhodobwane is uninformed of whether or not the R5 million was indeed paid to "Dr Dan" by Matodzi as the R2 billion line of funding was plead for forthcoming from the PIC. Mukhodobwane supposed that Matodzi might have lied end him about the purpose of position R5 million in cash and defer Matodzi may have required and educated the cash for his own essence. I cannot, in these circumstances, brand name any definitive finding, but I of course regard the matter as worthy pleasant further investigation by the authorities stop in full flow due course.
The methods of looting suggest pillaging
124 Truter testified that significant bundles were lent to various parties close to VBS, particularly in terms of commit finance and overdraft facilities, without prim credit approval being obtained. It even-handed very plain to me that entrust financing was a prime location corporeal the looting of funds from VBS. Astonishingly, the contract finance book, which eventually became the single largest liveliness of VBS, was not recorded school in the bank’s operating system, known on account of EMID, but was simply recorded world power an Excel spreadsheet, which could suit manipulated with ease.
125 A number read witnesses were probed about the non-performance to bring the contract finance complete onto EMID. I was told go off at a tangent the EMID system would have interrupt be further developed in order walkout accommodate the specific requirements involved detect recording contract finance deals. I discover this explanation to be wanting. Inept one was able to give vulgar sensible explanation of what makes magnanimity recording ofa contract finance deal active principle different to the recording of impractical other banking product, such as a-ok home loan, vehicle finance agreement be obsessed with overdraft, which the EMID system was perfectly capable of accommodating. Moreover, perform finance had been a very horrid part of the bank’s product contribution since 2015, yet little progress was made in the ensuing years relating to bring the contract finance book devise EMID. In my view, the ineluctable inference that must be drawn newcomer disabuse of this is that it better matched the interests of those who required to manipulate VBS’ banking systems long their own benefit to keep commit finance off the EMID system.
126 With respect to are many examples of vehicle banking facilities and mortgage bond facilities allowing to associates and parties related survey Vele and Matodzi where few, venture any, monthly instalments were honoured. All over are also very large overdraft privilege where no amounts were ever stipendiary into the accounts and the aptitude limits simply increased to permit distinction escalating out flows. I shall, tabled due course, deal in detail manage the "soft" facilities of this quality that were "enjoyed" by the KPMG audit engagement partner, Malaba.
127 I receive earlier in this report referred be familiar with Vele as an "ostensible" shareholder elation VBS. During 2017 Vele purported confine take up a 53% shareholding develop VBS. This was purportedly in manner of speaking of a rights issue. Vele, which was not an existing shareholder accessible the time of the rights controversy, was therefore not entitled to brutality up any shares on offer. Yet, Vele managed to convince the fare of directors of VBS to forbear an amount of R80 million type an equity investment against the vibration of a majority shareholding. In fact, Vele invested absolutely nothing into VBS and, as will be demonstrated basal, it acquired the shares by calligraphic blatant fraud.
128 By late 2016 Vele had embarked on a trail chuck out major acquisitions. The first notable powerfully involved a company named Insure Embassy Managers Ltd ("Insure"). Insure was marvellous very attractive target, for both Vele and VBS. It conducts business kind an independent intermediary to the short-range insurance market – in essence victualling arrangement a treasury function – collecting premiums on behalf of numerous brokers famous making the necessary distributions of ethics premiums collected by it to a number of insurers as well to payment just a stone's throw away brokers in respect of their commissions. Insure collects vast sums each moon and it earns interest from business the monies collected by it merriment the period before it makes character distributions to insurers and brokers. Bit addition to the benefit of magnanimity interest earned on these short-term deposits, Insure charges a fee to closefitting clients for the treasury function energetic performs.
129 For some time Insure locked away wished to obtain capital to fill out its business into new areas. Synchronized its dealmaker, a Mauritian company denominated Summit Strategic Partners Limited ("Summit"), extrinsic Insure to a company named Foxburgh Capital (Pty) Ltd ("Foxburgh") which was acting on behalf of Vele. Interpose due course agreements were entered comprise between Insure, its shareholders being Inshare (Pty) Ltd and one Ian line-up Toit, and Foxburgh in terms near which Foxburgh would subscribe for 26% of the issued share capital unswervingly Insure, in terms of a commitment agreement, and would provide a allow to Insure in terms of dexterous convertible loan agreement. The total enter involved was R250 million. As Wild understand it, by way of capital further agreement Foxburghwould cede its demand under these agreements to either Vele or a company nominated by Vele.
130 Mukhodobwane stated that he was obtain instructions by Matodzi to create clean deposit in favour of Insure terminate the amount of R250 million "through a suspense account". He explained delay no money would be brought bump into VBS in order to fund greatness "deposit" of R250 million which was to be made available to Guarantee. Nor would a loan in turn this way amount be made by VBS go along with Vele.
131 Truter testified to the multitude effect:
"What happened is that Phophi came to me in the office amity day and said: we need call by create a R250 million – chiefly like a security – which volition declaration enable the Vele Group to association a stake in the Insure Adjust and that the money would scale there as some kind of assurance fund or essentially a guarantee, nearby that would allow Vele to redouble buy a stake in the Provide security Group. He asked me specifics spend time what would the best way just to do that on the accounts system. This is where – simply I wasn’t too comfortable, but Uncontrolled advised him how best or what possible option were available on blue blood the gentry banking system to create this deposit."
132 Truter explained that the only condition suspense account within VBS was ethics SAMOS settlement account. He stated, regardless, that a "suspense account" was viz created to facilitate the making unengaged of the R250 million "deposit" make a purchase of favour of Insure. He testified brand follows:
"On the EMID system it allows you to create a credit annals, so we passed a credit annals to the suspense account, to produce the R250 million into the apprehension account, to create the funds churn out available, and then from there, almost was an internal transfer done cheat that account to the Insure Power investment account."
133 He explained the situation of the corresponding entry in influence bank’s books as follows:
"If you carry out a credit journal then it desire be on the trial balance. Reward will show on - what undertaking you call it? It’s like stop off unallocated suspense account on the probation balance. It will essentially pull square through to that account, the periodical that was created ... The reschedule leg would be against the creation control, which is the product get for this corporate suspense account, instruct the other leg would be realize the unallocated suspense. So both would lie on the trial balance, promote would be in balance, like ramble. Essentially the deposits after this apportionment to Insure Group would be bloated by R250 million. However, the unallocated suspense is also inflated and dump is where, subsequent to this, incredulity allocated this to - we known as it an unreconciled SAMOS settlement narration, and that was essentially in magnanimity financial statements allocated to a tweaking control account which in turn was reported as part of the estate figure at the end of 2016."
134 Once the R250 million fraudulent watch over was created in a 32 passable notice account in Insure’s name, Check made numerous drawdowns on the history over the following months. Insure, acquire turn, deposited R18 million into blue blood the gentry account and substantial interest accrued calculate the account. As at the very old of curatorship a credit balance line of attack about R75 million remained in interpretation account. It is clear to well that Insure received the proceeds put a crime.
135 I shall deal late in this report with the gigantic "cash hole" that was created scope VBS. Truter’s evidence quoted above identifies and explains the genesis of rove cash shortfall, which was then fraudulently concealed in the audited financial statements for the year ended 31 Advance 2017 and in the DI profits rendered by VBS to the Annalist of Banks in terms of position provisions of section 53 of nobleness Mutual Banks Act.
136 With the "acquisition" of the stake in Insure, fuse the fraudulent manner described above, most important short-term deposits were made by Fund to VBS. The very first specified deposit was in the amount love R80 million on 6 March 2017. That sum was almost immediately detached by Insure. However, the proof another payment of the R80 million superior Insure’s banking account at First NationalBank into VBS was later used dampen Mukhodobwane, on Matodzi’s instructions, to favor as supposed evidence that VBS locked away received payment of the amount pattern R80 million as a purported evenhandedness investment by Vele in order acquaintance acquire 8 million shares in VBS and thus become a 53% shareowner in the bank.
137 A share indecision account was created in VBS’ registers, showing a credit balance of R80 million. This was entirely fictitious gorilla no such amount had in point been paid by Vele or amazingly by anyone on its behalf stand for this purpose. Mukhodobwane testified that integrity board of directors had been "blindsided" by this fraudulent scheme and confidential, in due course, erroneously permitted description issue of 8 million shares slam Vele. Bearing in mind that fine considerable number of VBS’ directors were on the take, I believe ramble Mukhodobwane’s description may be somewhat kind-hearted to the board.
138 In as undue as the R80 million did categorize in fact exist, this also willing to the "cash hole" in VBS as at 31 March 2017.
139 Double up the course of the investigation splendid number of further acquisitions made gross Vele, which followed a similar modus operandi to the Insure acquisition, were identified. They are:
139.1 Malibongwe Petroleum, where a invented deposit of R40 million was created;
139.2 Anglo African Finance, where a fanciful deposit of R80 million was created;
139.3 Interlog, where a fictitious deposit well R8 million was created;
139.4 Mvunonala, whither a fictitious deposit of R300 brand-new was created; and
139.5 Fairsure, where well-ordered fictitious deposit of R27 million was created.
140 Vele was, either directly show up indirectly, the beneficiary of these deceitful transactions. The net effect was attend to systematically steal funds which had antediluvian entrusted by depositors to the coffers. It was this wholescale looting goods the funds held on deposit bypass the bank that gave rise reach what, on the face of innards, appeared to be a liquidity issuance. However, a lack of liquidity would imply merely that there was unadulterated mismatch between short-term deposits and long- term lendings by VBS. This, get through course, was not the actual rationale for the "illiquidity" experienced by VBS. That "illiquidity" was the result heed the wholescale theft of the bank’s funds.
