KPMG’s fingerprints all over the Gupta empire

KPMG’s fingerprints are all over the Gupta empire and its controversial deals dating back to 2008‚ TimesLIVE/BusinessLIVE can reveal‚ as an industry probe into the firm’s involvement with the family unfolds.

KPMG’s involvement in auditing Linkway Trading‚ allegedly used to channel R30m of taxpayers’ money to fund the infamous 2013 Sun City Gupta wedding‚ is the subject of an inquiry by the Independent Regulatory Board for Auditors (IRBA).

KPMG has promised to do a “comprehensive” review of its work related to the Guptas.

The auditing firm also gave advice on investments and forming companies in Dubai‚ conducted a due diligence on Ubank — which the Guptas wanted to buy — and provided a tax opinion and audit of VR Laser Services.

This is revealed in leaked emails between the Guptas and their associates. They show the extent to which KPMG provided services to the family and at least 36 linked companies‚ at least until April 2016‚ when their South African CEO‚ Trevor Hoole‚ announced the termination of their services because of “association risk”.

After revelations in the leaked emails‚ Hoole said KPMG would conduct an internal review of work done for Gupta-linked companies.

Indian businessmen, Ajay Gupta (L) and younger brother Atul Gupta, Oakbay (C) MD Jagdish Parekh (R) with Sahara director, Duduzane Zuma (Far Right). File photo Image: Gallo Images

The review‚ by KPMG’s international company‚ will have to look at more than what has been publicly revealed in the leaked Gupta emails.

They show that KPMG provided a wide range of auditing‚ financial and advisory services.

During the provision of financial services to the Guptas‚ several KPMG staff members received potentially questionable invitations to events hosted by the family. Some included 2010 Soccer World Cup match tickets and invitations to the launch of The New Age and Diwali celebrations.

In some cases‚ communication between KPMG staff and the Guptas and their representatives appear to have gone beyond the provision of professional auditing and financial services; some suggest close familiarity.

The Gupta family has been implicated in numerous “state capture” allegations‚ most notably those associated with state-owned enterprises Eskom‚ Denel‚ Transnet and a dairy project in the Free State.

In the case of the Optimum Coal Mine acquisition‚ which ultimately saw the finance ministry and Eskom waive a R1.5-billion fine due to the power utility‚ and the purchasing of the mine by way of partial state funding‚ KPMG played a key role in what they coined “Project Dragline”.

Similarly‚ KPMG played a key role in the Guptas’ acquisition of Shiva Uranium mine which saw the non-payment of a loan and an ultimate loss to the Independent Development Corporation. KPMG dubbed this “Project Romulus”.

KPMG also acted for the Guptas‚ to an extent‚ in the controversial VR Laser matter‚ which state-owned arms manufacturer Denel exited from recently.

Sygnia CE Magda Wierzycka‚ who has been outspoken about KPMG’s role in the Gupta saga‚ said the firm needed to decide to what extent it wanted to redeem its reputation in the court of public opinion and if that mattered to them.

“If it does‚ the scope [of the review] must be exhaustive and the results transparent‚ including an apology‚” she said.

“KPMG also provided a lot of advisory work to the Guptas (particularly on the Optimum Coal transaction). Hence the scope of any investigation‚ internal or external‚ needs to take into account both audit work and advisory work.”

KPMG‚ in response to questions‚ said the scale and scope of the review was “comprehensive and covers all aspects of our work” related to the Guptas. On whether it would make the findings public‚ KPMG said it would‚ “within legal parameters”.

Since July‚ Sygnia has cut ties with them and the auditors seem likely to lose investment company Deneb — part of the Hosken Consolidated Investments group — after it launched their own review of KPMG’s role as their auditors.

This week the Board of the Institute of Directors in Southern Africa said it was temporarily suspending all co-branded activities with KPMG‚ including dropping the firm as sponsor for its golf day and involvement in the Audit Committee Forum.

IRBA’s complaint for now is focused primarily on the audit of Linkway Trading‚ but it may expand its investigation scope if necessary‚ it said.

If found guilty of wrongdoing‚ IRBA may‚ under the Auditing Profession Act‚ issue a caution or reprimand to KPMG‚ a R200‚000 fine per charge‚ suspend KPMG’s auditors’ rights to practice for a certain period or remove their auditors from South Africa’s register of registered auditors.

KPMG also face global scandals with its audit of Rolls Royce under investigation by the UK accounting watchdog.

It was recently slapped with a US$6.2-million fine over “audit failures” in its audit of Miller Energy Resources.

