One of the stranger moments of the Gupta state capture saga – which is rapidly turning everything that President Jacob Zuma’s controversial buddies touch into dross – is the decision by The Ethics Institute (TEI) to keep their accreditation of KPMG SA’s “ethics and fraud” whistle-blower hotline.
Professor Deon Rossouw, chief executive of TEI, explains that the institute will not withdraw KPMG SA’s accreditation, granted in August, since it is “technically sufficient to ensure that whistleblowers who make use of the line can feel safe knowing their report is confidential”.
The hotline is hosted by KPMG SA on behalf of its clients, so that they can anonymously report to the auditing firm any internal corruption at the client’s company.
It’s not configured to be used internally at KPMG SA for whistle-blowing by its own staff. If as a local KPMG staffer you want to spill beans on your colleague or your boss’s malfeasance, forget about using the hotline.
In the past fortnight KPMG SA has basically admitted to being a Gupta pawn. It has conceded also that its “rogue unit” report for the SA Revenue Service was a work of fiction – a hatchet job produced so that the forces of state capture could get rid of a couple of finance ministers and a swathe of Sars managers, all of whom stood in their way.
We also now know that some junior auditors at KPMG SA had raised red flags over work done for the Guptas, specifically around writing-off the R30 million cost of their Sun City wedding as a business expense. They were slapped down.
Thus it is not irrational to conclude that any whistle-blower at Sars, or any Gupta-controlled company, would similarly have got short shrift when they phoned in their tip-offs to KPMG.
We now know that for all the good their tip-off to the KPMG SA line would have done, they might as well have written it on a mulberry leaf and buried it on a full moon at the bottom of the garden, for the fairies to find.
No matter how correctly the KPMG SA hotline staff might have been at processing the tip-off, at some stage the information would have been passed along to KPMG SA operational staff to handle. There it would have stalled. At worst, it may even have been misused, in cahoots with those accused of malfeasance. The information leaked, fed back to those accused, conceivably might identify the whistle-blower or might allow the culprits to muddy their tracks.
Why would anything have changed? The forced resignation of its top executives, and the firing of a single auditor, does not mean that KPMG SA is suddenly an ethically credible organisation.
Until there has been a complete and transparent investigation by an independent agency, KPMG SA remains tainted. Until KPMG SA comes clean on the degree that it not only ignored auditing rules, but also actively participated in a campaign to assist in state capture, the stench lingers.
KPMG SA’s actions, as with those of UK public relations firm Bell Pottinger, go beyond breaking a few regulations. They verge on treason.
As economist Dr Iraj Abedian said, criticising the failure of bodies to act more decisively over KPMG SA: “You have to go through months and months of labour to prove KPMG SA has done wrong? Give me a break, every high school kid knows that they have done wrong.”
TEI is a highly regarded organisation. It has considerable cachet, which is why corporate clients pay top dollar for its professional services, such as the hotline accreditation. While it might be the hotline that gets the rubber stamp, it is the operator that basks in the implied imprimatur of TEI endorsement.
So it is sophistry by the TEI to seek refuge behind the fig leaf of the KPMG SA’s hotline meeting “technical sufficiency” standards. By such box-ticking approach, even the Mafia’s very own “independent” hotline for snitches could garner the TEI’s seal of approval.
There is inconsistency, too, on its part.
TEI is part of BEN-Africa, the Business Ethics Network Africa. KPMG SA has for years funded the NGO’s work and was to be the main sponsor for this year’s BEN-Africa conference. In response to KPMG SA’s ethical meltdown, the conference has been cancelled and the disgraced auditing firm’s logo and strategic partnership status removed from all BEN-Africa material.
When I argued these points with Rossouw, his response was that TEI endorsement of a KPMG SA independent hotline cannot and should not be seen as an endorsement of KPMG SA.
“The certification does not have any bearing on KPMG SA’s audit, advisory and forensic services, which are implicated in the current scandal. We expressed our condemnation of these unethical practices.
“Can we have the wool pulled over our eyes, as has the entire audit regulatory operation? Yes, that can happen. We are well aware of the dangers of being ‘useful idiots’.
“But the reality is that organisations can and do experience ethical failure. The response to such a failure cannot be to drive them into the ground. It must be to help them put themselves together again.”
All good and well. But if you are an employee from the world of state capture, looking to blow the whistle using the KPMG Ethics and Fraud Hotline, I’d save my breath. Stick to the fiddle, like your criminal colleagues.
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