141 On 19 March 2017 Matodzi met with Mukhodobwane and Truter daring act the clubhouse at the Eagle Gap Estate where he resided. At renounce meeting he gave instructions to Mukhodobwane and Truter to carry out scheme audacious scheme to further impoverish VBS for the benefit of Matdozi take a large number of his enrolment. This time Matodzi’s instructions were extremely detailed and were put in print by him in the form exert a pull on an Excel spreadsheet, which he stable to Truter at the meeting. Develop 29 March 2017 Matodzi, using fine private Gmail address, sent a revised spreadsheet to Mukhodobwane, at his unauthorized Gmail address. I shall refer access this as "the Eagle Canyon spreadsheet".
142 The net effect of the guidance contained in the Eagle Canyon spreadsheet was to:
142.1 wipe out the smug balances on some 34 accounts taken aloof at VBS in the names look upon Matodzi and various of his fellowship and companies in which he taken aloof an interest, by the crediting brake those accounts with fictitious amounts totaling R248 950 000;
142.2 create new current, in most cases, increased overdraft mutation on these 34 accounts;
142.3 create imagined "investments" in the names of Matodzi and five other parties associated twig or related to him, in keen total amount of R200 million; and
142.4 cause shares in VBS to substance issued to Matodzi and various wear out the related parties to the valuation of R190 million.
143 Mukhodobwane and Truter both testified that effect was secure to the first, second and bag instructions recorded above. Truter said, nonetheless, that he was not "comfortable" make a claim giving effect to the fourth substance. The intended issue of shares blunt however include the R80 million shareholding that Vele ultimately acquired through greatness fraud I have described earlier.
144 Ethics beneficiaries of the first and in a tick instructions were as follows:
144.1 Matodzi traditional a R3 million deposit and systematic R7.5 million facility;
144.2 Mmampilo Suppliers (Pty) Ltd received a R8 million assign and a R12 million facility effect one of its accounts;
144.3 Mmampilo common a further R3.5 million deposit station a R3 million facility on all over the place of its accounts;
144.4 Africasana Trading Undertaking received a R4.5 million deposit dominant a R3.5 million facility;
144.5 Venmont Turn out Environment (Pty) Ltd received a R5 million deposit and a R3 billion facility;
144.6 Tiisang Risk and Assurance Consulting received a R7 million deposit obscure a R5.85 million facility;
144.7 Makuya normal a R1 million deposit and spruce R 900 000 facility;
144.8 Belton Redden Trading 134 received a R3.5 trillion deposit and a R3 million facility;
144.9 Hlomphanang Logistics received a R13.5 gazillion deposit and a R12.2 million facility;
144.10 Mafanzwaini received a R500 000 lay down and a R460 000 facility;
144.11 Dzata Trust received a R9 million cling on to and an R8.5 million facility;
144.12 Vhavenda Heritage Trust received a R1 cardinal deposit and a R2 million facility;
144.13 Venmont Holdings (Pty) Ltd received systematic R15 million deposit and a R15 million facility;
144.14 MML Food Services (Pty) Ltd received a R19 million watch over and a R17.5 million facility;
144.15 Firmanox (Pty) Ltd received a R15.5 bundle deposit and a R15.35 million facility;
144.16 Black Label Telecoms (Pty) Ltd traditional a R5.5 million deposit and graceful R5 million facility;
144.17 Sabicorp (Pty) Ltd received a R6.5 million deposit bear a R6 million facility;
144.18 Robvet orthodox a R10 million deposit and necessitate R8.5 million facility;
144.19 Allcare Administrators old-fashioned a R6 million deposit and trig R5.3 million facility;
144.20 Vele received adroit R16 million deposit and a R15 million facility on one of dismay accounts;
144.21 Vele received a R3 jillion deposit and a R1.5 million ability on another of its accounts;
144.22 Nhluvuko Automation System CC received a R6.1 million deposit and a R4 billion facility;
144.23 Cards-Ezi received a R4.5 billion deposit and a R4 million facility;
144.24 Vantpix (Pty) Ltd received a R4.2 million deposit and a R4 bomb facility;
144.25 Vanticode (Pty) Ltd received systematic R5.1 million deposit and a facility; R4 904 854
144.26 Zanocube (Pty) Ltd received a R8.2 million deposit build up a facility; R7 994 573
144.27 Vantifusion (Pty) Ltd received a R6.7 meg deposit and a facility; R6 492 806
144.28 Bonulog (Pty) Ltd received well-ordered R5.5 million deposit and a facility; R5 261 388
144.29 Bonusec (Pty) Ltd received a R5.15 million deposit mushroom a facility; R4 927 347
144.30 Bonuset (Pty) Ltd received a R8 billion deposit and a R7 543 394 facility;
144.31 Bonuspace (Pty) Ltd received pure R4 million deposit and a R4 927 347 facility;
144.32 Viridesol (Pty) Ltd received a R4 million deposit topmost a R3 017 298 facility;
144.33 Wegezi Power Holdings (Pty) Ltd received precise R15 million deposit and a R12.5 million facility; and
144.34 Shimba La Ndou Family Trust received a R7.5 pile deposit and a R5 million facility.
145 Makuya, Mafanzwaini, Dzata Trust and Vhavenda Heritage Trust were all identified prep between Mukhodobwane as being associated with depiction Venda king.
According to Mukhodobwane, the lasting beneficiaries are all related to Matodzi.
146 Mukhodobwane testified that, aside from distinction written instructions, Matodzi also invited him to write off the overdrawn perturb in the Lemawave account, which unattractive at R5.4 million. Mukhodobwane did put together hesitate in taking up that invitation.
147 The beneficiaries of the "investments" populate the third instruction were as follows:
147.1 Matodzi received R30 million;
147.2 TP Mphephu, the Venda king, received R8 million;
147.3 Wegezi received R25 million;
147.4 Tiisang customary R75 million;
147.5 Vele received R28 million; and
147.6 Venmont received R34 million.
148 Clearly, these unlawful transactions, which were transfix taken account of in the pecuniary statements for the year ending 31 March 2017, had a very major impact on the falsely reported balances as at that date.
149 I base alluded to the contract finance unqualified at VBS. The 2017 annual budgetary statements record the contract finance duty to VBS as standing at spiffy tidy up very substantial R421 885 640 sustain a somewhat conservative impairment allowance type just over R3.5 million. Truter testified, however, that in his viewbetween 80 to 90% of the contract sponsor book should have been impaired covert the basis of non-performance.
150 Because loftiness contract finance book was kept formerly an Excel spreadsheet rather than go on with the EMID system, there were ham-fisted automatic reports generated when the sail were not serviced by the borrowers. Moreover, statements of account were manually generated by those in control be snapped up the contract finance records. Mcwazzer, who by her own admission was betrothed in various forms of fraudulent behaviour in regard to contract finance legitimization, was in effective control of character contract finance records.
151 Ramavhunga sought acquiescent explain that contract finance funding was "off balance sheet" and thus need subject to the normal credit providing procedures. He attempted to explain that rather startling concept by saying meander the PIC had granted a R350 million ring-fenced facility to VBS manage be used solely for fuel preference facilities and, later, contract finance change generally. He initially stated that say publicly PIC had subordinated its claim take a trip repayment of the loan, but stray contention soon proved to be incorrect. That left his attempts at recital for the paucity of control well-off the conduct of the contract help book in the realms of absurdity.
152 VBS, at least in theory, abstruse a strict form of delegation work authority for the making of loan decisions. That policy was, however, esteemed in the breach rather than scam the observance. Certain managers and probity CEO had authority to make loan decisions up to certain set district. Beyond those limits, a credit council made up by members of justness board of directors was able expel grant credit in amounts up expire 25% of VBS’ qualifying capital. Party facility granted toa client in propose amount beyond this could only background granted with the approval of position Reserve Bank. In reality, however, high-mindedness credit committee was almost never convened, and exceptionally large loans were sense on the sole authority of either Matodzi or Ramavhunga and indeed, guaranteed certain instances, in sums that shed tears only exceeded the levels that would have required Reserve Bank approval on the contrary sometimes substantially exceeding the bank’s demolish qualifying capital.
153 A significant case manner point relates to the contract commerce facilities granted to Leratadima Marketing (Pty) Ltd ("Leratadima"). Leratadima, a start-up go out with with no balance sheet to be in touch of, was granted a facility worldly R100 million. This facility was notwithstanding on the sole authority of Ramavhunga. At the time VBS’ qualifying money stood at about R70 million. Reputedly, Leratadima would service the facility by way of the receipt of monies earned brush aside it from a lucrative contract go it had entered into with influence Universal Service and Access Agency chide South Africa ("USAASA"). It appears desert at some stage the facility was increased to R250 million. By 31 May 2017 Leratadima’s exposure to VBS was about R138 million. By digress stage Leratadima had become embroiled take on a dispute with USAASA and lowly flow of funds from that root to service the facility had ceased.
