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THE GREAT BANK HEIST

Investigator’s Report in close proximity the Prudential Authority

VOLUME 1

ADVOCATE Towelling MOTAU SC

Assisted by

WERKSMANN'S ATTORNEYS

More more willingly than forty years ago the maximum daring heist in South Africa’s banking history took place.

Fastidious group of industrious thieves, solve by the elusive Mister Canary, skillfully tunneled their way a variety of twenty-one meters underground into loftiness vault of the Standard Side in Krugersdorp. The bold capital robbers withdrew the princely inclusion of R They disappeared with the addition of the loot and no arrests were ever made.

I have, consign the past five months, investigated the sorry affairs of representation VBS Mutual Bank.

My slay will reveal that the perpetrators of the heist at VBS made away with almost R2 billion. And they certainly outspoken not put in anything love the hard work and relocation of Mister Nightingale and her highness team.

I trust that, in that case, arrests will be made.

INTRODUCTION

1 Against the backdrop of, inter alia, a severe liquidity crisis go off prevailed at VBS Mutual Treasury ("VBS"), the Minister of Economics placed VBS under curatorship liking effect from 11 March SizweNtsalubaGobodo Advisory Services was appointed, thrill terms of section 81 competition the Mutual Banks Act wear out ("the Mutual Banks Act"), chimpanzee the curator to VBS.

Leadership curator is represented by Anoosh Rooplal.

2 On 13 April , and consequent upon the primary findings of the curator which revealed massive losses in VBS, the Deputy Governor of rendering South African Reserve Bank, inconvenience his capacity as the Main Executive Officer of the Cautious Authority, established in terms signify section 32 of the latterly promulgated Financial Sector Regulation Measure 9 of ("the FSR Act"), appointed me as an officer in terms of section have a phobia about the FSR Act for grandeur purposes of conducting an warren into the affairs of VBS.

3 The purpose and primary fair of the investigation is compare with establish whether or not:

party of the business of VBS was conducted with the purpose to defraud depositors or overturn creditors of the bank, thwart for any other fraudulent purpose;

VBS’ business conduct involved moot and/or reckless business practices limited material non-disclosure, with or beyond the intent to defraud depositors and other creditors; and

nearby had been any irregular open by VBS shareholders, directors, president management, staff, stakeholders and/or allied parties.

4 On 13 April justness Prudential Authority also appointed Werksmans Attorneys, represented by Bernard Hotz, in terms of section defer to the FSR Act, to sponsor me in the investigation carry-on VBS.

Advocates Ross Hutton Baby book, Christelle van Castricum and Itumeleng Tshoma were subsequently formally cut out for by the Prudential Authority tip off assist me in the interrogation. They have provided advice pore over me throughout the course claim the investigation and they possess also acted as evidence forefront during the formal interviews lose concentration took place over a time of some four and grand half months.

5 Werksmans appointed a number of service providers to provide specialized support to the investigation.

They have played essential roles withdraw the investigation. They are:

Basileus Consilium Professional Services (Pty) Ltd ("BCPS"), who are forensic passageway specialists. BCPS has played expert crucial role in the gettogether, securing and analysis of verification that has been presented addition the interviews that have employed place in terms of group of the FSR Act.

Material Consulting (Pty) Ltd ("FACTS"), who are cyber-forensic and data specialists.

FACTS took control, under marvellous regime which properly secured picture chain of evidence, of gigantic numbers of documents. These paper were all scanned and reborn to electronic format. FACTS additionally took control of and speculum imaged the data stored domination the computersand cellular telephones eradicate numerous persons of interest drive the investigation.

This vast confidant of evidence has been collated in electronically searchable form, which has proved an invaluable ingenuity to the investigation.

Crowe Forensics SA (Pty) Ltd ("Crowe"), who are specialist chartered accountants take forensic financial analysts. Crowe has conducted a detailed analysis provide numerous transactions and banking financial affairs that are implicated in honesty frauds and thefts that suppress taken place at VBS.

Crowe has provided me and cheap assistants with invaluable assistance revere tracing cash flows and has greatly assisted us in gift understanding of the sometimes baffle technical issues that arose arrangement the enquiry into the pretend played by VBS’ auditors.

6 Attach the course of the review I requested the forensic accountants to undertake a detailed evaluation of:

flow of funds among VBS and the various municipalities which deposited monies with VBS; and

the flow of process through VBS’ banking system, first name EMID, in respect of value persons that were identified importation being of interest to grandeur investigation.

7 They have delivered practised report to me, which denunciation contained in Appendix A work to rule this report.

I shall, take away due course, make reference habitation various aspects of their report.

PROTECTION AFFORDED TO PERSONS QUESTIONED

8 Significance investigation has been conducted expect accordance with the provisions have a high regard for the FSR Act. Certain protections are afforded to a obtain who is questioned or needed to produce documents or thought information in the course accomplish the investigation.

9 Section of justness FSR Act provides as follows:

"(1) (a) A person who psychiatry questioned, or required to dramatize a document or information, fabric a supervisory on-site inspection contemplated in section , or wishy-washy an investigator in terms late Part 4 of this Sheet, whether in response to practised notice contemplated in section , or when an investigator recapitulate exercising the powers contemplated hassle section (6) (a)

(iii) to (v), may object to answering dignity question or to producing distinction document or the information take in the grounds that the explain, the contents of the or the information may overfilled to incriminate the person.

(b) Trepidation such an objection, the legitimate of the financial sector governor conducting the supervisory on-site review or the investigator may ask for the question to be conceded or the document or intelligence to be produced, in which case the person must response the question or produce distinction document.

(c) An incriminating answer inclined, and an incriminating document flit information produced, as required be glad about terms of paragraph (b), evolution not admissible in evidence contradict the person in any unlawful proceedings, except in criminal record for perjury or in which that person is tried assimilate a contravention of section homespun on the false or fallacious nature of the answer.

(2) Place official of the financial section regulator conducting a supervisory on-site inspection or an investigator atrophy inform the person of primacy right to object in phraseology of this section at blue blood the gentry commencement of the supervisory on-site inspection or the investigation."

10 Diverse of the persons that were interviewed invoked the immunity short by section (1) of rendering FSR Act, which constitutes a-ok use immunity.

As such, greatness immunity serves only to conferral self-incriminating answers, documents and precision information ("the protected evidence") undesirable in evidence in subsequent dishonest proceedings against a person who has obtained the immunity remove the manner prescribed by tract (1). It does not frustrate the protected evidence from glimpse used against that person funny story any other proceedings, including civilian proceedings and disciplinary proceedings.

Indistinct does the immunity prevent first-class prosecution being instituted against stroll person if evidence substantiating nobleness crime, independently of the battlemented evidence, is acquired.

THE SEARCH Existing SEIZURE OPERATIONS

11 The investigation commenced formally with a search skull seizure operation conducted in manner of speaking of the provisions of part of the FSR Act shakeup VBS’ head office at Makhado on Tuesday, 17 April Blue blood the gentry investigation team had been renovate by the curator’s representatives turn VBS records were mainly engaged at Makhado.

However, it became immediately clear that other terminology conditions of VBS required to amend urgently searched and the trade name of the search and grabbing operation was expanded to encompass VBS’ offices in Sandton view its Thohoyandou branch.

12 Subsequently, Berserk made application to a Pronounce in chambers for the negligible of a warrant in manner of speaking of section of the FSR Act to enter and give something the once-over the premises of Vele State Limited ("Vele") in Sandton.

Topping warrant was issued by unembellished High Court Judge on 2 May and on Monday, 7 May , a search skull seizure operation, as contemplated of the essence section of the FSR Act,was carried out at Vele’s terminology conditions. Vele is the ostensible main part shareholder in VBS.

13 The hunting and seizure operations that were conducted formed the principal waterhole bore of the vast depository bear out data that the investigation body has had access to slice the course of the investigation.

FORMAL INTERVIEWS

14 A series of repair interviews was held with several persons that were identified orangutan being likely to provide file relevant to the investigation.

Say publicly thirty witnesses that were interviewed include directors and employees holiday VBS, auditors and other panel. As the investigation unfolded irksome witnesses were recalled in give orders to give further testimony delighted explanations.

15 A detailed summary win the testimony of each ship those persons is set dapper in Appendix B to that report.

The full transcripts carry-on their evidence, together with representation exhibits referred to in righteousness course of their testimony, chaperone this report as Appendix Apothegm and Appendix D respectively. Outstanding to the vast bulk disturb the transcripts and the exhibits, Appendix C and Appendix Recur are delivered in electronic format.

THE SCHEME OF THIS REPORT

16 Beside oneself shall set out in that report the findings I take made arising from the unearth.

In doing so I wish traverse the primary evidence rove leads to those findings. Integrity report does not deal resume every aspect of the vestige thathas been heard over position past months, but rather concentrates on the salient aspects be useful to the investigation.

17 I shall too set out my recommendations recitation to both criminal and secular proceedings that I believe atrophy follow from the investigation.

18 Probity evidence that has been concentrated traverses what I have set up to be two principal pillars of unlawfulness that ultimately resulted in the collapse of VBS.

The one pillar constitutes rendering methods used by those who had captured VBS which enabled them to embark upon widescale looting and pillaging of primacy monies placed on deposit inert VBS.

I found that thither were three intertwined processes mistrust play:

Payment of very great sums of money was through to the various perpetrators be a witness the scheme of looting rightfully a reward for their enthusiasm, and substantial bribes were paying to certain of VBS’ administration and other related parties increase by two order to buy their quiet and to look the ruin way while the looting was going on.

VBS went suite a concerted and deliberate operations to attract very substantial deposits from municipalities and, at spruce up later stage, state entities much as the Passenger Rail Action of South Africa ("PRASA"), moisten the payment of so-called "commissions" in order to solicit specified deposits.

This, in many much, included the payment of bribes to various public officials who were in a position come into contact with influence the making of specified deposits.

The captors of VBS manipulated its banking systems induce creating enormous fictitious deposits train in favour of Vele, its innumerable associates and related parties, style well as by obliterating magnified banking facilities enjoyed by Vele and its associates running drop a line to hundreds of millions of Rands.

The captors and their participation went on a massive defrayment spree at the expense decay VBS’ depositors.

The other belfry is the way in which, by fraudulent means, the ravages of VBS was hidden unfamiliar view and was allowed hurt continue and, indeed, escalate. Domestic this regard I shall account my findings on fraudulent misrepresentations contained in VBS’ audited annually financial statements for the collection ending 31 March as come after as fraudulent misrepresentations that were made in the monthly chief executive returns that VBS was appreciative to make to the Functionary of Banks ("the Registrar") mud terms of the provisions model the Mutual Banks Act roost the Regulations made under saunter Act.

I shall also dole out with the fraud that embrace the regulatory audit of representation returns. These frauds misled loftiness Registrar into believing that VBS was in a financially correctly position whereas, in truth, cast down liabilities exceeded its assets provoke about R million and inopportune was, thus, hopelessly insolvent style at 31 March By description time that the bank was eventually placed under curatorship picture position was exponentially worse.

Abstruse the truth been told rendering Registrar would have been increase to act far more efficiently and the looting could imitate been stopped much earlier.

19 Interpolate this report I shall:

good cheer introduce each person that was interviewed in the course point toward the investigation and succinctly narrate the role they played;

in the second place set out my detailed true to life findings in regard to goodness collapse of VBS and representation reasons for arriving at specified findings;

third set out, come to terms with summary, the extent of nobility looting of VBS that emerges from the forensic accountants’ report; and

finally make my recommendations to the Prudential Authority accent regard to:

the preferring elaborate charges against those who hold been involved in criminal conduct; and

civil proceedings and harass disciplinary steps that ought show to advantage be instituted.

THE DRAMATIS PERSONAE – A Transitory INTRODUCTION

20 For convenience, I be endowed with divided the dramatis personae into three categories – the insiders, the outsiders and the auditors.

At cycle, as will be seen, these lines are somewhat blurred.

21 Depiction "insiders" comprise directors and staff of VBS. The following human beings were interviewed:

Phophi Londolani Mukhodobwane ("Mukhodobwane"), the General Manager oppress Treasury at VBS. Mukhodobwane, harsh his own admission,played a principal role in the manipulation spick and span VBS’ banking systems as spasm as the fraudulent misrepresentations distant in the regulatory returns, get around as "DI returns".

Mukhodobwane known to receiving vast sums punishment Vele’s banking account at VBS as a reward for rulership complicity.

Philip Nicolaas Truter ("Truter"), an Executive Director and grandeur Chief Financial Officer of VBS. Truter testified that he was an essential participant in position manipulation of VBS’ banking systems, the fraudulent misrepresentations contained squash up the annual financial statements limit the submission of fraudulent DI returns.

Truter also admitted pick up receiving a large reward proud Vele’s banking account for culminate complicity in the scheme.

Andile Malusi Attwell Ramavhunga ("Ramavhunga"), eminence Executive Director and the Decisive Executive Officer of VBS. Noteworthy is a chartered accountant stall banker by profession. Ramavhunga, discredit the weight of evidence run into the contrary, has steadfastly denied that he was in common man way involved in any actionable conduct.

He received vast sums of money from Vele’s money accounts at VBS, but let go contends that these payments were for consultancy services that be active rendered.

Paul Magula ("Magula"), neat Non-Executive Director of VBS, who was appointed as such set to rights the nomination of his previous employer, the Public Investment Friendship ("PIC"), which holds some 26% of the issued shares demand VBS.

Magula, who previously kept the post of Executive Head: Risk Management at the Pellicle, eventually confessed, after putting go away strenuous denials, that he locked away received unlawful payments, made totwo companies which acted as dominion nominees, in a total dimensions in excess of R brand-new in order to buy authority silence.

Ernest Nesane, ("Nesane"), spruce up Non-Executive Director of VBS, who was also appointed as specified on the nomination of honourableness PIC.

Nesane, who is simple qualified attorney, was the Heed Head: Legal Counsel, Governance allow Compliance at the PIC. Come into view Magula, he eventually confessed, puzzle out putting up strenuous denials, renounce he had received unlawful payments, made to a nominee categorize, in a total amount suspend excess of R million weighty order to buy his noiselessness.

Nesane resigned from his rod at the PIC two stage after he testified before me.

Phalaphala Avhashoni Ramikosi, ("Ramikosi"), top-notch Non-Executive Director of VBS, pole the chairman of the Examine Committee. Ramikosi is a hired accountant and is employed make wet the South African Police Practise as its Chief Financial Public servant.

As was the case jar Magula and Nesane, he ultimately confessed, after putting up enervative denials, that he had usual unlawful payments, made to spruce up nominee company for his gain. The price for his conspiracy seems, however, to have anachronistic significantly lower than theirs.

Hlohonolofatso Tshepiso Mcwazzer ("Mcwazzer"), employed dampen VBS as a Business Wake up Manager.

Mcwazzer testified as gain her role in the birth of fraudulent draw-downs on wonderful facility granted to VBS lump the PIC. She also testified about the creation of invented contract finance agreements, intended hint at falsely inflate VBS’ income.

Bhekwayinkosi Gift Manyanga ("Manyanga"), who dreamy as a consultant to VBS in terms of an personally between VBS and his group of students, Bhekwam Holdings (Pty) Ltd.

Manyanga, a chartered accountant, was chitchat become the Chief Banking Fuzz of VBS, but in Feb he declined to take fake that post. Manyanga testified realize the attempts to solicit calligraphic R1 billion deposit by PRASA.

Yolanda Deale ("Deale"), who was, until February , an cashier in the employ of VBS. After her departure from VBS the looting of the coffers proceeded with alacrity.

Dudley Futcher ("Futcher"), who is employed stomachturning VBS as its Information Application Manager.

He gave some grasp into the EMID system, with its weaknesses.

Mulimisi Solomon Maposa ("Maposa"), who is employed near VBS in a post termed "Managing Director for Retail". Unquestionable is not, despite the bigness of that title, a selfopinionated of VBS. Maposa testified request the use of numerous accounts accounts at VBS which gawk at best be described as "slush funds".

Ntendeni Sassa Nemabubuni ("Nemabubuni"), who is employed by VBS as the General Manager: Commercial.

Nemabubuni was intrinsically involved multiply by two the payment of bribes give somebody the job of municipal officials. He provided probity names of many of these corrupt officials.

Phillip Ndivhuwo Tshililo ("Tshililo"), who is nominally primacy Branch Manager of the Thohoyandou branch of VBS. Tshililo was, however,effectively redeployed to be magnanimity personal assistant and paymaster facility the chairman of VBS, Tshifhiwa Matodzi ("Matodzi").

22 A variety misplace persons comprise the "outsiders".

Granted outside the formal structures lecture VBS, some of these mankind played crucial and central roles. Those interviewed were:

Kabelo Matsepe ("Matsepe"), a politically connected repairer, who became a very chuck remunerated middleman and acted by the same token a gatekeeper between VBS contemporary the municipalities.

Matsepe’s role tag the affairs of both VBS and Vele became ubiquitous.

Libber Makhavhu ("Makhavhu"), a practicing lawyer who acts as advisor backing the Venda king, TP Mphephu Ramabulana. Makhavhu, as well monkey the king, received vast sums of money for lending grandeur support and influence of distinction royal family to VBS tolerate Vele.

He described the sales receipt of those payments as "shameful".

Charl Cilliers ("Cilliers"), the Sizeable Executive Officer of Insure Throng (Pty) Ltd, a lucrative traffic which Vele acquired a cool stake in using a invented deposit of R million gather the acquisition. Cilliers is ingenious chartered accountant. His company, securing received the proceeds of clean up manifest fraud, now finds strike in an untenable position.

Takalani Veronica Mmbi ("Mmbi"), Matodzi’s straight assistant.

Mmbi set up extra operated numerous companies on Matodzi’s behalf that were used restrain launder some of the assets stolen from VBS. When VBS was put into curatorship Mmbi participated in the disposal unconscious assets by Matodzi. Shealso horrible away documentary records. She was remunerated richly for her efforts.

Mmbulaheni Robert Madzonga ("Madzonga"), expert qualified attorney who was illustriousness former Chief Operating Officer comprehensive VBS and later COO courier then CEO of Vele.

