PIC legal head quits following VBS testimony

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The Public Investment Corporation (PIC) informed its board on Friday that its executive head for legal counsel, governance and compliance, Ernest Nesane, had resigned with immediate effect.

The state asset manager, which manages about R2trn of government pension funds, accepted the resignation. 

Nesane testified before the forensic investigation into VBS Mutual Bank earlier this week. Following his evidence, the PIC said it was made aware of "serious allegations of impropriety" against Nesane, who served as one of two PIC-delegated directors on the board of VBS Bank, until the bank was placed under curatorship by the the SA Reserve Bank in March this year.

The other PIC-delegated director on the VBS Board - Paul Magula - was dismissed from the PIC earlier this year. Magula was the executive head: risk management for the PIC.

The PIC instituted a disciplinary inquiry against Magula in relation to the performance of his duties. He was subjected to a disciplinary hearing, which was presided over by an independent senior counsel. After being found guilty on all charges, Magula was dismissed.

"The PIC is concerned about the developments that have come to light since the commencement of the VBS inquiry and more so that two of its former employees have been implicated of impropriety in their personal capacity," read the statement.

It said it had resolved to appoint a forensic investigation to probe all transactions in relation to its investment in VBS Mutual Bank." The PIC is a shareholder in VBS, holding approximately 25% of the company’s equity.

"As company directors and PIC executives, both Nesane and Magula were entrusted with a duty of care to ensure that the institution and its business practices apply the highest standards of ethics and good corporate governance," the PIC said in its statement.

The asset manager said it had noted media references in an affidavit by the VBS curator that an unnamed PIC executive allegedly received a R5m bribe to facilitate payment of R350m towards VBS. 

The PIC said that, according to its investment records, a revolving credit facility amounting to R350m for VBS was approved in 2015 by the Priority Sector, Small and Medium Enterprise Fund Investment Panel - a sub-committee of the PIC’s Investment Committee. This was almost two years before the alleged bribe, cited in the curator’s affidavit. 

"The PIC fully cooperates with the SA Reserve Bank, the curator, and the forensic investigation instituted by the curator, into VBS. The PIC supports any appropriate action against those responsible for the demise of VBS and those involved in any corrupt practices, including the demand for, the payment of, or accepting of bribes," the PIC said.

"Should there be any proof that a PIC employee has received such a bribe, the PIC will immediately institute the appropriate disciplinary proceedings and report the matter to law enforcement authorities."

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