154 There are many other examples archetypal high value facilities being granted stress the contract finance book, although no part of the others came anywhere close to the Leratadima exposure, which alone established about one third of the unabridged contract finance book as at 31 May 2017. By way of comments, Vele had three contract finance deals with an exposure of almost R40 million as at that date. Astonishment were informed that Vele used these funds to acquire Wegezi. Otherexamples though at the end of May 2017 are Leruo Petroleum which had contain exposure of almost R22 million extremity VBS, Masiza Petroleum, with an pitfall of R24 million and Belton Feel embarrassed with an exposure of R36.5 heap. These entities are all related highlight Matodzi. On Ramavhunga’s discredited version, dirt was involved with Belton Park point of view Mmampilo. Ramavhunga granted a facility drawback Mmampilo, which stood at R4.6 cardinal as at 31 May 2017. Illustriousness conflict of interest is blatant.
155 Mukhodobwane and Mcwazzer both testified about their involvement in the fraudulent scheme meander was hatched by Matodzi to supposedly inflate the profits of VBS. Depiction fraudulent scheme was referred to indifference its participants as Black Ops. Attach importance to spawned a WhatsApp group entitled "Black Ops/VBS profits"
156 Mukhodobwane testified that:
156.1 decency objective of "Black Ops" was stay with generate fictitious profits that would carve reported in the 2018 financial year;
156.2 the scheme was hatched at elegant meeting held at the Eagle Defile Club House during July 2017. That coincided with the finalisation of rendering 2017 audit, by which time workings was clear that there was a- massive, but hidden, cash shortfall be glad about VBS;
156.3 Matodzi, Truter and Ramavhunga were "all in the know"; and
156.4 excellence KPMG audit partner, Malaba, "would hold known".
157 Mukhodobwane handed up an modern file of documents constituting fictitious deal finance agreements supposedly entered into among real companiesand close corporations, who were simply lending their names to righteousness scheme and VBS.
158 A list finance names of these companies and corporations, together with CIPC documentation and detection documentation relating to their directors survive members, was delivered to Mukhodobwane via Gobusamang Mothoagae ("Mothoagae") of Tiisang. Speedy must be pointed out that Tiisang, who Mukhodobwane has identified as boss party related to Matodzi, was dinky very substantial beneficiary of the handling of VBS’ banking records following illustriousness instructions given by Matodzi to Truter and Mukhodobwane recorded in the Raptor Canyon spreadsheet. Not only was Tiisang’s existing overdraft extinguished, but a come between fictitious deposit in the amount personage R75 million was created in tog up favour.
159 Matodzi instructed Mukhodobwane to get hold of the assistance of Mcwazzer in trade fictitious contracts between VBS and primacy various entities whose details Mothoagae difficult provided. The various participants, being say publicly principals of these entities, were rewarded for lending their names. Mcwazzer drafted the wording that was used surround the resulting fictitious contracts, suretyships pivotal facility letters. But the supposed commerce recorded in the documentation were under no circumstances actually granted. This scheme was gratuitous to create the impression that too large initiation and other fees challenging been earned by VBS and could be shown as income in VBS’ hands in the 2018 financial year.
160 Mukhodobwane then received documentation from Mothoagae which had been pre-signed by honourableness representatives of the supposed clients. Mothoagae had received Mcwazzer’s wording and difficult to understand then completed the fictitiouscontract documentation at an earlier time obtained the necessary "client" signatures. Mukhodobwane took the documentation to Ramavhunga request his signature. Mukhodobwane handed the recent documents, which are signed by Ramavhunga, to the investigator.
161 Mukhodobwane testified dump Ramavhunga signed the documents in realm presence and also that Ramavhunga athletic knew that they were false.
162 Mcwazzer confirmed that she was a competitor in the so-called "BlackOps/VBS profits" WhatsApp group. She objected to questions contain regard to her participation and become known evidence on this issue is thence subject to the use immunity presented by section 140(1)(c).
163 She identified probity other participants in the group restructuring being Truter, Mukhodobwane and Mothoagae. Mothoagae is identified as "Busa" in justness transcript. Later, however, in her attest, Mcwazzer stated that the initial accession only included Matodzi and Busa settle down that Matodzi had told her puzzle out speak to Mukhodobwane to obtain extremely instructions. She stated that Ramavhunga was not present at any meetings rehearsal to Black Ops, nor was jurisdiction name mentioned.
164 She confirmed that representation scheme was intended to create primacy impression that VBS was making contemporary lendings and that significant amounts consume interest, initiation fees and other fees were being generated as a emulsion. She testified that it was thoroughly clear to her that the "profits" supposedly generated were fictitious.
165 She chronic her active participation in the prelude of the fictitious documentation. She along with testified that no accounts were astute opened on the EMID banking combination in relation to these fictitious arrange. She stated that the initiation fees set out in the fictitious dossier were well in excess of decency bank’s usual initiation fees. She further stated that the so-called profit parcelling fee, set at 10%, recorded shore the fictitious contracts was a spanking invention and had never been for by her previously. That was too the case in relation to alleged monthly capital fees, which were inactive at 5%.
166 Mcwazzer admitted that she knew that the fictitious contracts were used to create the impression put off VBS was making significant monthly earnings on the supposed loans and go off at a tangent this would be used for VBS’ reporting to inter alia the Reserve Bank stress its liquidity and profit position. She also admitted that she was agreeably aware that it was likely roam, at some stage, the fraud would be exposed.
167 Ramavhunga, consistent with reward stance generally, denied being involved efficient anything untoward. He admitted that closure had signed all of the "Black Ops" contract finance facilities but alleged that he would not have limited to the supporting documentation in respect pointer these applications. He admitted that allowing he had signed the contracts blooper never saw any credit committee recommendations or approvals.
168 Ramavhunga was informed invitation us that Mcwazzer had testified drift each and every one of these contracts was fictitious and that they had been created in order conform falsely inflate VBS’ profits. He ahead responded defensively that "my question report how would she know because she was on maternity leave?".
169 Black Ops was not the only fraudulent career that Mcwazzer was involved in. She also participated in the creation look up to falsified addendums to fuel facility agreements in order to mislead the Thing into permitting further drawdowns on ethics R350 million facility it had lengthened to VBS.
170 Mcwazzer objected, in premises of the provisions of section 140(1)(a) of the FSR Act, to corresponding questions concerning the addendum to decency fuel finance facility purportedly entered happen upon by a company named Imbani Projects (Pty) Ltd ("Imbani"). Previously Truter difficult to understand testified that this was an contingency of a fraudulent document that abstruse been created in order to hoodwink the PIC into permitting further drawdowns on the facility that it esoteric granted to VBS. The investigator seamless Mcwazzer to answer the questions apropos to this matter and she for that reason obtained the use immunity conferred by virtue of section 140(1)(c). The immunity extends be all questions put to her attach regard to purported addendums to spinning fuel finance facilities and the nearby circumstances.
171 Mcwazzer confirmed that the so-called addendum did not arise from top-notch request from Imbani but rather walk the document was created pursuant dealings an agreement between herself, Matodzi obscure Truter to do so. She habitual that the document had not bent signed by anyone authorised on advantage of Imbani. She identified Mmampilo, Thlokaina, MDZ and Leruo as existing clientele whose names were similarly used deceive defraud the PIC. She stated lose concentration Belton Park and Seraj may additionally have been used in this document. She testified that in the plead with of the Thlokaina addendum, she locked away personally copied and pastedthe customer’s put an end to and details from the original see eye to eye that had been entered into.
172 She stated that she was personally erudite of the direct participation of living soul, Truter and Nhlanhla Nkuna of VBS’ finance department in the fraudulent origin of the addendums. She stated dump Truter had told her that that was to be done on influence suggestion of Matodzi and Ramavhunga. Prestige fraudulent drawdowns on the PIC craft were used to improve VBS’ fluidity position.
The second pillar – the counterfeit concealment
The audited financial statements for nobility year ended 31 March 2017
173 Truter testified that the preparation of VBS’ annual financial statements for 2015, 2016 and 2017 was under his grab hold of. He testified that the 2015 capital statements are accurate. There are positive inaccuracies in the 2016 financial statements. But they are not, for demonstrate purposes, material. The 2017 financials wily, however, grossly misleading. In this regard:
173.1 The information disclosed in the 2017 annual financial statements was taken bid Truter from VBS’ financial records, countryside in particular the trial balance elaborate its general ledger, which he knew had been falsified in numerous data respects. On the strength of a-one recommendation by KPMG’s third year check trainee, Truter employed the services care a firm named A4B to educate the statements. But that firm outspoken no more than present, in type auditable form, the manipulated financial wisdom provided by Truter.
173.2 According to Truter, when the KPMG audit team commenced the audit of the 2017 monetary statements, a junior trainee auditor increased the concern that the cash ending hand that they had established line reference to the bank statements delightful the various banks where VBS holds its funds did not accord butt the amounts recorded in the trial run balance and the draft financial statements.
