EDINBURGH — After months of public pressure, Big Four accounting firm KPMG has finally moved to apologise for its role in state capture and corruption. It has also axed a senior employee and indicates that more heads will follow. Until now, KPMG has been unrepentant in the public domain about evidence that it watched as a Gupta entity used taxpayers’ money to pay for a lavish private family wedding – and then, in an additional blow to taxpayers’, allowed the Guptas to dodge tax on the money. Senior KPMG employees attended the Gupta wedding at Sun City. Many of KPMG’s clients have supported KPMG as has the Institute of Directors. However, South African entrepreneur Magda Wierzycka recently fired KPMG as auditors to her group, Sygnia, because KPMG “looked the other way” as the Guptas raided state coffers. KPMG has consistently ignored requests from BizNews for comments and information in connection with its links to the Guptas. Earlier this week, BizNews sent an email to a senior international KPMG figure asking for the view of global heads on the role of KPMG in moneylaundering and corruption in South Africa. Today, it has emerged that KPMG International has taken over control of the review of KPMG links with the Gupta family. This is not a moment too soon for KPMG. Many South African shareholders have been writing to companies on a list of 70 high profile clients – published here on BizNews – in which they demand to know why these companies have not yet cut ties with KPMG. – Jackie Cameron
I want to make the following statement to update our clients and the wider public on the steps KPMG is taking to address the issues raised by various stakeholders regarding the work we previously performed for companies related to the Gupta Family (the Group). From the outset we have taken these allegations extremely seriously and the KPMG South Africa Board immediately initiated a comprehensive review to establish the facts regarding the range of professional services we had delivered.
KPMG South Africa has worked collaboratively with KPMG International (KPMGI) on the review thus far. To re-enforce confidence in the rigour of the review, we have determined KPMGI will independently lead all aspects of the comprehensive review. Accordingly, the review team is now being led by an experienced Senior Partner from the KPMG network, reporting directly to KPMGI’s Global Vice Chair of Quality Risk and Regulatory, as well as to the South African Board. Norton Rose Fulbright as external Legal Counsel, with support from various experts including appropriate Senior Counsel, continue to provide independent, expert, external views and opinions. All aspects of our work related to the Gupta Group is being robustly reviewed, including client acceptance, execution and the quality of the work. Where any problems or issues are found, those KPMG individuals responsible will be held accountable.
We also note that KPMG has received criticism regarding the ‘SARS Report’. The review being conducted by KPMGI will be extended to include KPMG’s role in this report. It is important to note that the engagement Partner for the SARS project resigned from KPMG in March 2017. As with the above review, all aspects of the engagement, including client acceptance, execution and the quality of the work will be considered.
While the last audit opinions for the Group were signed for the 28 February 2015 year ends, it is now clear that based on publicly-available information, KPMG should have resigned earlier than March 2016 and should have stopped working for the Gupta companies sooner than we did. In my judgement, we were too slow to recognise the wider public interest related to these matters, given the existing socio-political environment in South Africa. We fully understand that our client acceptance and continuance procedures must be improved to take account of this fact.
That said, neither our review of Linkway Trading, which is the subject of an IRBA investigation, nor the broader review into professional services rendered in the wider Group has, to date, found any evidence that KPMG in any way supported or condoned alleged tax evasion or money laundering, nor that there was any dishonesty by the teams.
At the same time, we fully understand the criticism for the attendance at the Gupta family wedding in 2013 by four KPMG Partners. The South African Firm accepts that the Partners should not have attended this wedding.
Further, our Board has deemed it appropriate to take the following steps pending the conclusion of KPMGI’s comprehensive review:
- The lead audit engagement Partner has been suspended. We reiterate that our review, to date, has not found any evidence of dishonesty on the part of the Partner.
- Two other Partners who were connected to these matters will be relieved of their Board and Executive positions pending the outcome of the comprehensive reviews, and further actions will be taken as appropriate.
On behalf of the Partners and staff at KPMG, I wish to sincerely thank our many clients for allowing a fair and due process to follow and for affording us the opportunity to fully and robustly review this matter.
