- Three former municipal officials arrested in connection with VBS fraud are accused of making 26 illegal investments into the defunct bank.
- The case sheds new light into how the three allegedly overlooked their fiduciary duties in exchange for home loans, cars and a year-end party.
- The case also links some payments to front companies, used by top VBS officials, to pay kickbacks.
Millions in cash. Shares. Loans to buy homes and luxury cars. Even a year-end staff party. That’s what it took, says the National Prosecuting Authority (NPA), to ensure that three former West Rand District Municipality (WRDM) officials would keep streaming illegal deposits into the now-defunct VBS Mutual Bank.
The three are the latest suspects arrested in connection with the large-scale plunder of VBS. Collectively, they face 20 counts of corruption and two counts of contravening the Municipal Finance Management Act (MFMA). If found guilty, they face mandatory minimum sentences of at least 15 years each.
Former municipal manager David Mokoena, former chief financial officer Romeo Mohaudi and former income and expenditure manager Mzwandile Mkhize are said to have authorised cumulative investments of over R347 million from the municipality into VBS.
During a stint as acting municipal manager at Merafong Municipality, from May 2017 to October 2017, Mohaudi also instructed that R50 million be invested into VBS.
When VBS collapsed, WRDM was left more than R76 million out of pocket, and Merafong more than R50 million short.
Some 20 municipalities made irregular investments into VBS. But the three West Rand officials have a special place in the VBS saga: their municipality was the first source of large-scale funding for what turned out to be a Ponzi scheme.
A 73-page indictment released by the NPA details how the money was irregularly invested, withdrawn, and reinvested in 24 different transactions between February 2015 and March 2018. The indictment confirms much of the detail in a 2019 forensic investigation by the audit firm Deloitte – revealed by amaBhungane in June last year – and adds additional evidence.
Adding to the Deloitte case
Deloitte examined irregular investments by two Gauteng municipalities, WRDM and neighbouring Merafong. The investigation found that, in August 2017, after supporting VBS for two-and-a-half years, Mohaudi and Mkhize were copied into a National Treasury email warning municipalities that deposits made with VBS were in contravention of the MFMA and municipal investment policies.