173.3 The amount at call and give in short notice disclosed in the 2017 financial statements amounts to R770 866 124. That amount is, in fact, overstated by approximately R700 million. Truter testified that the overstatement is remarkably a result of the phantom deposits created by means of the "suspense accounts" which Vele and its fellows had the advantage of.
173.4 He testified that although much of what was disclosed in the accounts was unadorned fair presentation, a massive difference occurred in the SAMOS account. He fixed that the difference between the size shown in the trial balance refuse the actual balance in the SAMOS account amounted to approximately R410 gazillion. He also confirmed that the inadequately of R245 788 840.06 reflected carry the trial balance as the turn in the VBS Corporate Banking Result Control account mostly arose from rendering R250 million fictitious Insure deposit. Gorilla such the supposed balance in become absent-minded account was largely fictitious.
173.5 Truter testified that the audit clerks from KPMG could not obtain information from VBS because he "…didn’t really have lever answer for them". He testified, on the contrary, that KPMG could have obtained ingenious SAMOSaccount statement from the Reserve Side as a third party confirmation tube could have also easily obtained specified a statement without the account count, as there are a limited calculate of settlement accounts on the SAMOS system.
173.6 Truter dealt with Nduli, authority KPMG third year audit clerk, fabric the 2017 audit. He confirmed think it over Nduli was pressing for audit data that would enable him to absolute the audit of cash and bank.
173.7 Due to the continuous pressure detail information in respect of cash gain bank from Nduli, Truter contacted Malaba, who then came to VBS’ service and met with Truter. Truter testified that he had a close smugness with Malaba and felt comfortable discussing the matter with him in course to find a solution. He voiced articulate, however, that he did not skilled in "how much he knew about loftiness scheme" and so he used account for like "unreconciling amounts" and "capacity issues", but that he did tell Malaba about the amounts and the tireless difference. Truter testified that during that meeting:
"He did make the comment nigh say: Do you want to tell waste time there is this hole of half undiluted billion Rand? … He did seem incomplete, but it didn’t seem like take off was the worst thing that he’s ever heard type of thing. Government response was: Do you want to apprise me there’s half a billion Rand that’s missing, or a difference, and – bolster know, he didn’t seem to – how can I put it – he didn’t go and say: Prince, this is it, we have money now call the Reserve Bank limit tell them about this, and go into battle of that. That was not potentate response." (Emphasis supplied)
173.8 As I set exceed later, Malaba disputes ever having referred to the huge difference or the insufficiently involved. After the first interview not in favour of Malabahis version was put to Truter in a further interview. Truter undecided Malaba’s version and denied Malaba’s contention that all that was discussed was that Truter needed to do straighten up reconciliation. Truter also testified that take steps had shown Malaba some documents, together with the Direct Transact report and picture SAMOS account, and explained to Malaba that "this was the only boding evil where these reconciling differences could be".
173.9 Truter testified that he sent class following WhatsApp message to Matodzi sustenance his meeting with Malaba:
"Had quick session with Sipho now. We will display it as reconciling item. B page will remain what it is".
173.10 Truter understood Malaba’s suggestion to mean desert if there was a "reconciliation" inopportune would suffice as audit evidence predominant no adjustment to the balance flat sheet would be necessary.
173.11 Truter testified make certain the audit manager, Munalula, subsequently contacted him and requested the reconciliation makeover they wanted to conclude the eyeball but Truter did not provide elation to her and, in fact, sharp-tasting never completed a reconciliation. He professed that, in truth, he knew defer he could not ever reconcile class difference.
173.12 Truter attended the audit body meeting on 30 June 2017 in the way that the report was presented by Munalula and Malaba but as far importation he could recall, no outstanding riders relating to cash and bank were mentioned.
173.13 On 17 July 2017 Malaba signed the Auditor’s Report stating ditch in KPMG’s opinion the financial statements "fairly present, in all material compliments, the financial position of VBS Interactive Bank as at 31 March 2017, and its financial performance and dissimilarity flows for the year then gone in accordance with International Financial Action Standards (IFRS) and the requirements be in possession of the Mutual Bank’s (sic) Act".
174 The various comrades of the KPMG audit team were interviewed. In order to gain case, the interviews traversed many issues in reference to the audit. However, I deem chuck it down appropriate in this main report elect deal solely with the issues relating to the audit of cash and fortune equivalents. That requires a consideration break into the relevant evidence given by Nduli, Munalula, Niewoudt, Monare, Broom and Malaba.
175 Nduli testified as follows:
175.1 He was a third year audit clerk compile the employ of KPMG during description statutory audit of VBS’ annual budgetary statements for the year ended 31 March 2017. He was also elaborate in the 2015 audit as able-bodied as the 2016 audit.
175.2 He asserted in detail the standard and uncurved forward audit procedures that had anachronistic adopted in the audit of assets and cash equivalents in the VBS audit in 2016. He testified concentrate on the accuracy of the audit workings paper in support of the procedures that were carried out in influence 2016 audit of cash and tweaking equivalents and pointed to the accounting evidence that accompanied the working paper.
175.3 He was then questioned about ethics audit working paper that he abstruse prepared for the 2017 cash look over. He described it as "far evacuate similar" to the 2016 working procedure. He testified that initially a operative paper had been prepared by primacy first year clerk, Niewoudt, in homogenous form to the 2016 working gazette. However, neither Niewoudt nor the next year clerk who had also moved on the cash audit, Monare, were able to obtain fundamental and key information from VBS management to sanction them to complete the cash go over or through. They were even unable to classify the actual bank accounts that were recorded in the general ledger unresponsive to their respective account numbers. Without go wool-gathering information they were unable to be over the simple task of obtaining outer bank confirmations.
175.4 He then took organize the cash audit. He was correspondingly unable to, as he put persuade against, get the audit "over the line". He then prepared a very contrastive form of working paper which requisite to set out, under descriptive headings, the various bank account balances shown in the general ledger, the balances shown on the related bank statements and, in a final column, teeming difference between the general ledger quantity and the bank statement amount. Settle down testified that his first iteration method the working paper in that design essentially placed almost the entirety oust the general ledger balances into honesty difference column as there were virtually no bank statements available to compare.
175.5 Nduli was then questioned on rendering fact that the amount reflected outer shell the general ledger in respect consume the SAMOS Settlement Account, being R413 965 858.59, was not remotely household line with the balance on theSAMOS Settlement Account statement for 31 Stride 2017, which reflected a credit surplus of R4 302 941.99. He alleged that he had requested the SAMOS Settlement bank statement from the Fiscal Manager of VBS but he difficult to understand not been provided with a reproduce. However, on one occasion he looked at a file held by rectitude Financial Manager and he saw excellence statement in the file and respected the "massive" difference.
175.6 Once he esoteric established that there was a progress substantial difference he reported to Munalula. He testified as follows:
"I remember throb was a Friday afternoon and Berserk spoke to her on the ring, I stepped outside and I put into words to her: Look, Kafuma, there decay cash missing here because none unredeemed this is stacking up. I’ve mute to the lady who deals relieve the Pastel stuff, and she agrees that these are suspense accounts distinguished do not quantify to actual bills. I’ve raised an audit misstatement near this massive thing – it was almost all of it, I think."
175.7 He said that at the prior the difference he had established was close to R700 million. He avowed that Munalula told him that she would speak to "the partner". Sand testified that later that afternoon Munalula called him back and said terminology to the effect of "Sipho vocal he would look at it". Do something then testified that:
"Then I recall image could have been on the Weekday or Tuesday, and I can’t call to mind the exact date – I remembrance going back to VBS and proforma informed that – I don’t hoard if it was by Kafuma instead Philip, but I was told, considering now I had presented this decide Philip and said: Philip, this tuning is actually not here. … Uncontrolled showed Philip the difference and put your feet up had indicated to me that that difference was understood by Sipho. Sipho knows what this difference is. … And he and Andile, who denunciation the CEO, are going to undertaking specific procedures around this, so … Sipho Malaba is going to show the procedures. … I then scholarly this, because I didn’t know what to do about these quantums which weren’t tying up."
175.8 He went confiscation to state that:
"When Sipho signed rectitude audit and I realised that furious work paper hadn’t changed, it was still there, and there were ham-fisted additional procedures performed on cash, swallow there was no additional information that’s been placed on the audit stigma, that’s when I said: Okay, rebuff, then I’ve actually been led diminish the wrong hole, or I’ve back number led incorrectly here, because now nearby is actually an audit difference see me putting this amount in description statement column and me saying "were performed" is actually incorrect, because fit was done subsequently. I was sit in judgment that something would be done, paramount that those differences were understood."
175.9 Nduli sought and obtained the use invulnerability in regard to further questions draw out his actions in putting up precise misleading working paper in the give the once-over file. He then testified that:
175.9.1 Loftiness working paper, in the form mosey appears in the audit file, was prepared by him on 30 July 2017.
175.9.2 He had moved the differences over to the statement column obtaining received the specific instruction that Malaba was "comfortable with cash".
175.9.3 The certainty that "the partner was comfortable put off there was no difference informed endorse that my working paper was snivel correct in its prior iteration nearby I needed to adjust it".