Mistakes have been made and painful lessons learnt. We commit to take every action necessary to apply these learnings to strengthen the way we work, and help restore the public trust we have earned over more than a century of commitment to the highest professional and ethical standards and dedicated service to South African businesses, the capital market and the wider public interest.
Shareholder activists move to axe KPMG
BizNews visitors have reacted with outrage that 70 major South African companies have not axed KPMG as auditors, while Sygnia CEO Magda Wierzycka fired them for “looking the other way” as the Gupta family tucked in to state funds. Some have written to these companies to ask for action against KPMG.
South Africans have been angered by President Jacob Zuma’s ability to remain in power in the face of a mountain of evidence that he is corrupt and has handed over the levers of power to the Gupta family, yet they stand back and do nothing about the corporate corrupt who have played their part in state capture. Redefine International, a South African-focused property company, is a prime example. A BizNews reader got the following response from it today:
Redefine International says it is ‘very satisfied’ and ‘confident’ about KPMG
“Thank you for your email.
The Group does currently engage the services of the Irish firm of KPMG as its external auditor. We have been very satisfied with the service KPMG has provided the Group and remain confident that the quality of this service will not be compromised by recent events in the media.
Notwithstanding this the Company’s audit committee has, as a matter of best practice for listed entities, confirmed in the 2016 report and accounts that it intends to place the external audit contract to tender during 2018 so this position will be reviewed again at that time.
2nd Floor, 30 Charles II Street, London, SW1Y 4AE
Got a letter to share with BizNews about the KPMG-Gupta scandal? Send it to [email protected].
Keep up with the role of KPMG in state capture here on BizNews:
South African business leaders have turned a blind eye to the role of KPMG in aiding and abetting the Gupta family, which effectively controls the ruling ANC through President Zuma. BizNews publishes the list of companies still doing business with KPMG – even though the Big Four consultancy appears unrepentant about its relationship with the Gupta family.
Magda Wierzycka is the first leader in the business sector to take a firm stand against the big corporates who have benefited from state capture. Wierzycka said in a recent interview on television that she was prepared to be outspoken, even though this is not the done thing in the corporate sector, as she is fully committed to seeing a better future for South Africa. Meanwhile, KPMG leaders appear to have their proverbial heads in the sand, opting for a “silence is golden” approach to managing their reputation in this crisis.
Magda Wierzycka is one of South Africa’s most successful female entrepreneurs, and arguably its most influential in the financial services sector. Wierzycka has also become one of the most outspoken South African CEOs on the subject of corruption and the abuse of the disadvantaged. Earlier this year, her criticism of asset management rival Allan Gray ultimately led to a change in the boardroom of Net1 – a Nasdaq-listed companyaccused of riding on the backs of welfare recipients. Now Wierzycka has taken action against Big Four accounting firm KPMG.
While South Africans react with outrage over the vast and growing body of evidence that multinationals like KPMG and McKinsey have been complicit in the Gupta state capture campaign, the leaders of these companies are sitting pretty it seems. For example, neither the police nor the Financial Intelligence Centreappear to be investigating damning allegations that KPMG was aware of tax evasion and moneylaundering by the Gupta family. What’s more, KPMG CEO Trevor Hoole and team don’t seem to think they owe South African taxpayers a detailed explanation for the involvement of KPMG in Gupta affairs.
Moses Kgosana was about to take the chair at Alexander Forbes Group Holdings when his name emerged in secret emails leaked from the heart of the Gupta family empire. He has been linked to an accounting manoeuvre that facilitated state payment for an extravagant private event. Read more.
Auditing firm KPMG has been thrust into the limelight for its relationship with the Gupta family – Indian immigrants at the centre of a state capture scandal that has engulfed South Africa. KPMG helped the Gupta family divert taxpayers’ funds to pay for an extravagant family wedding at Sun City and went one step further in ripping off taxpayers by helping the family to avoid paying tax on the funds. Read more.