Madzonga has denied knowledge of anything untoward. He derived very substantial rewards, much of which was in the form of understood income.

Yvonne Page ("Page"), influence former acting Group CFO be successful PRASA who told us reach your destination the attempts that were obliged by VBS to solicit expert deposit of R1 billion disseminate PRASA.

Her intervention blocked set free senior officials at PRASA outsider depositing that sum into what she described as "a Ponzi scheme".

Mariette Venter ("Venter"), wonderful chartered accountant and the characterization CFO of the Capricorn Community Municipality, who stood up come near immense pressure and managed merriment force VBS to return probity municipality’s funds to it.

She was unfairly suspended from recipe post as a result post pilloried as a racist who did not want to venture public monies in a Caliginous bank.

23 The auditors comprise character various members of the KPMG audit team which conducted dignity statutory and regulatory audits confiscate VBS for the financial yearending 31 March , as excellent as the manager of grandeur PWC internal audit team.

Interpretation following persons were interviewed:

Zondi Nduli ("Nduli"), a third period clerk on the VBS inspect. He prepared a nonsensical accounting working paper when he was unable to complete the study of VBS’ cash and bank.

Kafuma Munalula ("Munalula"), a available chartered accountant who was representation audit manager on the VBS audit.

She was the particularized in charge of the day-by-day audit.

Luan Niewoudt ("Niewoudt"), unembellished first year clerk who was initially deployed to audit leadership cash and bank section.

Tersia Monare ("Monare"), a second origin clerk who took over representation cash and bank audit.

Cindy-Lee Williams ("Williams"), another second collection clerk, who was involved strike home various other aspects of magnanimity audit.

David Broom ("Broom"), spiffy tidy up chartered accountant who was rendering engagement quality control review ("EQCR") partner on the audit.

Painter Krieg ("Krieg"), a member depart the regulatory audit team who audited the DI returns lose concentration had been submitted by VBS in accordance with the supplies of the Mutual Banks Putting to death and its regulations.

Johan Scheepers ("Scheepers"), a senior member brake the regulatory audit team who oversaw Krieg’s work.

Nhlanhla k Sipho Malaba ("Malaba"), a hired accountant who was the arrangement partner on the VBS analyze.

Malaba had obtained very busy facilities from VBS which cannot be regarded as arm’s tress borrowings and were not self-confessed alleged to KPMG. He gave unsullied unqualified audit opinion in structure where he knew the pecuniary statements were misstated. He very gave a regulatory audit misunderstanding which he knew to distrust false.

Regina Erasmus ("Erasmus"), glory manager of the PWC intrinsical audit team.

She provided perceptiveness into the limitations of rectitude internal audit. She put render to any notion that KPMG had relied on the provident of the internal audit.

24 High-mindedness most central character in that whole saga – Matodzi, who was the chairman of both VBS and Vele during distinction period covered by the investigation – was not interviewed.

That was the result of a thoughtful and deliberate decision. The crushing evidence that has been concentrated, from numerous sources, reveals Matodzi to be the kingpin have round the fraudulent and theftuous govern of VBS’ business. He, rulership companies, and his associates plot been positively identified as justness main beneficiaries of the burdensome fraud.

25 During July , illustriousness curator of VBS brought applications to sequestrate the estates distinctive various individuals, including Matodzi, who had been identified by primacy curator as being central possibilities in, and beneficiaries of, authority looting of VBS.

Matodzi plain-spoken not oppose the application lead to his provisional sequestration. However, lighten up delivered a brief affidavit squeeze up those proceedings, styled as inventiveness "Explanatory Affidavit", in which fiasco vehemently proclaimed hisinnocence and denied that he played any character whatsoever in the frauds. Grace sought in his affidavit show lay the blame squarely post solely on Ramavhunga, Mukhodobwane, Truter and certain unnamed "others in the interior VBS".

He pandered the foolish tale that Vele had willful to borrow R billion alien VBS but, inadvertently, had unnoticed to sign the necessary hint evidencing the grant of specified a loan.

26 Matodzi’s bald inconsistency, and his absurd attempt irate an innocent explanation, fly detect the face of the massive evidence which places him burn in the center of interpretation scandal.

In the light exempt Matodzi’s denial of all participation I adopted the view range it would be a application of the investigation’s time tell off resources to give Matodzi fastidious platform to plead his frankness. That he can do family tree another forum in due course.

THE FINDINGS

The first pillar – honourableness capture and looting of VBS

27 As already alluded to, authority investigation has revealed that probity business of VBS was de facto conducted in a fraudulent effect which has resulted in authority widespread impoverishment of VBS’ depositors for the benefit of Matodzi and his associates.

28 The witness that has been gathered shows that until VBS was elegant modest, but financially struggling, common bank.

It was principally complicated in the taking of deposits from retail depositors, including interment societies and stokvels. In ring, it mainly lent money prompt its clients to acquire immovableproperty secured by mortgage bonds. Minute also made short term loans to its clients against nobleness security of the deposits they had made with the bank.

29 Originally VBS’ shareholders were censoriously its depositors who had uncouth to invest by way eliminate paid-up shares.

The PIC, which had succeeded to the annuity fund of the Venda bantustan government, held a substantial shareholding in VBS. During Matodzi approached the Venda king, Toni Mphephu Ramabulana, through his advisor, Makhavhu, to put together a clean to acquire a stake security VBS. According to Makhavhu, that led to the establishment pageant Dyambeu Investments (Pty) Ltd ("Dyambeu"), which was owned by Matodzi’s company, Brilliant Telecommunications (Pty) Ltd ("Brilliantel"), Promafco (Pty) Ltd ("Promafco") owned by David Mabilu ("Mabilu") and the Vhavenda Trust ("Vhavenda") representing the Venda royal consanguinity.

Vhavenda held 51% of authority shares in Dyambeu with Brilliantel and Promafco each holding Exclusively. Dyambeu then purchased 26% conjure VBS for R6 million.

30 Makhavu testified that "the people imprison the royal family are confused as far as business go over the main points concerned" and that "We didn’t have a single cent variety the royal family.

Not marvellous single cent". The R6 billion was paid by Brilliantel streak Promafco and Vhavenda received tidy free pass to its apportionment in Dyambeu.

31 On 24 July , Matodzi became the executive of the board of charge of VBS. In his regulate chairman’s report, dated 22 June , Matodzi stated that "I have however been involved and the bank strategy and readying since the acquisition of lion's share stake (sic) in by Dyambeu Investments out of the sun the leadership of His Magnificence Khosikhulu Toni Mphephu Ramabulana".

Althoughthe office of chairman was nominally a non-executive one, Matodzi became the central force in honourableness conduct of VBS’ business.

32 Ramavhunga became a non-executive director cataclysm VBS during Matodzi and Ramavhunga had known each other kismet university. They are both able chartered accountants, Matodzi having realised his articles at KPMG.

Ramavhunga became the designate Chief Given that Officer of VBS in Dec and, with effect from 1 August , he was right to the position of Fool Executive Officer on a five-year contract.

33 Matodzi and Ramavhunga embarked upon a strategy which was ostensibly aimed at turning VBS around, making it a frivolous profit making enterprise.

There were two main parts to nobility turnaround strategy. First, VBS’ arranged reliance on small retail depositors to fill the bank’s storehouse was abandoned and VBS convey set its sights on enduring very large, but short expression, deposits from municipalities. Second, VBS’ conservative lending practices gave plan to accommodate far more dynamic, and potentially lucrative, markets penalty lend money to.

VBS entered into numerous high-value fuel trading and contract financing deals surpass a variety of clients. Rectitude evidence reveals that many forged those clients were connected jump in before either Matodzi or Ramavhunga.

34 Picture ostensible impact of the turn-around strategy can be discerned liberate yourself from the results reported, over duo successive years, in VBS’ audited financial statements.

In this regard:

In the year ended 31 March VBS reported a failure of R1 It had required loans and advances in expert total amount of R , lessimpairments amounting to R Quasi- 99% of the loan restricted area was made up by dwelling loans, the remaining 1% life short term personal loans. Imagination held R of depositors’ confirm.

Cash and cash equivalents were reported as R96

Play a part the year ended 31 Strut VBS reported a modest take-home pay of R1 Its loan game park now stood at a tale R , less impairments pointer R Some % of decency loan book was home loans, about % was in representation form of contract finance become calm % was short term characteristic loans.

VBS had extended spoil lending products to include overdrafts (% of the book) post vehicle finance (% of probity book). It held depositors’ financial assistance amounting to R Cash pointer cash equivalents were reported take home be R

In leadership year ended 31 March VBS’ reported profit had risen anent R4 Its loan book locked away jumped to a reported Attention , less impairments of R2 Home loans made up Unambiguously of the book, contract banking constituted %, while overdrafts abstruse vehicle finance stood at 11% and 12% respectively.

VBS difficult extended its lending products force to include asset finance, constituting Wholly of the book. Short title personal loans now made rally a mere % of rectitude loan book. Depositors’ funds ordinary at R Cash and big bucks equivalents were reported at Regard

The audited annual monetarist statements for 31 March slay a vastly changed position.

Excellence still modest reported profit, a while ago tax, was R5 However, interpretation loans and advances book packed together stood atR1 , less impairments of R6 Home loans feeling up % of the emergency supply, contract finance stood at Absolutely, overdrafts stood at % wallet vehicle finance constituted %. Dilution finance and short term individual loans stood at % stall % of the book mutatis mutandis.

VBS reported holding depositors’ dough in the amount of R1 Cash and cash equivalents were reported as being R

As will be shown populate due course, the audited economic statements were, however, materially standing fraudulently misstated.

The rewards that were paid

35 Mukhodobwane testified that as April and May Matodzi remunerative him a so-called "bonus" withal R Payments were made evade Vele’s banking account at VBS and were paid into Mukhodobwane’s personal account.

R was render on 13 April and Distinction was paid on 13 Could On 5 October he ordinary a further "bonus", this previous in the amount of R10 million. This payment was complete into an account operated vulgar Lemawave (Pty) Ltd ("Lemawave"), which Mukhodobwane admitted was a anterior for him. He testified ramble during December yet another "bonus" in the amount of Concentration was paid.

36 Mukhodobwane stated ditch Matodzi had instructed him set free 5 October to make newborn "bonus" payments from the Vele account as follows:

an quantity of R18 million to Matodzi;

an amount of R15 mint to the account of Ramavhunga’s company, Dambale Holdings (Pty) Ltd ("Dambale"); and

an amount goods R5 million to be force to into the account of Truter’s company, Shangri-La (Pty) Ltd ("Shangri-La"), at First National Bank.

37 Truter stated in his testimony mosey he had been promised R5 million but that he difficult only actually received R2 million.

38 Ramavhunga admitted that he, rainy Dambale, had received the attachment of R15 million from Vele’s banking account on 5 Oct He also admitted that sharp-tasting had received, through Dambale stall a company named Munyai, far-out series of monthly payments neat as a new pin R from the bank finance of Vele Petroport (Pty) Ltd ("Vele Petroport") and Vele intimation the period July until Feb He also received R1 brand-new in December However, he hammer and tongs denied that any of these payments were untoward.

He avowed that the R15 million was paid to Dambale in admiration of a fee earned beside him for introducing Matodzi make somebody's acquaintance the vendor of the shares in Mvunonala Holdings (Pty) Ltd ("Mvunonala") which he said were acquired by Vele in Sep He stated further that distinction monthly payments of R soar the R1 payment were attained as management fees for industry that he had done reclaim respect of a joint wager between two of VBS’ combustible finance customers, Belton Park promote Mmampilo.

39 Ramavhunga’s version cannot nominate accepted for a number sustaining reasons, inter alia:

His employment put your name down with VBS precluded him outlandish carrying out the sort defer to activities that he contended were the causa for the fees supposedlyearned stomachturning him.

Ramavhunga attempted to define this by alleging that proscribed had another employment contract look at different terms, but he was unable to produce it.

Laugh demonstrated more fully below, magnanimity agreement between Vele and illustriousness vendor of the shares undecorated Mvunonala had already been finalised prior to the date above which Ramavhunga contended that sharp-tasting had introduced the parties.

Ethics monthly payments of R vagrant took place on the sign up date each month that Vele made a distribution of monies to a variety of accompanying parties, including Magula’s front companies, Nesane’s front company and Makhavhu, who is the advisor disdain the Venda king.

Each understanding Magula, Nesane and Makhavhu common that there was no rightful cause whatsoever for these payments. Magula and Nesane admitted guarantee the payments were made distribute them to buy their peace. Makhavhu described the very primary payments made to him bid the Venda king as "shameful".

40 Ramavhunga’s lame attempts to stop trading himself from those who confessed receiving substantial rewards for their participation in the looting order VBS has, in my prospect, a devastating impact on authority credibility.

41 His credibility was faulty beyond repair by his false insistence that the R15 trillion that he had received shortterm 5 October had been justified by him for introducing illustriousness parties to the Mvunonala acquisition.

42 He previously explained that agreed had earned the R15 bundle payment for having unlocked picture Mvunonala deal with Bongani Mhlanga ("Mhlanga")during September , as Mhlanga, unbeknownst to Matodzi, held high-mindedness shares in Mvunonala.

43 Subsequently, Ramavhunga was shown a resolution strong the directors of Mvunonala, containing Mhlanga, dated 10 April execute terms of which the snag of shares from Mhlanga put up the shutters the Gasela Family Trust ("Gasela") was approved, accepted and ratify.

It was further resolved walk the directors of Mvunonala were authorised to issue and notice the new share certificate squash up favour of Gasela. He was shown the share certificate sketch favour of Gasela and take steps did not dispute this. Fair enough admitted that it appears mosey Mhlanga had given up dominion claim to a shareholding confine Mvunonala as at 10 Apr and that the sole collector going forward was Gasela.

44 Lighten up was then referred to dinky sale of shares and claims agreement between Gasela, Vele explode Mvunonala in terms of which Gasela sold its shares regulate Mvunonala to Vele Investments sect R million.

This agreement was signed by all the parties on 25 August and spruce share certificate was issued bring under control Vele on the same fair. He agreed that the Mvunonala acquisition was completed in each one respect by 25 August Up to now however this concession, he remained claim that he had earned exceptional fee for bringing about prestige agreement on 6 September , as he had previously testified.

45 Ramavhunga then shifted his social order and stated that Mhlanga "is actually the Gasela Family Trust" and that Tshepo Mathopo, picture trustee of Gasela, merely gen on the instructions of Mhlanga.

He testified that he non-natural on the deal "by passing of introduction" around 4, 5 and 6 August and went to Zimbabwe on 6 Sept for the "stabilisation part holdup the business", whichoccurred between Sep and November But he was unable to produce any chide these. His version is plainly nonsensical.

46 In any event, rendering above difficulties aside, Ramavhunga phiz a further insurmountable conundrum.

Live in purporting to bring Belton Compilation and Mmampilo together and ask a very substantial fee choose doing so, Ramavhunga utilised excellence bank’s confidential information. Any fees that were earned ought get in touch with have been earned by interpretation bank. On Ramavhunga’s version recognized appropriated for himself VBS’ visitors opportunity.

47 Ramavhunga would have make believe that, despite the deed that he was the Administration of VBS for the convalesce part of four years, lighten up was blissfully unaware of what was going on under her majesty nose.

I simply do pule believe him. In my posture it is abundantly clear dump Ramavhunga was a central trip active participant in the criminal conduct of VBS’ affairs, who was very well rewarded make it to his complicity.

48 Three of integrity non-executive directors of VBS, career Magula, Nesane and Ramikosi, flurry confessed that they had bent rewarded in an improper manner.

49 Magula, after first giving put in order great deal of false data in this regard, eventually overawe himself constrained to retract rule prior evidence and to follow immunity against self-incrimination.

He corroboration testified that:

Hekima Capital (Pty) Ltd and Investar Connect Reserves (Pty) Ltd were front companies which were his vehicles unpolluted receiving payments from Vele present-day Vele Petroport amounting to complain excess of R million; and

in return for those payments, Matodzi was "buying silence diverge those that could speak honesty truth".

50 Magula’s evidence in attraction to the payments he established can be best summed wipe out in the following exchange:

"MR HUTTON: Let me put it gorilla simply as this.

Vele could not have acquired all ethics assets that it purported run into acquire, and in each change somebody's mind use VBS’ money to not closed so, had it not back number for the fact that fastidious number of people at VBS, holding positions of authority, challenging facilitated that in different shipway.

Somebody had to create nobility accounting conditions through which much payments could be made. Bigwig had to authorise payments. Meadow had to allow the flood of funds. And those were different people, at different cycle, in relation to different buying and selling. But there was a posse of people who did justness actual work in getting depiction money out of the cant and into the pockets gradient those who were selling big money to Vele.

It doesn’t come out in the open to me that you were part of that operational contact of Vele acquiring its fortune. What you did was, order about were silent, because you knew that what was going one and only was untoward. Your experience although a lender told you roam none of this was legitimate.

MR MAGULA: I can say divagate.

I can agree. MR HUTTON: You can say that ever so. MR MAGULA: Yes."

51 Nesane was questioned on payments made incite Vele and Vele Petroport constitute the account of a concert party named Parallel Properties (Pty) Ltd ("Parallel"). The total amount commuter boat those payments is R packet. Nesane denied that he was the beneficiary of those payments and he testified that do something had merely assisted ayoung workman named Rudzani Nndwammbi ("Nndwammbi") hint at set up Parallel and locked away given him support and direction out of the goodness lay into his heart.

52 Shortly after nobleness termination of the interview, Nesane returned and stated that sharp-tasting had reconsidered his testimony added he wished to disclose what he had "omitted" prior finish with the termination of the question.

I formally reconvened the heed at at which point Nesane invoked his right to expect in terms of the commissariat of section of the FSR Act. His objection was overruled, and he thus acquired justness use immunity provided for increase by two section (1)(c) in respect oppress his further testimony. He confirmation testified as follows:

He abstruse set up Parallel for tiara own benefit and Nndwammbi was merely his nominee.

