KPMG: SA CEO Resigns Following Gupta Scandal

September 26, 2017

Editorial

Last week KPMG CEO, Trevor Hoole, resigned along with six other executives as the auditing company withdrew its controversial “Rogue Unit”-report. The resignations come as a result of wide-ranging board clean-up in the aftermath of several revelations linking the company to the controversial Gupta-family, including an internal investigation by the global firm, which found that work done for the Gupta family in South Africa “fell considerably short” of KPMG’s standards.

The most recent developments follow a review of the company’s work with the Guptas and The South African Revenue Service (SARS). KPMG made a striking admission, saying that the findings, conclusions and recommendations of its SARS report should be withdrawn because it created the false impression that former finance minister Pravin Gordhan knew about a so-called “rogue unit” at the tax authority. This was the exact report that National Prosecuting Authority Head, Shaun Abrahams, used to charge Gordhan in October of last year.

 Among other scandals being uncovered, it also came to the light that KPMG failed to raise the issue that businesses controlled by the Gupta family diverted R30m of public money to pay for a family wedding. It was revealed that a total of R106m was transferred from Estina, a dairy farm outside Vrede funded by the Free State government, and then laundered through a complex web of Gupta front companies, before being used, inter alia, to settle the account for Vega Gupta and Aakash Jahajgarhia’s lavish wedding, at Sun City in 2013.

According to Bloomberg, KPMG was also aware that the family’s companies were categorising the wedding costs as business expenses, meaning they would not have to pay tax on them.

In addition to Hoole’s resignation, Ahmed Jaffer has resigned and stepped down as chairman of the board. Other partners who will be leaving the firm are Mike Oddy, head of Audit and board member, Muhammad Saloojee, head of Tax and board member, Herman de Beer, former head of Forensic and board member, John Geel, head of Deal Advisory, and Mickey Bove, risk management partner for Deal Advisory.

 Hoole has been replaced by replaced by Nhlamu Dlomu, who was previously KPMG South Africa’s Head for People and Change.

“This has been a painful period and the firm has fallen short of the standards we set for ourselves, and that the public rightly expects from us,” Dlomu said in a statement. “I want to apologise to the public, our people and clients for the failings that have been identified by the investigation.”

In a move applauded by many, KPMG said it would donate the R40 million it earned in fees from Gupta-controlled firms to charity and refund R23 million it earned by compiling a controversial report for the South African tax service.

KPMG is the latest international firm to become embroiled in factional battles within South Africa’s political establishment after British PR firm Bell Pottinger collapsed this month following a scandal over a racially-charged political campaign it ran on behalf of the Guptas.

It seems that KPMG South Africa might share Bell Pottinger’s fate as it enters into a period of unprecedented alienation and reputational blows.

Finance Minister Malusi Gigaba has requested South African law enforcement agencies to investigate KPMG after the firm’s relationship with the Guptas came to light.

As a result of the Gupta revelations, KPMG has already lost three major clients -  Sasfin Holdings Ltd., a financial-services company, Cape Town-based money manager Sygnia Ltd., and lobby group Business Leadership South Africa (BLSA).

“BLSA recognizes the considerable steps announced by KPMG to change its leadership and commence a process of cultural change,” BLSA said in a statement. “It cannot, however, look past the gravity of their conduct which is completely inconsistent with the values of BLSA,” continued the BLSA statement.

Several other major companies, including Barclays Africa and Investec, are now reconsidering their use of the firm, plunging KPMG South Africa into a state of uncertainty and instability.

The reputation and future of KMPG suffered further blows when Finance Minister Gigaba called on companies and other stakeholders to join hands and “(root) out bad elements” that undermine the South African economy.

“It is therefore, warranted and critical that the relevant law enforcements and bodies such as the Independent Regulatory Board for Auditors look into this matter to identify and sanction those responsible for any wrong-doing,” Gigaba said in a statement.

Shortly after Gigaba’s statement, the National Assembly’s medical-insurance plan also said it had decided to drop KPMG.

While Finance Minister Gigaba called on government departments to review their work with KPMG, the Democratic Alliance has also vowed to review KPMG’s contracts in the municipalities that it runs.

KPMG International said last week that it would approach legal help to conduct an independent investigation into the work its South African firm did for the Gupta family.

Storie nommer 2

Zizi K odwa

Dat die bloed op die grond by KPMG selfs die ANC geruk het, was gister duidelik toe Zizi Kodwa, die party se hoofwoordvoerder, in sosiale media gesê het dit bewys die #GuptaLeaks is geen versinsel nie.

