The “epic” scale of the alleged fraud perpetrated at VBS Mutual Bank is detailed in an explosive new affidavit by VBS curator Anoosh Rooplal, including the wanton creation of millions in fake deposits and bribes paid to politicians and “senior officials” of the Public Investment Corporation (PIC) and the Passenger Rail Agency of SA (Prasa) to get them to deposit public money in the bank.
The directors of VBS Mutual Bank and its majority owner, Vele Investments, stole more than R1.5 billion from the bank’s depositors, claims the affidavit. It accompanied an urgent application to liquidate Vele, which was filed on Friday. Applications to sequestrate the bank’s executives will follow shortly. Most of the shocking details come from evidence provided by VBS’s former treasurer, Phopi Mukhodobwane, who revealed how he and his colleagues allegedly pillaged depositors’ money.
He also provided evidence of the patronage network built to keep money flowing into the bank. An unnamed “senior executive” of the PIC allegedly received a suitcase stuffed with R5 million in cash. In return, the PIC gave VBS a R350 million credit facility meant to fund VBS’s tender finance business.
VBS executives went on to pillage this loan by creating fake finance contracts. The amount of R1.5 million was also allegedly paid to “individuals at Prasa” to facilitate a R1 billion deposit which ultimately fell through.
Mukhodobwane’s evidence also appears to implicate the ANC’s Limpopo treasurer, Daniel Msiza, and the ANC Youth League’s Gauteng leader, Kabelo Matsepe.
On December 22 2017, a company owned by Matsepe was paid R1.5 million via a shelf company that Mukhodobwane says was used to channel bribes.
Read: PIC duo’s shady payouts
Both Public Investment Corporation deployees to the VBS board were seemingly paid in the region of R5 million through shelf companies.
In messages between VBS executives, they discuss “Kabelo” as well as “Bra Danny” in relation to their help with facilitating municipal deposits into VBS. City Press reported earlier how Msiza received a R9.5 million loan from VBS to buy a conference centre in Polokwane, but he said at the time that it was a normal commercial loan.
Rooplal’s affidavit sheds light on the bizarre movements of money in and out of VBS into various related parties’ accounts that City Press reported on two weeks ago.
The crux of the fraud was that VBS bosses, in effect, fabricated money by manually entering fictitious “deposits” into the VBS system. These would either be transferred into their own VBS accounts from a so-called suspense account – or be simply fictitiously entered directly into their accounts and the accounts of their other companies, alleges Rooplal.
Once that was done, the perpetrators could withdraw actual cash or simply have their overdrafts disappear – all at the expense of actual depositors, ranging from individuals to burial societies, the PIC and the municipalities that infamously stuck hundreds of millions of rands into the bank. Vele’s directors allegedly not only used depositors’ money to live large buying cars and houses, but also to acquire practically all their other businesses – and even control over VBS itself – without paying a cent.
“VBS fell prey to a fraudulent scheme of epic proportions, which has resulted in a loss to the bank of at least R1 521 925 280.46,” claims Rooplal.
Half of this amount was used by Vele to acquire its various businesses, effectively for free. These “free” acquisitions included Insure Group Management, bought with fake money in order to direct its real money into VBS to help plug the holes the executives were leaving.
Vele allegedly also acquired Malibongwe Petroleum, Anglo African Finance, Mvunonala and Fairsure with invented money.
While the fraud was very complicated and pervasive, it was also “unsophisticated”, says Rooplal. VBS chairperson Tshifhiwa Matodzi was the “main architect of the fraudulent scheme” and made the most money from it, alleges Rooplal. VBS chief executive Andile Ramavhunga, chief financial officer Philippus Truter, treasurer Mukhodobwane and chief operations officer Robert Madzonga were, however, all part of it, he says.
Truter, who has worked at VBS since 2005, and Mukhodobwane made the fictitious entries and carried out fraudulent transactions on Matodzi’s instructions, Rooplal alleges.
Rooplal procured an affidavit from Mukhodobwane testifying to how it was done:
- Matodzi instructed Truter and Mukhodobwane to facilitate the acquisition of Insure Group Managers for R250 million with fictitious money. The imbalance in VBS’s balance sheet would then be fixed by having Insure deposit its real money back into VBS. The deal was done and the fake R250 million ended up in an Insure account at VBS. From there it was paid out to other related parties, becoming real money. Vele, in effect, “paid nothing for the investment” in Insure, claims Rooplal. Other Vele subsidiaries were bought in the same way.
- More shockingly, even the controlling share Vele has in VBS was bought without actually paying anything. VBS created a fake R350 million deposit in favour of Vele, of which R90 million was used to buy more shares in VBS. Another R80 million in VBS shares was acquired by having Insure put money in VBS for unrelated purposes.
- Of the R350 million fake deposit, R48 million was paid as “bonuses” to Matodzi, Ramavhunga, Mukhodobwane and Truter.
- The most complex part of the fraud is R262 million in fake deposits created to settle 35 different overdrafts. Matodzi gave Truter and Mukhodobwane the list of overdrafts to settle with fake money and then told them they were free to pay their own overdrafts the same way. Many of the overdrafts were for Vele and its directors directly, but the list includes a large network of shelf companies with no directors that evidently just channelled the money to Vele. “The perpetrators were effectively stealing money at a greater rate than was being deposited into VBS. This resulted in the severe liquidity crisis in which VBS finds itself,” alleges Rooplal.
“Vele has acted with such dishonesty that, even at this stage, it may prove a difficult task to locate all of the proceeds of the fraud.”
Despite the bank becoming a house of cards, KPMG auditor Sipho Malaba signed off VBS’s books last year. Rooplal argues for the immediate liquidation of Vele so that he can recover whatever is left of the looted money.
“I have attempted to engage with the management of Vele, but it has become increasingly unclear as to who is in control, as there is a dispute as to the effective leadership of Vele and its subsidiaries. There is, as far as I am aware, no effective management due to the above dispute, which has led to a breakdown of the management and governance of Vele,” he says.
Deon Botha, head of corporate affairs for the PIC, sent City Press the following response to the allegations above: “The PIC is not aware of the alleged payment of a bribe to one of its employees. All PIC investments and related financial transactions must comply with the approved mandates of its clients and follow a thorough investment evaluation process. Investment decisions by the PIC are taken by committees and not by any individual. Any investment decision by the PIC may either be subject to approval from the PIC’s board or be reviewed by the board or any of its subcommittees.
“The PIC fully cooperates with the Reserve Bank as well as the curator and the forensic investigation into VBS, and supports any appropriate action against those responsible for the bank’s demise and those involved in any corrupt practices, including the demand for, payment of or acceptance of bribes.
“The PIC expects its employees to act in an ethical manner. Should further information emerge that implicates any PIC employee in wrongdoing, the PIC will deal with the matter in terms of its disciplinary codes. It will also request law enforcement agencies to investigate.
“The PIC supports every effort by the Reserve Bank to restore VBS to a position where it can trade again on a commercial basis in terms of its banking licence.”
Matsepe also responded, saying: “I confirm that my company had a memorandum of understanding to do capital raising for VBS, which was signed in 2016, and I confirm to helping raise capital and being paid for it.
“I confirm to helping raise capital from international bankers and I completely deny the mentioned transaction that is said to have happened on December 22 2017.”