Scandal Of The Year: VBS — A Most Unsophisticated Bank Heist
VBS Mutual Bank collapsed this year after being fleeced by the very people entrusted with looking after depositors’
money. There has always been corruption in SA. But in 2018 it reached an Olympic standard as an industrial-scale
looting exercise resulted in a whole bank being stolen in four years. VBS Mutual Bank, based in Thohoyandou,
Limpopo, collapsed this year after being fleeced by the very people entrusted with looking after depositors’ money.
Almost R2bn was stolen by the bank’s directors, senior executives and well-connected politicians.
VBS has taken SA’s corporate corruption gig to a new level. Most alarmingly, the auditors employed by KPMG are
believed to have participated in the feeding frenzy, helping the thieves cover up the crime. It’s not as if the
embattled auditing firm needed any more negative publicity, so the revelations by the Reserve Bank investigators
that KPMG’s senior partner on the audit, Sipho Malaba, received more than R34m in gratuitous payments from
VBS, were a body blow. Those payments were not disclosed to KPMG. When confronted, Malaba resigned, together
with another VBS auditor, Dumi Tshuma. Reclaiming the stolen cash hasn’t been easy. The estates of six of the top
brass of the 36-year-old bank were sequestrated in the high court. About R700m of the cash was used to fuel an
acquisition spree by the bank’s largest shareholder, Vele Investments, which is also being sequestrated.
It is a scandal that has reverberated across the northern provinces. This month the ANC fired 14 mayors in
municipalities across Limpopo and the North West for allegedly instructing officials to deposit municipal funds with
the bank (illegally). Some municipalities lost as much as R234m as VBS ran out of cash and went into business rescue
in March. In Gauteng, the ANC is said to be pressuring two mayors to resign, as it is illegal to deposit municipal
funds with a mutual bank. The ANC has also had to admit it benefited to the tune of more than R2m in sponsorships
by Vele and VBS, which hired buses to ferry members to its December 2017 elective conference.
But it is the EFF that is hurting most from the scandal. The brother of EFF deputy president Floyd Shivambu and a
cousin of EFF leader Julius Malema allegedly received about R20m of the funds looted, according to the report on
VBS written for the Reserve Bank by advocate Terry Motau, and reports in the Daily Maverick.
The municipal officials are said to have received personal inducements, averaging about 2% of the deposits, to place
funds with VBS. In the process, municipalities lost more than R1.6bn in funds deposited with the bank. This cash
was used to pay bribes, fuel Vele’s acquisition spree, for personal vanity projects, or to buy flashy supercars and
multimillion-rand properties.
The looting scheme worked like this: Vele Investments first sought the help of VBS chief technology officer Philip
Truter, who allegedly created fictitious deposits in the bank’s IT system, which were then converted to equity in the
bank. It allowed Vele to become VBS’s largest shareholder, with 26% of the stock. Vele’s nominees were then
appointed to the VBS board, including chair Tshifhiwa Matodzi and CEO Andile Ramavhunga. Then the game really
picked up: more fictitious deposits were created in VBS accounts, while real money was transferred from the pool
of actual deposits to beneficiaries at other banks. Motau called it one of the most unsophisticated bank heists seen
in SA. It’s no understatement.
Source:https://www.businesslive.co.za/fm/features/cover-story/2018-12-21-scandal-of-the-year-vbs--a-most-
unsophisticated-bank-heist/

QUESTION 1 (20)
Using the facts in the case and additional research as the basis for your answer, assess that consequences of the
VBS scandal.
QUESTION 2 (20)
Discuss the role of leadership in the ethical stance of an institution such as VBS. In addition, discuss how an
assessment of the ethical stance could have been assessed.
QUESTION 3 (20)
Keeping the article in mind, discuss the reasons why corporate governance has become prominent in these modern
times.
QUESTION 4 (20)
Would a code of ethics have been helpful in alleviating such a scandal? Substantiate your answer.
QUESTION 5 (20)
Assume that you had a conversation with a member of staff Tshepo in VBS who was experiencing an ethical dilemma
as the fraud was happening within the organisation. Discuss how you would have advised Tshepo about making
sound ethical decisions at the time