South African Institute of Chartered Accountants (SAICA) chief executive Trevor Nombembe said the review KPMG was undertaking involved reviewing documents the firm had audited. “They will look at the audit files to ensure that the conclusions arrived at are consistent with the evidence contained within the files.”

Asked if the results had to be shared outside of KPMG‚ Nombembe said:
“They would not necessarily have to share their findings with IRBA‚ although IRBA would have access to these files.”

IRBA said it was in the public interest for KPMG to make its review findings public‚ especially if auditors were transparent about matters which affected the public.

Who paid for the Gupta wedding?

KPMG review of work done for Guptas to be completed by end of month:

Auditing and accounting firm KPMG says a review of work done for the Guptas will be comprehensive and complete by the end of September.

The review team is being led by a senior partner from KPMG International with law firm Norton Rose Fulbright as external counsel.

“The scale and scope is comprehensive and covers all aspects of our work related to the Gupta group‚” said KPMG.

It would report any irregularities unearthed to the authorities if wrongdoing was found.

These are some of the services KPMG rendered to the Guptas‚ according to the leaked emails:

  • Appointed as auditors for Gupta companies including All Craze‚ Oakbay Investments‚ Sahara Systems‚ Westdawn Investments‚ Tegeta Exploration and Resources (2008)
  • Appointed auditor for Islandsite Investments 180 (2009)
  • Provided financial services pertaining to sales and data to Sahara Computers (December 2010);
  • Advisory and financial services relating to the acquisition of Shiva Uranium (March 2011)
  • Advice to the Sahara Group on setting up foreign bank accounts.
  • Auditing services for the Sahara Group (2012 onwards);
  • Financial statements for Oakbay Investments (2012 onwards);
  • Handling of a tax dispute between Sahara and the SA Revenue Services (October 2012); Advisory and financial services to Infinity Media Networks (2013 onwards);
  • Obtaining bank confirmations for Oakbay Investments (2014 onwards);
  • Facilitation of a loan agreement between Wavestone and Oakbay Investments (2013);
  • Conducted audits for Sahara Computers (May 2013);
  • Advisory and other services relating to litigation between Sahara Holding and Q-Soft Technologies (2014);
  • Auditing services for All Craze (2014 onwards);
  • Auditing services for Sahara Distribution (2014 onwards);
  • Auditing services for Sahara Holdings (2014 onwards);
  • Financial statements for Sahara Distribution (2014 onwards)
  • Financial statements for Sahara Computers‚ Sahara Consumables and Sahara Distributions (2014 onwards);
  • Confidentiality agreement between Oakbay and Eternal Flame (May 2014);
  • Confidentiality statement for Before the Wind Investments 220 (October 2014);
  • “Subordination agreements” between Islandsite and Infinity Media Holdings and Islandsite and Vesiana Property Holdings and put together letters of comfort from shareholders (November 2014);
  • Oakbay Resources and Energy listing on the Johannesburg Stock Exchange (November 2014);
  • Tax opinion and audit of VR Laser Services (January 2015);
  • Audit of the Sun City Wedding (September 2014);
  • Audit of Sahara Distribution (April 2015);
  • Due diligence on Ubank (January 2015);
  • Duduzane Zuma’s remuneration at Oakbay Resources and Energy at year end (February 2015);
  • Conducted a peer analysis (March 2015);
  • Checked Sahara Computers’ aircraft and their insurance (April and May 2015);
  • Gave advice to Gupta family members on investments and forming companies in Dubai; gave an opinion on tax implications in the UAE.
  • Drafting of the confidential expression of intention to buy Optimum Coal (July 2015)
  • Due diligence on Optimum Coal called Project Dragline (November 2015)
  • Various correspondence between KPMG and Shaun Blankfield of Glencore (June 2015)
  • Conducted a valuation and put together financials for Gearhouse (August 2015)
  • Audit of LMT Holdings‚ which had a contract with Denel‚ and this landed up in the Guptas’ possession (March 2015)
  • Provided VAT advice for Sahara Computers when it had oversupplied stock to Lenovo;
  • Put together a proposed scope for financial and tax due diligence for the Sarsgrove Dairy called Project Jersey (April 2014)
  • Managed the registration and administration of the TNA Foundation trust‚ free of charge.
  • Provided the Guptas with tax advisory‚ “tax structures and implications” and litigation services throughout the period in question.

– TimesLIVE/BusinessLIVE

Source: TMG Digital.

By: Genevieve Quintal and Graeme Hosken – BusinessLIVE/TimesLIVE

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