While commissions of inquiry into state capture have begun to reveal
how sleazy politicians and their cronies lined their own nests at the
expense of the taxpayer, parts of South Africa's business world have not covered
themselves in glory. Here are the five worst cases — some linked to
state capture, some not — of corporate skulduggery in recent times:
1. Steinhoff crashes after overstating income and asset value
Auditors from PwC that have trawled through the Steinhoff books have
"confirmed a pattern of transactions undertaken over a number of years,
across a variety of asset classes that led to the material overstatement
of income and asset values of the group".
According to Rob Rose, writing in the Financial Mail,
"Initially, in December, Steinhoff said the size of the 'hole' in its
accounts was about €6bn. But insiders close to the forensic
investigators who’re picking through the mess tell the Financial Mail that
they have since discovered numerous other frauds. The upshot: the
'hole' is now likely to be billions deeper than that initial €6bn."
Rose said the comparison between Steinhoff and Enron, the
Houston-based energy company that went bankrupt in 2001 after systemic
accounting fraud was discovered, seemed "irresistible".
According to Heather Sonn, who was appointed chair of the company
after the crisis struck: "At Steinhoff, I believe there was purposeful
deceit where certain people went to great lengths to misrepresent the
financial statements, in collusion with others."
2. 75% VBS assets stolen by executives and directors
The Reserve Bank estimated that as much as 75% of VBS Mutual Bank’s assets may have been stolen by its executives and directors.
VBS, formed as a building society in the former Venda homeland, shot
to prominence when it gave former president Jacob Zuma a R7.8m loan
after he was ordered to repay the state for upgrades made to his Nkandla
home.
Municipalities broke the rules and invested with VBS, possibly after
political pressure was applied, and are estimated to have lost R1.6bn
they deposited.
Curator Anoosh Rooplal is attempting to recover more than R1.5bn from
the bank’s largest shareholder, Vele Investments, as well as from the
bank’s executives and directors, was done to prevent further
"dissipation of assets".
3. KPMG helps the Guptas pay for a wedding as a 'business expense'
Audit firm KPMG has been embroiled in several allegations of state capture since the release of the "Gupta emails" last year.
Among the allegations is that KPMG partner Jacques Wessels passed off wedding costs as business expenses, dodging R2m in taxes.
Wessels has admitted to negligence before an inquiry into the matter, but denies deliberate wrongdoing.
The Gupta company Linkway was allegedly used to channel R30m of
taxpayers’ money to fund the infamous 2013 Sun City Gupta wedding.
4. McKinsey helps capture Eskom and Transnet
McKinsey was paid R1bn for six months' work for Eskom on an invalid
contract that allowed Gupta-linked firm Trillian to pocket another
R600m, the Financial Mail reported.
McKinsey has owned up and paid back the money — without interest.
McKinsey's global managing partner flew to SA to deliver a grovelling
apology over the company's connection to state capture via Trillian.
It now emerges that Trillian might be more deeply involved than what
it has admitted to. A draft report for the Treasury by Fundudzi Forensic
Services suggests Anoj Singh, former CFO at Transnet and Eskom,
received travel benefits from McKinsey before the firm was awarded
lucrative consulting deals at both entities. This from the FM story:
The draft Treasury report points out that McKinsey was subsequently
awarded five contracts worth a total of R1bn at Transnet over two years,
before being awarded the Eskom contract with Trillian. The
investigators conclude that between 2005 and 2017 Transnet paid R3.1bn
to McKinsey and its partners, Regiments and Trillian.
5. Bain & Co restructures Sars, damaging its revenue collection severely
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