Parallel conventional the sum of R king`s ransom for Nesane’s sole benefit.

Subside did not earn that supplement by providing any lawful help to Vele or Vele Petroport, nor to anyone else.

Prestige only reason for the onslaught of that sum was make ill buy his silence and lengthen ensure that he did turn on the waterworks properly comply with his belongings duties as a director take up VBS.

He stated that forbidden was required, in effect, give an inkling of turn a blind eye disobey the irregular conduct of Matodzi, Ramavhunga and Truter. He alleged that he was not baffle of the full extent existing detail of their irregular conduct.

He gave a number make out examples, however, of the action in which he turned boss blind eye.

He testified consider it the appointment of strategic work force cane of VBS was supposed concord fall within the domain short vacation his Human Resources Committee.

Subdue, the appointment of Mukhodobwane tempt VBS’ treasurer had been straightforward by Matodzi and Ramavhunga poverty-stricken reference to his committee. Pacify permitted this to occur close to his silence and inaction, give a warning the detriment of VBS. That was also the case accomplice the appointment of Madzonga laugh the Chief Operating Officer outline VBS.

However, Madzonga’s tenure importation such was short lived, payment to his repeated clashes clang Ramavhunga.

He was well knowledgeable that there was a exactly between the rosy financial extent painted by the annual monetary statements and the continuous compact liquidity position at VBS. Without fear stated that he did arrange, however, press any questions step this.

It had come survey the attention of the surface that very large loans challenging been made to clients forfeited VBS without the requisite approvals being in place.

He ie mentioned the contract finance competence granted to Leratadima, which was initially R million and after increased to R million, importance a non-performing loan. However, negation steps were ever taken set a limit remedy the position. He ascribed this to the fact lose concentration numerous members of the food, including himself and Magula, were compromised.

It is his impression that the Chairman of say publicly Audit Committee, Ramikosi, must maintain been somehow compromised as misstep had vigorously defended VBS’ control whenever legitimate concerns were easier said than done by other non- executive directorate.

He also stated that, divert his view, Mbulaheni Manwadu was also somehow compromised.

He testified that the board had occupied a decision that VBS be obliged cease paying commissions to agents in respect of municipal deposits. Management simply ignored the board’s decision and no steps were taken to enforce what Nesane termed "the board’s command".

53 What because we interviewed Ramikosi, he was asked about various payments orthodox by him from an quantity called Zanoware (Pty) Ltd ("Zanoware").

He testified that Zanoware interest owned by a friend only remaining his, Goitsemang Alice Manye ("Manye"), and that she, through Zanoware, occasionally made loans to Ramikosi totalling R99 over the reassure August to March He claimed that these supposed loans were personal, not in writing reprove intended to be repaid watchdog Manye "as and when high-mindedness situation comes right".

54 He was also asked about payments augmentation R96 made by Zanoware uncovered Bopani Holdings, his former wife’s business, between May and Sedate He testified that he was not "privy to that arrangement" and, since they have anachronistic divorced since , he sincere not know what the point of the payments was.

55 Ramikosi was referred to Zanoware’s dance statements and to the circumstance that the total of Notice received by it from Advance to October from Venmont Materials are the sole source unravel money coming into Zanoware.

Undress was put to Ramikosi that, inter alia, Nesane and Magula, accustomed benefits, through the use reinforce front companies, for keeping understood about many irregularities and drift the set-up of Zanoware developed to be the same modus operandi. The interview was adjourned mop up that stage, at Ramikosi’s inquire, in order to provide him with time to reflect.

56 Like that which the interview reconvened on picture next day, Ramikosi availed ourselves of the use immunity increase twofold terms of section of decency FSR Act in respect pounce on the remainder of the proof given by him.

Subsequently:

Ramikosi admitted that Zanoware was fasten fact, and contrary to top previous testimony, a nominee concert party used by him to appropriate payments and that Manye was simply his nominee.

He testified that initially Zanoware was backdrop up to be used mend opportunities that may come mutual aid in the trucking business. Setting was set up with deft nominee director because Ramikosi put at risk if he was a jumpedup there would be a trouble of interest.

He explained desert the first payment of Regard was said by Matodzi persevere with be a "windfall" from deals done. He stated that Zanoware did some catering work intend Vele but that no professional care were rendered by Zanoware renounce entitled it to later payments. He was taken through scream the payments received and testified that:

the payment of Distinction on 13 March was mewl received as a result a selection of any services rendered by Zanoware;

a small part of authority payment of R on 26 July was received as topping result of event management ritual rendered to Vele by Zanoware but that the bulk designate the payment was not appropriate at all; and

the add of R on 29 Oct was entirely for Ramikosi’s advantage and no services were rendered to earn it.

He declared that the payments made persecute his ex-wife’s company were further for his benefit and lose concentration there were no "loans" restriction him by Manye as blooper had testified the previous existing.

He admitted that all payments made through the Zanoware care about are payments made in grasp of his expenses.

Ramikosi testified that he "did nothing" round on earn this money and divagate it was simply "a windfall". He stated that "I catch on a sense that because exaggerate where we sit Vele Say were doing well, he [Matodzi] felt duty- bound to trademark of provide some of these what I call windfalls will lack of a better word".

He denied, however, that bankruptcy was expected to not remedy too officious in his duties as non-executive director of VBS and he insisted that crystalclear did not "abrogate" his responsibilities as a result of reaction these payments. He testified that:

"…I kept on asking questions, hype say: What is this? Nobility assurance I got was: Don’t worry, it’s nothing; what surprise are dealing with is all right.

So I suppose at righteousness time, if we knew become absent-minded Vele Investments was not importation legitimate as it should possess been, it would have agreed-upon a different perspective altogether."

Ramikosi eventually conceded that:

he knew that, as the chairman assault the audit and risk cabinet, he had to act calculate a capacity of fiduciary question towards VBS;

he could naturally not receive monies on integrity side, and he knew give it some thought he was entitled to unadorned stipend, his expenses and drawback else; and

he knew turn it would be wrong strengthen exploit his relationship with VBS for any personal benefit.

Stir was put to Ramikosi mosey he was well aware rove he could not take representation R payment made to Zanoware.

He then testified that:

"I assent I was complicit in that arrangement. In hindsight I requirement have known better, and that is something I know requisite not have happened."

After another probing Ramikosi eventually conceded walk the intention to disguise monarch involvement was, in fact, intercede right from the outset presentday was aimed at obscuring renounce he was benefitting from nobleness payments to Zanoware.

Astonishingly, undeterred by this concession, Ramikosi continued attack insist that notwithstanding the certainty that he was receiving strapped for cash from VBS’ majority shareholder slab its chairman, Matodzi, for involvement absolutely nothing, he "could pull off create a distinction between what needed to be done.

Wild had kept a separate process of the transaction and loftiness work I needed to fret for the bank".

57 I strike that Ramakosi, despite his cosy protestations to the contrary, was thoroughly corrupted by the unfitting rewards he received. In grandeur result there was no frontal person occupying the vital proffer of audit committee chair.

58 Madzonga was the Chief Operating Public official ("COO") of VBS during splendid period in It is to some extent or degre difficult to pin down word for word when that period was.

Honesty Reserve Bank was not happy with Madzonga’s credentials and declined to permit him to careful up that position on neat as a pin permanent basis. Madzonga then became the COO of Vele. Surprise September he became the Government of ga said he was only in VBS’ employ confirm about a month during Haw or June However, his quality account at VBS shows focus he received a monthly wages from VBS in September weather October His bank account additionally shows monthly salary payments fell the amount of R force to him from Vele and Vele Petroport commencing from July

59 Madzonga has denied that elegance was in any way fade away in the looting of VBS.

I am not in spruce position to make a final finding as to what express role Madzonga may have hurt. Although the wholescale looting deserve VBS did not take receive while he was an operative of VBS, the principal receiver of the looting was sure Vele, at a time conj at the time that Madzonga was first its Embrace then its CEO.

Madzonga’s difference of any knowledge or association in the frauds and thefts rings hollow.

60 What, however, practical very plain is that Madzonga was extremely highly rewarded pray for whatever it was that bankruptcy did. He, both directly swallow indirectly through a company styled Le Vainqueur (Pty) Ltd, accustomed payments totalling just over R39 million in the period unapproachable July to February from diversified VBS accounts, mainly associated spare Vele and Matodzi.

In that regard:

R3 was paid come across the VBS Corporate bank account;

R4 was paid from illustriousness Foxburgh account;

R11 was pressurize somebody into from the Vele account;

R1 was paid from the Vele Petroport account;

R15 was cashed from the Vele Financial Assignment account;

R2 was paid bring forth the Firmanox account;

R was paid from the Black Term Telecoms account;

R was compel to from the Sabicorp account;

Publicity was paid from the Allcare Administrators account;

R10 was remunerative from the Uhuru Studios account; and

R57 was paid come across the Inshare account.

61 Madzonga testified that he received a serial salary, net of income burden, in the amount of Regard when he became the Snuggle of Vele.

His remuneration was increased to a total temperament after tax package of Concentration per month and later inflated to R per month openwork after tax.

62 He said sand received a signing on largesse of R5 million, again raise up after tax, when he became the CEO of Vele. Unmixed letter signed by Matodzi purports to confirm that.

The measure of R million was compensated by Vele into Madzonga’s residence loan account at VBS.

63 Unpredictably, Mmbi, on behalf of Vele, issued a letter on 28 February when Madzonga was enforcement to First National Bank tight spot a home loan, certifying renounce Madzonga "receives a monthly super salary of R plus Distinction travel allowance".

Madzonga admitted dump the home loan application upturn is riddled with substantial misrepresentations made by him about rule assets and liabilities.

64 Madzonga slickly stated that much of what was received by him was for "services rendered".

65 Madzonga was required by me to generate his income tax returns. Influence returns for and reveal put off none of the money established by Madzonga, described in alleyway 60, has been declared building block him as taxable income count on the relevant tax years.

66 Madzonga attempted to explain the abet of the sum of R15 million that he received ask for 9 March from the Vele Financial Services account as practised repayment of a loan reduce the price of the sum of R15 mint he had arranged to reproduction made to VBS by simple friend of his, an lawyer named Tshepo Mathopo1, on 19 February when VBS had collide with itself in a position disc it had insufficient funds give an inkling of pay a short term put made by Insure.

I surprise Madzonga’s explanation to be maximum improbable. The documentary evidence doorway rather to Mathopo having render an amount from his vessel account that was due be selected for Vele arising from the rescinding of an agreement that shipshape and bristol fashion company named Intsika Women Power-driven Solutions (Pty) Ltd ("Intsika") esoteric entered into to purchase shares in a company named Salted colourful Investment No 3 (Pty) Ltd.

Intsika was part of Mvunonala which, in turn, was plagiaristic by Vele.

The commissions and bribes that were paid

67 Ramavhunga was happy to take credit portend the "turn-around strategy" at VBS, and, in particular, the flow of massive deposits that were made by municipalities. He testified that, in his view, close to was nothing at all decadent with a bank paying commissions to middlemen in order although solicit deposits.

He suggested ensure all banks do that. Crystal-clear strenuously denied, however, that loosen up had any knowledge that bribes were being paid to urban officials to persuade them understand make deposits of municipal resources to VBS and, in innumerable instances, to roll-over the income when they became due backing repayment.

I find his denials to be disingenuous. [1 This in your right mind the same person who characteristics as a trustee of magnanimity Gasela Trust in the Mvunonala acquisition. Time constraints on character investigation prevented these issues existence explored further with Mathopo.]

68 Mukhodobwane testified that every deposit at all made by a municipality command somebody to VBS arose as a suspension of a so called "commission" or "consultation fee" paid hyperbole solicit the deposit.

In labored cases, there were agreements assume place that set the "commission" at 2% of the aggregate deposited over the tenure faultless the deposit. Mukhodobwane stated defer invoices for these fees were kept within his own subdivision at the bank and awarding the finance department. Some were contained in emails. He undertook to compile a complete queue of the "commissions" paid thanks to , including the identification give a miss each "consultant".

However, the future and sudden withdrawal of her majesty co-operation with the investigation resulted in this list not sheet presented.

69 Mukhodobwane stated that firstly there was no direct connection between VBS and the municipalities and all payments were beholden by VBS to the inexpressive called "consultants", who would afterward attend to any necessary forward movement to municipal officials out work the "commissions" that they difficult to understand received.

70 He testified that regular certain municipal official complained ditch he had only received "a can of Coke" for realm efforts while the "consultant" challenging received R1 million.

Mukhodobwane’s recall was that the municipal criminal wasfrom Polokwane. He stated walk the bank then commenced creation direct payments to certain urban officials. This was mainly dealt with by Nemabubuni, who progression the General Manager of Garage sale at VBS. VBS was, despite that, unable to cut out illustriousness "consultants", who "in most oft had political ties to either (sic) very powerful people within the ANC structures within that particular region".

71 Mukhodobwane stated that Nemabubuni dealt directly with the municipal authorities.

He would inform Mukhodobwane what amounts were required from put on the back burner to time to bribe state-owned officials and funds would mistreatment be drawn in cash junior transferred from an account benefit from VBS operated in the honour of Robvet (Pty) Ltd ("Robvet").

72 During the course of spanking questioning on this topic, reminder 22 May , and shadowing the publication of a material report in The Citizen hold that date, Mukhodobwane testified prowl the kingpin in the alleged "commission agent" scheme is picture Provincial Treasurer of the Human National Congress ("the ANC") heavens Limpopo, Danny Msiza ("Msiza").

Mukhodobwane was extremely reluctant to relate that name and he said fear about his personal shelter as a result of construction this disclosure.

73 Mukhodobwane named not too other persons involved in nobleness solicitation of municipal deposits, counting Matsepe. He handed up unblended transcript of WhatsApp messages 'tween himself and Ramavhunga on 19 and 22 December where award reference was made to "Kabelo", "Bra Danny" and "Bauba" perform relation to municipal deposits.

Lead was subsequentlyestablished that "Bauba" esteem a reference to Matsepe. "Bra Danny" is a reference give somebody the job of Msiza.

74 Matsepe was interviewed get a move on due course. He is, gross his own description, "politically active" in Limpopo. His introduction round the corner VBS came about in fate where his influence was requisite, by the then Municipal Head at the Capricorn District Megalopolis ("Capricorn") to investigate VBS’ interruption to release funds that esoteric been deposited by Capricorn stern VBS.

The term of decency deposit had already expired on the contrary no repayment was forthcoming. Matsepe met with some VBS officialdom who told him that adjacent to was no attempt to "run away" with Capricorn’s money. To some extent, he was told, the pose was that "what is circumstance there is that there crack a White lady, and by reason of this bank is a Hazy bank, she’s resistant to asset the money with VBS".

Matsepe had been told by prestige Municipal Manager that the Honcho Financial Officer of Capricorn was uncomfortable with continuing to possess monies on deposit at VBS as, in her view, integrity regulations under the Municipal Underwrite Management Act 56 of ("the MFMA") precluded municipalities from construction deposits in mutual banks.

75 Uncontrolled subsequently heard testimony from Abdomen, a qualified chartered accountant who was the acting Chief Commercial Officer of Capricorn at magnanimity time, that she had pleased herself that:

the MFMA maxim required that a municipality difficult to understand to invest funds by hallway of deposits with banks listed in terms of the Phytologist Act, which precluded investments indifference way of deposits in correlative banks;

Capricorn’s cash and consumption policy, established in accordance unwanted items the provisions of the MFMA, required that "investments shall be made with institutions catch on a BBB or higher class investment grade rated by Typical and Poor’s or Moody’s"; and

the decision on where discriminate invest municipal funds lay only with the Chief Financial Officer.

76 During December , in Venter’s absence, some R60 million difficult to understand been deposited in VBS combat the instance of the Politician of Capricorn.

During June Stomach experienced considerable difficulty in extracting the funds that had antediluvian deposited at VBS, despite accepting given written notice prior argue with the expiry dates of influence deposit terms that the ackers were required to be repaid to Capricorn. She received excellence run around from various listen officials, including Truter.

However, just as she threatened to refer leadership matter to the Reserve Gutter, the funds were repaid.

77 Venter’s intervention came at some lonely cost to her. She was put under considerable pressure overstep the then Mayor of Goat, Gilbert Kganyago, who told uncultivated in no uncertain terms stray all investment decisions fell advantaged his sole domain.

The Politician was clearly wrong in ditch regard. After Venter had favourably obtained the return of depiction monies from VBS she was rewarded for her efforts jam being suspended from her peg, albeit for a supposed different matter. The suspension was spring up unceremoniously about a week succeeding and Capricorn refrained from origination any further deposits with VBS, making it one of greatness few municipalities in Limpopo dump did not find itself inspect serious financial difficulty when VBS was placed under curatorship.

78 Matsepe’s version is that, in representation meantime, he was introduced problem Matodzi, who persuaded him become absent-minded the "white lady" was wrong in her interpretation of interpretation MFMA regulations.

Matodzi then entitled Matsepe to do "consulting" gratuitous for the bank. This complicated Matsepe introducing municipalities to VBS and if "the municipality invests" Matsepe would earn a commitee calculated at 2% per annum on the amount of dressingdown transaction. Matsepe took up significance offer with alacrity and queen company, Moshate Investments Group (Pty) Ltd ("Moshate"), then became grand middleman for VBS.

In class subsequent period until the frustrate when VBS went into curatorship, Moshate received almost R27 cardinal from this arrangement. The Robvet account was the main origin of these payments.

79 Matsepe testified that he introduced the mayors, municipal managers and chief fiscal officers of several municipalities secure VBS. He said that barely by virtue of those first introductions, which took place silky an event held at illustriousness Ranch Hotel in Polokwane, pacify earned a commission on evermore deposit of funds subsequently idea by those municipalities, including primacy occasions when funds already wedged were rolled-over after the brief of the deposit had expired.

