Why PIC’s execs got the bullet
The departure of two executives from the state-owned pension fund manager in recent weeks is linked to the bank scandal. The FM has uncovered disturbing deals involving these executives
The sudden departure of two executives of the Public Investment Corp (PIC), casualties of the widening VBS Mutual Bank corruption scandal, has raised new concerns over the way in which the continent’s largest pension fund manager is being run.
For PIC CEO Daniel Matjila, this could hardly have come at a worse time, as two political parties — the UDM and the DA — have called for his suspension and a forensic probe into how the institution is being managed.
The PIC played a pivotal role at VBS: besides lending the bank R350m, it also holds a 25.26% stake in the institution. The money this represents all but vanished when the bank was placed under curatorship in March.
Ernest Nesane, the executive legal head of the PIC, resigned with immediate effect last week after forensic investigator Terry Motau notified the PIC of "serious allegations of impropriety" against him. Nesane had been summoned to testify by Motau, who has been tasked with establishing why the bank collapsed.
Back in April, the PIC had fired another executive, Paul Magula, for poor performance, according to the asset manager.
Magula, the executive head for risk management, and Nesane were the PIC’s representatives on the VBS board. Magula chaired the credit committee, while Nesane sat on the risk & compliance committee. Together, they were meant to safeguard the interests of civil servants whose pensions were invested in the bank.
The obvious question is: how did Nesane and Magula fail to notice what curator Anoosh Rooplal has described as a "fraudulent scheme of epic proportions" that led to as much as R1.5bn of the bank’s R2bn in assets being siphoned off?
The alleged bribe, said to have been delivered by helicopter ‘to a PIC executive’, was meant to grease the wheels
This is especially pertinent, given Rooplal’s contention that the fraud was "pervasive" but "unsophisticated".
The answer, it would seem, lies in the movement of cash from VBS to various entities linked to its directors, including those linked to PIC representatives.
On Tuesday, the high court will hear Rooplal’s urgent application to sequestrate the estate of Vele Investments, VBS’s 53% shareholder, as well as the personal estates of certain of the bank’s directors.
It is ironic that Vele became VBS’s largest shareholder only through a series of allegedly fictitious transactions — false entries that were made in VBS’s accounts to show money had changed hands.
Rooplal says such schemes were used to siphon R1.5bn from the bank — money that was used for the personal benefit of VBS directors, including the PIC’s Nesane and Magula.
Nesane’s phone was off and he did not respond to text and voice messages seeking comment for this story. Magula could not be reached for comment.
The FM has flagged a number of suspicious deals involving Nesane that appear damning.
A search on the Companies & Intellectual Property Commission (CIPC) database shows him to be a director of Dzata Cleaning & Projects. He is also a former director of entities carrying the Dzata name, including Dzata Group and Dzata Driving School & Removals.
In March last year, the Dzata Trust had an overdraft of R4.9m with VBS. Rooplal says the overdraft was cleared in the last two days of that month through a fictitious deposit of R9m, leaving it with a surplus of R4.1m.
The payment, which court papers say was made on the written instruction of VBS chair Tshifhiwa Matodzi, was one of 35 payments into accounts that together owed R171m. Fictitious deposits amounting to R376.5m were made into these accounts, leaving a net balance of R205m.
Many of these accounts allegedly belong to entities linked to VBS’s top brass, who went on to spend their windfall on luxury cars and fancy properties.
Besides the R9m "gift" given to Nesane, a deed search shows that the Dzata Trust on July 23 2015 bought a 1,059m² property in Dainfern, Johannesburg, for R7.5m. The FM has obtained the title deed, which shows the property was mortgaged through VBS for the full purchase price.
Two independent sources close to the PIC also independently confirmed to the FM that Nesane also received a R7m loan from VBS. It is not clear whether these loans had been disclosed to the asset manager.
When it comes to Magula, a CIPC search does not turn up any directorships linked to the companies that benefited from the fictitious deposits.
However, a deed search shows that Magula received a R4.8m mortgage loan from VBS in 2017 — for a property that he bought in May 2016 for R3.1m. The 1,570m² property in Robindale, Johannesburg, is registered in Magula and his wife Sandra’s names. It is not clear what happened to the remaining R1.7m in the VBS bond.
What it means
It is suggested that nefarious financial dealings went undetected by the PIC’s internal systems
The same sources confirmed to the FM that VBS loans to Magula had totalled R7.4m.
It gets worse. VBS executive Phophi Mukhodobwane — the woman who executed these deals, allegedly at the instruction of Matodzi — has claimed under oath that certain PIC representatives received a R5m cash bribe from Matodzi last year. The alleged bribe, said to have been delivered by helicopter "to a PIC executive", was meant to grease the wheels to ensure speedy assistance from the PIC.
The PIC, however, denies that there was any bribe, saying its only loan exposure to VBS was from a R350m revolving credit facility that had been approved in 2015.
Until now, the PIC hasn’t provided detail on the claims against Nesane. It says it let him go only because he is implicated "in serious allegations of impropriety". But this suggests any nefarious financial dealings went undetected by the PIC’s own internal systems for more than two years.
This explains why the VBS revelations could prove deeply embarrassing for Matjila. It implies that the pension manager is unable to properly monitor employees who are deployed to look after unlisted investments worth more than R100bn.
Publicly, the PIC has promised to co-operate with Motau’s probe into VBS. But the deeper issue is whether its systems are robust enough to protect its R1.9 trillion investment empire from errant employees who are tempted to behave badly.