Business

How VBS was plundered

2018-06-24 06:00

As VBS Mutual Bank’s crash paralyses municipalities after it lost R1.5 billion of their funds, details are emerging of how Vhavenda King Toni Mphephu Ramabulana and the bank’s executives lived the high life. They flew in helicopters, drove Range Rovers and Mercedes-Benz Vianos and shopped at exclusive boutiques.

A stack of bank statements City Press has obtained show how Ramabulana, the bank’s former chairperson and Vele Investments founder Tshifhiwa Matodzi and former Vele chief executive Robert Madzonga allegedly dipped into hundreds of millions of rands belonging to depositors to finance their lifestyles. This all took place while Andile Ramavhunga was the chief executive of VBS.

The documents show how the bank collapsed under the weight of hundreds of millions of rands in overdrafts, unpaid vehicle finance deals, mortgage bonds and complex intercompany loans between VBS, Vele Investments and other Vele-controlled companies. Vele Investments is VBS’s main shareholder, with a 53% stake, and it appears to have used the bank to keep its other businesses afloat.

Included in the transactions is Vele Investments’ acquisition of a R12.8 million Bell helicopter from Marshall Eagle Aviation, in March 2017. The bank statements show how Ramabulana got a monthly salary of R310 000 from Vele, deposited into his VBS account. The bank financed the king’s five cars, worth more than R6.5 million in total, including a Mercedes-Benz Viano worth R1.6 million and a R1.4 million Range Rover. Ramabulana spent R26 000 on designer clothing at the Giorgio Armani store in Sandton, Johannesburg, and a further R12 000 at La Martina, a boutique sports and leisure clothing store in Nelson Mandela Square, in one day.

VBS paid the Dzata Trust, registered under Ramabulana’s legal adviser Paul Makhavhu’s name, R9 million. Some of this was used to pay for the monarch’s Viano, his Range Rover and a mortgage for his house in the upmarket, gated Johannesburg suburb of Dainfern. The trust had a R6 million overdraft from the bank.

The king is known to throw lavish parties at his home. Guests are treated to bottles of expensive whisky or champagne on arrival, which is served by the king’s personal butler, who is also his aide and driver. Those close to the king apparently benefited from the bank’s largesse.

In March last year, an ally of his, whose name is known to City Press, was paid R500 000 from the bank’s corporate account. Madzonga enjoyed an after-tax monthly income of R400 000 and a travel allowance of R100 000 a month. He received a further R15 million from VBS. This was first transferred to Vele, then to another company and finally deposited into Madzonga’s account.

This money was used to pay for six of his cars – worth more than R6 million in total – cover his R213 000 monthly bond repayment and pay for occasional dinners at Gianni’s Ristorante, an upmarket seafood eatery in Ballito, KwaZulu-Natal. VBS financed all of Madzonga’s cars and property. According to the statements, the bank paid R22 million into Matodzi’s VBS savings account.

The incestuous relationship between Vele Investments and VBS Mutual Bank

Intercompany loans

The statements paint a picture of complex intercompany loans and transfers to Vele and its subsidiaries, including:

  • Between August and December, about R175 million in depositors’ funds was transferred from VBS’s corporate account to Bophelo Benefit Services;
  • Between October and December, about R120 million in depositors’ money was transferred from VBS to Bophelo Life Insurance;
  • Between R250 million and R300 million a month was moved from VBS to Insure Group Managers. A few days later, the money was transferred back into an account belonging to VBS. The records show this happened from at least September until February this year;
  • Anglo African MBR Finance operated through a R14 million unserviced overdraft from VBS;
  • Wegezi Power Holdings ran its operations through a R7 million unserviced overdraft facility from VBS;
  • In January last year, Vele Investments had a R15 million overdraft facility at VBS; and
  • A number of small companies, with irregular or no income at all, ran their operations through unserviced VBS overdraft facilities worth between R1 million and R10 million. Vele Investments has a string of subsidiaries, including Wegezi Power Holdings, Insure Group, Anglo African MBR Finance, Malibongwe Petroleum, Allcare Administrators, Hlomphanang Logistics, the Mvunonala group of companies and a lucrative zinc processing plant in Springs, Gauteng.
People simply didn’t pay their home loans, overdrafts and vehicle loans. But also, some of Vele’s subsidiaries ran their day-to-day business through large VBS overdraft facilities and complicated intercompany loans. It was like a Ponzi scheme that was going to fail.

