Seven of the eight men arrested on Wednesday in connection with the multi-billion-rand theft from VBS appeared in court on Thursday, while former CFO Philip Truter is in quarantine due to Covid-19.

Those arrested include former VBS and Vele Investments chairperson Tshifhiwa Matodzi, the alleged “kingpin” of the heist.

The others are Andile Ramavhunga, former VBS chief executive officer, Phophi Mukhodobwane, former VBS general manager for treasury, and former VBS chief financial officer, Truter.

Truter did not appear in court with his co-accused on Thursday as he is in quarantine.

The others are Sipho Malaba, the KPMG engagement partner responsible for the audits of VBS, and three non-executive directors, Ernest Nesane, Paul Magula and Phalaphala Ramikosi.

All eight men, in addition to being charged with the theft and cover-up of VBS funds, were handsomely rewarded for their alleged complicity.

Nesane and Magula were seconded to the VBS board by the Public Investment Corporation (PIC), which held considerable investments in VBS.

Ramikosi, the former chief financial officer of the SAPS, was the chairperson of the VBS audit and risk committee.

All eight men, in addition to being charged with the theft and cover-up of VBS funds, were handsomely rewarded for their alleged complicity.

“At all times relevant to the indictment, accused 1 to 8 were associated in fact and thus formed an enterprise… the accused amongst others made use of the following legally registered entities to wit VBS Mutual Bank, Vele Investments, Vele Petroport Holdings, Venmont Holdings and Robvet to provide continuity of structure for the unlawful activities of the enterprise,” the charge sheet reads in support of the State’s allegation of racketeering.

It reads:

“The theft of the money was covered up through various acts of fraud and money laundering. Members of the enterprise also received and made corrupt payments as indicative of their and/or other persons, known and unknown to the State, participation in the theft, or at the very least, in the acts of fraud that covered up the theft,” the charge sheet reads.

The overarching charge by the State is that 41 of the 47 counts set out a “pattern of racketeering activities” in that the men acted individually or together, committing acts of racketeering in the conduct of the enterprise.

The specific offences outlined in counts 6 to 47 deal with alleged contraventions of the Prevention of Corrupt Activities Act, theft in terms of common law, fraud, money laundering and corruption in that:

Counts 6 to 16 — Theft

Matodzi, Ramavhunga, Truter and Mukhodobwane (accused 1 to 4) created fictitious credits in accounts held by nearly 40 companies totalling R2.2-billion that was siphoned out of VBS bank, through numerous accounts, between April 2016 and March 2018.

The largest “beneficiary” of the theft was Vele Investments – an entity also controlled by Matodzi, through which numerous companies were acquired.

Count 17

Nesane, Magula, Ramikosi and Malaba are accused of theft in that “at all relevant times they were entrusted with the oversight of the system of internal financial control of VBS” and that they were party to the theft of R2.2-billion.

Count 18 to 24 — Fraud

The state alleges fraud against the men for signing off on the financial statements dated 31 March 2017 during that year, knowing full well they did not represent the true picture of VBS’s financial affairs.

There are numerous counts dealing with specifically, the signing off of the director’s statement of responsibility, the audit committee report and the regulatory filings filed with the Prudential Authority (previously the Registrar of Banks).

Count 25 to 40 — Corruption, in terms of the contravention of the Prevention and Combating of Corrupt Activities Act (Precca)

The counts deal with the amounts paid to each of the accused, allegedly in exchange for them remaining silent and complicit in the theft. Matodzi is individually charged with an offence for each amount paid to his co-accused, while the others are charged with contravention of Precca for accepting the payments.

The charge sheet shows the following:

• Accused 1, Matodzi – no amount is mentioned, but it is made clear he authorised and caused payments to be made to the other accused. The Great Bank Heist report by advocate Terry Motau sets out that Matodzi himself took upwards of R300-million.
• Accused 2, Ramavhunga was paid R23.4-million between 9 February 2016 and 2 February 2018.
• Accused 3, Truter was paid R2-million between 20 November 2017 and 15 December 2017. He was promised more than R5-million, which he accepted.
• Accused 4, Mukhodobwane was paid R17-million between 30 March 2017 and 5 October 2017.
• Accused 5, Malaba was paid more than R30-million between 18 April 2016 and 14 September 2017.
• Accused 6, Ramikosi received roughly R750,000.
• Accused 7, Nesane was paid R7.4-million between 1 March 2016 and 2 February 2018.
• Accused 8, Magula was paid R7-million between 25 August 2016 and 2 February 2018.

Count 41 to 47 — Money Laundering in contravention of the Prevention of Organised Crime Act

Accused 2 to 8 are each charged with money laundering for the manner in which the payments were made to them as set out in counts 25 to 40.

The payments were made to companies, the majority of which had “nominee” directors that created the impression the funds were not for their benefit. These companies were shown in Motau’s report to have been fronts only, intended to disguise the payments.

The men told the court on Thursday that they would plead not guilty to charges despite five of those arrested admitting guilt during Motau’s investigation in 2018.

Matodzi and Ramavhunga are the only accused who steadfastly denied before Motau and Werksmans that they were guilty of the bank heist or running and organising the racket. Magula, Nesane, Truter, Ramikosi and Mukhodobwane confessed to some of their own wrongdoing. For example, Magula and Nesane both admitted to Motau of having received illegitimate funds of about R7-million, when in fact they have received about double this amount. Malaba seemed to not have actually confessed, but his problem is that he signed off on #VBS’s positive AFS, lied to the SARB and did not disclose his exposure to KPMG.

Yet, before court, all of them (except Truter, whose plea we have yet to hear) have stated they will plead “not guilty”.

So why the difference and why are the amounts on the NPA’s indictment different from the amounts they actually received?

The short answer to why this has happened is: An attempt to avoid jail.

The NPA’s indictment further accuses the VBS eight of stealing less money than Motau showed they actually received. That is because Motau collated and reported loans, vehicle facilities, mortgage bonds, overdraft facilities and cash payments.

The long answer has to do with Section 140 of the Financial Sector Regulation Act. In short, it states that a person may object to answering questions or to produce evidence on the grounds that the answer or info may incriminate them. When they object, the official conducting the investigation (in this case Motau) may grant them indemnity. This incriminating answer or document is – because of the indemnity – not admissible as evidence against this person in criminal proceedings.

In colloquial terms, the attorneys describe this as a “use indemnity”.

The big “but” is that the state can collate all the evidence independently from Motau’s procedure, prove the guilt of the accused and then present their evidence in a criminal case before court.

That means the state will have to prove their case before court from scratch, and if they don’t, people who pleaded guilty before Motau may be found not guilty by the court.

A different court has, however, already pronounced on most of the VBS eight

in sequestration and liquidation procedures where the bar for guilt and having to pay back the money is quite high.

The NPA’s indictment further accuses the VBS eight of stealing less money than Motau showed they actually received. That is because Motau collated and reported loans, vehicle facilities, mortgage bonds, overdraft facilities and cash payments. Truter, for example, received R5.8-million in banking facilities, but is indicted for only R2-million. Mukhodobwane received more than R30-million in banking facilities and cash, Motau found, but is indicted for only R17.1-million.

That is because:

a) some of the banking facilities were paid back, and
b) the state cherry-picks those instances where they feel they can win.

It’s ultimately a case of identifying which instances the NPA feels most confident about being able to prove in court. DM