VBS Mutual Bank was set to further expand to become a commercial bank and several new branches may have opened around the country if those running the organisation had successfully managed to conceal allegations of intense looting.
Two of the bank’s executives in 2017 also wanted to entice state entities to deposit money with it. It was hoped that VBS’s “proven track record of growth” would lure them into doing so.
But it seems these statements, contained in reports by the executives, were made to sugar-coat the alleged reality of VBS - that some at the bank were bribing state entities and that R1.5bn had been looted to fund the lavish lifestyles of the very executives saying the organisation was excelling.
In March 2018 the bank, which was facing a severe liquidity crisis, was placed under curatorship by the SA Reserve Bank. Auditing firm SizweNtsalubaGobodo Advisory Services, represented by Anoosh Rooplal, was appointed as the mutual bank's curator.
The stance of Rooplal and the viewpoints of the two VBS executives are wildly contradictory, with Rooplal saying the bank was grossly plundered causing it to effectively collapse, and the two executives saying the bank was a total success and ready to expand its operations.
Vele Investments, which became a majority shareholder of VBS through alleged fraudulent means in March 2017, is alleged to have also benefited from the suspected fraudulent activities at the bank.
In an affidavit dated earlier this month, Rooplal said that Tshifiwe Matodzi, the former chair of VBS’s board of directors and also the director and group executive chairman of Vele, is described as the “controlling mind” and “main architect” behind the fraud scheme.
Rooplal stated in his affidavit that it was “not without irony” that an overview presented by Vele Investments in 2017 stated, in reference to Matodzi, that: “He is the author of the VBS Mutual Bank turnaround strategy which has proven to be a phenomenal success and he holds the role of Chairman of the Bank.”
But Rooplal said that contrary to this rosy picture, over time VBS had started losing money at a rapid rate.
Stealing money faster than deposits being made
“The deficit created by the perpetrators grew larger; as the perpetrators were effectively stealing money at a greater rate than what was being deposited into VBS,” he said in the affidavit.
“This resulted in the severe liquidity crisis in which VBS finds itself - which the perpetrators fraudulently sought to hide in VBS’ Annual Financial Statements audited by KPMG.”
But in his chairman’s report on VBS, which is included in court papers and which refers to the 2016/2017 financial year, Matodzi had said the bank was managing to excel.
‘VBS is resilient, superior’
“Despite tough conditions in general, VBS has once again proved to be resilient due to superior strategy and execution. A starting point for any bank is the size of its balance sheet,” said Matodzi.
“I am pleased to announce that the Bank did not disappoint, with the balance sheet now above R2 billion from R380 million in 2015. The bank will continue to be aggressive in the growth of its balance sheet.”
Matodzi said that except from municipalities and corporates, support from both the provincial and national public sector, as well as state-owned entities, was mostly non-existent.
“I hope the Bank’s now proven track record of growth will convince these important stakeholders to allocate some of their deposits to the bank,” he said.
However, Rooplal, in his affidavit, alleged that Matodzi and others had implemented underhanded tactics to get state entities to make deposits with the bank.
Rooplal said that to make actual money available, they had “solicited large deposits from organs of State and State-owned enterprises through the payment of bribes.”
Matodzi, meanwhile, in his report had argued that VBS had grown to such an extent it was ready to become a commercial bank.
‘Too big to remain a mutual bank’
“The rapid growth in the Bank’s balance sheet and product diversification has resulted in VBS becoming too big to remain a mutual bank… the process of converting into a commercial bank will commence in the coming financial year,” said Matodzi.
“I would like to thank my fellow board members for the support and guidance during the year and the Chief Executive, his team and their families for their selfless contributions to VBS in 2017.”
Andile Ramavhunga, VBS’s chief executive officer, was also identified by Rooplal as being a key figure in the fraud saga.
In his report on the 2016/217 financial year, Ramavhunga said VBS had posted “solid results” for year under review.
“The main focus of the Bank in the next financial year will be on growing transactional accounts and deposits,” he said. “To this end a number of new branches will be opened in KwaZulu-Natal, North West, Limpopo, Gauteng and Mpumalanga.”
Ramavhunga added that VBS had been on a recruitment drive “for capable staff” and to “address capacity challenges.”
Staff numbers had increased from fewer than 60 in 2013 to 115 in the 2016/2017 financial year. VBS was also hoping to launch a mobile app and improve its internet banking services.
‘No breakdown of internal control’
VBS documents, which form part of the papers referred to in Rooplal’s affidavit, stated that the bank’s finances were above board.
A 2017 audit committee report on VBS, for example, said: “No findings have come to the attention of the committee to indicate that any material breakdown in internal control has occurred during the financial year under review.
In July 2017 KPMG compiled a report on the audit of the bank's financial statements.
It said: “In our opinion, the financial statements present fairly, in all material respects, the financial position of VBS Mutual Bank as at 31 March 2017, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) and the requirements of the Mutual Bank’s Act.”
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