How PIC men got paid | Fin24
 
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How PIC men got paid

Jul 15 2018 06:00
Dewald Van Rensburg

Both of the Public Investment Corporation’s (PIC’s) representatives at VBS Mutual Bank were paid millions to look the other way as the bank got looted into the ground by Vele Investments.

And, in a new twist, another VBS non-executive director has been suspended from his day job – the finance boss of the SA Police Service (SAPS).

Paul Magula was fired as executive head of risk at the PIC in April for incompetence.

A senior source in the PIC at the time told City Press it was astonishing that he sat on the VBS board to the bitter end without raising any red flags.

The PIC even put R90m into VBS late last year when the bank conducted a rights issue, an invitation to existing shareholders to buy more shares in the company.

City Press has established a credible reason for this: Magula received at least R5.05m from VBS’s major shareholder, Vele, between December 2016 and February this year. He received these payments while he was a non-executive director of VBS meant to safeguard the interests of the PIC, which is a 25% shareholder in the bank.

Magula also received a R4.8m mortgage from VBS last year.

Reams of bank statements included in VBS curator Anoosh Rooplal’s liquidation application against Vele show that Magula was paid R1.75m between December 2016 and July 2017. The payments are from Vele Investments to “Magula P”.

After that, similar monthly payments began being made to a company called Hekima Capital, which has Magula’s home address as its registered business address. Hekima received monthly payments until February this year, totalling R3.3m.

The payments to Magula and then Hekima, coincidentally, total R5.05m – the same amount that was allegedly given as a bribe to an unnamed “senior PIC executive” in cash, according to Rooplal’s explosive affidavit in support of the liquidation of Vele filed on Friday, July 6.

New evidence

Two days ago, the PIC announced that its other representative at VBS, Ernest Nesane, had resigned after revealing new evidence to the investigators working for the VBS curator. This suggests Nesane was the “senior executive” paid in cash, meaning both PIC men got R5m.

Nesane was the PIC’s executive head for legal counsel, governance and compliance, making the involvement of him and Magula, the PIC head of risk, in the VBS scandal deeply ironic and embarrassing for the continent’s largest asset manager.

This week, Magula told City Press that he never received any cash or payment from VBS, but he would not comment on the bank transfers from Vele to him and Hekima which are visible in documents now before the court.

“I would rather reserve comment. I would like the investigation to proceed. I have given my statement to the investigator,” he said. He did say that Hekima was an “advisory company”.

While Hekima is registered at Magula’s home address, he was a director of Hekima for only a brief spell in 2016, and the company currently has only one director: Lot Magosha. Magosha told City Press he bought Hekima from Magula and that it was an “empty” shelf company at the time. He claims the money paid to Hekima in monthly instalments were all loans that will be paid back to Vele.

However, in Vele’s bank statements, only one of the Hekima payments is identified as a “loan payment”. Strangely, two Hekima payments are called “salaries”.

Top cop on the scene

Magula and Nesane are not the only non-executive directors of VBS in trouble. The suspended chief financial officer of the SAPS, Phalaphala Avhashoni Ramikosi, is also an independent nonexecutive director at VBS.

He is also a member of the bank’s board audit committee as well as its risk and compliance committee – theoretically, making him one of the key checks on the other VBS executives’ alleged plundering of the bank.

Ramikosi is, however, currently on paid suspension from the police service. SAPS spokesperson Vishnu Naidoo would not reveal why Ramikosi was suspended.

“We will neither be discussing the circumstances nor the merits of his suspension as this is an internal process, and it will be dealt with as such,” Naidoo told City Press.

Ramikosi’s suspension was revealed in Parliament last month by national police commissioner General Khehla Sitole.

“There had been misconduct that he had committed in terms of the regulations, which warranted a suspension,” Sitole told the parliamentary portfolio committee for police on June 14.

Ramikosi obtained a R3.3m mortgage from VBS last year.

Commissions

Last week, Rooplal claimed that VBS used a company called Robvet to pay bribes and commissions to individuals to help keep large deposits, mostly from impoverished municipalities, flowing into VBS to plug the R1.5bn hole left by the bank bosses’ alleged fraud.

An analysis of Robvet’s bank statements shows that the single largest recipient of commissions from VBS was politically connected businessman Kabelo Matsepe. His company, Moshate Investment Group, apparently received R12m between July 2017 and February this year.

Matsepe had said earlier that he had a legitimate capital-raising contract with VBS.

“I really don’t understand why Moshate and other companies were paid from a shelf company,” he told City Press by message.

“It is clear that there might have been governance issues and corruption at the bank of which I was not involved in their operations. I really don’t understand why I am being castigated for assisting what I considered the only black-owned bank in this country.

“I hope law enforcement agencies speed up their investigations and bring to book anyone who might have broken the law.”

Another company which allegedly received significant payments out of Robvet is Gundo Wealth Solutions, which received R2.3m from Robvet and another R1.5m from Vele Investments directly between October 2017 and January this year.

Gundo director Ralliom Razwinane told City Press that Gundo was a registered financial services provider and was “engaged with various financial institutions, including VBS Mutual Bank, in the normal and ordinary course of business”.

“Like others in the market, we are horrified at the reported events unfolding at both VBS and Vele Investments, especially the losses suffered by the poor and vulnerable,” he said.

“We are willing and prepared to cooperate with relevant authorities should we be called upon to do so.”

Regulatory failure 

This week, the SA Reserve Bank washed its hands of the apparently enormous alleged fraud that occurred at VBS. Central bank governor Lesetja Kganyago said at a media briefing that it was not the bank’s job to detect fraud.

“Let’s be clear: what happened was fraud. The regulator is not there to detect if an institution is defrauded ... You can’t ask the bank: ‘Where were you?’” he said.

The Reserve Bank can do very little if both the board of a bank and the external auditors – in this case, KPMG – wilfully mislead it, he said.

The registrar of banks, Kuben Naidoo, accused VBS of regulatory arbitrage – using a less regulated mutual bank licence to conduct the business of a commercial bank.

“For two years we asked them to upgrade to a commercial banking licence,” he said.

National Treasury has now provided a guarantee of R336m to the Reserve Bank. This covers money that the central bank is providing to the curator of VBS so that retail depositors can withdraw up to R100 000 each from VBS. This will cover almost all individuals with money at VBS, which will now be transferred to new Nedbank accounts.

But the municipalities and companies which put money in VBS are still out of luck.

“Municipalities had no business placing deposits with VBS,” said Kganyago. “They knew what they were doing and will have to stand in line.”

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