VBS Mutual Bank collapsed under “two principal pillars of unlawfulness” a forensic report released by the South African Reserve Bank on Wednesday has found.
The report, entitled The Great Bank Heist was completed by Advocate Terry Motau, who was assisted by Werksmans Attorneys.
“The one pillar constitutes the methods used by those who had captured VBS which enable them to embark upon widespread looting and pillaging of monies placed on deposit at VBS,” the report said.
“Very large sums of money were made to various perpetrators of the scheme of looting as a reward for their participation, and substantial bribes were paid to certain of VBS’ directors and other related parties in order to buy their silence and to look the other way while the looking was going on.”
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“VBS went on a concerted and deliberate campaign to attract very substantial deposits from municipalities and, at a later stage, state entities such as the Passenger Rail Agency of South Africa, by the payment of so-called ‘commissions’ in order to solicit such deposits.
"This, in many instances, included the payment of bribes to various public officials who were in a position to influence the making of such deposits,” the report added.
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“The captors of VBS manipulated its banking systems by creating enormous fictitious deposits in favour of Vele, its myriad associates and related parties, as well as by obliterating overdrawn banking facilities enjoyed by Vele and its associates running to hundreds of millions of rands.
"The captures and their associates went on a massive spending spree at the expense of VBS’ depositors.”
The report identified a second pillar of “unlawfulness”, which was the “fraudulent means” used to hide the looting at VBS.
Fraud was also discovered in the regulatory returns that VBS submitted.
“These frauds misled the registrar into believing that VBS was in a financially sound position whereas, in truth, its liabilities exceeded its assets by about R180 million and it was, thus, hopelessly insolvent as at March 31, 2017.”
“The investigation has revealed that the business of VBS was indeed conducted in a fraudulent manner which has resulted in the widespread impoverishment of VBS’ depositors for the benefit of Matodzi and his associates.”
VBS’ financial statements show that the bank went from a loss of R1.9 million for the year ended March 2014 to a profit of R5.7 million for the year ended March 2017.
During that time, VBS’s cash climbed from R96 million to R802 million and the amount of depositor’s funds climbed from R285 million to R1.55 billion.
However, the probe found that the 2017 audited financial statements were “materially and fraudulently misstated”.
Motau wrote that: “In my view, one of the most illuminating examples of the rampant corruption and bribery that occurred is to be found in a WhatsApp discussion between Kabelo Matsepe and VBS chairman Tshifhiwa Matodzi on December 20 2017.
Matsepe reported to Matodzi that:
“The mayor of Vhembe is crying she says we must give her and the speaker a Christmas [bribe] because they are the ones who are making sure we keep that money for six months.
"We gave 300k and she cried and we gave juniors R1.5 million and we give her 300K … We said we’ll consult with you and will sort her out Friday morning…If we can let’s give her 1% or 2% on a level of trust because she did keep her promise that she will block the money from being withdrawn.”
Matsepe was a “politically connected fixer, who became a very well remunerated middleman and acted as a gatekeeper between the VBS and the municipalities”, according to the forensic report.
The Reserve Bank placed VBS under curatorship on March 11 due to serious liquidity crisis at the mutual bank.