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KPMG denies knowing Guptas moved R30m for wedding

Jun 30 2017 21:17
Franz Wild, Bloomberg News

Johannesburg - KPMG South Africa failed to raise alarms when businesses controlled by the Gupta family - friends of President Jacob Zuma - diverted the equivalent of $3.3m of public money to pay for a family wedding and their auditing firm, documents show.

South Africa’s Independent Regulatory Board for Auditors said it will open an investigation.

KPMG was also aware that the family’s companies were categorising the wedding costs as business expenses, meaning they wouldn’t have to pay tax on them, according to emailed communication. The papers are part of a trove of documents known as the Gupta Leaks, and the amaBhungane Centre for Investigative Journalism posted them on its website on Friday with an account of the events. Bloomberg couldn’t independently verify the information.

The unfolding scandal of how the Gupta family used its closeness with Zuma to win billions of rand worth of contracts from state-owned companies and influence government appointments and decisions has led to challenges to the president’s leadership - including failed no-confidence votes - and has weakened the currency.

Global consultancy KPMG’s clean audit of Gupta family companies is at odds with its description of itself on its website as a market leader in money-laundering prevention.  

Moses Kgosana, KPMG South Africa’s then chief executive officer, said by phone on Friday that the auditor hadn’t known about the payments. It would have been obliged to raise them with the Independent Regulatory Board for Auditors, had it known, he said.

Relationship ended

KPMG ended its 15-year relationship with the Gupta family two years ago, after the Office of the Public Protector initiated an investigation into their dealings. KPMG told amaBhungane it was “satisfied that at no stage was independence impaired”. Because of confidentiality constraints, “we cannot respond to your questions and request that you direct the same to our former client”, KPMG said.

KPMG spokesperson Nqubeko Sibiya said he may respond to emailed questions but had no immediate comment. Zuma’s spokesperson, Bongani Ngqulunga, didn’t respond to calls to his mobile phone. Gupta family spokesperson Gary Naidoo didn’t respond to a phone message.

The money for the country’s most high-profile wedding of recent years went from the rural Free State province’s government, via an agricultural project, to bank accounts in the United Arab Emirates and back to Gupta business accounts in South Africa, amaBhungane said.

The wedding was held in the luxury Sun City resort about two hours west of Johannesburg over four days in April and May 2013. On July 31, the family-controlled Linkway Trading sent an invoice for R30m, or $3.3m to another Gupta-controlled company in the UAE called Accurate Investments Ltd. It itemised everything from chocolate truffles to fireworks, according to a copy of the invoice.

Account transfers

Over the next six weeks, a series of transfers from one Gupta-controlled company to another took place. The Guptas’ Estina farming project in the Free State, which had obtained the funds from the provincial government, transferred $5m to UAE bank accounts held by two separate Gupta-controlled companies. Both of them transferred about $3.4m to Accurate, which in turn paid Linkway. The record of transactions is based on a spreadsheet of payments posted by amaBhungane.

Calls to the Free State agricultural department’s media office didn’t connect.

A KPMG audit of Linkway posted by amaBhungane and emails between KPMG and Linkway executives show that the auditors were aware of the payments and didn’t raise any concerns.

The leaked emails also show that Kgosana - who left in 2015 - was one of the wedding guests.

“All this money laundering that has surfaced did not go through the books that KPMG audited,” said Kgosana, who takes over as chairperson of financial-services firm Alexander Forbes Group Holdings on August 31. “There was no way that KPMG could’ve seen the transactions. Hindsight is a wonderful thing.”

The Independent Regulatory Board for Auditors said that news reports about the transactions prompted it to open a probe into KPMG’s audit of Linkway. It added that it had informed both the auditors and the firm of its plan.

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