Julia irvine 25 Jun 2018 03:52pm

Former VBS audit partners to sue KPMG SA

Two former partners in KPMG South Africa are to sue the Big Four firm for R30m (£1.67m) each, alleging discrimination and defamation

Two former partners in KPMG South Africa are to sue the Big Four firm for R30m (£1.67m) each, alleging discrimination and defamation

Lawyers for Sipho Malaba and Dumi Tshuma have sent a legal letter to the beleaguered firm which earlier this month underwent a major restructuring as part of a plan to restore public trust in its business following several accounting and auditing scandals and loss of clients.

KPMG says it is aware of the letter and rejects the claims. However, as it explains, since the conduct and performance of the VBS engagement is currently subject to a number of investigations, it would not “be appropriate to comment at this time until these have been appropriately concluded and reported”.

Malaba and Tshuma resigned in April after being told they faced disciplinary charges in connection with VBS Mutual Bank, an audit client which was placed into administration in March this year after it could no longer pay its depositors their money.

In a statement at the time of the resignations, KPMG alleged that Malaba, who was the lead audit partner on the bank’s audit and a member of the firm’s executive committee, and Tshuma had failed to comply with the firm’s policies and procedures relating to the disclosure of relevant financial interests.

“When VBS Bank recently went into curatorship, information arose in relation to these partners that prompted KPMG to launch an independent investigation, conducted by Bowmans [a law firm]. That investigation is ongoing and further action will be taken as appropriate,” it said.

The firm’s chief executive Nhlamulo Dlomu added that the VBS affair had been “a very disappointing episode for KPMG”.

“There can be no tolerance, however, of any conduct that compromises our reputation and we have moved decisively to deal with the situation.”

According to a recent report in the Mail & Guardian, Dlomu sent letters to the two partners on 12 April asking them to respond to allegations of misconduct relating to undisclosed loans from VBS.

The letters alleged that Malaba had a R7.3m mortgage bond and two vehicle finance arrangements totalling R959,000 with the bank.

Malaba has denied any wrongdoing and has accused the firm of not giving him the time to prepare his defence.

In Tshuma’s case, the firm alleged that he had failed to disclose a VBS loan taken out by a company in which his wife was a shareholder. He has also denied the allegations.