November 23, 2018 / 6:36 PM / 17 days ago

S. Africa's KPMG reports ex-partner to police over bank scandal - sources

JOHANNESBURG, Nov 23 (Reuters) - KPMG South Africa has reported a former partner to the police over his alleged role in a corruption scandal in which almost 2 billion rand ($144 million) was stolen from VBS bank, two KPMG employees familiar with the matter said.

The KPMG employees said the accounting firm had sent an internal email to staff on Friday that said its board had “assessed information on VBS and support criminal action being taken” against the partner, Sipho Malaba.

KPMG audited VBS Mutual Bank’s financial results before it was placed under curatorship in March, a step that permits the central bank to appoint an administrator or curator to run a bank.

Malaba is one of two former partners of KPMG South Africa who resigned in April after facing disciplinary charges over their failure to disclose financial interests in connection with VBS, KPMG said at the time.

Reuters has been unable to reach Malaba for comment. He did not respond to personal messages sent to his LinkedIn profile.

A central bank investigation into the VBS scandal, led by Advocate Terry Motau, recommended in October that criminal charges be brought against more than 50 people and entities who orchestrated and benefited from the VBS theft.

Motau found in the report, which was published on the central bank website, that Malaba had committed fraud, saying he had been aware of a cash hole when he gave his audit opinion on the bank’s annual financial statement in July last year.

South Africa’s News 24 website quoted a statement, issued by Malaba’s lawyers last month in response to the central bank’s findings, as saying that the report was “riddled with inaccuracies” and that the inquiry had “completely ignored the evidence presented before it.”

KPMG first reported Malaba to the elite South African police investigating unit, the Hawks, on Sept. 10, one employee said, reading the internal email to Reuters by telephone.

The employee said KPMG told staff it had “submitted a second report to the Hawks” related to the case after learning more information from Motau’s investigation.

“We haven’t received any communication from KPMG regarding Malaba and the Hawks,” Sheree Rogers, a member of Malaba’s legal team, said by phone. She declined comment on the allegations made against Malaba.

The Hawks spokesman said the unit doesn’t discuss investigations in public, when asked if the force had received a report from KPMG about Malaba.

During the investigation, Malaba blamed failures in the VBS audit on another auditor and said he could not be held responsible for reckless lending by VBS, Motau’s report said.

Motau’s investigation said the scale of looting from VBS would not have been possible had KPMG not signed off on the bank’s results.

The investigation concluded that South Africa should seek damages from KPMG for the role it played in the VBS affair.

A South African court approved an application by the central bank this month to wind up VBS Mutual Bank.

The VBS probe was the latest headache for KPMG, which has lost more than a dozen clients as questions have been raised about its ethical conduct in South Africa.

KPMG South Africa has already cut jobs and lost business over work done for a company owned by the Gupta family, friends of scandal-plagued former president Jacob Zuma, who were accused of unduly influencing the award of billions of rand in government contracts. Zuma and the Guptas deny wrongdoing.

$1 = 13.8524 rand Reporting by Nqobile Dludla; Additional reporting by Patricia Aruo Editing by Edmund Blair and Adrian Croft

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