Trevor Hoole, uitvoerende hoof van die ouditeursfirma in SuidAfrika, en ’n rits ander hoë bestuurslui en selfs vennote het gister op hul swaard geval oor die skandaal wat om KPMG Suid-Afrika losgebars het.

Die skandaal spruit uit die #GuptaLeaks, e-posboodskappe met verdoemende inligting oor die Gupta-familie wat uitgelek het.

“Die bloedbad by KPMG is ’n bewys dat die #GuptaLeaks ondersoek moet word en dat dit nie as ’n versinsel afgemaak kan word nie,” het Kodwa getwiet.

Een van die belangrikste uitvloeisels van KPMG se verklaring gister was die erkenning dat Pravin Gordhan, voormalige minister van finansies, nie bewus was van die sogenaamde “rogue unit”, ’n geheime eenheid wat in die SuidAfrikaanse Inkomstediens (SAID) tot stand gekom het, nie.

KPMG Suid-Afrika het al sy bevindings, gevolgtrekkings en aanbevelings ten opsigte van dié eenheid teruggetrek en aangebied om die R23 miljoen wat hy daarvoor betaal is aan die SAID terug te betaal of aan welsynorganisasies te skenk.

Die verslag het ’n rol gespeel in die politieke ondergang van Gordhan, wat destyds die SAID-kommissaris was.

Die eenheid het na bewering onwettig op vermeende groot belasting oortreders gespioeneer.

KPMG sê in sy mediaverklaring dat sy bevindings en gevolgtrek-

kings in die verslag oor die eenheid op so ’n manier geskryf is dat dit daarop gesinspeel het dat Gordhan geweet het, of moes geweet het, dat dit onwettig was om die eenheid te begin.

“Dit was nie die voorgenome interpretasie van die verslag nie.

“Om dit duidelik te stel: Die bewyse in die dokumentasie wat aan KPMG gegee is, ondersteun nié die interpretasie dat mnr. Gordhan geweet het, of moes geweet het, van

die afvallige aard van die eenheid nie,” lui KPMG se verslag.

Gordhan het gisteraand in ’n verklaring gesê hoewel hy die terugtrekking van die verslag verwelkom, is hy verbaas oor die min agting wat KPMG vir sy rol in die “kaping” van die inkomstediens toon (sien kassie).

Benewens Hoole, het Steven Louw as bedryfshoof bedank en Ahmed Jaffer het uitgetree as voorsitter van die direksie.

Daar is ook vyf vennote wat die maatskappy verlaat.

Hulle is Mike Oddy, oudithoof en direksielid; Muhammad Saloojee, belasting hoof en direksie lid; Herman de Beer, forensiese hoof en direksie lid; John Geel, hoof van trans aksie-advies; en Mickey Bove, risiko bestuur s vennoot vir transaksie- advies.

Luidens KPMG se verklaring het die maatskappy besluit om tugstappe te doen teen Jacques Wessels, hoofvennoot vir die oudits van die ongenoteerde Gupta-maatskappye, met die oog daarop om hom af te dank.

Die KPMG-slagting volg nadat die Britse skakelmaatskappy Bell Pottinger die afgelope week in sakeredding geplaas moes word omdat sy kliënte hom een na die ander verlaat weens sy omstrede en rasverdelende veldtog in Suid-Afrika.

Die hele bestuur van SAP Africa is in Julie geskors hangende ’n ondersoek deur die Duitse moedermaatskappy na ’n R100 miljoengunsloon wat glo aan die Guptas betaal is vir Transnet-kontrakte.

Ook dit het uit die #GuptaLeaks-e-posboodskappe geblyk.

KPMG sê in sy mediaverklaring daar was geen onwettige optrede aan sy kant in die werk wat hy vir die Gupta-familie gedoen het nie, maar dat dié familie en sy ondernemings hom in sekere gevalle om die bos gelei het.

Die Guptas was in verskeie gevalle oneerlik of misleidend met die inligting wat hulle aan die ouditfirma verskaf het, sê KPMG in ’n verklaring. Die maatskappy, wat in Maart 2016 as ouditeure van die Gupta-maatskappye bedank het, sê hy moes dit vroeër gedoen het.

“KPMG Suid-Afrika is spyt dat sy verbintenis met die Guptas en hul sakeondernemings vir veels te lank aangehou het.”

Krediet aan,

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Die Burger

Niel Joubert en Elvira Wood