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Why KPMG Would Rather Ditch Gupta Money Than Risk Reputational Damage

KPMG has opted to terminate an auditing business contract with all Gupta-owned companies as it chooses its reputation over the family’s lucrative business, according to reports

Citing an internal memo sent by KPMG Southern Africa CEO Trevor Hoole to employees, Fin24 reports that the decision to suspend its services to Gupta-owned companies wasn’t related to any audit reasons, but is rather a means for the company to protect itself from any reputational damage that could be caused by the firm’s association with the Guptas.

“The recent media and political interest in the Gupta family, together with comments and questions from various stakeholders . . . has required us to evaluate the continued provision of our services to this group. We have decided that we should terminate our relationship with the group immediately,” Hoole said in the memo.

“I can assure you that this decision was not taken lightly, but in our view the association risk is too great for us to continue. It is with heavy hearts that we have reached our conclusion and there will clearly be financial and potentially other consequenses to this, but we view them as justifiable.”

KPMG’s cutting of ties with the Gupta family comes as the family remains under intense public and political scrutiny over its close friendship with President Jacob Zuma and several allegations of state capture made against the family.

It follows Deputy Finance Minister Mcebisi Jonas’ explosive confirmation two weeks ago that the Gupta brothers had offered him former Finance Minister Nhlanhla Nene’s job before Zuma had even fired him.

Former ANC MP Vytjie Mentor was the first to lift the lid on the Gupta’s alleged state capture, claiming that the Guptas had offered her the position of Public Enterprises Minister following former ANC MP Barbara Hogan’s axing in 2010. Mentor declined the offer, which came with conditions, and the job ultimately went to Malusi Gigaba.

Oakbay Investments, the Gupta’s holding company, confirmed that “KPMG is no longer the auditor for Oakbay Investments” while KPMG Executive Director for Clients and Cectors Carel Smit declined to comment.

“This is a confidential matter between us and our clients,” he was quoted saying.

Gupta company co-founders and chairpersons Ajay and Atul Gupta are at the centre of an ANC investigation to determine whether or not they influence who Zuma appoints to key government positions to ensure business deals are structured around their businesses.

“We welcome this process, which should ultimately allow the truth to be recognised and end this current trial by innuendo and slander. We will fully co-operate with the office of the Secretary General during the information gathering process,” Oakbay Investments said in a statement last week.

KPMG was criticised recently for its report on the alleged SA Revenue Service (Sars) “rogue” unit, creating a standoff between Treasury and the tax collector.

When Finance Minister Pravin Gordhan was reappointed in December, he criticised KPMG over the leaked report. “It’s allegations that have no foundation. They are based on a leaked document that even I haven’t seen,” he said at the time.

On Wednesday, Gordhan said the Sikhakhane Panel finding that the establishment of the unit contravened the National Strategic Intelligence Act was wrong and based on a superficial and clearly mistaken reading of the aforementioned Act.

“As far as I was aware, the unit lawfully performed its functions,” he said. “My legal advice is that the establishment unit was lawful.”

In the KPMG report, which says the creation of the unit was unlawful, it failed to interview the people that were allegedly guilty.

“Their report contains large chunks of text delivered to them in correspondence by a firm of lawyers acting for Sars,” Business Day editor-in-chief Peter Bruce wrote in his column recently. “And then they instructed their own clients that their report must not be used against those people.

“The reputational damage this could do to a brand as big as KPMG is enormous, particularly if, as is possible, this investigation is one day tested in court and found to have no merit,” he said.

source: Destinyman


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