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KPMG South Africa faces social media fury over false report

South Africa has been shaken by the report that senior KPMG personnel colluded with officials in the South African Revenue Service to create a bogus document which led directly to the firing of former finance minister Pravin Gordhan.

He's issued a statement after the KPMG CEO Trevor Hoole, the company chief operating officer Steven Louw, its chairperson Ahmed Jaffer and five senior executives have resigned over the affair.

The company is now exposed to possible further civil and criminal action, while US authorities have also been informed of possible infringements linked to US law.

Gordhan has issued a statement which has called for further action.

"I note their ‘regret’, but doubt whether this is adequate and proportional to the damage that KPMG has done," he said. "I will be seeking legal advice in this regard." "The witting and over-enthusiastic collaboration of senior KPMG personnel (whether in current employment at KPMG or not) and their collusion with nefarious characters in SARS (South African Revenue Service) in fact directly contributed to ‘state capture’ and gave legitimacy to the victimisation of good, honest professionals and managers. It should and must be remembered that this was about attacking SARS as an institution with the main intention being to capture it.

"This is typical colonial arrogance and KPMG has not done enough. One would have expected KPMG to have the courage to admit, in the face of their own investigation, that the establishment of this unit was in fact legal. This option still remains open to them."

The company could be in even bigger trouble should US authorities begin an immediate investigation. The major issue is that KPMG International picked up that their South African unit, which had been contracted by SARS Commissioner Tom Moyane, was wrong to suggest that Gordhan knew or should have known about the establishment of an intelligence unit in contravention of the rule of law – or what's known in South Africa as the "SARS rogue unit".

This follows the KPMG International offer to repay the money they were paid to compile the bogus report.

“KPMG South Africa has contacted SARS and offered to repay the R23m fee received for the extensive work performed, or to make a donation for the same amount to charity. “In addition to the R23m fee for the SARS report referred to above, KPMG South Africa will also make a donation of R40m into education and anti-corruption not-for-profit organisations. The R40m figure is based on the total fees earned from Gupta-related entities to which KPMG South Africa provided services from 2002,” the company said in a statement.

But that's not placated the former finance minister, and South Africans have reacted with fury. The last company to face this sort of hurricane on social media was Bell Pottinger, the PR firm in London that worked as the Gupta family's spin doctors. They have now formally gone bankrupt as their clients flee in droves following revelations that they concocted race-based messaging to obscure the Gupta family involvement in dubious financial transactions.

Some of the comments on Twitter include a call for KPMG to lose its trading licence and the executives to face criminal charges.

While the company claims that none of its executives knew of the alleged fraud, investigations inside the country over months have revealed a more complex picture.

For example, in June 2017 it was shown that the Free State provincial government picked up most of the tab for a Gupta family wedding at Sun City and KPMG apparently was aware and perhaps was directly implicated in siphoning the money from taxpayers to pay for the wedding.

The KPMG report claims :

"Despite the deficiencies in the audit work, KPMG International found no evidence of dishonesty or unethical behaviour on the part of the audit partners and audit teams working on the audits for the Gupta group of companies. However, the investigation established that management of many Gupta entities responded misleadingly and inadequately to audit teams' inquiries about the nature of related-party relationships and the commercial substance of significant unusual transactions."

Things are going from bad to worse with the news that Barclays South Africa is reviewing its relationship with KPMG.

The Gupta family, who are hiding out in Dubai, have refused to comment on the latest reports.


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