How the money disappeared

A source close to auditing firm SizweNtsalubaGobodo, which the SA Reserve Bank appointed as the curator of VBS in April, said Vele Investments used depositors’ money to buy and run many of its subsidiaries. “The guys at VBS used depositors’ money to fund Vele’s expansion. If you look at the books closely, you will soon discover that there are three ways in which the bank’s money disappeared,” the source said.

“People simply didn’t pay their home loans, overdrafts and vehicle loans. But also, some of Vele’s subsidiaries ran their day-to-day business through large VBS overdraft facilities and complicated intercompany loans. It was like a Ponzi scheme that was eventually going to fail.”

The source said VBS’s 20 biggest creditors were related and linked to Matodzi, Ramabulana and their families.

Vele spokesperson Ndivhuwo Khangale did not respond to detailed questions sent on Thursday. He however told City Press that he was speaking on behalf of the king as well as former VBS and current Vele executives. All of them, he said, declined to comment on the contents of the bank statements because an investigation was underway.

A senior executive at Vele Investments said the money transferred from VBS to Vele Investments were genuine loans, and there was nothing illegal about this. “No money was stolen. Granted, procedures were not followed properly when Vele borrowed money from VBS, but we have some form of documentation and we will produce those documents in an appropriate forum,” he said.

The executive said Vele was in the process of signing an acknowledgement of debt, and would “probably” sell the company to settle what it owed VBS.

Meanwhile, at the municipalities

This week, Cooperative Governance Minister Zweli Mkhize met representatives of 14 municipalities that invested their funds in VBS. He gave them a month to come up with plans to mitigate their losses.

Mkhize also instructed the mayors of the affected municipalities in Limpopo, Gauteng and North West to submit financial reports and recovery plans.

Further documents City Press obtained show how a municipal manager ordered a subordinate to deposit R50 million into a VBS account within 30 minutes. This was done in the middle of the first “liquidity stress event” the bank experienced last year.

Emails show how Romeo Mohaudi, the chief financial officer at West Rand District Municipality, pulled his counterpart from Merafong City Local Municipality, Thys Wienekus, out of a meeting to ensure he made the payment before noon on June 23 last year. Mohaudi had been seconded to Merafong as municipal manager at the time.

The bizarre haste with which Merafong gave VBS R50 million is possibly explained by happenings at VBS itself that week. In an affidavit earlier this year, Kuben Naidoo, the registrar of banks, included a list of “liquidity stress events” at VBS – instances when the bank did not have cash to settle transactions with other banks. The first one was on June 20 last year, when VBS came up R295 million short. The previous day, Rand Merchant Bank filed a final written demand and began suing VBS.

On June 22, Wienekus emailed VBS at Mohaudi’s behest to enquire about interest rates. The next day at 11.18am, Mohaudi emailed an administrative officer at Merafong to “please ensure that Thys receives the attached documents and invests the money through to VBS Mutual Bank. The amount agreed is R50 million. The investment deposit must be made today before 12pm.”

When the administrator responded that Wienekus was in a meeting, Mohaudi wrote: “I have requested him to excuse himself from the meeting to ensure the payment is done before 12pm.”

The payment was evidently made because the Merafong and West Rand municipalities each have R50 million in VBS, according to figures presented in Parliament by Treasury earlier this year. Wienekus and Mohaudi declined to comment.

“Provincial treasury had appointed Deloitte to conduct a forensic investigation on VBS Investments, therefore I cannot further respond to your questions. Let’s allow the investigation to be concluded,” said Wienekus. Mohaudi said: “While I can readily respond to your questions, I would rather request that I be afforded the opportunity to give due regard to the investigative processes currently under way.” 

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May 19 2019