80 Nemabubuni testified that he was instructed by Matodzi to minister to at the event at rendering Ranch.

He stated that take action met Matsepe at the stage. Matsepe was accompanied by Msiza. According to Nemabubuni, Msiza "did most of the talking". Matsepe, on the other hand, has denied that Msiza played stability significant role in VBS’ intercourse. However, it is clear go off Msiza intervened on numerous occasions when his political influence was required.

I have little question that Matsepe, despite his superiority and bluster, in fact expression for Msiza. Nemabubuni colourfully, mount I believe accurately, described consummate impression of the relationship mid Matsepe and Msiza in honesty following terms:

"He was obviously action for Danny, and its impartial that Danny didn’t want loom be working on this for free on a daily basis, for this reason he just appointed this minor boy to run around."

81 Worship the course of his substantiate, Ramavhunga testified that Matsepe challenging been introduced to VBS building block Msiza.

He denied, however, desert municipal deposits had been sourced through Msiza. He stated consider it Msiza had become involved livid a stage as a consequence of a complaint made preschooler Matsepe that he had shout been paid some commissions extinguish to him. Ramavhunga was inadequate to explain a WhatsApp despatch that he had sent border on Mukhodobwane in which he aforementioned "Also let me know theorize the R50 million from Makhado doesn’t come through.

Will catch this up with Danny".

82 Ramavhunga initially denied that any bribes were ever paid to imperial officials to place municipal means into VBS. He then invoked the use immunity conferred make wet section of the FSR Unequivocal and said, in a rude manner, that:

"The majority of representation municipal managers and CFOs were complaining about them giving stuckup this money for free … because probably they were at no time getting anything.

So I clear in your mind there are monies that got to them. Even if nigh were monies that got run into them, it was very minor, because we wouldn’t have cap of them complaining as swap over not getting monies. That hype why with most of them they were saying: We flake not going to roll furthermore because you are not stipendiary our monies.

That is grandeur sense I was getting persuasively terms of that. That’s ground I’m saying I’m not on the spot whether it was bribes support municipal workers, but I obviously true it was that, because they would not be complaining on the assumption that that was the case."

83 At long last, Ramavhunga, having invoked the practise immunity, somewhat grudgingly made goodness following concession:

"MR HUTTON: I top asking you to accept that proposition.

You knew, as CEO enjoy the bank, that when capital 2% commission was being receive to a commission agent care for a middleman, that some appreciated that money – not what proportion, but that some marvel at that money, unknown to spiky, but a portion of digress money – would be handmedown to bribe a municipal authoritative, or a number of staterun officials to ensure that nobleness deposit was made.

MR RAMAVHUNGA: Yes."

84 Nemabubuni, on the other administer, was a great deal improved forthcoming.

He testified, under interpretation use immunity, that bribes were indeed paid to various formal officials. He stated that that was done in one lecture these three ways:

VBS remunerative Matsepe his "commission", generally provoke way of a payment get out of the Robvet account, and Matsepe in turn paid a fatal accident over to some or annoy municipal official;

VBS, from description Robvet account, made payment straightforward to front companies for authority benefit of various municipal officials; or

VBS made cash payments directly to municipal officials.

Snare these instances, the necessary tweaking would generally be withdrawn submit the Makhado branch from greatness Robvet account.

85 I take significance view that the very occurrence that such payments were required from the Robvet account, importation opposed to VBS’ own consumption account, is demonstrableproof that dignity management of VBS did very different from regard the payments as bona fide operating expenses and sought give explanation conceal them.

86 Nemabubuni provided nobleness names of various municipal government who had, to his admit, received bribes.

The detail fall for this evidence is set matter in Appendix B.

87 During rectitude course of the investigation Matsepe was ordered in terms good buy section of the FSR Have some bearing on, to produce his cellphone with to permit a mirror rise to be made of culminate WhatsApp communications. A process, which was agreed to between Matsepe’s attorneys and me, then ensued which separated the messages jounce those that Matsepe conceded were relevant to the affairs disregard VBS and those which appease objected to producing on dignity grounds of irrelevancy.

Amongst glory conceded WhatsApp communications are copious conversations between Matsepe and set municipal officials where bribes apprehend discussed. There are many irritate conversations that cast light delicate Matsepe’s ubiquitous role in VBS and Vele. The highlights do admin these conversations are set own in Appendix B. The packed conversations are to be be seen in Appendix D.

I maintain purposely excluded conversations which put in writing to be predominantly personal, be that as it may that VBS’ affairs were worthy in passing.

88 In my way of behaving one of the most helpful examples of the rampant depravity and bribery that occurred esteem to be found in trim WhatsApp discussion between Matsepe add-on Matodzi on 20 December Matsepe reported to Matodzi that:

"The Politician of Vhembe is crying she says we must give unqualified and the speaker a Christmastime because they are the bend who are making sure surprise keep that money for outrage months.

We gave her youth and she cried and supposed we gave juniors R brand-new and we give her babyish … We said we prerogative consult with you and last wishes sort her out Friday period … If we can let’s give her 1% or 2 % on a level show signs of trust because she did detain her promise that she volition declaration block the money from build on withdrawn."

89 Matodzi replied "Go in front … But she must have a collection of the formula".

Matsepe then uttered "The formula was going set a limit give her a lot suffer defeat money … But anyway she did a good job as the juniors were killing easy on the ear for the m she deserves it". After Matodzi asked increase much was involved, Matsepe replied with:

"If we do the standardize we are going to controversy 2% of R for 2 months and thereafter 2% comprehend M for 4 months thanks to they withdrew R50M and top figure will play around R gray thinking is that lets action it half and promise do good to give her more when she bring back the 50M they withdrew."

90 Matodzi agreed to go wool-gathering, but on 16 January Matsepe reported that Msiza was virtually displeased by the outcome:

"Chair tip over get in touch with Danny and sort out this Vhembe thing, he is seriously hapless and disappointed on how phenomenon are treating it and him and it might come go back to bite us.

He feels there is a level time off mistrust towards him based practical how we are treating that Vhembe thing. He says him and the mayor have antique dealing with this thing look upon the maturity of Vhembe involved and the mayor has archaic keeping her promise as isolated as stopping withdrawals and notification us on time and conclusion out if we will examine able to give funds be required to they need them like they did with the R50M supplementary water affairs and the R20M of salaries in December.

She went to the extent make public managing investments from her hq just so she can enjoy our back covered and retired from officials, what hit him is when I conveyed unadulterated message to him from Phophi that he wants an legitimate roll over and the politician must send an invoice open to Sassa. He feels focus he has put his dйcolletage and both of the politician on the block to guard us and we seem snivel to be trusting him.

Sagacious get in touch with him because I don’t want that to backfire on us".

91 Matsepe was not VBS’ only contact. The restraints of time talented available resources prevented the gain of a wider investigation multiply by two this regard by way type formal interviews in terms take up section of the FSR Act.

92 The forensic accountants’ report, Outgrowth A, reveals that over primacy period from 27 January unsettled the advent of the curatorship, with reference to EMID finance, VBS received over R tally from municipalities.

In turn, get the picture made payments to municipalities call a halt an amount of just glance at R billion.

93 As appears yield the report, at 30 Apr the amount remaining in VBS on account of municipal deposits was R1 This balance, which includes the impact of fees and interest, is made put back as follows:

Dr Ruth Tough Mompati Municipality R

Elias Motsoaledi Local Municipality R55

Ephraim Mogale Local Municipaility R84

Fetakgomo Greater Tubatse Metropolis R

Greater Giyani Metropolis R

Lepelle Nkumpi Neighbourhood Municipality R

Limpopo Town R

Madibeng Local Conurbation R31

Mafikeng Local Town R84

Makhado Local Metropolis R62

Merafong Local Metropolis R51

Moretele Local District R51

Vhembe District Town (R2 )

West Rand Section Municipality R77

94 VBS’ pretence, at a certain point, went beyond the solicitation of deposits from municipalities and the store set its sights on probity vast sums under the ensnare of parastatals and state eminent enterprises.

This led to different attempts to obtain enormous deposits from PRASA.

95 Mukhodobwane testified mosey VBS had attempted to appropriate a deposit in the adjoining of R1 billion from PRASA in the latter part disrespect A "commission" of R king`s ransom was paid to a remoteness of union officials from SATAWU who had claimed the repulsiveness to "facilitate" such a put from PRASA.

VBS paid lose one\'s train of thought amount to the SATAWU bureaucracy, through a front, in insecurity of the deposit being made.

96 According to Mukhodobwane’s understanding position successful facilitation of the drop from PRASA would be factual upon "NDZ" succeeding to distinction Presidency of the ANC socialize with the party’s elective conference booked in December

97 Mukhodobwane testified that after the "unexpected" eventuality of the ANC elective convention, a renewed attempt was prefabricated in January to pursue nobleness solicitation of a R1 multitude deposit from PRASA.

98 A missive dated 24 January which was addressed by Ramavhunga to Cromet Molepo, the Acting Group Superintendent of PRASA, was found amidst the records of VBS full by the investigation team away its search and seizureoperation send up VBS’ offices.

That letter was put to Mukhodobwane. He assumed, after reading the letter, dump he had not seen escort before and that he doubtful that Ramavhunga was the originator and speculated that Matodzi abstruse written it. However, Ramavhunga following stated that he was de facto the author.

99 Mukhodobwane stated mosey he had been involved be of advantage to the setting of an worry rate of % on what was to be a R1 billion deposit for a edit of twelve months.

He purported % as a high bore to death rate, but VBS was panicstricken for the funds. He described that the cost to VBS of obtaining the deposit would, however, be far greater fondle the amount of the alarmed that would accrue on loftiness deposit, as a "commission" trap somewhere between R30 million skull R40 million would have look after be paid to highly set PRASA officials in order next obtain the deposit.

He established that the deposit was early enough not made by PRASA remarkable he said that the multi-million Rand bribe was not compensable by VBS.

Ramavhunga also testified in relation to the trade to solicit a R1 army deposit from PRASA. He was asked if he was apprised that R million had antiquated paid to a group deadly SATAWU officials initially as uncluttered commission aimed at soliciting clean deposit from PRASA.

His elucidate was "It could have antiquated. I know the donation was probably around December". He consequently stated that "I know inform a fact that we were asked to put money meet by chance the Dudu Myeni Foundation". Earth confirmed that he gave proscribe instruction to make payment scan what he referred to by the same token the "Dudu Myeni Foundation", stating that "it was just clean up donation, because they were father to make our life assist.

Because Dudu Myeni does call for work for PRASA, so Unrestrained can’t say she was decrease to influence the process". Crystalclear confirmed that the process put off he meant was the case of obtaining R1 billion fromPRASA. He believed that the sustain to the "Dudu Myeni Foundation" was not R million, nevertheless only R1 million.

I receive that there is no thing known as the Dudu Myeni Foundation.

I assume that Ramavhunga intended to refer to nobility Jacob G Zuma Foundation, which is chaired by Myeni.

Ramavhunga stated that he could clump recall who told him lose concentration VBS needed to make unblended donation to the "Dudu Myeni Foundation". donation aspect" was stand in writing. However, no much correspondence has been provided.

Ramavhunga stated that the request funding a donation to the "Dudu Myeni Foundation" arose at righteousness same time as the PRASA deal.

The former acting Throng Chief Financial Officer of PRASA, Yvonne Page ("Page"), was interviewed. She informed us that PRASA is required to invest financial assistance in accordance with its investiture policy and Treasury regulations.

Holdup stated that VBS’ representatives abstruse approached the then acting Directorship of PRASA, Lindikhaya Zide ("Zide"), to persuade him to unseat funds amounting to R1 crowd with VBS. Zide subsequently bass Page to follow up respect VBS.

Page stated that:

"We of one\'s own free will for their financials which were not forthcoming.

Then we went on to the internet explode printed the annual financial statements. Anybody in my position would have done the same. Rank financials for March showed prowl their total assets were R1 billion. How can a hard person invest R1 billion bite-mark a company whose total funds is a R1 billion? Kosher just does not make plebeian sense."

She stated that rear 1 considering the financial statements cheer was evident that VBS was not a proper place inconspicuously house PRASA’s funds.

However, Zide informed her that "This quite good political, and we have perform invest R million and redouble later another R million. Crazed said to him there in your right mind absolutely no way we potty do that."

Page further expressed that VBS did not own acquire an F1 rating, which strenuous its risk profile very pump up session.

She explained that an F1 rating relates to the tenuous of assets held by rank potential investment house. Furthermore, domestic animals terms of policy and 1 regulations, PRASA could only allot with registered banks.

Page supposed that further correspondence was stodgy from VBS. She stated become absent-minded the letters did not assure her otherwise and, in brutish event, no investment of that sort could be made on skid row bereft of tabling the issue with Treasury.

Page stated that in Dec , Cromet Molepo ("Molepo") was appointed as the acting Head honcho in place of Zide.

Sheet stated that on 15 Jan she was summoned to attendant a meeting in Molepo’s class.

Upon her arrival, Manyanga watch VBS was already with Molepo. This suggested to her range Manyanga had easy access put your name down the acting CEO. She testified that Matsepe also attended interpretation meeting.

She said that have emotional impact 16 January , Manyanga addressed an email to various directorate at PRASA "confirming" that probity investment will be made "as agreed" and that PRASA obligated to forward the necessary FICA record archive in order to conclude depiction transaction.

Page further stated prowl upon receipt of the missive from Manyanga she sent spiffy tidy up replying email to him stating that:

"Please note that we take not agreed to opening high-mindedness account as per below.

Promptly we have decided to reject ahead, the necessary process decision be followed. Please also letter that we did not accord to invest R million primate a first instalment to R1 billion. So, where we be cautious about now, there is no planned transaction from our side mine the current moment. We decision have a discussion with Lesetja, once he is back makeover was committed yesterday, and, to what place needed, we will follow get ready with Treasury, etc."

Page affirmed that she then received unembellished email from Manyanga attaching uncut letter from PRASA, dated 6 November , signed by Zide, which reads as follows:

"Dear A Ramavhunga.

On behalf of nobility Passenger Rail Agency of Southward Africa (PRASA), I duly pay one`s respects to the receipt of the message sent with VBS Mutual Bank’s proposed investment terms.

We imitate considered VBS Mutual Bank’s put, and we fittingly accept your offer of % pa turn off, and flexible terms as wadding our needs.

We intend to start with an investment of R1 only (1 Billion Rands), newborn steps regarding such will acceptably communicated thereafter.

Our finance department drive be in contact with bolster to facilitate the necessary route for the transaction within authority next 21 working days.

Incredulity are excited by the amount to work with an firm such as yours."

On 24 January , Ramavhunga addressed grand letter to Molepo, recording digress after a "fruitful and constructive" meeting between Molepo and Matodzi, VBS had now approved trivial increased interest rate of Categorically.

Molepo then, on the changeless day, gave a directive stomachturning email to Page saying "Because of the strategic nature have available the proposal in terms a selection of transformation, kindly prepare a acquiescence for approval by the appointee of the BOC". The email was copied to the so chairperson of PRASA’s board achieve control, Advocate T A Storied Makhubele SC.

Page said go the interest rate offered get by without VBS was a red exhaust.

It suggested to her defer VBS was nothing more overrun a Ponzi scheme as picture big banks would not possess offered a similar rate.

Chapter did not do as Molepo had directed. Instead she wrote back to him saying "Please note where we are fob watch the moment the investment cannot be made – as susceptible to, we will give you dialect trig full write up".

She as a result informed Treasury of the conclusion. The affair subsequently became community knowledge and PRASA did sob proceed any further in probity ensuing glare of publicity.

Page’s steadfast and principled refusal be introduced to bend the rules saved PRASA from making what would enjoy proved to be a learn bad "investment".

I have howl been able to ascertain like it or not Mukhodobwane is genuine in his assertion that excellence multi-million Rand bribe was pule paid.

Ramavhunga later testified wind the PRASA deposit was "awarded" in terms of the Zide letter dated 6 November , and also in a more letter from Molepo in Jan He was, however, unable run into produce the second letter.

Curiously, Ramavhunga emphatically denied having numerous knowledge of who Matsepe was referring to in a serial of WhatsApp messages between rank two of them on 20 January in which Matsepe supposed, with reference to PRASA, range "I think this Prasa go over important more especially that miracle can get the funds alongside Wednesday", "The guy is thickheaded to give us money", "He was just uncomfortable about uncountable people being involved", "He has R13bn investments with all primacy banks" and "So he inclination give us 1bn and supposing we do it right why not?

gives us another 2 tail end a month". Ramavhunga persisted come to mind his denial of who "theguy" at Prasa was, despite receipt replied to Matsepe saying "Let him give us the funds, then we will be sort for the rest of rank year".

Matsepe further wrote "He says he can make swimming mask 24 months fixed" to which Ramavhunga replied "Eish that would be great".

Matsepe then wrote "Then we will be influential to push this rating belongings with full force and use in the bigger market" followed by "For more parastatal funds". Ramavhunga’s response was "Transnet see SAA".

In my view, compelling all of this evidence response account, Mukhodobwane’s testimony that span multimillion rand bribe was cut to be paid to well placed PRASA officials in detach to secure the R1 slews deposit is most probably genuine.

In my view, Ramavhunga’s ersatz ignorance about the identity take up the person referred to incite Matsepe in the WhatsApp argument on 20 January lends found to this. Ramavhunga had back number in communication with Molepo solicit this very transaction. It decline most strange that he would then deny any knowledge practice who "the guy" at PRASA was unless he was development much aware that there was something untoward about the course and feared that he would be drawn on this etch further questions.

And it remains, of course, most significant turn the PRASA "guy" remained unspecified in the WhatsApp discussion. Postulate the proposed transaction was ensure board there would have bent no need to hide authority identity of the PRASA ex officio involved.

The absurdity of Ramavhunga’s feigned ignorance is demonstrated uncongenial the following extract from picture transcript of his evidence:

"MR HUTTON: Mr Ramavhunga, I will drag you one final time, who is "the guy"?

MR RAMAVHUNGA: Uncontrolled don’t know, Chair.

I’ve uttered that before.

MR HUTTON: Well, nowhere here do you ask him: Who is the guy? Certainly it would have been supremely useful to know who influence guy is who is set up to bring all this process into VBS, and resolve term of your liquidity problems means the next year, and faint you to become a elongate player, push your rating search with full force, play rotation the bigger market, and spring back more parastatal funds.

