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KPMG: Redefining the meaning of

‘conflict of interests’

Men occasionally stumble over the truth, but most of them

pick themselves up and hurry off as if nothing ever happened.

– Winston Churchill

Before, during and after the Kebble era, Investec was loyally supported by its auditors, KPMG: ‘audit, tax, advisory,’ which also operates KPMG Services in South Africa, specialising in ‘forensic’ work.


In an era in which regulators have become increasingly jumpy about conflicts of interest, KPMG took the concept and its practice to levels that defy description. Apart from statutes, rules and regulations on the subject, whole books have been written about conflicts of interest.

KPMG had been internal and external auditors at Western Areas throughout the Kebble era from 1997: apparently asleep at the wheel, KPMG had not noticed how R522 million in looted

cash had poured into Western Areas over a number of years, mainly in the latter period of the Kebble era.

Forensic analysis, conducted on behalf of Randgold, in the wake of the Kebble era, would detail how R522 million of illicit cash had rolled into Western Areas. The cash had been generated by selling shares stolen from Randgold, mainly those held in Randgold Resources.

George Poole, one of Brett Kebble’s main helpers, would later confess: ‘I admit to having forged the signature of Brett Kebble to the resolution approving the disposal of Randgold Resources shares. Only the signatures of Brett Kebble, Trish Beale or myself would have appeared on the resolutions. Only Brett Kebble’s or Trish Beale’s signatures would have appeared on the share transfer Crest forms. I forged Brett’s signature on his instruction and am not aware whether or not any other person beside myself was interested to do the same thing’ 

At the time, there would have been no reason for KPMG to have known about Poole’s activities, but even cursory analysis of JCI’s financial situation would have indicated that something was horribly wrong. JCI was always short of cash, yet it was loaning hundreds of millions of rand to Western Areas. And KPMG didn’t raise even the slightest alarm.

As to Western Areas, on the overall score, let’s give KPMG the benefit of the doubt. A company’s auditors are not expected to be anything more than of average intelligence.

KPMG was also internal and external auditors at T-Sec, which, by its own admissions, had laundered hundreds of millions of rand worth of listed shares looted by Kebble and company

(although it claimed that it had no knowledge of the laundering at the time). Apparently fast asleep again, KPMG had not noticed anything less than perfect practices at T-Sec.

Some truly extraordinary things took place at T-Sec, Bossau Beyers ‘Bossie’ Boshoff recalled. Head of the international desk at T-Sec from 2002 to 2006, he counted how T-Sec CEO Peter Henry Gray had said that it was his, Gray’s…



fulltime job to try and fund Brett Kebble all the time. I asked him where all the millions went that we converted for JCI and he told me that Western Areas was a big black hole that JCI poured all its money into.

He then told me that Brett Kebble won’t be in a financial position to in future buy back the shares he sold during the last year under the scheme/agreement. He also said that one of the BEE

partners [Bookmark126] sold the shares that were pledged under the scrip-lending/loan agreements, and that that was putting a very big strain on JCI’s cash flow, as these shares had to be accounted

for and bought back.



It seems pretty unbelievable that KPMG never noticed that T-Sec was nothing more than a thinly disguised boiler room where, over the period of a few years, more than R1 billion in cash was laundered.

KPMG was also auditors at SocGen, which, under then- CEO Peter Henry Gray, had in May 1997 played a material role in funding Brett Kebble’s most significant private financing, via BNC Investments. Significant chunks of this debt would be repaid in the years to come from cash looted from Randgold. SocGen, along with T-Sec, also indulged Kebble in his scriplending

fantasies, where over two years, starting early in 2004, he accumulated massive losses of over R1 billion by selling borrowed shares ‘short’ into bull markets. This debt was settled by the flogging off of millions of Randgold Resources shares that had been purloined from Randgold.

KPMG was also auditors to the JSE Securities Exchange, which responded to all the goings on of the Kebble era as if they simply never happened. It is worth noting that Investec

CEO Stephen Koseff sat on the JSE board of directors, until his sudden resignation in July 2008. After the end of the Kebble era, the JSE appointed KPMG to investigate whether or not the JSE should take any action in relation to the wreckage. It is not known what happened to that particular investigation.

When Investec took effective control of JCI and Randgold in August 2005, KPMG was – inevitably, it would seem – appointed as the new auditors at both JCI and Randgold. The concept of conflict of interest did not seem to feature.

KPMG Services was then appointed as forensic investigators at JCI, as of mid-October 2005. On 30 January 2007, KPMG’s Carl Ballot faced up to just one instance of a clear conflict of interest and boldly told me:

The shareholders of Randgold and JCI appointed us as these companies’ auditors, and subsequently we accepted the further appointment for the forensic audit of JCI (effectively as an

adjunct to the audit) only. We thought that it was inappropriate to be the forensic auditors for both Randgold and JCI, particularly as it was expected that there could be differences of interest in

some of the outcomes that may therefore have presented a conflict of interest. Being the auditors of a shareholder does not preclude us from having accepted this engagement. Indeed, a fundamental part of our business is our whole Client Engagement Acceptance and Continuance business process; in short, if we’d thought that there was any conflict for this engagement, we simply would not have undertaken the work.

No matter how strong the denials, and the justifications, KPMG’s conduct and findings were clearly in the best interests of Investec. There is little doubt that this was not coincidental.

To reiterate, and cover the ground from a slightly different angle: in its 8 May 2006 forensic report for JCI, KPMG Services was unequivocal in its findings that JCI had benefited from assets purloined from Randgold. Within months, KPMG Services completely changed its tune about the Kebble forensics, releasing, on 14 September 2006, a materially amended forensic report. This included a protracted fishing expedition aimed at establishing a legitimate basis for Randgold’s ‘disposal’ of its Randgold Resources shares. A positive outcome, if it were ever to be established, would have suited Investec down to the ground.

Years later, on 1 December 2008, a strongly redacted and reduced version of KPMG Services’ forensic report for JCI was released to the public. This version, signed off by Déan Friedman for KPMG Services, includes a highly detailed nine-page cash flow analysis of CMMS, the 98 per cent JCI subsidiary, from 1 April 2002 to 31 October 2005.

The analysis is pointless, and tells us nothing about what Kebble and company had really been up to. While it does show the highly detailed kind of information that was available, it fails to identify even a single instance where shares and monies were looted.

The nine-page data dump must surely rank as one of the most meaningless pieces of would-be analysis in the history of forensic investigations.

Perhaps most significantly, KPMG Services would (or could) not produce a cash flow analysis showing looted cash that had flowed into JCI from sales of assets belonging to Randgold. Equally, there was no analysis showing where such cash had gone once it had passed through JCI’s fouled hands.

KPMG Services’ 14 September 2006 forensic report was hugely defensive of JCI’s position. On 8 September 2006, JCI had delivered to Randgold a ‘statement of defence’, where JCI portrayed itself as the perfect innocent:

JCI asserts that insofar as Randgold is able to establish that the perpetrators committed unlawful

acts, there is no basis upon which JCI should be held responsible for such unlawful acts...

It was an extraordinary denial, given that JLCO’s forensic reports had shown that looted stock, mainly in Randgold Resources, owned by Randgold, had been used to generate R1.9 billion in illicit cash. Seen in the first instance, most of this cash had gone to JCI and CMMS (a 98 per cent subsidiary of JCI), Western Areas (JCI’s most valuable investment), Brett Kebble (the biggest individual shareholder in JCI) and entities and individuals of his choosing, and Investec.

According to JCI’s ‘statement of defence’, Randgold was owed not a single cent, never mind an apology.