The out-of-court settlement between KPMG and liquidators of VBS Mutual Bank has come into question, after it emerged that the auditing firm has agreed to pay R500 million to liquidators of the now defunct bank.
The liquidators had initially sued KPMG for R864m for its poor work when it was auditing the mutual bank.
The bank lost more than R2 billion, and advocate Terry Motau conducted a forensic investigation into the collapse of the bank.
It emerged this week that an out-of-court settlement was reached between KPMG and liquidators and that the auditing firm will pay R500 million to the liquidators.
Anil Rooplal was appointed liquidator of VBS in 2018 after Motau submitted his damning report.
Independent economic analyst Professor Bonke Dumisa said on Friday there was nothing wrong with liquidators of VBS entering into an out-of-court settlement, as lawyers do reach this stage in any litigation when they feel they may not get what they want.
“I believe this was the case here, the liquidators of VBS did not have a firmer leg to stand on in getting anything higher than R500 million, that is despite the fact that we all agree that what KPMG did at at VBS may be reasonably termed unconscionable conduct,” said Dumisa.
“On the other hand, I find this R500 m out-of-court settlement troublesome because ordinary South Africans may say this is yet another example that rich people do always buy their way out of trouble, especially if the majority of the victims are black, as in the case of VBS.”
Dumisa added that liquidators of VBS felt that if the litigation continued, it could have been prolonged and caused unreasonable delays.
This would have been counter-productive.
“There is no guarantee persisting with demands for more from KPMG could have yielded relatively more money than this R500 m in the long-term,” said Dumisa.
Professor Bheki Mngomezulu, a political analyst from the Nelson Mandela University said there was nothing wrong with an out-of-court settlement between VBS liquidators and KPMG.
However, in the context that this issue was mired in such controversy, there should have been some level of transparency.
“In principle, the process should have been transparent, especially given public interest in the matter. However, two things are worth noting. The secrecy trend has been set by matters which concern the President (Cyril Ramaphosa), where forensic documents are kept from the public eye.
“The law allows parties to settle matters out of court, thereby preventing the public access to the terms of agreement. In short, the decision is legally sound, but politically flawed,” said Mngomezulu.
Several senior officials from VBS and municipalities that invested in the bank were arrested and charged.
The National Prosecuting Authority (NPA) has said 32 people have been arrested and three have been convicted.
The Hawks first made the arrests in 2020, following the forensic report linking them to the looting of the bank.
They have made several appearances in court in the last four years.