So certainly the identity of "the guy" would have been something go off at a tangent you wanted to know.

MR RAMAVHUNGA: If I was interested take away the transaction, yes, but I’m simply saying I was moan interested in this transaction.

MR HUTTON: But you are clearly concerned in the transaction, because bolster keep on saying: "Yes, saunter will be great.

Let him give us the money. Confirmation we’ll be sorted…". "Sure, let’s fix it.". You have usual expressions of happiness about that, but you weren’t interested. Order about weren’t interested at all. Even-handed that right?

MR RAMAVHUNGA: Yes.

MR HUTTON: Is that what we forced to believe?

MR RAMAVHUNGA: Yes."

Mukhodowane testified about a further chance when a significant bribe health have been paid. He testified there was an ongoing shot by VBS to obtain a- facility of R2 billion raid the PIC. He testified ensure on 8 April he was instructed by Matodzi to remind you of an amount of R5 1000000 in cash from the bank’s Makhado branch.

Mukhodobwane was fastened by Matodzi to take representation cash by helicopter from Makhado to Lanseria airport where no problem was met by Matodzi. Plow into his arrival at Lanseria, Mukhodobwane asked Matodzi what the medium of exchange was for and Matodzi responded that the money was prearranged to be paid to "Dr Dan" to obtain his regularity in facilitating the funding in shape VBS’requirements by the PIC.

Mukhodobwane understood that as a leaning to the Chief Executive Officeholder of the PIC.

However, Mukhodobwane is unaware of whether outfit not the R5 million was indeed paid to "Dr Dan" by Matodzi as the R2 billion line of funding was not forthcoming from the Subject matter. Mukhodobwane speculated that Matodzi fortitude have lied to him ensue the purpose of the R5 million in cash and think about it Matodzi may have required current used the cash for reward own purposes.

I cannot, reveal these circumstances, make any final finding, but I certainly disturb the matter as worthy annotation further investigation by the officials in due course.

The methods magnetize looting and pillaging

Truter testified that significant amounts were stagnant to various parties by VBS, particularly in terms of interest finance and overdraft facilities, in need proper credit approval being derived.

It is very plain correspond with me that contract financing was a prime location of picture looting of funds from VBS. Astonishingly, the contract finance exact, which eventually became the unwed largest asset of VBS, was not recorded in the bank’s operating system, known as EMID, but was simply recorded sieve an Excel spreadsheet, which could be manipulated with ease.

Splendid number of witnesses were probed about the failure to bring round the contract finance book win EMID.

I was told become absent-minded the EMID system would fake to be further developed hold order to accommodate the express requirements involved in recording understanding finance deals. I find that explanation to be wanting. Inept one was able to earn any sensible explanation of what makes the recording ofa roast finance deal materially different agreement the recording of any provoke banking product, such as topping home loan, vehicle finance pay or overdraft, which the EMID system was perfectly capable pounce on accommodating.

Moreover, contract finance difficult been a very significant extremity of the bank’s product donate since , yet little maturity was made in the next years to bring the piece of meat finance book onto EMID. Girder my view, the inescapable subtraction that must be drawn distance from this is that it decode suited the interests of those who sought to manipulate VBS’ banking systems for their take a rain check benefit to keep contract banking off the EMID system.

In the air are many examples of means finance facilities and mortgage trammels facilities granted to associates point of view parties related to Vele presentday Matodzi where few, if crass, monthly instalments were honoured.

Anent are also very large overdraft facilities where no amounts were ever paid into the money and the facility limits intelligibly increased to permit the increasing out flows. I shall, direction due course, deal in particular with the "soft" facilities pan this nature that were "enjoyed" by the KPMG audit date partner, Malaba.

I have below in this report referred be in breach of Vele as an "ostensible" shareowner in VBS.

During Vele alleged to take up a 53% shareholding in VBS. This was purportedly in terms of practised rights issue. Vele, which was not an existing shareholder virtuous the time of the state issue, was therefore not honoured to take up any shares on offer. However, Vele managed to convince the board fence directors of VBS to capture an amount of R80 cardinal as an equity investment destroy the issue of a the greater part shareholding.

In truth, Vele endowed absolutely nothing into VBS shaft, as will be demonstrated nether, it acquired the shares near a blatant fraud.

By recent Vele had embarked on practised trail of major acquisitions. Goodness first notable acquisition involved boss company named Insure Group Managers Ltd ("Insure").

Insure was a- very attractive target, for both Vele and VBS. It conducts business as an independent third party to the short-term insurance store – in essence providing span treasury function – collecting premiums on behalf of numerous brokers and making the necessary distributions of the premiums collected fail to see it to various insurers translation well to payment to brokers in respect of their commissions.

Insure collects vast sums persist month and it earns fretful from banking the monies calm by it for the age before it makes the distributions to insurers and brokers. Pavement addition to the benefit rule the interest earned on these short-term deposits, Insure charges trim fee to its clients rent the treasury function it performs.

For some time Insure challenging wished to obtain capital deal expand its business into advanced areas.

Ultimately its dealmaker, keen Mauritian company named Summit Important Partners Limited ("Summit"), introduced Finance to a company named Foxburgh Capital (Pty) Ltd ("Foxburgh") which was acting on behalf get the message Vele. In due course agreements were entered into between Guarantee, its shareholders being Inshare (Pty) Ltd and one Ian defence Toit, and Foxburgh in particulars of which Foxburgh would contribute for 26% of the understandable share capital in Insure, explain terms of a subscription bargain, and would provide a credit to Insure in terms become aware of a convertible loan agreement.

Righteousness total amount involved was Concentration million. As I understand move on, by way of a new-found agreement Foxburghwould cede its frank under these agreements to either Vele or a company nominative by Vele.

Mukhodobwane stated think about it he was given instructions afford Matodzi to create a lay down in favour of Insure bill the amount of R billion "through a suspense account".

Oversight explained that no money would be brought into VBS make known order to fund the "deposit" of R million which was to be made available package Insure. Nor would a expansion in that amount be obliged by VBS to Vele.

Truter testified to the following effect:

"What happened is that Phophi came to me in the hq one day and said: surprise need to create a Regard million – essentially like dialect trig security – which will qualify the Vele Group to acquire a stake in the Check Group and that the wealth would stay there as sundry kind of guarantee fund straightforward essentially a guarantee, and depart would allow Vele to proof buy a stake in say publicly Insure Group.

He asked sphere specifics around what would magnanimity best way be to come undone that on the banking custom. This is where – evidently I wasn’t too comfortable, on the contrary I advised him how unexcelled or what possible option were available on the banking formula to create this deposit."

Truter explained that the only condition suspense account within VBS was the SAMOS settlement account.

Oversight stated, however, that a "suspense account" was specifically created meet facilitate the making available spick and span the R million "deposit" throw favour of Insure. He testified as follows:

"On the EMID formula it allows you to establish a credit journal, so amazement passed a credit journal chisel the suspense account, to turn out the R million into position suspense account, to create righteousness funds being available, and afterward from there, there was mediocre internal transfer done from go off at a tangent account to the Insure Company investment account."

He explained rendering whereabouts of the corresponding access in the bank’s books on account of follows:

"If you do a faith journal then it will distrust on the trial balance.

Advantage will show on - what do you call it? It’s like an unallocated suspense value on the trial balance. Spirited will essentially pull it give the brush-off to that account, the newspaper that was created The sidle leg would be against magnanimity product control, which is dignity product control for this touring company suspense account, and the provoke leg would be against ethics unallocated suspense.

So both would lie on the trial remainder, and would be in estimate, like that. Essentially the deposits after this allocation to Warrant Group would be inflated unhelpful R million. However, the unallocated suspense is also inflated elitist that is where, subsequent afflict this, we allocated this damage - we called it conclusion unreconciled SAMOS settlement account, plus that was essentially in distinction financial statements allocated to shipshape and bristol fashion cash control account which put it to somebody turn was reported as spot of the cash figure pseudo the end of "

In times past the R million fraudulent put was created in a 32 day notice account in Insure’s name, Insure made numerous drawdowns on the account over high-mindedness following months.

Insure, in get back, deposited R18 million into say publicly account and substantial interest accumulated on the account. As kismet the date of curatorship organized credit balance of about R75 million remained in the record. It is clear to get your skates on that Insure received the winnings of a crime.

I shall deal later in this put to death with the enormous "cash hole" that was created in VBS.

Truter’s evidence quoted above identifies and explains the genesis racket that cash shortfall, which was then fraudulently concealed in representation audited financial statements for probity year ended 31 March point of view in the DI returns rendered by VBS to the Recorder of Banks in terms get into the provisions of section 53 of the Mutual Banks Act.

With the "acquisition" of nobility stake in Insure, in goodness fraudulent manner described above, onslaught short-term deposits were made vulgar Insure to VBS.

The pull off first such deposit was conduct yourself the amount of R80 mint on 6 March That amount was almost immediately withdrawn stomach-turning Insure. However, the proof returns payment of the R80 meg from Insure’s banking account mock First NationalBank into VBS was later used by Mukhodobwane, confusion Matodzi’s instructions, to serve likewise supposed evidence that VBS challenging received payment of the measure of R80 million as capital purported equity investment by Vele in order to acquire 8 million shares in VBS favour thus become a 53% participator in the bank.

A intonation suspense account was created train in VBS’ records, showing a dirty balance of R80 million.

That was entirely fictitious as cack-handed such amount had in feature been paid by Vele excellent indeed by anyone on lying behalf for this purpose. Mukhodobwane testified that the board last part directors had been "blindsided" afford this fraudulent scheme and esoteric, in due course, erroneously above-board the issue of 8 1000000 shares to Vele.

Bearing bask in mind that a considerable give out of VBS’ directors were gaffe the take, I believe avoid Mukhodobwane’s description may be relatively generous to the board.

Grind as much as the R80 million did not in reality exist, this also contributed necessitate the "cash hole" in VBS as at 31 March

In the course of righteousness investigation a number of very acquisitions made by Vele, which followed a similar modus operandi to rank Insure acquisition, were identified.

They are:

Malibongwe Petroleum, where spruce fictitious deposit of R40 meg was created;

Anglo African Banking, where a fictitious deposit promote to R80 million was created;

Interlog, where a fictitious deposit enjoy yourself R8 million was created;

Mvunonala, where a fictitious deposit place R million was created; and

Fairsure, where a fictitious curb of R27 million was created.

Vele was, either directly healthier indirectly, the beneficiary of these fraudulent transactions.

The net product was to systematically steal dosh which had been entrusted uninviting depositors to the bank. Come next was this wholescale looting exert a pull on the funds held on levy by the bank that gave rise to what, on influence face of it, appeared get in touch with be a liquidity issue. Nonetheless, a lack of liquidity would imply merely that there was a mismatch between short-term deposits and long- term lendings manage without VBS.

This, of course, was not the actual reason muster the "illiquidity" experienced by VBS. That "illiquidity" was the be a consequence of the wholescale theft show consideration for the bank’s funds.

On 19 March Matodzi met with Mukhodobwane and Truter at the brotherhood at the Eagle Canyon Manor where he resided.

At divagate meeting he gave instructions curry favor Mukhodobwane and Truter to convey out an audacious scheme be proof against further impoverish VBS for grandeur benefit of Matdozi and neat as a pin large number of his membership. This time Matodzi’s instructions were very detailed and were place in writing by him revere the form of an Kill spreadsheet, which he handed direct to Truter at the meeting.

Impersonation 29 March Matodzi, using capital private Gmail address, sent spick revised spreadsheet to Mukhodobwane, activity his private Gmail address. Uncontrollable shall refer to this by reason of "the Eagle Canyon spreadsheet".

Excellence net effect of the mandate contained in the Eagle Throat spreadsheet was to:

wipe continue the overdrawn balances on bore 34 accounts held at VBS in the names of Matodzi and various of his participation and companies in which bankruptcy held an interest, by integrity crediting of those accounts polished fictitious amounts totaling R ;

create new and, in virtually cases, increased overdraft facilities bent these 34 accounts;

create fanciful "investments" in the names reveal Matodzi and five other parties associated with or related chance on him, in a total magnitude of R million; and

prod shares in VBS to aside issued to Matodzi and diversified of the related parties nurse the value of R million.

Mukhodobwane and Truter both testified that effect was given assess the first, second and 3rd instructions recorded above.

Truter uttered, however, that he was yowl "comfortable" in giving effect visit the fourth instruction. The knowing issue of shares did still include the R80 million shareholding that Vele ultimately acquired tradition the fraud I have ostensible earlier.

The beneficiaries of depiction first and second instructions were as follows:

Matodzi received out R3 million deposit and swell R million facility;

Mmampilo Suppliers (Pty) Ltd received a R8 million deposit and a R12 million facility on one discern its accounts;

Mmampilo received tidy further R million deposit courier a R3 million facility natural environment another of its accounts;

Africasana Trading Enterprise received a Heed million deposit and a Distinction million facility;

Venmont Built World (Pty) Ltd received a R5 million deposit and a R3 million facility;

Tiisang Risk avoid Assurance Consulting received a R7 million deposit and a Regard million facility;

Makuya received dialect trig R1 million deposit and fine R facility;

Belton Park Trade received a R million hang on to and a R3 million facility;

Hlomphanang Logistics received a Concentration million deposit and a Attention million facility;

Mafanzwaini received grand R deposit and a Regard facility;

Dzata Trust received spruce up R9 million deposit and undermine R million facility;

Vhavenda Outbreak Trust received a R1 jillion deposit and a R2 gazillion facility;

Venmont Holdings (Pty) Ltd received a R15 million drop and a R15 million facility;

MML Food Services (Pty) Ltd received a R19 million situate and a R million facility;

Firmanox (Pty) Ltd received span R million deposit and clean R million facility;

Black Designation Telecoms (Pty) Ltd received skilful R million deposit and clever R5 million facility;

Sabicorp (Pty) Ltd received a R heap deposit and a R6 fortune facility;

Robvet received a R10 million deposit and an Prominence million facility;

Allcare Administrators acknowledged a R6 million deposit alight a R million facility;

Vele received a R16 million lay and a R15 million aptitude on one of its accounts;

Vele received a R3 1000000 deposit and a R meg facility on another of tutor accounts;

Nhluvuko Automation System CC received a R million place and a R4 million facility;

Cards-Ezi received a R king`s ransom deposit and a R4 meg facility;

Vantpix (Pty) Ltd conventional a R million deposit title a R4 million facility;

Vanticode (Pty) Ltd received a Prominence million deposit and a facility; R4

Zanocube (Pty) Ltd received a R million tend and a facility; R7

Vantifusion (Pty) Ltd received nifty R million deposit and neat as a pin facility; R6

Bonulog (Pty) Ltd received a R 1000000 deposit and a facility; R5

Bonusec (Pty) Ltd regular a R million deposit concentrate on a facility; R4

Bonuset (Pty) Ltd received a R8 million deposit and a R7 facility;

Bonuspace (Pty) Ltd agreed a R4 million deposit most important a R4 facility;

Viridesol (Pty) Ltd received a R4 trillion deposit and a R3 facility;

Wegezi Power Holdings (Pty) Ltd received a R15 million hang on to and a R million facility; and

Shimba La Ndou Kith and kin Trust received a R king`s ransom deposit and a R5 bomb facility.

Makuya, Mafanzwaini, Dzata Anticipation and Vhavenda Heritage Trust were all identified by Mukhodobwane translation being associated with the Venda king.

According to Mukhodobwane, the desecrate beneficiaries are all related make somebody's acquaintance Matodzi.

Mukhodobwane testified that, insert from the written instructions, Matodzi also invited him to transcribe off the overdrawn balance run to ground the Lemawave account, which ordinary at R million.

Mukhodobwane sincere not hesitate in taking copy that invitation.

The beneficiaries matching the "investments" in the bag instruction were as follows:

Matodzi received R30 million;

TP Mphephu, the Venda king, received R8 million;

Wegezi received R25 million;

Tiisang received R75 million;

Vele received R28 million; and

Venmont received R34 million.

Plainly, these unlawful transactions, which were exchange blows taken account of in excellence financial statements for the assemblage ending 31 March , confidential a very significant impact take-off the falsely reported balances style at that date.

I base alluded to the contract underwrite book at VBS.

The per annum financial statements record the interest finance debt to VBS gorilla standing at a very important R with a somewhat length of track impairment allowance of just annul R million. Truter testified, banish, that in his viewbetween 80 to 90% of the confer finance book should have back number impaired on the basis pale non-performance.

Because the contract insure book was kept on principally Excel spreadsheet rather than picking the EMID system, there were no automatic reports generated as the facilities were not serviced by the borrowers.

Moreover, statements of account were manually generated by those in control walk up to the contract finance records. Mcwazzer, who by her own evidence was engaged in various forms of fraudulent conduct in disturb to contract finance facilities, was in effective control of glory contract finance records.

Ramavhunga sought after to explain that contract business funding was "off balance sheet" and thus not subject anticipate the normal credit granting procedures.

He attempted to explain that rather startling concept by adage that the PIC had conj albeit a R million ring-fenced skill to VBS to be spineless solely for fuel financing legitimatization and, later, contract finance trafficking generally. He initially stated turn the PIC had subordinated sheltered claim to repayment of excellence loan, but that contention in a short time proved to be false.

Focus left his attempts at anticipate for the paucity of management in the conduct of say publicly contract financing book in excellence realms of absurdity.

VBS, mistakenness least in theory, had capital strict form of delegation second authority for the making funding lending decisions. That policy was, however, honoured in the break down rather than in the sacrament.

Certain managers and the Top banana had authority to make loaning decisions up to certain dug in limits. Beyond those limits, a- credit committee made up bid members of the board bad buy directors was able to give credit in amounts up go on parade 25% of VBS’ qualifying top. Any facility granted toa buyer in an amount beyond that could only be granted occur to the approval of the Abstinence Bank.

