VBS fallout extends to insurance industry
JOHANNESBURG – The fallout over the collapse of the VBS Mutual Bank extended to the short-term insurance industry after insurance collector Insure Group found itself under curatorship after it deposited R250 million for an acquisition of a stake in the bank.
Insure was placed under voluntary curatorship last month following a review by the Financial Sector Conduct Authority (FSCA) of the regulatory solvency of Insure Group Managers (IGM). Insure collects from brokers and pays to insurance companies. It is believed to control 75 percent of the country’s gross short-term collections.
Pieter Bezuidenhout, the curator appointed by the authority to take charge of Insure, immediately suspended the company’s chief executive, Charl Cilliers, who the SA Reserve Bank (Sarb) forensic inquiry on VBS fingered as one of the beneficiaries of the R1.9 billion looting of the bank. Advocate Terry Motau said Cilliers unduly pocketed R12m from VBS.
Bezuidenhout said the regulatory solvency concerns raised by the FSCA resulted from the investment of funds by IGM into long-term and illiquid investment, which funds are required to service short-term obligations.
“The curator is currently studying the report to the Sarb to assess the matter and will in due course decide on appropriate action to be taken if required,” Bezuidenhout said.
“It needs to be noted that the allegation against Mr Cilliers is in his personal capacity and not related to any business conduct by IGM.”
IGM was founded in 1991 and was until recently identified as a successfully operating operation.
The group said on its website that it was, directly and indirectly, responsible for the management of up to R17.5bn of premiums as at November 2016.
Motau’s report, titled “The Great Bank Heist”, details how R1.8bn was brazenly stolen from the mutual bank, and was scathing about Cilliers conduct.
“Cilliers is a chartered accountant. His company (IGM), having received the proceeds of a manifest fraud, now finds itself in an untenable position,” Motau said.
He further detailed how the R250m was squandered at an alarming speed. Motau said once the money was fraudulently deposited, IGM made numerous drawdowns on the account over the following months.
“IGM in turn deposited R18m into the account and substantial interest accrued on the account. As at the date of curatorship, a credit balance of about R75m remained in the account. It is clear to me that IGM received the proceeds of a crime,” Motau said.
Phophi Mukhodobwane, the former VBS head of treasury, confessed to investigators that VBS and Vele Investment chairperson Tshifhiwa Matodzi instructed him to create a deposit in favour of Insure in the amount of R250m “through a suspense account”.
Mukhodobwane said no money would be brought into VBS in order to fund the “deposit” of R250m which was to be made available to Insure. Nor would a loan in that amount be made by VBS to Vele.
“With the ‘acquisition’ of the stake in IGM, in the fraudulent manner described above, large short-term deposits were made by IGM to VBS.
“The very first such deposit was in the amount of R80m on March 6, 2017. That sum was almost immediately withdrawn by IGM,” Motau found.