Market News

S. African Probe Finds $130 Million Looted From Failed Bank - BLOOMBERG

OCTOBER 10, 2018

By  and 

  •  Investigators say there is no saving South African lender VBS
  •  VBS had provided former President Jacob Zuma with mortgage


A probe into the failure of VBS Mutual Bank found that at least 53 people and companies may have benefited from the looting of 1.9 billion rand ($130 million) from the South African lender before its collapse.

Terry Motau, who was appointed by the central bank to lead the investigation, is calling for arrests to be made and for tax authorities to swoop on those identified in his 139-page report, titled “The Great Bank Heist.” He also recommends an auditor’s liability claim be brought against the company’s auditor, KPMG South Africa, and that VBS be wound up.

“There is no prospect of saving VBS,” Motau said in the report, which was posted on the central bank’s website on Wednesday. “It is corrupt and rotten to the core. Indeed, there is hardly a person in its employ in any position of authority who is not, in some way or other, complicit.”

Motau’s report described a bank that extended overdrafts to favored clients’ accounts that had no deposits, and that issued payments to individuals in exchange for massive deposits from various state entities and municipalities.

Before being taken over by an administrator in March, the bank caught public attention in 2016 when it gave former President Jacob Zuma a mortgage to settle a Constitutional Court order to repay taxpayers some of the money spent upgrading his private residence.

Zuma Foundation

According to the report, Andile Ramavhunga, former chief executive officer of VBS, said he oversaw the payment of 1.5 million rand to what he called the Dudu Myeni Foundation in order to secure a 1 billion rand deposit from a state-owned rail agency.

This foundation didn’t exist under that name, and may have been a reference to Zuma’s own foundation, which is chaired by Myeni, Motau alleged. Myeni, was ousted as chairwoman of South African Airways last year, having served on the board of the unprofitable airline in various capacities since 2009.

Click here to read more about how VBS failed

WhatsApp messages showed that SAA and state-owned ports and freight-rail operator Transnet SOC Ltd. were among Ramavhunga’s targets for deposits. Investigators also heard testimony claiming that VBS sought 2 billion rand of funding from the Public Investment Corp., Motau said. Ramavhunga “steadfastly denied that he was in any way involved in any unlawful conduct,” his report showed.

There were many examples of loans extended by the bank where “few, if any, monthly installments were honored," the report said. “There are also very large overdraft facilities where no amounts were ever paid into the accounts and the facility limits simply increased to permit the escalating outflows.”

(Updates with background, more information from report starting in paragraph under Zuma Foundation subheadline.)

SEE HOW MUCH YOU GET IF YOU SELL

NGN
Real Time Analytics