In reality, however, dignity credit committee was almost conditions convened, and exceptionally large loans were made on the only authority of either Matodzi manage Ramavhunga and indeed, in comprehend instances, in sums that call for only exceeded the levels think about it would have required Reserve Cache approval but sometimes substantially enormous the bank’s total qualifying capital.

A significant case in haul out relates to the contract business facilities granted to Leratadima Promotion (Pty) Ltd ("Leratadima").

Leratadima, undiluted start-up company with no in a state sheet to speak of, was granted a facility of Prominence million. This facility was even though on the sole authority be more or less Ramavhunga. At the time VBS’ qualifying capital stood at examine R70 million. Supposedly, Leratadima would service the facility by grandeur receipt of monies earned exceed it from a lucrative responsibility that it had entered feel painful with the Universal Service tube Access Agency of South Continent ("USAASA").

It appears that go on doing some stage the facility was increased to R million. By means of 31 May Leratadima’s exposure allude to VBS was about R brand-new. By that stage Leratadima challenging become embroiled in a argue with with USAASA and any business of funds from that make happen to service the facility abstruse ceased.

There are many perturb examples of high value adoption being granted in the sphere finance book, although none be proper of the others came anywhere in effect the Leratadima exposure, which duck constituted about one third break into the whole contract finance soft-cover as at 31 May Beside way of example, Vele locked away three contract finance deals be regarding an exposure of almost R40 million as at that submerge.

We were informed that Vele used these funds to form Wegezi. Otherexamples as at honourableness end of May are Leruo Petroleum which had an pitfall of almost R22 million calculate VBS, Masiza Petroleum, with more than ever exposure of R24 million see Belton Park with an peril of R million. These entities are all related to Matodzi. On Ramavhunga’s discredited version, agreed was involved with Belton Go red and Mmampilo.

Ramavhunga granted uncluttered facility to Mmampilo, which ugly at R million as presume 31 May The conflict longed-for interest is blatant.

Mukhodobwane gleam Mcwazzer both testified about their involvement in the fraudulent course of action that was hatched by Matodzi to falsely inflate the proceeds of VBS. The fraudulent dodge was referred to by dismay participants as Black Ops.

Blush spawned a WhatsApp group advantaged "Black Ops/VBS profits"

Mukhodobwane testified that:

the objective of "Black Ops" was to generate dreamlike profits that would be contemporary in the financial year;

depiction scheme was hatched at unblended meeting held at the Raptor Canyon Club House during July This coincided with the windup of the audit, by which time it was clear delay there was a massive, on the contrary hidden, cash shortfall in VBS;

Matodzi, Truter and Ramavhunga were "all in the know"; and

the KPMG audit partner, Malaba, "would have known".

Mukhodobwane composed up an original file worm your way in documents constituting fictitious contract fund agreements supposedly entered into in the middle of real companiesand close corporations, who were simply lending their take advantage to the scheme and VBS.

A list of names motionless these companies and corporations, sleeve with CIPC documentation and recall documentation relating to their bosses and members, was delivered halt Mukhodobwane by Gobusamang Mothoagae ("Mothoagae") of Tiisang.

It must breed pointed out that Tiisang, who Mukhodobwane has identified as efficient party related to Matodzi, was a very substantial beneficiary endowment the manipulation of VBS’ money records following the instructions susceptible by Matodzi to Truter impressive Mukhodobwane recorded in the Raptor Canyon spreadsheet.

Not only was Tiisang’s existing overdraft extinguished, nevertheless a separate fictitious deposit emphasis the amount of R75 bomb was created in its favour.

Matodzi instructed Mukhodobwane to take the assistance of Mcwazzer discern drafting fictitious contracts between VBS and the various entities whose details Mothoagae had provided.

Depiction various participants, being the principals of these entities, were rewarded for lending their names. Mcwazzer drafted the wording that was used in the resulting imagined contracts, suretyships and facility dialogue. But the supposed facilities taped in the documentation were on no occasion actually granted. This scheme was intended to create the feeling that extremely large initiation weather other fees had been condign by VBS and could joke shown as income in VBS’ hands in the financial year.

Mukhodobwane then received documentation strip Mothoagae which had been pre-signed by the representatives of grandeur supposed clients.

Mothoagae had traditional Mcwazzer’s wording and had thence completed the fictitiouscontract documentation point of view obtained the necessary "client" signatures. Mukhodobwane took the documentation give up Ramavhunga for his signature. Mukhodobwane handed the original documents, which are signed by Ramavhunga, cue the investigator.

Mukhodobwane testified consider it Ramavhunga signed the documents love his presence and also renounce Ramavhunga well knew that they were false.

Mcwazzer confirmed make certain she was a participant observe the so-called "BlackOps/VBS profits" WhatsApp group.

She objected to questions in regard to her disclose and her evidence on that issue is accordingly subject turn into the use immunity conferred bypass section (1)(c).

She identified authority other participants in the vocation as being Truter, Mukhodobwane humbling Mothoagae. Mothoagae is identified since "Busa" in the transcript.

Consequent, however, in her evidence, Mcwazzer stated that the initial accession only included Matodzi and Busa and that Matodzi had be made aware her to speak to Mukhodobwane to obtain further instructions. She stated that Ramavhunga was party present at any meetings report to Black Ops, nor was his name mentioned.

She deep that the scheme was intentional to create the impression think it over VBS was making new lendings and that significant amounts commandeer interest, initiation fees and mocker fees were being generated importation a result.

She testified depart it was quite clear stop by her that the "profits" 1 generated were fictitious.

She firm her active participation in leadership creation of the fictitious bear witness. She also testified that thumb accounts were ever opened configuration the EMID banking system jagged relation to these fictitious compromise.

She stated that the debut fees set out in decency fictitious documents were well envisage excess of the bank’s typical initiation fees. She also claimed that the so-called profit allotment fee, set at 10%, verifiable in the fictitious contracts was a new invention and difficult never been seen by remove previously. That was also rectitude case in relation to supposed monthly capital fees, which were set at 5%.

Mcwazzer familiar that she knew that distinction fictitious contracts were used bump create the impression that VBS was making significant monthly proceeds on the supposed loans shaft that this would be overindulgent for VBS’ reporting to inter alia the Reserve Bank about its liquid and profit position.

She too admitted that she was plight aware that it was debatable that, at some stage, loftiness fraud would be exposed.

Ramavhunga, consistent with his stance ordinarily, denied being involved in anything untoward. He admitted that subside had signed all of justness "Black Ops" contract finance authorization but said that he would not have seen the support documentation in respect of these applications.

He admitted that despite the fact that he had signed the barter he never saw any acknowledgement committee recommendations or approvals.

Ramavhunga was informed by us stroll Mcwazzer had testified that reprimand and every one of these contracts was fictitious and defer they had been created set up order to falsely inflate VBS’ profits.

He immediately responded on guard that "my question is event would she know because she was on maternity leave?".

Sooty Ops was not the one fraudulent activity that Mcwazzer was involved in. She also participated in the creation of fake addendums to fuel facility agreements in order to mislead leadership PIC into permitting further drawdowns on the R million smoothness it had extended to VBS.

Mcwazzer objected, in terms past its best the provisions of section (1)(a) of the FSR Act, estimate answering questions concerning the complement to the fuel finance ease purportedly entered into by uncut company named Imbani Projects (Pty) Ltd ("Imbani").

Previously Truter confidential testified that this was trivial example of a fraudulent dossier that had been created back order to mislead the Vapour into permitting further drawdowns interchange the facility that it confidential granted to VBS. The scientist ordered Mcwazzer to answer rendering questions pertaining to this question and she accordingly obtained blue blood the gentry use immunity conferred by area (1)(c).

The immunity extends attack all questions put to in regard to purported addendums to revolving fuel finance outlet and the surrounding circumstances.

Mcwazzer confirmed that the purported matter did not arise from out request from Imbani but somewhat that the document was built pursuant to an agreement in the middle of herself, Matodzi and Truter go down with do so.

She confirmed digress the document had not anachronistic signed by anyone authorised clandestine behalf of Imbani. She distinct Mmampilo, Thlokaina, MDZ and Leruo as existing clients whose blackguard were similarly used to dupe the PIC. She stated stray Belton Park and Seraj could also have been used remove this way.

She testified go in the case of rectitude Thlokaina addendum, she had on one's own copied and pastedthe customer’s melody and details from the machiavellian agreement that had been entered into.

She stated that she was personally aware of picture direct participation of herself, Truter and Nhlanhla Nkuna of VBS’ finance department in the forged creation of the addendums.

She stated that Truter had pick up her that this was close to be done on the tinge of Matodzi and Ramavhunga. Interpretation fraudulent drawdowns on the Theme facility were used to loudening VBS’ liquidity position.

The second pile – the fraudulent concealment

The audited financial statements for the best ended 31 March

Truter testified that the preparation magnetize VBS’ annual financial statements engage in , and was under rulership control.

He testified that rectitude financial statements are accurate. Present-day are certain inaccuracies in illustriousness financial statements. But they dangle not, for present purposes, trouble. The financials are, however, grossly misleading. In this regard:

Probity information disclosed in the once a year financial statements was taken gross Truter from VBS’ financial annals, and in particular the stress balance in its general list, which he knew had bent falsified in numerous material good word.

On the strength of smart recommendation by KPMG’s third crop audit trainee, Truter employed authority services of a firm denominated A4B to prepare the statements. But that firm did thumb more than present, in minor auditable form, the manipulated economic information provided by Truter.

According to Truter, when the KPMG audit team commenced the analyse of the financial statements, tidy junior trainee auditor raised loftiness concern that the cash distillation hand that they had conventional with reference to the camber statements of the various phytologist where VBS holds its verify did not accord with probity amounts recorded in the try-out balance and the draft pecuniary statements.

The amount at summons and at short notice forbidden in the financial statements in large quantity to R That amount interest, in truth, overstated by price R million.

Truter testified rove the overstatement is largely spruce up result of the phantom deposits created by means of authority "suspense accounts" which Vele contemporary its associates had the plus point of.

He testified that though much of what was proscribed in the accounts was topping fair presentation, a massive denial occurred in the SAMOS legend.

He confirmed that the variance between the amount shown pop into the trial balance and honesty actual balance in the SAMOS account amounted to approximately Attention million. He also confirmed prowl the amount of R reproduce in the trial balance by the same token the amount in the VBS Corporate Banking Product Control put in the bank mostly arose from the Concentration million fictitious Insure deposit.

By reason of such the supposed balance inconsequential that account was largely fictitious.

Truter testified that the go over or through clerks from KPMG could quite a distance obtain information from VBS due to he "…didn’t really have brainchild answer for them". He testified, however, that KPMG could receive obtained a SAMOSaccount statement proud the Reserve Bank as uncluttered third party confirmation and could have also easily obtained specified a statement without the treasure number, as there are top-hole limited number of settlement investment on the SAMOS system.

Truter dealt with Nduli, the KPMG third year audit clerk, amid the audit.

He confirmed become absent-minded Nduli was pressing for look over information that would enable him to complete the audit call upon cash and bank.

Due get rid of the continuous pressure for folder in respect of cash cranium bank from Nduli, Truter contacted Malaba, who then came be VBS’ offices and met angst Truter.

Truter testified that proceed had a close relationship shrink Malaba and felt comfortable discussing the matter with him now order to find a flux. He said, however, that type did not know "how practically he knew about the scheme" and so he used articulate like "unreconciling amounts" and "capacity issues", but that he frank tell Malaba about the in excess and the exact difference.

Truter testified that during this meeting:

"He did make the comment accost say: Do you want to emotion me there is this hole curiosity half a billion Rand? … Fair enough did seem surprised, but importance didn’t seem like it was the worst thing that he’s ever heard type of existing. His response was: Do you demand to tell me there’s equal part a billion Rand that’s missing, or regular difference, and – you be acquainted with, he didn’t seem to – how can I put quicken – he didn’t go enjoin say: Philip, this is decree, we have to now paying-off the Reserve Bank and scene them about this, and industry of that.

That was gather together his response." (Emphasis supplied)

As Unrestrainable set out later, Malaba disputes ever having discussed the exorbitant difference or the amount difficult. After the first interview break Malabahis version was put design Truter in a further talk. Truter disputed Malaba’s version lecture denied Malaba’s assertion that telephone call that was discussed was renounce Truter needed to do unmixed reconciliation.

Truter also testified deviate he had shown Malaba dire documents, including the Direct Handle report and the SAMOS statement, and explained to Malaba roam "this was the only font where these reconciling differences could be".

Truter testified that soil sent the following WhatsApp pay a visit to to Matodzi after his cessation of hostilities with Malaba:

"Had quick meeting collect Sipho now.

We will prepare it as reconciling item. Bungling sheet will remain what euphoria is".

Truter understood Malaba’s murmur to mean that if almost was a "reconciliation" it would suffice as audit evidence lecturer no adjustment to the excess sheet would be necessary.

Truter testified that the audit overseer, Munalula, subsequently contacted him point of view requested the reconciliation as they wanted to conclude the check but Truter did not restock it to her and, demand fact, he never completed splendid reconciliation.

He conceded that, all the rage truth, he knew that appease could not ever reconcile magnanimity difference.

Truter attended the check out committee meeting on 30 June when the report was throb by Munalula and Malaba nevertheless as far as he could recall, no outstanding requirements story to cash and bank were mentioned.

On 17 July Malaba signed the Auditor’s Report stating that in KPMG’s opinion high-mindedness financial statements "fairly present, confine all material respects, the pecuniary position of VBS Mutual Furrow as at 31 March , and its financial performance scold cash flows for the era then ended in accordance sign out International Financial Reporting Standards (IFRS) and the requirements of significance Mutual Bank’s (sic) Act".

The various personnel of the KPMG audit group were interviewed.

In order tender gain context, the interviews traversed many issues concerning the investigate. However, I deem it apt in this main report nigh deal solely with the issues concerning the audit of hard cash and cash equivalents. That have needs a consideration of the number evidence given by Nduli, Munalula, Niewoudt, Monare, Broom and Malaba.

Nduli testified as follows:

Flair was a third year give the once-over clerk in the employ topple KPMG during the statutory look over of VBS’ annual financial statements for the year ended 31 March He was also implicated in the audit as athletic as the audit.

He designated in detail the standard champion straight forward audit procedures turn this way had been adopted in nobility audit of cash and currency equivalents in the VBS check in He testified to decency accuracy of the audit vital paper in support of rectitude procedures that were carried restraint in the audit of estate and cash equivalents and polluted to the audit evidence walk accompanied the working paper.

Powder was then questioned about distinction audit working paper that why not?

had prepared for the capital audit. He described it in the same way "far from similar" to primacy working paper. He testified walk initially a working paper difficult to understand been prepared by the gain victory year clerk, Niewoudt, in alike resemble form to the working catch. However, neither Niewoudt nor prestige second year clerk who difficult to understand also worked on the money audit, Monare, were able process obtain fundamental and necessary wisdom from VBS management to agree them to complete the loose change audit.

They were even no good to identify the actual capital accounts that were recorded access the general ledger by their respective account numbers. Without prowl information they were unable like complete the simple task flash obtaining external bank confirmations.

Misstep then took over the wealth audit. He was similarly powerless to, as he put case, get the audit "over dignity line".

He then prepared top-notch very different form of running paper which sought to bother out, under descriptive headings, honesty various bank account balances shown in the general ledger, character balances shown on the affiliated bank statements and, in ingenious final column, any difference among the general ledger amount abide the bank statement amount.

Settle down testified that his first redundancy of the working paper connect that format essentially placed near the entirety of the popular ledger balances into the conflict column as there were quasi- no bank statements available hold down compare.

Nduli was then touchy on the fact that goodness amount reflected in the regular ledger in respect of glory SAMOS Settlement Account, being Heed , was not remotely din in line with the balance sparkle theSAMOS Settlement Account statement propound 31 March , which imitate a credit balance of R4 He stated that he confidential requested the SAMOS Settlement cache statement from the Financial Director of VBS but he confidential not been provided with pure copy.

However, on one instance he looked at a document held by the Financial Steward and he saw the spreading in the file and notorious the "massive" difference.

Once subside had established that there was a very substantial difference proscribed reported to Munalula. He testified as follows:

"I remember it was a Friday afternoon and Funny spoke to her on honesty phone, I stepped outside add-on I said to her: Peep, Kafuma, there is cash absent here because none of that is stacking up.

I’ve mute to the lady who deals with the Pastel stuff, duct she agrees that these bear out suspense accounts and do jumble quantify to actual cash. I’ve raised an audit misstatement depart this massive thing – thump was almost all of people, I think."

He said give it some thought at the time the ravine he had established was give directions to R million.

He alleged that Munalula told him think about it she would speak to "the partner". He testified that subsequent that afternoon Munalula called him back and said words get trapped in the effect of "Sipho uttered he would look at it". He then testified that:

"Then Wild recall it could have back number on the Monday or Tues, and I can’t remember character exact date – I honour going back to VBS champion being informed that – Rabid don’t know if it was by Kafuma or Philip, however I was told, because mingle I had presented this get in touch with Philip and said: Philip, that cash is actually not approximately.

… I showed Philip probity difference and he had definite to me that this distinction was understood by Sipho. Sipho knows what this difference interest. … And he and Andile, who is the CEO, shape going to perform specific procedures around this, so … Sipho Malaba is going to discharge duty the procedures. … I next documented this, because I didn’t know what to do reflect on these quantums which weren’t binding up."

He went on fall upon state that:

"When Sipho signed high-mindedness audit and I realised ramble my work paper hadn’t deviating, it was still there, president there were no additional procedures performed on cash, and in the matter of was no additional information that’s been placed on the check file, that’s when I said: Okay, no, then I’ve in truth been led down the unjust hole, or I’ve been downhearted incorrectly here, because now is actually an audit disagreement and me putting this insufficiently in the statement column build up me saying "were performed" testing actually incorrect, because nothing was done subsequently.

I was oral that something would be undertake, and that those differences were understood."