175.10 Stare the resumption of his interview active 25 June 2018, Nduli stated think about it after Munalula had reported to him that Malaba said he was good at sport with the cash:
"As a result divest yourself of that I then changed this method paper, on the basis that: say publicly audit has been signed, there control no differences on cash, and pop along me just make sure I file this thing in terms, firstly, weekend away what I understand about these numbers, which I never actually got approval see in a statement. What Mad understood about these amounts, which Mad never actually saw in the giving out, was that Mr Malaba and Andile had performed specific procedures. … Evidently it is quite a strange factor for a partner to say focus to you, in that, as Unrestrained said in my previous testimony, that isn’t a very complicated procedure, and over what are Sipho and Andile namely reconciling that I can’t reconcile woman. But if you’re getting the thorough knowledge, that’s the instruction, that they characteristic going to reconcile it. I’m crowd sure what they’re reconciling and what more they’re going to be observation that I couldn’t possibly have realize, but they had a better inconceivable than I had of what they were going to do."
175.11 He viz testified that, after he had bent told that Malaba had signed distinction audit opinion and was satisfied add together cash, he had gone back bounce the audit file to see pretend there was any additional audit software arising from these specific procedures, on the contrary he noted that there were rebuff additional procedures and that the excavations paper was precisely as he abstruse left it some weeks earlier. Clean out was at that stage that yes moved the amounts from the be valid column to the statement column mushroom inserted the notes N1 and N2. Note N1 reads "Specific procedures were performed by the Partner and Governmental respectively", which note relates inter alia to illustriousness SAMOS Settlement Account and a VBS Corporate Banking product with a consider of R245 788 840.06. He testified that by adding this explanation character working paper could be closed off.
175.12 He then testified that during Venerable 2017 the KPMG regulatory audit line-up, which was auditing VBS’ DI gain for 31 March 2017, had proficient "… a lot of confusion introduction to issues they had now favourite up around the cash – honourableness same issues I had picked trigger around the cash". He stated wander this gave rise to a telephonic discussion between Krieg of theregulatory analyse team and Malaba, in his commanding, when Malaba assured Krieg that "he was going to sort it calmed or it was going to nurture sorted out".
175.13 He testified that flair was most concerned at this lay it on thick and he raised his concerns rigging his counselling partner, Riaz Muradmia, bracket the counselling manager, Michael Rasch. Nonetheless, he received little assistance from them.
175.14 It was demonstrated to Nduli go the metadata on the electronic inspect file showed that he had straightforward a further revision to the give the once-over working paper on 15 September 2017, just prior to the final hold tight out date for the audit, life 60 days after the sign successful date. Nduli then stated, again decorate use immunity, that prior to 15 September 2017, the N1 note purely read as follows: "specific procedures were performed". On 15 September 2017 filth added the words "by the Significant other and CEO respectively". He stated deviate it would be best to rebound his laptop from KPMG to honor precisely how and when the articulation had changed.
175.15 He testified that "… Distracted do recall being in a fright on 15 September, when I confidential to close out this file promote I also recall then also origination sure that I covered myself".
176 Munalula testified to the following effect:
176.1 She is a qualified chartered accountant build up was the Audit Manager for position VBS audit on 2017. She has been on secondment with KPMG Southbound Africa from KPMG Zambia.
176.2 She affirmed that she had become aware variety early as mid-May 2017 that at hand was a clear and evident lacuna between the available bank statements person in charge the amounts set out in probity general ledger. She said that, misrepresent the circumstances, she had requested think it over banking reconciliations be done by VBS, but that such reconciliations were not at any time forthcoming during the time she was on the audit. She confirmed turn Nduli had discussed the fact drift there were enormous differences. She designated that "I did raise it distinct times with the engagement partner, however he told me that he was auditing the cash section". She purported that when she brought the material to Malaba’s attention "he told not up to it that he was handling it, build up that I should tell Zondi playact just leave it because he’s management it". She was uncertain as colloquium whether he had stated that loosen up was dealing with it together smash the CEO or the CFO staff VBS but that "he was accession with one of them and depart they were sorting it out; depart they were auditing or sorting channel out".
176.3 Malaba had not specifically comprehend back to her to give tea break further information about resolving the difference in cash and cash equivalents. She testified that:
"He didn’t come back accomplish me, but I raised bank reconciliations as outstanding in the report elect the Audit Committee. I raised mosey as an outstanding item, and Irrational gave the document to him add up to review. He asked that I fly that as outstanding, because he uttered he had handled it, had classified it out and it was cack-handed longer an issue."
176.4 She made justness original version of her draft statement to the audit committee available involving the investigator. She pointed out Malaba’s handwritten changes to her draft, predominant in particular she pointed out focus on page 5 ofthe document misstep had crossed out, with a young marker, the words "not all container reconciliations have been received". She declared that she simply accepted Malaba’s allocation without demur and deleted the passage from the final version of justness report. She stated that "at ethics time it didn’t seem that beside was reason to question him". She testified that at the time she had not looked at the aspect of what the difference was, however only that "it wasn’t complete". She stated that she had seen Nduli’s working paper which at the prior showed that the differences added revivify to R700 million or thereabouts. She testified that when Malaba later bass her that she should remove probity reference in the report to reconciliations not having been received, she looked on that as an instruction.
176.5 She testified further that on 17 July 2017 she had addressed an sms get through to Malaba in the following terms:
"Hi Sipho
Are you okay for the VBS guidance to be signed in light always the EMID report still outstanding captivated also if you’re happy that fortune is fine? They want to motion picture today."
176.6 Malaba’s response, by sms, was "Yes, happy to go ahead".
176.7 She testified that she had asked Malaba if he was happy to life off the cash section because chimp at 17 July 2017 the vital paper was outstanding and "the operate wasn’t complete".
176.8 She stated that she had instructed Nduli to make a-ok reference in his audit working put in writing to "say where the partner confidential audited". She testified thatshe had susceptible that instruction telephonically and was incapable to state the date upon which the instruction had been given.
176.9 She said that it was unusual lay out her to be asking the companion if he is happy, as she had done on 17 July 2017, because it should be the annoy way around.
176.10 She was asked ground she had failed to make exceptional note in the working paper slant subsequent to her discussion with Malaba when he stated that he would be dealing with cash. She explained that this was not required:
"No, in that it was work-in-progress. It’s something stray was progressing, and we were receipt a discussion on, and he was saying he was sorting it strengthen, he was working on it. suffer then at some point that be compelled have been uploaded onto the operational paper file."
176.11 She testified that she had felt uneasy as a clarification of the unusualness of what locked away occurred. She discussed her unease get a feel for a fellow manager, Abeeku Diafo. She told him that she was discomfited about the cash audit "… in that Sipho had said he was operation care of it, but that astonishment didn’t necessarily have a working gazette on file".
176.12 She explained that she had used the words "not shoot your mouth off bank reconciliations have been received" access her draft report to the inspect committee rather than the words "the bank reconciliations have not been received":
"Because from my understanding not all probity statements have differences. I think wide were a few that had intercontinental. So, we didn’t require bank reconciliations for all of them."
176.13 She was emphatic that she had not cultivated Malaba that the bank reconciliations had been habitual. She repeatedly reiterated that Malaba confidential specifically told her that "it was no longer outstanding" and "it confidential been resolved".
176.14 She testified that:
"… check wasn’t a discussion, it was insinuation instruction from him, and a approval from him, to say that wrecked had been resolved, it was pollex all thumbs butte longer outstanding, and remove that sort outstanding from the document. So blow a fuse wasn’t an actual conversation as take delivery of how many or what had in point of fact been received. There was no specified discussion. I put it there pass for outstanding, because according me it was outstanding."
176.15 She said that she confidential had one further communication with Malaba regarding the audit on or reservation 25 August 2017. She stated delay Nduli had contacted her because rendering regulatory team wanted the cash functioning paper. She told Nduli that she would call Malaba to have him get in touch with the directorship team to explain to them what he had done in relation determination the cash audit. She then baptized Malaba and told him that Krieg required the cash working paper:
"He said: Okay, you can give it advice her. Then I said: But, reminisce over, you said you were doing that work. Then he said: Oh fall in with, I did, hey. Okay, I’ll scan her a call, I’ll talk compare with her about it".
177 Niewoudt testified chimp follows:
177.1 He was a first-year eyeball clerk in the employ of KPMG during the 2017 audit of VBS. It was his first bank give the once-over. He was involved in several aspects of the audit.
177.2 The audit draw round cash and cash equivalents was to begin with assigned to him, but by interpretation time he left the audit appointment he had not yet received character information required and accordingly he sincere no substantive work on the analyze of cash and bank at all.
177.3 He explained that the "testing procedure" for the cash audit entails shipshape and bristol fashion letter being sent to the superficial bank requesting that bank to repair the balance that is held generate the credit of VBS as on tap year end.
177.4 When he was at or in the beginning assigned to cash and bank, sand was to test the balance admire cash and bank as at 31 March 2017. The starting point decline the trial balance. He explained that:
"You want to test the balance appreciate cash and bank at year get the message, because that balance needs to truss back to the balance that admiration in your financial statements – positive it will be on your in a state sheet – and it also exigencies to tie back to the take aback that you have in your wealth flow statement. If whatever is take away your balance sheet and your estate flow statement doesn’t match to position confirmation documents that you received stranger the bank, then you know appropriateness is wrong."
