'How we looted VBS': Tshifhiwa Matodzi details how the now-defunct bank collapsed

From issuing instructions without authority to promoting unlawful activities in municipalities and investor entities, and creating and abusing suspense accounts within the bank. 

This is how Tshifhiwa Matodzi, former chairperson of the now-defunct VBS Mutual Bank board and executive chairperson of Vele Investments, collapsed VBS. 

As chairperson, Matodzi was involved in falsifying financial records, misleading the board and involving his family members in corrupt activities.

“After becoming chair of the VBS board, I would regularly make requests for loans and/or overdraft increases for use by my companies or those associated with me,” he said in court papers. 

Through this modus operandi, loans would be approved to people whose credit profiles were unacceptable and these practices introduced excessive credit and liquidity risk to VBS.

Matodzi compromised municipal officials through offers of gratification in the formulation and promotion of unlawful activities in municipalities.

He said he operated alone or in cahoots with other participants in and outside the bank in the acquisition of investments from municipalities.

Officials deemed strategic in these entities were encouraged to apply for loans at VBS or  move their banking and loan facilities they held at other banks to VBS.

“The loans to these individuals were granted without following credit policies of VBS and/or ignoring the individual's adverse credit profile.” 

He said this was deliberately designed to ensure the officials were indebted to VBS while they remained employed at their respective entities or even if they moved to other entities or similar positions elsewhere.

Matodzi was involved in a rogue deposit-suspense accounts creation scheme with a few other colleagues in the bank. He said these accounts were the main cause of VBS' collapse through availing non-existent cash to Vele and its entities.

The scheme involved creating fictitious deposits through manipulation of “deposits” into suspense accounts which were later credited to companies owned by him, his associates, certain bank officials and family members.

After creation, these deposits were immediately available for use or withdrawal though no cash was deposited. “This led to VBS running out of cash.”

He then used the money with his accomplices from the suspense account to acquire big companies. This also enabled them to finance their expensive personal lifestyles at the expense of real depositors.

The scheme became out of control due to its easy and simple nature to implement, to the point that the bank lost its ability to effectively perform cash management and liquidity control.

“There were uncontrolled withdrawals of money by us that never existed. The greed by myself involved prioritising my own payment plans over those of legitimate needs of VBS to lend money to qualifying clients or to invest excess money in liquid money markets.” 

Through the creation of the fake deposits, he obtained majority control of the bank through the acquisition of VBS shares.

When Matodzi was involved in falsifying financial records and misleading the board, he participated in the preparation of the financial records for the annual financial statements, the Public Investment Corporation and auditors, misleading them while knowing the true state of affairs. 

His meddling in the executive functions compromised, misled and weakened the board to a point at which it couldn't perform its duties.

Growing up in Thohoyandou, a town in Limpopo, Matodzi assisted his parents at their small general trading shop while he was in high school. He sold paper bags and, in time, made profits. This led to his parents opening a bank account for him at the bank so he could deposit his share of the profits.

After 1995, he studied for a BCom accounting degree at Rand Afrikaans University. During holidays he would visit home and he then observed the deterioration of the bank. 

In his version, this prompted him to find the best way to restore VBS “to what one may call its former glory”.

When shares were advertised in a local newspaper in 2012, he travelled to Venda and inquired about the share subscription which led to his acquisition of 10,000 shares which he purchased for R100,000 using his own money. This is how he first became involved in the bank which he later helped destroy.

Matodzi pleaded guilty in the Pretoria high court to 33 counts, including corruption, theft, fraud, money laundering and racketeering in contravention of the Prevention of Organised Crime Act.

He was sentenced to 15 years on each count. Though the combined sentence amounts to 495 years, the court ordered the sentences to run concurrently. He will serve an effective 15 years' imprisonment.

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