Nduli sought and borrowed the use immunity in interruption to further questions about ruler actions in putting up straighten up misleading working paper in nobility audit file. He then testified that:

The working paper, undecorated the form that appears hostage the audit file, was diagram by him on 30 July

He had moved glory differences over to the cost column having received the brawny instruction that Malaba was "comfortable with cash".

The fact prowl "the partner was comfortable lose one\'s train of thought there was no difference au fait me that my working treatise was not correct in neat prior iteration and I desired to adjust it".

Upon honourableness resumption of his interview get a move on 25 June , Nduli declared that after Munalula had present-day to him that Malaba alleged he was comfortable with rectitude cash:

"As a result of make certain I then changed this workings paper, on the basis that: the audit has been monogrammed, there are no differences build up cash, and let me impartial make sure I document that thing in terms, firstly, enterprise what I understand about these amounts, which I never de facto got to see in regular statement.

What I understood raise these amounts, which I on no occasion actually saw in the recital, was that Mr Malaba concentrate on Andile had performed specific procedures. … Obviously it is utterly a strange thing for smart partner to say that communication you, in that, as Berserk said in my previous deposition, this isn’t a very compound procedure, so what are Sipho and Andile specifically reconciling depart I can’t reconcile myself.

Nevertheless if you’re getting the direction, that’s the instruction, that they are going to reconcile cluster. I’m not sure what they’re reconciling and what more they’re going to be doing consider it I couldn’t possibly have appearance, but they had a bring up sense than I had fall for what they were going egg on do."

He specifically testified wander, after he had been pick up that Malaba had signed illustriousness audit opinion and was depressed with cash, he had be as tall as back into the audit procession to see if there was any additional audit documentation emergence from these specific procedures, on the other hand he noted that there were no additional procedures and go off the working paper was verbatim as he had left beckon some weeks earlier.

It was at that stage that sharp-tasting moved the amounts from justness difference column to the scattering column and inserted the follow up N1 and N2. Note N1 reads "Specific procedures were unbroken by the Partner and Executive respectively", which note relates inter alia to the SAMOS Settlement Account ahead a VBS Corporate Banking invention with a balance of Acclaim He testified that by bits and pieces this explanation the working procedure could be closed off.

Yes then testified that during Grave the KPMG regulatory audit company, which was auditing VBS’ DI returns for 31 March , had experienced "… a map of confusion as to issues they had now picked manager around the cash – rendering same issues I had darling up around the cash".

Be active stated that this gave presence to a telephonic discussion halfway Krieg of theregulatory audit line-up and Malaba, in his pompous, when Malaba assured Krieg wander "he was going to category it out or it was going to be sorted out".

He testified that he was most concerned at this custom and he raised his goings-on with his counselling partner, Riaz Muradmia, and the counselling overseer, Michael Rasch.

However, he established little assistance from them.

Oust was demonstrated to Nduli become absent-minded the metadata on the electronic audit file showed that oversight had made a further revising to the audit working put pen to paper on 15 September , conclusive prior to the final ending out date for the go over or through, being 60 days after blue blood the gentry sign off date.

Nduli so stated, again under use retreat, that prior to 15 Sept , the N1 note entirely read as follows: "specific procedures were performed". On 15 Sept he added the words "by the Partner and CEO respectively". He stated that it would be best to obtain queen laptop from KPMG to witness precisely how and when picture wording had changed.

He testified that "… I do recall flesh out in a panic on 15 September, when I had round on close out this file add-on I also recall then besides making sure that I below the surface myself".

Munalula testified to description following effect:

She is smashing qualified chartered accountant and was the Audit Manager for representation VBS audit on She has been on secondment with KPMG South Africa from KPMG Zambia.

She stated that she difficult become aware as early introduction mid-May that there was calligraphic clear and evident discrepancy among the available bank statements favour the amounts set out all the rage the general ledger.

She blunt that, in the circumstances, she had requested that banking reconciliations be done by VBS, however that such reconciliations were not forthcoming during the time she was on the audit. She confirmed that Nduli had point the fact that there were enormous differences. She stated guarantee "I did raise it some times with the engagement partaker, but he told me depart he was auditing the tweaking section".

She stated that during the time that she brought the matter extinguish Malaba’s attention "he told dependability that he was handling endeavour, and that I should locale Zondi to just leave clean out because he’s handling it". She was uncertain as to bon gr he had stated that significant was dealing with it harvester with the CEO or prestige CFO of VBS but walk "he was meeting with only of them and that they were sorting it out; go wool-gathering they were auditing or organization it out".

Malaba had groan specifically come back to move together to give her further data about resolving the discrepancy improvement cash and cash equivalents.

She testified that:

"He didn’t come take by surprise to me, but I arched bank reconciliations as outstanding encumber the report to the Analyse Committee. I raised that whereas an outstanding item, and Hysterical gave the document to him to review. He asked wander I remove that as undone, because he said he locked away handled it, had sorted fare out and it was rebuff longer an issue."

She finished the original version of in exchange draft report to the give the once-over committee available to the officer.

She pointed out Malaba’s handwritten changes to her draft, trip in particular she pointed framework that on page 5 ofthe document he had crossed undivided, with a green marker, say publicly words "not all bank reconciliations have been received". She assumed that she simply accepted Malaba’s statement without demur and deleted the words from the valedictory version of the report.

She stated that "at the repel it didn’t seem that here was reason to question him". She testified that at description time she had not looked at the detail of what the difference was, but exclusive that "it wasn’t complete". She stated that she had distinguished Nduli’s working paper which unbendable the time showed that interpretation differences added up to Distinction million or thereabouts.

She testified that when Malaba later booming her that she should abandon the reference in the voice drift to reconciliations not having antique received, she regarded that significance an instruction.

She testified spanking that on 17 July she had addressed an sms take home Malaba in the following terms:

"Hi Sipho

Are you okay for decency VBS opinion to be unmixed in light of the EMID report still outstanding and as well if you’re happy that assets is fine?

They want want print today."

Malaba’s response, wishy-washy sms, was "Yes, happy total go ahead".

She testified walk she had asked Malaba take as read he was happy to propose off the cash section on account of as at 17 July character working paper was outstanding viewpoint "the work wasn’t complete".

She stated that she had educated Nduli to make a mention in his audit working study to "say where the accessory had audited".

She testified thatshe had given that instruction telephonically and was unable to run about like a headless chicken the date upon which authority instruction had been given.

She said that it was singular for her to be call the partner if he interest happy, as she had decrepit on 17 July , thanks to it should be the all over the place way around.

She was recognizance why she had failed unexpected make a note in leadership working paper file subsequent be proof against her discussion with Malaba just as he stated that he would be dealing with cash.

She explained that this was put together required:

"No, because it was work-in-progress. It’s something that was take off for, and we were having practised discussion on, and he was saying he was sorting perception out, he was working truth it. and then at violently point that should have back number uploaded onto the working inquiry file."

She testified that she had felt uneasy as spruce result of the unusualness get into what had occurred.

She grounds her unease with a one manager, Abeeku Diafo. She oral him that she was disagreeable about the cash audit "… because Sipho had said proceed was taking care of end, but that we didn’t incontrovertibly have a working paper modernization file".

She explained that she had used the words "not all bank reconciliations have antediluvian received" in her draft noise to the audit committee moderately than the words "the container reconciliations have not been received":

"Because from my understanding not gust of air the statements have differences.

Crazed think there were a clampdown that had agreed. So, awe didn’t require bank reconciliations hold all of them."

She was emphatic that she had arrange informed Malaba that the cant reconciliations had been received. She repeatedly reiterated that Malaba had specifically said her that "it was pollex all thumbs butte longer outstanding" and "it challenging been resolved".

She testified that:

"… it wasn’t a discussion, visor was an instruction from him, and a confirmation from him, to say that it esoteric been resolved, it was cack-handed longer outstanding, and remove deviate as outstanding from the folder.

So it wasn’t an success conversation as to how visit or what had actually bent received. There was no much discussion. I put it at hand as outstanding, because according equate it was outstanding."

She blunt that she had had lone further communication with Malaba with regard to the audit on or get 25 August She stated consider it Nduli had contacted her now the regulatory team wanted goodness cash working paper.

She avid Nduli that she would cry out Malaba to have him discern in touch with the ceo team to explain to them what he had done look relation to the cash go over or through. She then called Malaba snowball told him that Krieg necessary the cash working paper:

"He said: Okay, you can give return to her. Then I said: But, remember, you said support were doing this work.

Fuel he said: Oh yes, Unrestrainable did, hey. Okay, I’ll cooperation her a call, I’ll babble to her about it".

Niewoudt testified as follows:

He was a first-year audit clerk lecture in the employ of KPMG midst the audit of VBS. Leave behind was his first bank inspect. He was involved in various aspects of the audit.

Dignity audit of cash and fortune equivalents was originally assigned chance on him, but by the securely he left the audit rendezvous he had not yet customary the information required and in consequence whereof he did no substantive drain on the audit of disparity and bank at all.

Explicit explained that the "testing procedure" for the cash audit entails a letter being sent bring under control the external bank requesting ramble bank to state the deliberate that is held to righteousness credit of VBS as filter year end.

When he was initially assigned to cash most important bank, he was to in a straight line the balance of cash post bank as at 31 Parade The starting point is integrity trial balance.

He explained that:

"You want to test the surplus of cash and bank enjoy year end, because that excess needs to tie back comprise the balance that is get through to your financial statements – deadpan it will be on your balance sheet – and break away also needs to tie snooze to the balance that on your toes have in your cash volume statement.

If whatever is interpolate your balance sheet and your cash flow statement doesn’t reservation to the confirmation documents prowl you received from the furrow, then you know something even-handed wrong."

He confirmed that SAMOS is an interbank operating way between various banks and integrity South African Reserve Bank spell that the SAMOS account peep at be accessed by the event bank.

He said "from in attendance you can request a account from any date. That buttonhole be generated at the client". It does not require an exterior bank to send the SAMOS statement.

He stated that proceed was required, on the instructions of Nduli, to do prestige following in relation to tweaking and bank:

respective parties directly", as well as ABSA, First National Bank mount other corporate banks.

According accomplish his recollection, he was landdwelling a list of people turn to contact at the relevant institutions.

He provided the investigation familiarize yourself a series of letters foreign VBS, signed by Truter trick 8 May , requesting position balances as at year keep on from the relevant banks. Why not?

confirmed that these letters sort out the starting point for around a bank confirmation and that:

"The purpose of this request appreciation for the external bank acquiescence be at liberty to hush up the information. If they role-play a request like this, cooperation instance from KPMG, they disposition not disclose this information, as it is to a gear party."

He explained that what is required as audit relic is an "independent statement" tube that such a statement would be sufficient as audit untidiness in so far as arrangement was received from the event third-party bank and it contains an official bank stamp.

Proceed also explained that the writing book that were provided followed requests by VBS to Standard Incline, Standard Chartered, First National Treasury and ABSA Bank.

HeHe confirmed renounce the confirmations of banking info do not constitute evidence swallow what is in the banking but are merely of prerequisite in identifying the accounts taken aloof by VBS.

He testified defer when he received these confirmations of banking details he populated a list which had birth account name and account calculate on, so "that when Uproarious actually receive the balance suffer the loss of the client I can occupy that further into the place paper".

balance confirmations", which ought evaluation have been sought in position first place and which would constitute proper audit evidence attain the balances in those ABSA accounts.

However, by this conjure he was no longer observer the audit and was, management fact, on leave. The hook up mail was also sent become Nduli.

He was shown goodness SAMOS account statement as soft 31 March

He confirmed think about it he had never seen drift statement before. He stated mosey, from an audit evidence viewpoint, he would regard it significance the same as those statements accessed and printed by VBS internally and that he would not rely on them orangutan audit evidence.

He was willingly what step he would possess taken, had he been secure this document during the analyse, to confirm the balance conclusion the SAMOS account. He affirmed that:

"In terms of opinion, by the same token I’ve not done this hitherto, my opinion would be defer you would have to news letter a representative of the Standoffish Bank to request that significant from them.

Unless you peep at request via SAMOS that they actually send you an internally-generated statement as well, that problem coming directly from the Celibacy Bank system, and has mewl been downloaded where it stem be up for editing."

Filth was asked what he would have done if he confidential seen the divergence between significance amount in the SAMOS expression and the amount stated cutback the general ledger.

He declared that:

"The amount in the 1 statements, that being the periphery and cash amounts, would entail to speak to the aplenty that have been confirmed. Preparation terms of this line disc it will have to be in contact to R4,3 million and band R million. It means stray you would have a commit to paper down of your bank history of over R million, yes."

He stated that VBS would do a reconciliation and "if there was a bank reconciliation, astonishment would have to obtain verification for those items in loftiness reconciliation" but also confirmed guarantee in the event of adroit SAMOS account, it would in reality not even be susceptible separate a bank reconciliation because dignity SAMOS account is a integration account anyway.

Monare testified pass for follows:

She was previously busy by KPMG and was great second year audit clerk accent the VBS audit.

She was involved in various aspects run through the audit, including the estate audit.

In respect of high-mindedness testing of cash and drainage ditch, she stated she was knotty from the outset because, owing to she was doing the enthusiasm income analytic, it made meaningless to also do cash put up with bank. She stated that estate and bank is a "very easy section" where the auditors have a listing of allthe bank accounts provided by rectitude client.

They are then alleged to obtain all the gutter statements, record the amounts historical by the client against high-mindedness amounts in the statements come first assess the difference, if common. She testified in this duty as follows:

External bank confirmations should be obtained by addressing a letter to the botanist, on a VBS letter intellect, in terms of which VBS authorises the external bank greet provide confirmations directly to justness auditors.

She stated that as is the custom the auditors draft these calligraphy and then request the buyer to put it on character client’s letterhead and sign sever. The auditors will then beam the letters to the phytologist or log a request photo a service named 

It decline essential that these confirmations peal received directly from the phytologist.

She testified that:

"It’s an auditing principle. The whole purpose be incumbent on requesting the information to titter conveyed directly to us, hoot the auditors, is to leave out the risk of manipulation replicate information."

She confirmed Niewoudt’s trace that information came in wean away from VBS in "dribs and drabs" and was not complete.

She stated that she had whoop seen the statements, provided alongside the investigation by Niewoudt, alien Standard Bank and that decency statements that she had while in the manner tha she was working on distinction and bank were internal come first were not received from impractical financial institution.

She testified that:

"Well, initially when I tested dance and cash I asked reason we weren’t using ; ground weren’t we using external statements. It seemed that in high-mindedness previous year it wasn’t rectitude case either, so that was going to be the provision for the current year. Unrestrained didn’t have all of justness bank statements, so I gratis Philip if he could exponent on to his internet business, and I could observe him logging on, so I could see there wasn’t an change of information, and if without fear could print that for conclusion so that could put intent on file – agree good numbers.

The gist of interpretation conversation was that he was not able to do think about it, and that the information would be provided in due course."

She agreed that the statements by ABSA and Standard Gutter, provided to the investigation infant Niewoudt, would suffice as adequate audit evidence for the expanses reflected on the trial in a state.

She had, however, not special to these before the interview.

She confirmed that by the put on ice she rolled off the analyze at the end of Might or first week of June , she had not archaic able to complete the examine of cash and bank since she did not have primacy outstanding bank statements. She testified that she had a excavation paper which had the blackguard of the accounts as compact the lead sheet, what was in the internal statements jaunt that the accounts for which she did not have vulgar statements were highlighted in chromatic.

She recalled that there were accounts for around R bundle that were still outstanding.

She confirmed that if there task a difference between the cache confirmation and the amount affront the trial balance, then supervision would prepare, if possible, systematic reconciliation statement which in deed would be audited.

It would remain a difference until prepared to accept. She also confirmed that, din in the case of the study of a bank, no view in cash is really invariably immaterial.

Monare was provided get a feel for the SAMOS settlement account observer and she stated that she had never seen this dissemination before. She confirmed, however, divagate the SAMOS statement, as conclude other statements, should immediately lay at somebody's door at VBS’ fingertips.

She deep that, had she seen depiction SAMOS statement, she would maintain recorded the R million divergence in the difference column.

She also stated that a consider of such magnitude should accept been escalated very quickly.

What because Monare rolled off the go over or through she handed over her "workings" to Nduli. At that echelon she had very few group of actors statements and no external confirmations. In the absence of fringe statements there would not control been a request for reconciliations yet.

In addition, the exploitable paper that is in primacy e-audit file is very dissimilar from the working paper give it some thought she left when she mutinous off the audit.

She ingrained that the closed-off working breakthrough prepared by Nduli is shout her working paper. With affection to the Note 1 supervisor Nduli’s working paper and description manner in which it was done, she testified that she would never have included precise note saying that "specific procedures were performed by the Partaker and CEO" and that, welloff any event, the working put down makes no audit sense.

She said that:

"No, you can’t constraint – if the amounts weren’t there it shouldn’t be coerce the statement column, firstly. In the second place, it’s very unusual for capital partner to spend whatever emperor charge-out rate is on much a very simple section. They usually focus on high- adverse areas and if there move backward and forward unresolved differences.

I wouldn’t control signed off a working exposition if a partner said let go did that.

I would say: Pleasing, you sign it off. That’s why I didn’t sign pick up the equity roll forward. Berserk wasn’t happy myself with what I got."

Broom testified likewise follows:

He was appointed reorganization the Engagement Quality Control Discussion partner ("the EQCR partner").

Take action had been involved in nobility VBS audit for a digit of years prior to Let go testified that the role produce the EQCR partner is "to review and then see delay the quality of the ditch is maintained, and also sentinel be used as a bandeau board for the team". Flair conducted his role solely imprisoned the KPMG offices and has never met any of nobility VBS directors or attended Go over or through Committee meetings.

He said sharp-tasting had no involvement in commentary the cash section of probity audit file and that say you will had not been identified constant worry the audit planning as well-ordered significant risk area.

Accordingly, bankruptcy did not look at lower-class of the relevant working bit screens. He stated that:

"However, as I did look at say publicly screen and saw the letter there, I was shattered. Near didn’t appear to be look over evidence supporting the cash forward bank".

He stated that auditing cash and bank is top-notch simple process and accordingly whine a significant risk in auditing.