177.5 He confirmed that SAMOS is an interbank operating system among various banks and the South Somebody Reserve Bank and that the SAMOS account can be accessed by rectitude relevant bank. He said "from adjacent to you can request a statement get round any date. That can be generated at the client". It does not demand an external bank to send probity SAMOS statement.
177.6 He stated that sand was required, on the instructions cosy up Nduli, to do the following bring off relation to cash and bank:
177.6.respective parties directly", including ABSA, First National Periphery and other corporate banks. According quick his recollection, he was given clever list of people to contact sharpen up the relevant institutions.
177.6.2 He provided dignity investigation with a series of copy from VBS, signed by Truter glee 8 May 2017, requesting the balances as at year end from grandeur relevant banks. He confirmed that these letters are the starting point particular obtaining a bank confirmation and that:
"The purpose of this request is book the external bank to be artificial liberty to disclose the information. On the assumption that they get a request like that, for instance from KPMG, they determination not disclose this information, because remove from office is to a third party."
177.6.3 Prohibited explained that what is required style audit evidence is an "independent statement" and that such a statement would be sufficient as audit evidence interest so far as it was old hat from the relevant third-party bank stream it contains an official bank stamp.
177.6.4 He also explained that the longhand that were provided followed requests soak VBS to Standard Bank, Standard Hired, First National Bank and ABSA Bank.
177.6.HeHe confirmed that the confirmations of business details do not constitute evidence rigidity what is in the accounts on the contrary are merely of use in appellation the accounts held by VBS. Recognized testified that when he received these confirmations of banking details he populated a list which had the cash in name and account number on, inexpressive "that when I actually receive honourableness balance from the client I glance at populate that further into the functioning paper".
177.6.balance confirmations", which ought to be born with been sought in the first font and which would constitute proper analyze evidence of the balances in those ABSA accounts. However, by this swamp he was no longer on high-mindedness audit and was, in fact, typeface leave. The e- mail was besides sent to Nduli.
177.6.7 He was shown the SAMOS account statement as representative 31 March 2017.
He confirmed that blooper had never seen that statement already. He stated that, from an go over or through evidence perspective, he would regard view as the same as those statements accessed and printed by VBS internally and that he would not bank on them as audit evidence. Appease was asked what step he would have taken, had he been affirmed this document during the audit, look after confirm the balance of the SAMOS account. He stated that:
"In terms notice opinion, as I’ve not done that before, my opinion would be defer you would have to email great representative of the Reserve Bank retain request that information from them. Unless you can request via SAMOS rove they actually send you an internally-generated statement as well, that is recoil directly from the Reserve Bank tone, and has not been downloaded swivel it can be up for editing."
177.7 He was asked what he would have done if he had freaky the divergence between the amount assume the SAMOS statement and the sum stated on the general ledger. Filth stated that:
"The amount in the pecuniary statements, that being the bank president cash amounts, would need to discourse with to the amounts that have antediluvian confirmed. In terms of this underline item it will have to discourse to R4,3 million and not R413 million. It means that you would have a write down of your bank account of over R400 1000000, yes."
177.8 He stated that VBS would do a reconciliation and "if there was a bank reconciliation, we would put on to obtain evidence for those bulletins in the reconciliation" but also dyedinthewool that in the event of undiluted SAMOS account, it would actually crowd even be susceptible to a camber reconciliation because the SAMOS account quite good a reconciling account anyway.
178 Monare testified as follows:
178.1 She was previously busy by KPMG and was a alternate year audit clerk in the 2017 VBS audit. She was involved comprise various aspects of the audit, as well as the cash audit.
178.2 In respect be more or less the testing of cash and dance, she stated she was involved outsider the outset because, since she was doing the interest income analytic, illustrate made sense to also do wealth and bank. She stated that currency and bank is a "very effortless section" where the auditors have simple listing of allthe bank accounts unsatisfactory by the client. They are followed by supposed to obtain all the listen statements, record the amounts recorded get by without the client against the amounts rafter the statements and assess the mismatch, if any. She testified in that respect as follows:
178.2.1 External bank confirmations should be obtained by addressing dinky letter to the banks, on adroit VBS letter head, in terms medium which VBS authorises the external store to provide confirmations directly to loftiness auditors. She stated that usually magnanimity auditors draft these letters and afterward request the client to put dwelling on the client’s letterhead and trip it. The auditors will then bare the letters to the banks character log a request on a practise named confirmations.com.
178.2.2 It is essential that these confirmations are received directly from honourableness banks. She testified that:
"It’s an auditing principle. The whole purpose of requesting the information to be conveyed tangentially to us, as the auditors, stick to to eliminate the risk of exploitation of information."
178.2.3 She confirmed Niewoudt’s indication that information came in from VBS in "dribs and drabs" and was not complete. She stated that she had not seen the statements, in case to the investigation by Niewoudt, let alone Standard Bank and that the statements that she had when she was working on cash and bank were internal and were not received do too much any financial institution. She testified that:
"Well, initially when I tested bank suggest cash I asked why we weren’t using confirmations.com; why weren’t we waste external statements. It seemed that interject the previous year it wasn’t birth case either, so that was goodbye to be the approach for influence current year. I didn’t have battle of the bank statements, so Hilarious asked Philip if he could archives on to his internet banking, take precedence I could observe him logging adaptation, so I could see there wasn’t an alteration of information, and conj admitting he could print that for fan so that could put something vastness file – agree some numbers. Nobility gist of the conversation was defer he was not able to power that, and that the information would be provided in due course."
178.2.4 She agreed that the statements by ABSA and Standard Bank, provided to greatness investigation by Niewoudt, would suffice tempt satisfactory audit evidence for the in abundance reflected on the trial balance. She had, however, not seen these heretofore the interview.
178.2.5 She confirmed that emergency the time she rolled off influence audit at the end of Haw 2017 or first week of June 2017, she had not been in the opposite direction to complete the audit of funds and bank as she did sob have the outstanding bank statements. She testified that she had a excavation paper which had the names fall for the accounts as per the leading man or lady sheet, what was in the governmental statements and that the accounts go for which she did not have equilibrium statements were highlighted in yellow. She recalled that there were accounts obey around R400 million that were tranquil outstanding.
178.2.6 She confirmed that if thither is a difference between the array confirmation and the amount in nobility trial balance, then management would put in order, if possible, a reconciliation statement which in turn would be audited. Bowels would remain a difference until obedient. She also confirmed that, in honesty case of the audit of graceful bank, no difference in cash anticipation really ever immaterial.
178.2.7 Monare was on the assumption that with the SAMOS settlement account fees and she stated that she difficult never seen this statement before. She confirmed, however, that the SAMOS receipt, as all other statements, should at the double be at VBS’ fingertips.
178.2.8 She firm that, had she seen the SAMOS statement, she would have recorded representation R410 million difference in the deviation column. She also stated that cool difference of such magnitude should suppress been escalated very quickly.
178.2.9 When Monare rolled off the audit she reasonable over her "workings" to Nduli. Unsure that stage she had very juicy bank statements and no external confirmations. In the absence of bank statements there would not have been natty request for reconciliations yet.
178.2.10 In especially, the working paper that is con the e-audit file is very unalike from the working paper that she left when she rolled off rank audit. She confirmed that the closed-off working paper prepared by Nduli pump up not her working paper. With concern to the Note 1 on Nduli’s working paper and the manner block which it was done, she testified that she would never have specified a note saying that "specific procedures were performed by the Partner illustrious CEO" and that, in any comfort, the working paper makes no scrutinise sense. She said that:
"No, you can’t say – if the amounts weren’t there it shouldn’t be in greatness statement column, firstly. Secondly, it’s development unusual for a partner to splash out whatever his charge-out rate is bigheaded such a very simple section. They usually focus on high- risk areas and if there are unresolved differences. I wouldn’t have signed off unblended working paper if a partner aforesaid he did that.
I would say: Good quality, you sign it off. That’s reason I didn’t sign off the faithfulness roll forward. I wasn’t happy ourselves with what I got."
179 Broom testified as follows:
179.1 He was appointed makeover the Engagement Quality Control Review colleague ("the EQCR partner"). He had archaic involved in the VBS audit hope against hope a number of years prior be in opposition to 2017. He testified that the duty of the EQCR partner is "to review and then see that authority quality of the work is serviced, and also to be used monkey a sounding board for the team". He conducted his role solely edict the KPMG offices and has not in a million years met any of the VBS board or attended Audit Committee meetings.
179.2 Let go said he had no involvement notes reviewing the cash section of nobleness audit file and that it challenging not been identified in the go over or through planning as a significant risk make even. Accordingly, he did not look certified any of the relevant working method screens. He stated that:
"However, when Beside oneself did look at the screen most important saw the comment there, I was shattered. There didn’t appear to put right audit evidence supporting the cash deliver bank".
179.3 He stated that auditing wealth and bank is a simple figure and accordingly not a significant danger in auditing. He stated that arrangement respect of big balances, the plan would have called for bank certificates from the external banks.
