A former risk and compliance executive who was sacked by the Public Investment Corporation (PIC) for failing to protect its interests while he was on the board of VBS Mutual Bank says there was no way he could have known that there was grand scale corruption taking place at the bank.
Paul Magula, who was the executive head of risk and a non-executive director at VBS, was dismissed in April 2018 for poor performance and failing to protect the PIC from risk and financial loss at VBS.
The mutual bank collapsed after its executives and various politically connected people defrauded the bank of close to R1.5-billion, the majority of the money which came from illegal municipal deposits.
Magula was deployed to the VBS board as a non-executive director to protect the PIC’s interests which held a 25% stake in the VBS and had extended a R350-million credit facility to the bank.
“I take responsibility that what happened at the bank was wrong but also there is no way I could have known what was happening [because of] the misrepresentation made to the board through audit reports that were presented to me as a board member,” Magula said on Monday.
Magula was testifying before the PIC commission of inquiry into issues of impropriety at the state asset manager. The commission is headed by retired Judge Lex Mpati who is assisted by former Reserves Bank governor Gil Marcus and investment expert Emmanuel Lediga.
While Magula was sitting on the board of VBS, City Press newspaper reported he had received at least R5-million from the mutual bank’s major shareholder, Vele Investments between December 2016 and February 2018.
City Press reported that in 2017 Magula also received a R4.8-million mortgage loan from VBS. In addition, there were payments totalling R1.75-million paid to Magula between December 2016 and July 2017.
These payments have added to the suspicion that Magula turned a blind eye to what curator Anoosh Rooplal described as “unsophisticated” looting at VBS.
But Magula told the commission that he has never participated in any illegal or fraudulent activities while he was a board member at VBS
“Some of the things like fictitious deposits, fraudulent withdrawals, bribes that are said to have happened at VBS I got to know about when I went to the Prudential Authority’s forensic investigators,” Magula testified.
Instead, he says the VBS charges were made against him while he was already on suspension stemming from issues that he had with former chief executive Dan Matjila and acting chief executive Matshepo More who was the chief financial officer at the time.
Magula was initially charged with poor performance, which he described as a “trumped up” charge.
In his testimony, Magula detailed how his relationship with Matjila deteriorated and how he was investigated for leaking information about the PIC in the wake of the James Nogu emails in September 2017.
The anonymous whistleblower — who went by the Nogu moniker — accused Matjila of using PIC money to fund a company that his alleged girlfriend was linked to as well as securing money from a company that was a recent beneficiary of the PIC.
Magula was one of the executives who was targeted and investigated in Matjila’s quest to uncover the whistleblower.
Magula’s dispute of unfair dismissal is before the Commission for Conciliation, Mediation and Arbitration (CCMA). He said that the PIC has contacted his lawyers on several occasions asking to settle the dispute outside of the CCMA.
“I have insisted that I don’t want any payout or negotiations [but] rather be reinstated in my job,” said Magula.
The commission did not question Magula further on VBS due to ongoing police investigations which are now at an advanced stage.