VBS 101 - from the masterminds to the mass fraud

The effective collapse of VBS Mutual Bank, where at least R1.5bn was found to have been looted, leaving more than 22 000 depositors in the lurch, has revealed explosive and wide-ranging allegations against several individuals.

Investigations into the massive and growing saga are not yet done and more allegations are likely to surface.

VBS was placed under curatorship on March 11 and SizweNtsalubaGobodo Advisory Services (Proprietary) Limited, represented by Anoosh Rooplal, was appointed to deal with this.

“The bank has been the victim of a large-scale fraud that has caused the bank a loss in excess of at least R1 521 925 280.46,” Rooplal said in court papers dated earlier this month.

To try to simplify the complex matter, here is a breakdown of relevant information, including what the bank was meant to be, the key figures allegedly involved in what transpired at the bank, and the alleged fraud that occurred:

VBS Mutual Bank

According to an affidavit by Rooplal, VBS was founded in 1982 and originally operated as the Venda Building Society.

In October 2000, it was granted a permanent bank licence and it is one of three mutual banks in South Africa.

"Unlike ordinary commercial banks, mutual banks, such as VBS, operate on a mutual savings bank model," Raplool said.

"These types of banks are specifically aimed at encouraging individuals to save by making deposits into the bank."

The banks provided benefits in that when depositing funds into the bank, an individual could elect to essentially buy equity in the bank. "A mutual bank is therefore considered attractive to depositors," Rooplal said.

However, in the case of VBS, depositors were instead left fearing if they would be able to access their money.

A week ago the SA Reserve Bank announced that more than 20 000 depositors of VBS would receive their monies as long as the money deposited to the bank did not exceed R100 000. Nedbank facilitated this.

Vele Investments

This company became a majority shareholder of VBS, allegedly through fraudulent means, in March 2017.

Vele Investments was founded by Venda king Toni Mphephu Ramabulana and Ramabulana’s financial adviser Tshifiwa Matodzi, in an overview of Vele Investments previously presented to VBS, said.

The company allegedly benefited from the fraud committed at VBS.

Some of those linked to VBS are also linked to Vele.

The alleged masterminds and middlemen

Three individuals were named by Rooplal as being the “controlling minds” behind the saga.

These individuals are Tshifiwa Matodzi, Robert Madzonga and Andile Ramavhunga.

In his affidavit, Rooplal said Matodzi, the former chair of VBS’s board of directors and also the director and group executive chairman of Vele, was the “controlling mind” and “main architect” behind the fraud scheme.

VBS Mutual Bank chairperson Tshifhiwa Matodzi and

VBS Mutual Bank chairperson Tshifhiwa Matodzi and CEO Andile Ramavhunga during the signing of a partnership between the bank and Twelve Apostles Church in February 2017 . (File photo: Mduduzi Ndzingi, Sowetan, Gallo Images)

Madzonga is a former chief operations officer of VBS and is the group chief executive officer of Vele Investments.

He served as a director of three entities - Insure, Black Label Telecoms and Bonulog - which Rooplal said “benefited directly or indirectly from the fraudulent scheme”.

Ramavhunga is VBS’s chief executive officer.

“[His] involvement in the fraudulent scheme is marked by his acceptance of a R15 million ‘bonus payment’ from Vele shortly after the 5 October 2017 R350 million fictitiously generated deposit into a Vele VBS account,” Rooplal’s affidavit said.

He named two others as being implicated in the matter.

They are Phillip Truter, VBS's chief financial officer; and Phophi Mukhodobwane, VBS’s general head of treasury and capital management.

How it worked

Truter and Mukhodobwane, according to Rooplal, manually created the illusion of deposits being made into VBS.

They, he alleged, had used the bank’s electronic accounting system to create fake general ledger entries which reflected apparent deposits in VBS bank account created by, and for, Vele, as well as Matodzi, Ramavunga and Madzonga.

Rooplal said Truter and Mukhodobwane transferred the apparently deposited funds from a VBS “suspense account” to another VBS account held by one of those allegedly linked to the fraud scheme.

Once these apparent deposits showed in a VBS account, the account holder could draw on the deposit.

“As such, money became available, overdrafts were cleared and funds could be transferred out such accounts,” Rooplal said.

The suspected bribes

Rooplal said that Mukhodobwane had revealed that an account was used “for the convenient purpose of paying bribes using VBS funds in a manner that was not shown in the books”

He said that payments to officials in municipalities, the PIC, as well as the Passenger Rail Agency of SA, could be described as bribes.

“At the starting-end of the illicit fraudulent scheme of looting VBS and to make actual money available, the perpetrators solicited large deposits from organs of state and state-owned enterprises through the payment of bribes,” he said.

Thirteen municipalities which collectively deposited R1 596 909 649.60 with VBS were apparently linked to the bribe-paying account.

An affidavit by Mukhodobwane’s said that he had been instructed by Ramavhunga to speak to another individual about R1.5m that was needed to pay other individuals because they were working to ensure that the Passenger Rail Agency of South Africa (Prasa) placed R1bn with VBS.

Mukhodobwane said Ramavhunga’s words were that the R1.5m was to “unlock the Prasa deal”.

The R1.5m payment was made, according to Mukhodobwane, however Prasa never placed the R1.5bn with VBS.

Spending spree suspicions

Those allegedly involved in the scheme are believed to have used money, made up of deposits from members of the public and municipalities, on themselves.

Rooplal said the funds were “used to fund their lifestyles, purchase immovable property, buy high-end motor vehicles and take up shares and interests in other entities”.

He said that Madzonga had assets, including a sectional title property in Plettenberg Bay that was bought in April 2007 for R2 350 000.

Rooplal said that in March 2017, Madzonga had bought another property for R8 500 000.

A Porsche Cayenne GTS, valued at around R1.4m, and a Porsche 911 GT3 worth about R2.8m, had also been purchased by Madzonga.

"These are the assets I have been able to identify thus far," Rooplal said, referring to Madzonga.

On October 5, 2017, according to Rooplal, a “fictitiously generated deposit of R350m was created” in the account of Vele, which was a client of VBS.

The same day that the account was created, Matodzi and Mukhodobwane held a meeting in Sandton where Mukhodobwane was instructed to pay bonuses.

This included R18m to Matozi, R15m to Ramavhunga, R10m to Mukhodobwane and R5m to Truter.

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