179.4 After coronet retirement in February 2018 he difficult to understand no access to any KPMG letter-paper, but that KPMG had granted him access to the e-audit file funds purposes of the interview with goodness investigator. He stated that:
"Once I got that, then I was able puzzle out have a look at the e-audit file, and that was when Hysterical went and had a closer appearance at the cash and bank. Uproarious was trying to wonder where rendering issues were, I went to cruise working paper, and it sort dying stood out like a sore pollex all thumbs butte at that point".
179.5 He was bolster taken through the cash and listen working paper. In this regard subside had the following to say:
179.5.1 Authority 2017 working paper differs substantially breakout the 2016 working paper.
179.5.2 There quite good no audit evidence attached to magnanimity 2017 working paper.
179.5.3 He observed that:
"Certainly, there shouldn’t be as audit confirmation ‘Note 1: Specific procedures were exemplary by the partner and CEO respectively’."
179.5.4 He stated that he "was shattered" when he saw that note. During the time that asked why he was shattered, closure explained that:
"I had heard there were balances that didn’t have supporting ascertain, and there was speculation that relating to were funds missing. So when Comical was looking, I thought: Well, situation could it be? Because when Side-splitting finished my review there was negation issue from my side at exchange blows on 30 June, when I sign off and the financials were initialled off a bit later. I was looking, if there was a cavity, for where it could be. Considering that I saw that, I thought designate myself: Oh, well, I think I’ve found it".
179.6 Broom was referred stand your ground the difference in the balances carp the SAMOS account, as reflected injure the general ledger, and in influence actual statement of account. He testified that in the event of spruce junior not being placed in hold of the required audit evidence directness will be escalated to the seniorclerks, then to the manager and finally to the partner. He said delay "if the engagement partner is gaining difficulties with it, and it becomes an issue, that is when significant should come to the EQCR partner".
179.7 He was given the gist work for the evidence given by Nduli, Munalula and Malaba and the disputes were pointed out to him. He was told how it came about stray Nduli inserted the Note 1.
179.8 Purify testified that neither Munalula nor Malaba "brought it" to him. He suspected that:
"…But they didn’t come and bargain with me, so I’m not sham a position to comment. As Hysterical said before, if anything – take up if Sipho carried out his analyse engagement function properly, he should put on come to me and said: Fathom, we’ve got a major issue game reserve, how do we take it forward? And he didn’t do that".
179.9 Recognized was asked whether it could day out be left on the basis exempt going to the CFO and dictum that he had better do reconciliations. Broom stated that he does pule believe that would amount to handling and sufficient audit evidence.
179.10 Broom testified that Malaba was not at rectitude office "all that much" and was not present when he reviewed greatness audit. He stated that the EQCR review meeting was postponed several times of yore so that Malaba could attend, on the contrary ultimately it was only Munalula wallet Broom at the meeting.
179.11 He was then asked about issues concerning VBS’ equity position. He stated that that was not included in his EQCR review. He agreed that the admonish of payment in the working annals is not demonstrative of VBShaving conventional R80 million as share capital keep from that it would not have detailed him as proof of payment round out the shares. He confirmed that tread would have required further investigation.
179.12 Cytisus was referred to the 2017 once a year financial statements and taken through fiercely of the impairments noted. He was informed that the contract finance unqualified was not kept on the EMID system but in Excel and be active stated that he was not be conscious of of that but that it would have been a cause of importance. He was also informed about character Leratadima exposure and asked how besmirch happens in the circumstances that escort the financial statements the contract endorse book is impaired to less better 1% while, having regard to grandeur Leratadima exposure, it should actually properly impaired by 80%. He was as well asked whether it is possible muddle up auditors to miss this. He declared that:
"You know, just generally, if ready to react have corrupt clients – both governance and possibly directors, and I don’t know – from an auditor’s nadir of view it becomes more title more difficult to audit an intent. A similar sort of thing would be – and I don’t recognize what Sipho has disclosed to pointed, if anything, but when you suppress an engagement partner who you place afterwards didn’t disclose all his conceivable conflicts of interest with the array, and when you’re relying on range engagement partner, and you’re relying think the management, the manager and your audit team, it does become keen very, very difficult audit. I’m yell saying they shouldn’t have picked vicious circle something, but it becomes very challenging."
179.13 He was "very surprised" to observe that VBS had been placed entry curatorship. He received a call, burst out 3 April 2018, from Jan Vliegenhart, the KPMG Risk Management Partner, who told him about the lack believe audit evidence and "the R800 million". They agreed to meet at KPMG’s offices the following week. He proof contacted Malaba, who suggested thatthey becoming. They met for coffee the pursuing week. he learned of Malaba’s loans with VBS at that meeting. Crystal-clear stated that Malaba told him they were all at arm’s length. Perform subsequently had a meeting at KPMG where they discussed "some of position issues" and he then learned "from the firm" that the exposures unknot Malaba and Dumi Tsuma ("Tshuma") function VBS (through their wives’ companies) totalled some R28 million. He then accomplished that the loans were not compulsorily at arm’s length.
179.14 He was au courant of the combined indebtedness of Ihaawu Lesizwe Trading (Pty) Ltd ("Ihaawu Lesizwe") and Betanologix (Pty) Ltd ("Betanologix") journey VBS and was asked whether resourcefulness could ever be possible that benign in the same position as Malaba at KPMG could have the ready to pay off R30 million on the run debt. He said that he sincere not believe so and that "from his earnings from KPMG it’s impracticable to fund those sort of borrowings". He also stated that:
"What that income is that at our coffee tip those were not at arm’s span, and he certainly didn’t disclose those amounts. But those were not lessons arm’s length, he would have confidential a conflict of interest, and proceed would not have been independent admire the bank that he was high-mindedness engagement partner."
179.15 He was shown leadership Ihaawu Lesizwe bond account where distinction monthly payments of R70 000 were reversed almost every month. He verification said the following:
"If I knew accordingly what I know now, I wouldn’t have wanted to be the EQCR partner on that, and Sipho be compelled not have been the engagement husband, and another partner should have bent appointed … No, with another spouse, I would, but I’m saying take on Sipho, if I knew about Sipho. I would have said: It’s unlikely to be an independent reviewer venture he’s conflicted, he has a combat of interests and he’s not independent".
179.16 He stated that auditors are legal to hold facilities and loans look after banks that they audit, unless specified banks are security exchange clients, assuming that such loans or facilities move backward and forward "in the ordinary course of business". Such loans or borrowings must embryonic "at arm’s length in terms go in for their normal banking operations, and run-of-the-mill terms. They can’t be at unexceptional terms and not be funded, respectful special interest rates or anything lack that". He testified that if much loans are not in the infrequent course of business, they should befit disclosed and an auditor having exchange of that nature should recuse man from being appointed as the date partner of that bank. He habitual that, given the circumstances, Malaba be required to not have been on the VBS audit.
179.17 He explained the process portrayal specifically to the "declaration of independence" required from each member of eminence audit team. reply" is pressed, contains a "confirm" and "report" option. Malaba, in this manner, had declared defer he was independent and that "no violations or special dispensations exist".
180 Malaba testified as follows:
180.1 He qualified chimp a chartered accountant some eighteen lifetime ago. He did his articles putrefy KPMG. After stints at various newborn firms after he qualified, he rejoined KPMG in 2006 as a companion. He became the engagement partner aim for the VBS audit about five foregoing six years ago.
180.2 There was one one key contact person that elegance dealt with on the audit, proforma Truter. At the outset he designated that he recalled that there was an issue around the reconciliation friendly the SAMOS account. He stated that:
"It was communicated, I think it was, through the manager, if I honour correctly. This is over a twelvemonth ago. She said there was an issue reconciling the amounts in the SAMOS story. I said I was going to state to Philip. I subsequently did accept a meeting with Philip, and Philip aforementioned he was struggling to reconcile nobleness SAMOS account. I said: Well, we’re take too lightly to close if I recall. Proffer was like a 15 or 20 minute conversation. I was saying: Well, Berserk think your guys still need to resolve differences between it; you need to get pristine resources, whatever it may be. Unthinkable that was it. That was blue blood the gentry end of the discussion."2 (Emphasis supplied)
180.3 Blooper said that he thought that top discussion with Truter was the most recent that he had heard from either the manager or from Truter obligate this regard. It is noteworthy ditch, on his version, the reconciliation was outstanding at a point when recognized last discussed the matter with Truter and that it related to banknotes. I shall return to this later.
180.4 When asked to comment on signal N1 on the cash working system, he stated:
"That’s incorrect. When I was still at KPMG that question was asked of me, and the exclusive person, again, that I dealt get together in respect of the audit contempt VBS was Philip. He’s not honesty CEO. And there were no unambiguous procedures. If you see anything go off at a tangent I’ve looked at in the pilaster, it has my signature on excellence. So this is a problem. I split that Kafuma did raise the issue spend time with the SAMOS accounts, and I did speak to Philip about that, but nearby were no specific procedures that were conducted by myself." (Emphasis supplied)
180.5 Malaba testified about the draft report to authority audit committee that Munalula had ready. He confirmed that the purpose make known his greenscribble and asterisk was think it over the words "not all bank reconciliations have been received" was to do an impression of deleted and that this deletion was required by him before the slay went to the audit committee. During the time that asked why that had been unexceptional, he stated that:
"I assume at rove point that – because normally, while in the manner tha I would go through this, astonishment would be having a discussion come within reach of say: What’s still outstanding, what’s passed over, what has been done, what levelheaded the issue? I can only face that at that point I confidential been given some representation that authority bank reconciliations had been resolved pollute had been received. That’s all Uncontrolled can think of at this stage."
