- Mass arrests comply with the obvious collapse of drawn out plea cut price talks with a high VBS govt.
- Amongst these arrested is a former CFO of the police service who sat on the VBS board throughout the looting spree.
- Racketeering prices may imply jail phrases of between 15 and 30 years on high of different prices.
Eight males who’re prime suspects within the looting and collapse of VBS Mutual Financial institution have been arrested in a coordinated multi-province search and seizure operation by the Hawks and the Nationwide Prosecuting Authority (NPA).
This consists of the financial institution’s former chair, Tshifhiwa Matodzi, chief govt, Andile Ramavhunga, treasurer, Phophi Mukhodobwane, and chief monetary officer, Philip Truter.
Closely compromised outsiders have been additionally arrested. This consists of two former representatives of the Public Funding Company (PIC) to the VBS board, Paul Magula and Ernest Nesane. They allegedly accepted bribes to look the opposite method.
One other board member within the dock is Phalaphala Avhashoni Ramikosi, the previous chief monetary officer of the South African Police Service (SAPS).
The highest cop was a nonexecutive member of the VBS board and served on the extremely compromised audit committee in addition to its danger and compliance committee – theoretically making him one of many key checks on the VBS executives’ alleged plundering of the financial institution.
Shortly after VBS collapsed in March 2018, Ramikosi was suspended from the police resulting from an unrelated investigation into tender fraud by the Impartial Police Investigative Directorate (IPDID). He has not beforehand been recognized as a key particular person of curiosity in investigations into VBS.
Final however not least, among the many accused is Sipho Malaba, the disgraced audit accomplice from KPMG who signed off on the financial institution’s faux monetary statements to cover from regulators how the financial institution was hollowed out.
It’s understood that one of many males was not taken into custody as he’s in Covid-19 isolation. It was not instantly clear who.
Arrests have been repeatedly delayed by, amongst different issues, the NPA wrangling with a possible state witness from the inside sanctum of the fraud: long-serving finance boss Truter.
There have been a number of months of negotiations with Truter, who was supplied a plea cut price.
AmaBhungane understands from a number of sources that the talks have been on-again-off-again since at the least November final 12 months.
Truter was going to supply a sworn affidavit apparently totalling a number of hundred pages to the NPA in alternate for limiting his personal jail time period to seven years underneath comparatively comfy circumstances in a minimum-security jail.
It now seems that the deal has collapsed fully with Truter going through the identical destiny as his colleagues if discovered responsible.
That destiny is a minimal 15 years’ obligatory sentence – and most 30 years – on a cost of racketeering, the crime of working or benefitting from a “felony enterprise” over time.
The racketeering prices may be supplemented by different distinct industrial crimes like fraud and cash laundering.
The eight are anticipated to seem within the Palm Ridge Justice of the Peace’s Court docket, in Ekurhuleni, tomorrow.
Regardless of public scrutiny and a number of other distinct investigations, each the total extent and the precise function of central and peripheral role-players stay remarkably opaque.
The lads arrested in the present day have been the core of the alleged conspiracy despite the fact that dozens of others performed roles allegedly from facilitating the bribery of municipal officers, to forging paperwork.
A few of them had already confessed elements of those crimes to the investigative workforce working for the South African Reserve Financial institution (SARB) underneath advocate Terry Motau in 2018. That proof, broadly publicised in Motau’s Nice Financial institution Heist report, is nonetheless inadmissible in a felony trial.
An unlimited quantity of further data from Motau’s investigation, within the type of interviews and financial institution information, has nonetheless been made obtainable to the Hawks by the Reserve Financial institution. This has not been made public.
South Africa Reserve Financial institution deputy governor Kuben Naidoo, creator of the forensic report into VBS Mutual Financial institution advocate Terry Motau, and Treasury deputy director normal Ismail Momoniat.
Within the previous VBS workplaces in Rivonia, a whole bunch of neatly filed containers of paperwork occupy a big empty room after having been scanned. Search and seizure operations occurred on the financial institution’s workplaces a month after it went into curatorship.
What occurred at VBS was technically sophisticated however primarily a basic Ponzi scheme that took off modestly in 2015 and reached catastrophic proportions by 2018.
The financial institution took in actual deposits, largely from municipalities, after which redistributed that cash to a coterie of the financial institution’s executives, their mates, their corporations and to an enormous community of officers at municipalities that required bribing.
The one largest beneficiary of the scheme was Vele Investments, VBS chair Matodzi’s funding firm.
Vele used VBS cash to quickly purchase and run plenty of very actual corporations. It even used VBS cash to ostensibly purchase shares in VBS.
VBS finally ran out of cash on 16 February 2018. It was positioned underneath curatorship on 11 March 2018 after intense last-minute wrangling with the Reserve Financial institution and Nationwide Treasury. Shoppers have been immediately confronted with being unable to withdraw their deposits.
The mechanics of the fraud concerned creating accounts within the identify of an organization or particular person who had by no means deposited cash. These accounts have been then credited with no matter quantity VBS bosses noticed match.
