R2bn looted from 'corrupt & rotten' VBS Bank, says report

Advocate Terry Motau's report on VBS begins with a description of the daring 1977 robbery of Standard Bank in Krugersdorp, led by a “Mister Nightingale”.

Motau, who was appointed by the SA Reserve Bank (SARB) to investigate VBS, continues: “My report will reveal that the perpetrators of the heist at VBS made away with almost R2-billion. And they certainly did not put in anything like the hard work and effort of Mister Nightingale and his team. I trust that, in this case, arrests will be made.”

The damning investigation into fraud and reckless business practices at VBS, released on Wednesday, details how 53 persons of interest were unjustifiably paid R1.89-billion between 2015 and 2018 and calls for them to be criminally charged, the money recovered and that VBS be closed.

“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,” said Motau on VBS, which was placed under curatorship in March amid a liquidity crisis.

Recipients named include Brian Shivambu, the brother of EFF Deputy President Floyd Shivambu. Brian Shivambu is listed as having received R16.1-million in gratuitous payments. 

The report describes VBS as a modest bank until 2014, after Tshifhiwa Matodzi approached Venda King Toni Mphephu Ramabulana in 2013 asking to acquire a stake in VBS.

“The overwhelming evidence that has been gathered, from numerous sources, reveals Matodzito be the kingpin in the fraudulent and theftuous conduct of VBS’ business. He, his companies, and his associates have been positively identified as the main beneficiaries of the massive fraud,” reads the report. 

VBS then went on an ambitious campaign to attract large deposits from municipalities and state-owned entities like the Passenger Rail Agency of South Africa (Prasa) and shifted towards aggressive, high-risk lending.

Executives then established a network of looting, primarily facilitated by Matodzi's company Vele Investments, and created a fictitious image of the bank's finances. 

“The captors and their associates went on a massive spending spree at the expense of VBS’ depositors,” said Motau.

The report found there were two pillars that led to the collapse of VBS. Large sums would be paid to perpetrators of the scheme, while VBS directors were bribed, and Vele would make fictitious deposits to prop up the bank's apparent finances.

The books were so cooked that the registrar in 2017 believed VBS was financially sound, but it was effectively insolvent by March of that year, with liabilities exceeding assets by about R180-million.

“It was not possible, in the course of the interviews, to obtain a clear picture of the precise amount that has been looted from VBS by its captors,” said Motau.

However, he said forensic accountants were able to analyse cash flows and identify almost R2-billion in gratuitous payments from VBS. Vele and its associates received almost R1-billion, Tshifhiwa Matodzi was paid R325-million and the Free State Development Corporation received R104-million.

Those who the report says received over R30-million in gratuitous payments include: former ANCYL Limpopo leader and businessman Kabelo Matsepe, former KPMG partner Sipho Malaba, former VBS treasurer Phophi Mukhodobwane, the Venda king's attorney Paul Makhavu, and Vele CEO Robert Madzonga.

The report also said Mphephu received R17.7-million from VBS. Brian Shivambu, Floyd Shivambu's brother, is listed as having received R16.1-million. EFF leader Julius Malema has previously criticised SARB for placing VBS under curatorship. He called for those responsible for its financial collapse to be held accountable while maintaining that the bank should be saved. (See analysis here)

The report recommends that banking regulator the Prudential Authority take steps to pursue criminal charges against those who covered up the dodgy VBS books, those who perpetrated the theft, those who benefited from the receipt of funds, and those who have committed corruption.

It also suggests that the authorities immediately try to recover the stolen money through sequestration orders. Chartered accountants and lawyers involved should be reported to their industry bodies and their professional statuses stripped.

SARB said on Wednesday that the report had been handed over to the law enforcement authorities for further investigation.

“The evidence presented in the report is not a reflection of either the guilt or innocence of any party as not all parties have been given an opportunity to respond to the evidence,” said SARB in a statement.

“Once their investigations have been concluded, the authorities may decide to institute criminal prosecutions; the courts will be the final adjudicator in this regard,” it continued. - Additional Reporting by Pauli Van Wyk. DM