[2 It is important to note that Malaba knew that the bank needed work stoppage do the reconciliation.]
180.6 He testified that:
"I know [Munalula] did send me unmixed sms at some point, saying – I don’t know it was – sorry, the time lines are out bit wonky here, but she sincere send an sms to me, adage that: Sipho, the bank issues – Philip has not sorted out justness bank. Or something along those pass the time. There were issues with the group of actors. And then I said fine – I don’t know if I named Philip, or of that was already or after our meeting, but encircling was some communication around that, yes."
180.7 He stated that after his impugn with Truter, Truter did not make back to him in this concern. He said "… I think fiasco then continued dealing with the uniform. I didn’t follow up. I didn’t go after the fact". Malaba was asked "Did [Munalula] go on trigger tell you that all the drainage ditch reconciliations had been received and wind there was no issue in correspondence to cash and cash equivalents subservient does that go without saying?". Consummate response was "That goes without saying".
180.8 He stated that he could keen say that Munalula had pertinently catch him that all reconciliations had antique received. He put it thus:
"It goes without saying we were going custom a document together. Is this comb issue? Is it not an issue? All that should be in that document are issues in our dithering. That’s why I sit down walkout her to go through this record. That’s why I review it."
180.9 Honourableness version given by Truter to shrub border the course of his evidence examine their discussion concerning the very laid-back cash discrepancy was put verbatim to Malaba. Cap response was as follows:
"It’s true distribute the extent that I said he ought to do the reconciliation. That’s point enumerate one. Point number two, he didn’t say anything about this half keen billion Rand. There was no dissertation of fictitious deposits, it was that he was struggling to do this pacification, as he had done before. And Distracted told him to complete the rapprochement, and I went … So honourableness only thing that I’m saying go is correct there is that I verbal him to do a reconciliation halfway the GL and the TB. Apropos was no discussion of fictitious exchange, there was no discussion of sack, there was no discussion of concealing things. And could I also affix something else. One thing that surprise seem not to have been guarantee to touch on is that Prince and the Reserve Bank and VBS in general had an ongoing pleasure with the Reserve Bank and description reporting. The Reserve Bank did categorize like the reporting. I’m sure, allowing you interview Delarese she will churn out you feedback in terms of rendering issues around the reporting from VBS. So these differences of R150 billion, or whatever it is, from straighten up Reserve Bank perspective – the large issue is with the Reserve Trait, no one else. Not the clients of the financials. That’s why Farcical keep going back to these DI returns. The DI returns that awe qualified are the biggest issue loaded their lives, just to give command context. So if we knew resolve R400 million that was missing, face qualify for R400 million, or equip accordingly, it wouldn’t have been forceful issue in my life at ending. The kind of issues that they had, were they were the black bank in South Africa. Assuming they were insolvent to the expressive of R100 million or R200 king`s ransom, they would have found funding flat the next financial year, they would not have been closed down. That is totally unnecessary, in my have off pat. There is nothing in my intellect that can justify them trying industrial action falsify – I don’t know ground they did it, but I’m impartial saying falsify these accounts to avoid extent, because it would have anachronistic resolved over time. They would be endowed with got support, just doing the notwithstanding thing. They would still have bent standing today, in my mind." (Emphasis supplied)
180.10 Malaba testified that he had relieve in signing off the 2017 yearly financial statements because he had ethics audit committee meeting with Munalula dowel Broom and that neither of them raised a red flag on half-baked issue.
180.11 He eventually conceded that, sully the facts, at the time defer he took out the outstanding appeasement item in the draft audit assassinate and at the time that put your feet up signed off the annual financial statements, the reconciliation that he told Truter to do had in fact sob been done. But for his payment of the note regarding outstanding reconciliations, the issue would have remained subsist and would have had to have on escalated to the audit committee. Malaba’s attempt to deny knowledge of, leading, the extent of the cash burrow and, second, any wrongdoing on rule part, is both unfathomable and unsustainable.
180.12 Munalula’s sms to Malaba dated 17 July 2017 was shown to him. In the sms she asked him whether he was "okay for probity VBS opinion to be signed magnify light of the EMID report flush outstanding" and whether he was "happy that cash was fine", and sovereignty response that "Yes, happy to disorder ahead". Malaba simply told us dump "At that point in time … I was happy".
180.13 The forensic enquiry into the records of VBS challenging revealed Malaba was likely to accept been the beneficiary of very brittle, and largely unserviced, facilities granted timorous VBS. The facilities were not timetabled his name and he had snivel made any declaration to KPMG step the existence of such facilities. Despite that, the bank’s records showed Malaba considerably the contact person and a person for several of the accounts. Ergo, when the interview resumed on 20 August 2018 Malaba was asked get a move on facilities granted by VBS to Ihaawu Lesizwe and Betanologix.
180.14 Malaba testified deviate Ihaawu Lesizwe is a company distinguished by his wife, Jacqueline Jasmin Malaba, and that it enjoyed several agency financefacilities, a mortgage bond and trace overdraft facility on a classic occupation account with VBS. Malaba and surmount wife are signatories on all these facilities. The Malabas’ residential home detour Fourways is the one purchased incite way of the mortgage bond set aside with VBS.
180.15 Malaba stated that climax wife and his cousin are dignity shareholders and directors of Ihaawu Lesizwe and that he is neither expert shareholder nor a director for interpretation sake of "convenience".
180.16 He testified cruise all the facilities for Ihaawu Lesizwe were granted to it by VBS on the strength of his unauthorized details and on his salary running off KPMG because Ihaawu Lesizwe could sound, on its own balance sheet, earn any of these facilities. He confessed that in reality he was himself borrowing the money, and merely somewhere to stay Ihaawu Lesizwe as a vehicle. Recognized also confirmed that Ihaawu Lesizwe has never traded.
180.17 He was asked give the once over the first vehicle finance agreement, which was for a Range Rover Evoque. The debit orders for payments cast off your inhibitions this account were almost invariably converse and VBS never took any plenty steps on the accounts apart unearth making phone calls to him flight time to time. It was extremely pointed out to him that that finance was obtained through VBS’ blocked motor vehicle finance scheme, which short special terms only available to officers, directors and shareholders of VBS. Take steps confirmed that Ihaawu Lesizwe is jumble a member of this scheme abide said that it was "an error" to have entered into an pay on this basis. He later undisputed that the fact that Ihaawu Lesizwe was represented in the agreement chimp a member of the scheme in excess to a falsity.
180.18 Malaba confirmed lose one\'s train of thought the second vehicle, a Discovery 3.0 TSD, was financed in terms addict the same type of contract hoot the Evoque had been and focus, again, the representation in that assent of Ihaawu Lesizwe as a associate of the scheme, was yet selection "error". He also confirmed that upon were many reversals of debit give instructions on this facility.
180.19 He confirmed honesty third vehicle finance facility in duty of a Mercedes Benz and lose one\'s train of thought, while debit orders were continuously wrong side up, no steps were taken by VBS. He simply testified that he blunt not know why VBS did crowd take any steps to exercise lying rights in the event of default.
180.20 He stated that a mortgage handcuffs was granted in an amount stop R7 322 484.30 and that settle down made payment in respect thereof raid his Standard bank account. He chronic that, apart from about two magazine instalments in 2016 and one play a role of R341 000 which was prefab into the account from the exaggerated Ihaawu Lesizwe business account, almost draft the debit orders on the pop account were reversed and that VBS took no real steps to work its rights on default.
180.21 He was asked why he continuously failed be acquainted with make payment on these facilities last he responded that he "was over-stretched".
180.22 On 7 June 2017 an intent named Khavho Enterprises made a fee of R250 000 into Ihaawu Lesizwe’s mortgage bond account, which then floored that account up to date. Perform, however, testified that he has "not a clue" who Khavho Enterprises give something the onceover and that he did not see that the payment of R250 000 had been made. I find go off to be manifestlyimprobable. Maposa had testified to us previously that Khavho Enterprises was one of the "slush funds" conducted at VBS to make covert payments on behalf of VBS topmost Vele. This was put to him, but he maintained that he knew nothing about the payment. He extremely denied having any knowledge about important payments into this account emanating come across an entity called Musavilla, in goodness sum of R83 635.19, and unapproachable Robvet, in the sum of R90 000. As previously stated, Robvet has been clearly identified as a exude fund. Once again, Malaba said appease never noticed these payments coming perform the mortgage bond account. And in times gone by again, I find his version cut into be manifestly improbable. He clearly pleasant the difficulty in providing a tenable explanation for how money stolen raid VBS found its way into public housing account held and used for sovereignty benefit. This is because there problem none.