This faux cash was nonetheless nugatory till it left the financial institution. To attain that, these accounts needed to make exterior funds to accounts at different banks.
These exterior funds are what added as much as a grand whole of R1 894 923 675 – nearly R1.9 billion – in “gratuitous advantages” cited within the Nice Financial institution Heist report.
That was not the full quantity that left the financial institution; the quantity is simply the full for 53 focused “individuals of curiosity”, together with all eight arrested people.
One other technique to get cash out was merely to create accounts and allow them to run up apparently indefinite overdrafts with out these ever getting repaid.
Then there have been additionally automobile loans and mortgages that weren’t repaid.
Eventually depend, VBS was lacking R2.three billion. That is the distinction between confirmed claims of R2.7 billion and present belongings of R400 million recorded in liquidator Anoosh Rooplal’s most up-to-date report following a collectors’ assembly final October in Limpopo.
That’s not all theft. VBS additionally had what appears like extraordinarily unhealthy, however authorized, loans on its books.
Though municipalities have been by far the most important losers, small retail depositors have been those queuing in a single day at VBS branches hoping to get better their deposits after 11 March 2018, the day the financial institution was positioned underneath curatorship.
Nationwide Treasury finally made R260 879 594 obtainable to pay these principally poor individuals from rural Limpopo as much as R100 000 every. Depositors with greater than that within the financial institution, together with stokvels, misplaced one other R75 680 758.
Companies with deposits have misplaced R296 700 297.
The one largest creditor is nonetheless the PIC, which is owed R412 961 589 because of capital it supplied to VBS as an investor, in addition to a R350 million gas finance facility it gave VBS in 2015, which was spectacularly abused by means of fraud.
A significant downside with the investigation by Motau was that it was not at all times clear who obtained the cash as soon as it left the financial institution. It typically went to presumably innocent recipients like automobile dealerships and property brokers for the vehicles and homes VBS bosses splurged on.
Reams of financial institution statements extracted from the ruins of VBS which have been leaked or surfaced in court docket information present dozens of doubtless targets for prosecution within the close to future.
These vary from the Venda king Toni Ramabulana Mphephu to the ANC’s treasurer-general in Limpopo, Danny Msiza, who performed a key function in getting municipal deposits to VBS – a job laid naked in annexures to a number of VBS court docket circumstances.
Different ANC figures are additionally implicated as recipients of “gratuitous” advantages.
The management of the EFF has additionally obtained VBS cash by means of an organization belonging to the brother of its second-in-command, Floyd Shivambu.
Prosecutors will in all probability discover very fertile looking floor within the municipalities that shovelled cash into VBS.
Mukhodhobwane, the VBS treasurer, informed investigators that bribes have been paid to officers at each single municipality that put cash in VBS.
About 20 native governments did so, offering many of the money that obtained looted.
On the time the financial institution collapsed in March 2018, a complete of 15 of those municipalities had a collective R1.5 billion caught within the financial institution with little to no hope of recovering it.
Separate forensic reviews have been commissioned at each considered one of these municipalities and VBS insiders tasked with delivering bribes have given confidential proof to Motau and maybe the NPA or Hawks as properly.
Who did what
The alleged conspirators who obtained arrested all performed key roles.
Ramavhunga, the chief govt of VBS from 2014 to the implosion of the financial institution, is alleged to have obtained R28.9 million in “gratuitous” advantages beginning early 2015.
His advantages apparently began with him receiving a beneficiant “second wage” from Vele Petroport, Matodzi’s first enterprise that will depend on VBS funding. Ramavhunga would receives a commission by Vele immediately in addition to by means of entrance corporations, receiving bonuses of a number of hundreds of thousands of rands.
His work for the scheme included allegedly implementing a plan playfully dubbed “Black Ops” which entailed creating faux contract finance belongings to cowl up the outlet in VBS’ books.
His common funds from Vele are clearly seen in financial institution statements. When he was opposing his sequestration in court docket, he tried to elucidate them away as charges for extracurricular work.
Ramavhunga was key to the incestuous relationship between VBS and Vele. He personally brokered main offers and was about to be richly rewarded simply when VBS crashed. He was alleged to turn into head of a far grander entity referred to as Vele Monetary Companies which might personal VBS and different Vele acquisitions.
He was concurrently working the financial institution and dealing for its largest shopper – a gross battle of curiosity.
Ramavhunga was additionally allegedly the one who signed off on an audacious deal for Vele to amass an insurance coverage premium assortment firm referred to as Insure Group Managers with R250 million that by no means existed besides as an entry within the VBS books. This nonetheless led to Insure withdrawing R173 million in actual depositors’ cash.
Ramavhunga additionally allegedly helped prepare a bribe to unknown events on the Passenger Rail Company of South Africa (Prasa) to safe a R1 billion deposit that was meant to save lots of VBS in early 2018.
He has steadfastly insisted he had no thought what was happening on the financial institution he ran.
Mukhodhobwane, the treasurer, was the final of the alleged conspirators to affix the financial institution in August 2016, however was in some ways the personification of what went improper there.
