Banks cracks whips after Auction Alliance scandal

One of South Africa’s big-four banks, FNB, has confirmed that an employee has been suspended pending the outcome of a disciplinary hearing related to allegations of employees receiving kickbacks from auction house Auction Alliance, in return for business.

Both FNB and Investec have drawn on independent auditors to probe claims employees from various banks as well as liquidators and attorneys were on the take to favour Auction Alliance and its founder and former CEO, Rael Levitt.

According to reports, the allegations date back to about 13 years ago based on a paper trail and evidence apparently provided by a number of insiders who decided to break ranks with the auction house.

Investec’s global head of risk, Ciaran Wehlan, says the private bank commissioned the services of auditing firm Deloitte to conduct an investigation which is expected to be completed within the next two or three weeks. “To date there has been no evidence of wrongdoing by any of our employees,” Wehlan said.

FNB on the other hand has suspended one of its employees “pending the outcome of disciplinary procedures”.

Spokesperson and CEO commercial banking, Michael Vacy-Layle, says the institution has also made use of another auditing firm, KPMG, to investigate claims of employee collusion, while conducting its own internal probe.

“The bank has a zero tolerance towards illegal activity and will prosecute every instance. The bank has terminated its dealings with Auction Alliance while the investigation is underway,” Vacy-Layle said in an e-mail.

In its response to queries about progress into investigations of employee involvement in receiving kickbacks from Auction Alliance and Levitt, Standard Bank reiterated in a statement: “The Standard Bank Group is serious about combating fraud and corruption and will endeavor to prevent such activity on an ongoing basis.”

Attempts to find out whether or not the institution had been successful in uncovering any wrongdoing thus far, were unsuccessful.

Absa’s response was: "Absa was alerted to the alleged involvement of an Absa staff member who left Absa’s employ in 2003, in dealings with Auction Alliance. Absa is investigating these allegations and this investigation is still ongoing. Absa understands that the National Consumer Commission has launched an investigation into allegations against Auction Alliance. Pending the outcome of this investigation, Absa has resolved not to issue any new instructions to Auction Alliance."

Nedbank’s chief risk officer, Philip Wessels, said in response to Moneyweb’s query: “Nedbank has launched a full investigation in the allegations that some of its staff members received irregular undisclosed payments from Auction Alliance. In terms of Nedbank Group policies, staff members have to disclose any conflict of interest and/or payments received from clients and business associated in their personal capacities.  Nedbank has suspended the referral of any new business to Auction Alliance, as previously stated.”

The National Consumer Commission received a complaint from billionaire Wendy Appelbaum about Auction Alliance on January 31 2012 over the conduct of Levitt during the auction of Quoin Rock Estate, formerly owned by Dave King. The auction was held in Stellenbosch on December 10 2011.

Appelbaum alleged that Levitt used a ghost bidder whilst conducting the auction which is contrary to the provisions of section 45 of the Consumer Protection Act.
The allegations of ghost bidders involving Auction Alliance first emerged in the public domain in February 2012 after an exposé by a national newspaper and an investigation by M-Net’s actuality programme, Carte Blanche.

Wehlan says attempts by Investec and Deloitte to obtain evidence from Carte Blanche in order to investigate claims of irregularities by employees, dating back several years, have repeatedly fallen on deaf ears. “They have refused to cooperate.”

Transcripts of the programme have also been removed from the Carte Blanche website. Asked why this was the case and why it was reluctant to provide evidence, the channel replied:  “For the purposes of protecting our sources Carte Blanche has declined to share the information we have. We gave ample evidence on air; we are confident the bank is capable of investigating this further as the evidence required is not difficult to find.”

Author: Micel Schnehage

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