VBS Bank autopsy - court judgment: if you can't explain the cash, you have to pay it back

There is a moment in every scandal when the noise fades. The arrests have been made, the affidavits have been published, the big numbers have been thrown around. And then the liquidators start the very real work of tracing and recovering the money that was stolen or misappropriated.

Six years after more than R2-billion was siphoned from VBS Mutual Bank in what has been described as a “web of corrupt activities”, the story has shifted from exposure and outrage to recovery and accounting.

At its core, the Pollock NO & Others v Mphephu & Others judgment in the High Court in Johannesburg last month is about money flowing out of Vele Investments – the entity at the centre of the VBS scheme – and whether it must be returned.

The answer, in this case, is yes, but it’s important to look at how the court reached that conclusion.

The liquidators argued that more than R17-million paid to the respondents constituted “dispositions without value” – in other words, money that left the system without anything coming back in return.

The respondents – Toni Mphephu (former king of the VhaVenda people) and his nephew, Oscar Thobakgale – did not meaningfully dispute the payments. They were both cited as respondents in the case in their personal capacity and as trustees of the trust account into which the money was paid.

They did not demonstrate what value had been provided. In some instances, they did little more than deny the allegations.

And that is where the case turns, because the court is no longer interested in broad narratives about the VBS scandal. It is interested in specifics, such as what money moved, who received it and what they did or did not give VBS Mutual Bank in return.

At one point, the judgment records that Mphephu admitted to receiving R300,000 a month from Vele Investments “for which he was not expected to give any value”.

There is no need to dress that up, and there is no real way to defend it. Which is why this case signals something bigger than the repayment of R17-million.

The defence that missed the point

The respondents’ attempt to defend the payments leaned heavily on uluvha, or the customary practice of giving gifts to a traditional leader.

It is, on the face of it, a serious argument. South African law recognises customary law and the Constitution explicitly protects it, but the court’s reasoning is revealing.

The defence dealt with gifts of property – vehicles and a house. The case before the court dealt with cash payments, and more importantly, the payments came from a company.

A company, the court pointed out, is a juristic person, which means it cannot practise a custom nor can it participate in a cultural exchange in the way a human can.

That is where the defence’s argument fell apart. Customary law cannot be used to explain corporate cash flows that lack any underlying value.

The court’s impatience with what it called “bare denials” was a clear thread running through last month’s judgment, handed down on 2 March.

The respondents did not produce financial records to show that value had been given. They did not provide detailed explanations of the transactions. They simply denied and, as the ruling shows, this is no longer enough.

The court leans on established case law to make the point: a party must “seriously and unambiguously” engage with the facts. In the absence of that, the presumption stands that the money must be repaid.

This matters because it sets the tone for dozens of similar cases that are still working their way through the system. The burden has shifted. It is no longer the responsibility of the liquidators to prove wrongdoing in broad terms, but has moved to the people who received the money to justify why they were paid or accepted funds.

Even within this structured, legal process, there are still gaps. One of the more striking details in the judgment was the treatment of funds that passed through the attorney’s trust account. Of the R11.9-million that flowed through that account:

• A large portion was used to settle a bond;
• Nearly R3-million was retained as fees; and
• R1.78-million remains unexplained.

No one accounted for it. The court’s response was simple: those involved must repay it.

What about the gogos who put their savings into VBS?

The final question is who actually gets the money back, and the uncomfortable truth is that the gogos who invested their life savings in VBS are unlikely to see any refunds from this court judgment.

When VBS collapsed in 2018, the South African Reserve Bank stepped in to guarantee retail deposits of up to R100,000. This meant that many ordinary depositors – including pensioners who had placed modest savings with the bank – were paid out in full up to that threshold.

Anyone who had more than R100,000 in VBS became a creditor in the liquidation process. Getting their funds back depends on how much money can be clawed back through cases such as this one, and those recoveries have been partial.

Early liquidation dividends were measured in cents in the rand. Even now, years later, the gap between what was lost and what will be recovered remains significant and for many victims, this gap is permanent.

One of the victims, Elisa Mudau, who invested her late husband’s estate in VBS, put it plainly when she spoke to Daily Maverick in July 2024: “Whether he [Tshifiwa Matodzi] gets 15 or 25 years, it makes no difference… We just want our money.”

The court judgment shows a clear conclusion: if you can’t explain the money, you lose it.

Ultimately, Judge Johann Gautschi ruled that R17.29-million would have to be paid back:

• Toni Mphephu was held personally liable to repay about R4.4-million, or the 57 individual payments made to him;
• The Dzata Trust, which was linked to Mphephu and had received money via bond payments and direct transfers, had to repay just more than R8-million;
• Oscar Thobakgale, who acted as attorney, has to repay the R2.99-million that he retained as fees; and
• Mphephu and Thobakgale were found jointly and severally liable to repay the R1.7-million that they were unable or refused to account for.

For the liquidators, that is progress. For the courts, it is justice. But for the gogos who trusted VBS with their savings it is, quite simply, not enough. DM

Neesa Moodley is associate business editor at Daily Maverick.

This story first appeared in our weekly DM168 newspaper, available countrywide for R35.