When he obtained employed by VBS he was an unemployed 32-year-old banker with cash issues. Inside 18 months he had purchased R30 million price of vehicles and property on an official wage of R75 000 per 30 days.
He has admitted to taking part actively in many of the main frauds at VBS in an affidavit supplied to the Reserve Financial institution’s investigators in Might 2018.
This “whistleblower” affidavit is the supply of a lot of what’s recognized concerning the VBS fraud and the varied allegations towards the principle gamers. In it, Mukhodhobwane confessed to manipulating VBS’ books to facilitate the Insure deal, in addition to a large purge of overdrafts in March 2017, amongst different issues.
Truter, the chief monetary officer, allegedly manipulated the financial institution’s information alongside Mukhodobwane.
Truter can also be by far the longest-serving VBS govt implicated in defrauding the financial institution. He had been with VBS since 2005, lengthy earlier than the obvious begin of the pillage which adopted the arrival of a brand new shareholder within the type of Matodzi and colleagues.
His alleged share within the largesse has been pegged at a surprisingly minor R5.eight million.
Magula and Nesane, the PIC’s two representatives at VBS, have been paid extravagantly from 2015 by means of to the collapse of VBS.
Magula had an annual wage of R2.four million from the PIC however obtained R14.eight million in “gratuitous advantages” in simply two years from VBS. Nesane likewise had a wage of R2 million on the PIC however obtained R16.6 million out of the financial institution.
Their job was principally to do nothing. They allegedly didn’t elevate any questions and didn’t report something they noticed at VBS to their employer, the PIC.
The PIC owned 26% of VBS and repeatedly funded it.
An investigation the PIC itself commissioned from Nexus Forensic Companies revealed how each Magula and Nesane labored on a R350 million gas finance facility that the PIC granted VBS method again in 2015.
Magula was the one who allegedly initially put it collectively and Nesane allegedly intervened secretly to alter the circumstances of that contract to prejudice the PIC.
The 2 additionally advisable that the PIC make additional investments in VBS, which led to the state-owned asset supervisor giving VBS R90 million in December 2017, shortly earlier than the financial institution collapsed.
Magula and Nesane have each subsequently been struck off the checklist of registered monetary service suppliers and are actually debarred as a result of they don’t “adjust to private character qualities of honesty and integrity”.
Ramikosi, the highest police bureaucrat, performed a job that’s nonetheless unclear.
Not one of the earlier investigations delved very far into his case. In response to Motau’s report, he nonetheless did confess to getting paid off alongside Magula and Nesane.
Nesane informed the investigators that Ramikosi always defended the VBS executives at audit committee conferences the place he was the chair. Like the 2 PIC males, he obtained his VBS cash by means of a entrance firm and his whole alleged payoff totalled just below R6 million.
Malaba, from KPMG, was arguably key to the whole VBS enterprise. As audit accomplice to VBS he was allegedly tasked with hiding the truth that VBS had dissipated just about the entire money it claimed to have within the financial institution.
His foremost contribution was allegedly to clamp down on the audit of VBS’ monetary statements for the 12 months to 31 March 2017. Junior audit clerks have been baffled by VBS’ incapacity to indicate the place its claimed money was, and the issue was kicked up the chain of command to Malaba.
He allegedly informed everybody he had sorted it out.
His sign-off on the financials was the idea of KPMG additionally signing off on VBS’ monetary report back to the Reserve Financial institution, making Malaba instrumental in hiding the fraud from the authorities. He allegedly obtained paid R34 million by means of two entrance corporations, a tally that signifies how essential he was.
Matodzi, the chair and mastermind behind all of it, will doubtless be going through an excruciatingly lengthy checklist of prices.
It begins with the way in which during which he, by means of Vele, took management of VBS within the first place by allegedly shopping for shares with faux cash from the financial institution itself, abetted by Ramavhunga and others.
From there, VBS cash funded his private bills, but additionally Vele’s numerous acquisitions totalling a whole bunch of hundreds of thousands.
The large ones have been Insure for R250 million, the Mvunonala Group for R300 million and Anglo African Finance for R80 million.
A laundry checklist of his corporations operated on VBS overdrafts and he infamously obtained himself a R6.5 million Ferrari.
Hundreds of thousands extra left the financial institution from accounts belonging to different corporations he managed.
Greater than anything, he stands accused of orchestrating each fraud the others dedicated. It’s inconceivable to calculate precisely how a lot cash left VBS to fund him and his companies, however the going estimate is R326 million for Matodzi, plus his smaller issues, and R937 million for Vele.
On this context, extravagances like a R12 million helicopter purchased in Vele’s identify for using the Venda king are actually the tip of the iceberg.
All of the people arrested in the present day have already been sequestrated and have misplaced their registration as monetary service suppliers.
Matodzi and Ramavhunga misplaced their chartered accountant designations, however actual materials penalties have been restricted to the loss of some belongings like Matodzi’s home within the unique Eagle Canyon Property, which was seized and bought off for a meagre R5 million.
Now the actual accounting begins.