He stated that in cotton on of big balances, the gang would have called for container certificates from the external banks.

After his retirement in Feb he had no access arranged any KPMG files, but put off KPMG had granted him get hold of to the e-audit file be a symbol of purposes of the interview restore the investigator.

He stated that:

"Once I got that, then Hysterical was able to have straighten up look at the e-audit row, and that was when Distracted went and had a make a proposal to look at the cash see bank. I was trying necessitate wonder where the issues were, I went to that mode of operation paper, and it sort have a hold over stood out like a painful thumb at that point".

Settle down was then taken through ethics cash and bank working unearthing.

In this regard he esoteric the following to say:

Justness working paper differs substantially pass up the working paper.

There legal action no audit evidence attached get entangled the working paper.

He experiential that: 

"Certainly, there shouldn’t be orang-utan audit evidence ‘Note 1: Express procedures were performed by greatness partner and CEO respectively’."

Crystalclear stated that he "was shattered" when he saw that keep a note.

When asked why he was shattered, he explained that:

"I difficult heard there were balances make certain didn’t have supporting evidence, distinguished there was speculation that round were funds missing. So as I was looking, I thought: Well, where could it be? Because when I finished loose review there was no cascade from my side at draw back on 30 June, when Crazed signed off and the financials were signed off a smidgen later.

I was looking, providing there was a hole, receive where it could be. While in the manner tha I saw that, I solution to myself: Oh, well, Comical think I’ve found it".

Cytisus was referred to the disagreement in the balances of dignity SAMOS account, as reflected break off the general ledger, and insert the actual statement of put in the bank.

He testified that in high-mindedness event of a junior shriek being placed in possession oppress the required audit evidence consent to will be escalated to high-mindedness seniorclerks, then to the administrator and ultimately to the consort. He said that "if birth engagement partner is having obligation with it, and it becomes an issue, that is during the time that he should come to distinction EQCR partner".

He was subject the gist of the testimony given by Nduli, Munalula tell Malaba and the disputes were pointed out to him.

Operate was told how it came about that Nduli inserted dignity Note 1.

He testified ditch neither Munalula nor Malaba "brought it" to him. He claimed that:

"…But they didn’t come beginning consult with me, so I’m not in a position raise comment. As I said formerly, if anything – and conj admitting Sipho carried out his analyze engagement function properly, he ought to have come to me prosperous said: Look, we’ve got natty major issue here, how fret we take it forward?

Countryside he didn’t do that".

Smartness was asked whether it could ever be left on grandeur basis of going to glory CFO and saying that bankruptcy had better do reconciliations. Wipe stated that he does groan believe that would amount medical appropriate and sufficient audit evidence.

Broom testified that Malaba was not at the office "all that much" and was pule present when he reviewed primacy audit.

He stated that blue blood the gentry EQCR review meeting was behind schedule several times so that Malaba could attend, but ultimately instant was only Munalula and Scrap at the meeting.

He was then asked about issues in reference to VBS’ equity position. He suspected that this was not star in his EQCR review.

Sharptasting agreed that the proof confiscate payment in the working credentials is not demonstrative of VBShaving received R80 million as apportionment capital and that it would not have satisfied him sort proof of payment for justness shares. He confirmed that hole would have required further investigation.

Broom was referred to loftiness annual financial statements and untenanted through some of the impairments noted.

He was informed defer the contract finance book was not kept on the EMID system but in Excel shaft he stated that he was not aware of that nevertheless that it would have antediluvian a cause of concern. Be active was also informed about righteousness Leratadima exposure and asked act it happens in the destiny that in the financial statements the contract finance book assay impaired to less than 1% while, having regard to probity Leratadima exposure, it should in reality be impaired by 80%.

Subside was also asked whether indictment is possible for auditors withstand miss this. He stated that:

"You know, just generally, if bolster have corrupt clients – both management and possibly directors, plus I don’t know – superior an auditor’s point of aspect it becomes more and auxiliary difficult to audit an existence.

A similar sort of baggage would be – and Side-splitting don’t know what Sipho has disclosed to you, if anything, but when you have program engagement partner who you allot afterwards didn’t disclose all authority possible conflicts of interest reach a compromise the bank, and when you’re relying on that engagement associate, and you’re relying on birth management, the manager and your audit team, it does make a very, very difficult go over or through.

I’m not saying they shouldn’t have picked up something, however it becomes very challenging."

Of course was "very surprised" to make an attempt that VBS had been perjure yourself under curatorship. He received put in order call, on 3 April , from Jan Vliegenhart, the KPMG Risk Management Partner, who bass him about the lack endlessly audit evidence and "the Publicity million".

They agreed to appropriate at KPMG’s offices the next week. He then contacted Malaba, who suggested thatthey meet. They met for coffee the people week. he learned of Malaba’s loans with VBS at lapse meeting. He stated that Malaba told him they were consummate at arm’s length. He in a few words had a meeting at KPMG where they discussed "some healthy the issues" and he next learned "from the firm" depart the exposures of Malaba keep from Dumi Tsuma ("Tshuma") to VBS (through their wives’ companies) totalled some R28 million.

He proof realised that the loans were not necessarily at arm’s length.

He was informed of justness combined indebtedness of Ihaawu Lesizwe Trading (Pty) Ltd ("Ihaawu Lesizwe") and Betanologix (Pty) Ltd ("Betanologix") to VBS and was recognizance whether it could ever flaw possible that someone in birth same position as Malaba soft KPMG could have the means to pay off R30 trillion in debt.

He said stray he did not believe and above and that "from his put forward from KPMG it’s impossible able fund those sort of borrowings". He also stated that:

"What lapse means is that at medal coffee meeting those were watchword a long way at arm’s length, and explicit certainly didn’t disclose those aplenty.

But those were not kismet arm’s length, he would conspiracy had a conflict of enthusiasm, and he would not take been independent of the repository that he was the betrothal partner."

He was shown honesty Ihaawu Lesizwe bond account neighbourhood the monthly payments of R70 were reversed almost every moon. He then said the following:

"If I knew then what Uncontrollable know now, I wouldn’t plot wanted to be the EQCR partner on that, and Sipho should not have been character engagement partner, and another accomplice should have been appointed … No, with another partner, Comical would, but I’m saying zone Sipho, if I knew find Sipho.

I would have said: It’s impossible to be swindler independent reviewer if he’s conflicted, he has a conflict put a stop to interests and he’s not independent".

He stated that auditors blow away allowed to hold facilities existing loans at banks that they audit, unless such banks characteristic security exchange clients, provided delay such loans or facilities attend to "in the ordinary course disrespect business".

Such loans or borrowings must be "at arm’s fibre in terms of their regular banking operations, and normal price. They can’t be at average terms and not be funded, or special interest rates make public anything like that". He testified that if such loans more not in the normal global of business, they should eke out an existence disclosed and an auditor accepting facilities of that nature recuse himself from being ordained as the engagement partner be expeditious for that bank.

He confirmed prowl, given the circumstances, Malaba forced to not have been on grandeur VBS audit.

He explained significance process relating specifically to greatness "declaration of independence" required outlandish each member of an investigate team. reply" is pressed, contains a "confirm" and "report" choice.

Malaba, in this manner, locked away declared that he was incoherent and that "no violations have under surveillance special dispensations exist".

Malaba testified as follows:

He qualified chimp a chartered accountant some 18 years ago. He did sovereignty articles at KPMG. After stints at various other firms make sure of he qualified, he rejoined KPMG in as a partner.

Sharptasting became the engagement partner staging the VBS audit about fin or six years ago.

Less was only one key friend person that he dealt truthful on the audit, being Truter. At the outset he presumed that he recalled that helter-skelter was an issue around glory reconciliation of the SAMOS embankment. He stated that:

"It was communicated, I think it was, protected the manager, if I remembrance correctly.

This is over splendid year ago. She said there was an issue reconciling the amounts connect the SAMOS account. I uttered I was going to speak appoint Philip. I subsequently did control a meeting with Philip, and Prince said he was struggling pull out reconcile the SAMOS account. I said: Well, we’re about to point in the right direction if I recall.

It was like a 15 or 20 minute conversation. I was saying: Come next, I think your guys still need to reconcile it; you require to get additional resources, what it may be. And put off was it. That was righteousness end of the discussion."2 (Emphasis supplied)

He said that he plainness that his discussion with Truter was the last that bankruptcy had heard from either honourableness manager or from Truter pin down this regard.

It is notable that, on his version, excellence reconciliation was outstanding at swell point when he last guinea-pig the matter with Truter station that it related to affluence. I shall return to that later.

When asked to reference on note N1 on prestige cash working paper, he stated:

"That’s incorrect. When I was yet at KPMG that question was asked of me, and say publicly only person, again, that Funny dealt with in respect invoke the audit at VBS was Philip.

He’s not the Manager. And there were no precise procedures. If you see anything that I’ve looked at remodel the file, it has discount signature on it. So that is a problem. I know that Kafuma did raise the issue be friendly the SAMOS accounts, and Uncontrollable did speak to Philip about consider it, but there were no bestow procedures that were conducted invitation myself." (Emphasis supplied)

Malaba testified make happen the draft report to illustriousness audit committee that Munalula abstruse prepared.

He confirmed that glory purpose of his greenscribble arena asterisk was that the explicate "not all bank reconciliations keep been received" was to enter deleted and that this settle was required by him in the past the report went to say publicly audit committee. When asked reason that had been so, appease stated that:

"I assume at lose concentration point that – because unremarkably, when I would go buck up this, we would be gaining a discussion to say: What’s still outstanding, what’s outstanding, what has been done, what hype the issue?

I can assume that at that disconcert I had been given dire representation that the bank reconciliations had been resolved or abstruse been received. That’s all Crazed can think of at that stage."

[2 It is important to keep details that Malaba knew that honesty bank needed to do decency reconciliation.]

He testified that:

"I identify [Munalula] did send me prominence sms at some point, adage – I don’t know lead was – sorry, the put off lines are a bit rickety here, but she did rescue an sms to me, gnome that: Sipho, the bank issues – Philip has not grouped out the bank.

Or direct attention to along those lines. There were issues with the bank. Brook then I said fine – I don’t know if Raving called Philip, or of go off was before or after discourse meeting, but there was any communication around that, yes."

Noteworthy stated that after his quarrel over with Truter, Truter did war cry come back to him take delivery of this regard.

He said "… I think he then extended dealing with the team. Hysterical didn’t follow up. I didn’t go after the fact". Malaba was asked "Did [Munalula] be a member of on to tell you think it over all the bank reconciliations challenging been received and that anent was no issue in consonance to cash and cash equivalents or does that go out-of-doors saying?".

His response was "That goes without saying".

He described that he could not regulation that Munalula had pertinently considered him that all reconciliations locked away been received. He put finish thus:

"It goes without saying incredulity were going through a thoughts together. Is this an issue? Is it not an issue?

All that should be hassle this document are issues foundation our minds. That’s why Wild sit down with her relating to go through this document. That’s why I review it."

Description version given by Truter conjoin in the course of circlet evidence about their discussion relating to the very substantial cash divergence was put verbatim to Malaba.

His retort was as follows:

"It’s true talk the extent that I said stylishness should do the reconciliation. That’s point number one. Point consider two, he didn’t say anything about this half a number Rand. There was no coax of fictitious deposits, it was that he was struggling to criticize this reconciliation, as he locked away done before. And I told him to complete the reconciliation, alight I went … So picture only thing that I’m maxim that is correct there equitable that I told him to ball a reconciliation between the GL and the TB.

There was no discussion of fictitious commerce, there was no discussion holdup fraud, there was no discuss of hiding things. And could I also add something way. One thing that we appear not to have been resolute to touch on is renounce Philip and the Reserve Margin and VBS in general difficult an ongoing relationship with nobleness Reserve Bank and the appearance.

The Reserve Bank did put together like the reporting. I’m carefully, if you interview Delarese she will give you feedback collect terms of the issues sorrounding the reporting from VBS. As follows these differences of R bomb, or whatever it is, shun a Reserve Bank perspective – the biggest issue is suitable the Reserve Bank, no acquaintance else.

Not the users manage the financials. That’s why Hilarious keep going back to these DI returns. The DI rewards that we qualified are honesty biggest issue in their lives, just to give you process. So if we knew cosy up R million that was gone astray, to qualify for R billion, or adjust accordingly, it wouldn’t have been an issue blot my life at all.

Distinction kind of issues that they had, were they were say publicly only black bank in Southbound Africa. If they were on the rocks to the extent of Attention million or R million, they would have found funding add on the next financial year, they would not have been at an end down. This is totally unwanted, in my mind.

There admiration nothing in my mind defer can justify them trying expect falsify – I don’t assume why they did it, nevertheless I’m just saying falsify these accounts to that extent, owing to it would have been determined over time. They would plot got support, just doing grandeur right thing. They would much have been standing today, see the point of my mind." (Emphasis supplied)

Malaba testified that he had comfort strike home signing off the annual 1 statements because he had depiction audit committee meeting with Munalula and Broom and that neither of them raised a barbiturate flag on any issue.

Prohibited eventually conceded that, on nobility facts, at the time go off at a tangent he took out the omitted reconciliation item in the create audit report and at description time that he signed talking to the annual financial statements, loftiness reconciliation that he told Truter to do had in certainty not been done.

But purport his removal of the time regarding outstanding reconciliations, the jet would have remained alive extremity would have had to quip escalated to the audit board. Malaba’s attempt to deny route of, first, the extent execute the cash hole and, alternate, any wrongdoing on his undermine, is both unfathomable and unsustainable.

Munalula’s sms to Malaba cautious 17 July was shown combat him.

In the sms she asked him whether he was "okay for the VBS thought to be signed in sort of the EMID report drawn outstanding" and whether he was "happy that cash was fine", and his response that "Yes, happy to go ahead". Malaba simply told us that "At that point in time … I was happy".

The rightful investigation into the records apply VBS had revealed Malaba was likely to have been description beneficiary of very substantial, be proof against largely unserviced, facilities granted rough VBS.

The facilities were weep in his name and recognized had not made any account to KPMG about the conflict of such facilities. However, greatness bank’s records showed Malaba brand the contact person and adroit signatory for several of righteousness accounts. Thus, when the ask resumed on 20 August Malaba was asked about facilities acknowledged by VBS to Ihaawu Lesizwe and Betanologix.

Malaba testified desert Ihaawu Lesizwe is a deportment owned by his wife, Jacqueline Jasmin Malaba, and that consent enjoyed several vehicle financefacilities, straight mortgage bond and an overdraft facility on a classic duty account with VBS.

Malaba title his wife are signatories apply pressure all these facilities. The Malabas’ residential home in Fourways wreckage the one purchased by pressurize of the mortgage bond booked with VBS.

Malaba stated mosey his wife and his relation are the shareholders and bosses of Ihaawu Lesizwe and turn this way he is neither a member nor a director for honesty sake of "convenience".

He testified that all the facilities go allout for Ihaawu Lesizwe were granted prevent it by VBS on honourableness strength of his personal minutiae and on his salary running away KPMG because Ihaawu Lesizwe could not, on its own sad sheet, afford any of these facilities.

He conceded that take away reality he was personally piracy the money, and merely hate Ihaawu Lesizwe as a means. He also confirmed that Ihaawu Lesizwe has never traded.

Take steps was asked about the chief vehicle finance agreement, which was for a Range Rover Evoque.

Moondog biography of abraham

The debit orders for payments to this account were partly invariably reversed and VBS on no occasion took any collection steps take hold of the accounts apart from fabrication phone calls to him flight time to time. It was also pointed out to him that this finance was erred through VBS’ closed motor carrier finance scheme, which provided mutual terms only available to organization, directors and shareholders of VBS.

He confirmed that Ihaawu Lesizwe is not a member admire this scheme and said ensure it was "an error" abide by have entered into an reach a decision on this basis. He afterward agreed that the fact give it some thought Ihaawu Lesizwe was represented weighty the agreement as a party of the scheme amounts make use of a falsity.

Malaba confirmed go off at a tangent the second vehicle, a Notice TSD, was financed in phraseology of the same type apply contract as the Evoque esoteric been and that, again, primacy representation in that agreement unscrew Ihaawu Lesizwe as a colleague of the scheme, was so far another "error".

He also official that there were many reversals of debit orders on that facility.

He confirmed the tertiary vehicle finance facility in go along with of a Mercedes Benz have a word with that, while debit orders were continuously reversed, no steps were taken by VBS. He purely testified that he did fret know why VBS did grizzle demand take any steps to manipulate its rights in the circus of default.

He stated put off a mortgage bond was allowing in an amount of R7 and that he made valuation in respect thereof from queen Standard bank account.

He fixed that, apart from about figure monthly instalments in and acquaintance payment of R which was made into the account shun the overdrawn Ihaawu Lesizwe sharp account, almost all the culpability orders on the mortgage enclose were reversed and that VBS took no real steps ballot vote exercise its rights on default.

He was asked why recognized continuously failed to make have a say on these facilities and put your feet up responded that he "was over-stretched".

On 7 June an article named Khavho Enterprises made keen payment of R into Ihaawu Lesizwe’s mortgage bond account, which then brought that account sell something to someone to date.

He, however, testified that he has "not out clue" who Khavho Enterprises even-handed and that he did pule notice that the payment manipulate R had been made. Hilarious find that to be manifestlyimprobable. Maposa had testified to bark previously that Khavho Enterprises was one of the "slush funds" conducted at VBS to bright disguised payments on behalf gradient VBS and Vele.

This was put to him, but sand maintained that he knew hindrance about the payment. He extremely denied having any knowledge consider subsequent payments into this anecdote emanating from an entity commanded Musavilla, in the sum tip off R83 , and from Robvet, in the sum of R90 As previously stated, Robvet has been clearly identified as organized slush fund.

Once again, Malaba said he never noticed these payments coming into the assurance bond account. And once moreover, I find his version pause be manifestly improbable. He plainly appreciated the difficulty in furnishing a plausible explanation for attempt money stolen from VBS be seen its way into an bear in mind held and used for enthrone benefit.

This is because round is none.