CAPE TOWN - The infamous Gupta wedding is in the spotlight again as the disciplinary hearing into the actions of KPMG auditor, Jacques Wessels comes to light.
Wessels apparently worked on a number of the books of businesses owned by the Gupta family. The KPMG auditor worked on the Linkway Trading accounts and is facing six charges of inappropriate conduct and tax evasion.
These charges were initiated by the Independent Regulatory Board of Auditors (Irba).
According to Fin24, Linkway Trading was accused of diverting funds that were supposed to be used for the Vrede dairy project in order to pay for the lavish Sun City wedding.
In the Irba hearing, it was revealed that there was a massive funds trail between a number of businesses, owned by the Gupta family, that looked unusual or suspect.
Irba said Wessels was "grossly negligent" and lacked diligence when he conducted the audit on the 2013 wedding.
The extravagant wedding for Vega Gupta and Aakash Jahajgarhia came to R30 million. Some of the shocking evidence, that came out of the hearing, was that 55 percent of Linkway's revenue was paid into Accurate Investment, a Dubai-based company.
The wedding also caused Linkway to lose R6.9 million. This loss was then said to be an operating expense according to statements.
Linkway then went on to say that the loss was a result of the cost of sales, according to their annual financial results.
These actions led to Wessels being charged with tax evasion and him being accused of misrepresenting the million-rand loss.
Advocate Azhar Bham, Wessels lead council said his client did not try to deliberately hide the loss and said that Wessels should have been more skeptical about the reason for the loss. He was "naïve".
"What you rely on to draw an inference of dishonesty is not proven. The wedding transaction ought to have raised questions but there was no deliberate attempt to hide anything or act dishonestly," said Bham.
"There is no evidence at all to demonstrate that there was a conduct to collude with a client to hide expenses in order to gain a tax benefit," he said to Irba.
Wessels has pleaded guilty to contravening the auditing regulations in relation to the wedding transactions.
"Wessels concedes that the transaction relating to the wedding function organisation was an unusual transaction, and he failed to evaluate the business rationale for this transaction that was outside the normal course of business to identify whether there might be fraudulent financial reporting or misappropriation of assets," said Irba.
It should be noted that Wessels did attend the wedding at Sun City.
He resigned from KPMG in September 2017, just before the embattled auditing firm could impose a hearing against him.
KPMG SUFFERS
In June KPMG had to let go of 400 staff members due to the loss of lucrative government contracts.
KPMG South Africa chief executive Nhlamulo Dlomu said auditor-general Kimi Makwetu’s decision to sever ties with the firm left some of regional offices nonviable.
“It is important to note that the significant work we did on behalf of the auditor-general was done through our regional offices. The loss of the contract has put the financial viability of these offices at risk, hence the difficult decision we took,” Dlomu said back in June.
KPMG said it had to wind down its operations in Bloemfontein, Mbombela, Polokwane and East London.
The firm has 12 offices across the country. It said it would also consolidate its Pretoria office and Johannesburg operations, charging the restructuring would see it left with more than 130 partners and 2 200 employees in South Africa.
Dlomu said the retrenchments would mostly affect its back office staff, audit unit and advisory unit.
She said staff from its financial services unit – which was fingered in the VBS Mutual Bank scandal – would not be affected. In April Makwetu withdrew all government auditing contracts from KPMG and Nkonki, citing concerns over the firms’ audit standards.
The contracts covered every sphere of government, from municipal to local and provincial. The firm has been battling accusations of facilitating the Guptas’ alleged tax evasion and corruption. Another charge levelled against KPMG relates to a problematic report produced by the firm for South African Revenue Service (Sars).
The discredited report, which KPMG has since withdrawn, claimed that a rogue spy unit was operating within Sars. Iraj Abedian, the chief executive of Pan-African Resources Investment and Research Services said KPMG’s demise was nigh.