Quote of the week

Regard must be had to the higher standard of conduct expected from public officials, and the number of falsehoods that have been put forward by the Public Protector in the course of the litigation.  This conduct included the numerous “misstatements”, like misrepresenting, under oath, her reliance on evidence of economic experts in drawing up the report, failing to provide a complete record, ordered and indexed, so that the contents thereof could be determined, failing to disclose material meetings and then obfuscating the reasons for them and the reasons why they had not been previously disclosed, and generally failing to provide the court with a frank and candid account of her conduct in preparing the report. The punitive aspect of the costs order therefore stands.

KHAMPEPE J and THERON J
Public Protector v South African Reserve Bank (CCT107/18) [2019] ZACC 29 (22 July 2019)
16 October 2018

On the possible criminal prosecution of those allegedly involved in the VBS/Vele scandal

Last week the Reserve Bank released “Volume 1” (suggesting other volumes might follow) of a report entitled “VBS Mutual Bank — The Great Bank Heist”. The report was compiled by a team of investigators led by Advocate Terry Motau (SC). The report does not contain extensive legal analysis of the possible criminal offences committed by participants in the heist and does not make findings of criminal guilt. Rather, it provides a wealth of factual information and concludes that criminal prosecutions should be pursued. In what follows I explore the nature of some of the crimes that may have been committed.

At the time when South Africa’s Constitutional Court declared invalid sections of the South African Police Service Act (which gave the Minister of Police a veto power over which crimes the Directorate for Priority Crime Investigation, known as the Hawks, could investigate), swift action was taken to get rid of the then head of the Hawks, Anwa Dramat.

The judgment – in Helen Suzman Foundation v President of the Republic of South Africa and Others; Glenister v President of the Republic of South Africa and Others – meant that the National Head of the Hawks (at the time, the relatively impartial and fiercely honest Dramat) now had the discretion to decide which of the national priority offences – including corruption – to prioritise for investigation. The Minister of Police was no longer permitted to interfere politically in decisions about who to investigate and prosecute for corruption.

This development must have been viewed with concern by the corrupt politicians and the corrupt business associates who had gathered around these politicians like flies gather around a fresh dog turd. Something had to be done and, soon enough, a solution was found.

The Constitutional Court judgment was handed down on 27 November 2014. By 24 December 2014 Dramat had been suspended, based on (what now appears to have been bogus) allegations published in the Sunday Times about Dramat’s alleged involvement in the illegal rendition of Zimbabwean suspects.

This is just one example of how the criminal justice institutions such as the Hawks and the National Prosecuting Authority (NPA) were deliberately weakened, if not destroyed. This was done to protect corrupt politicians and businessmen and women involved in state capture and other forms of criminality from criminal prosecution and possible long jail sentences. I believe it is at least partly because of the fatal weakening of the Hawks and the NPA that Markus Jooste and others involved in the Steinhoff scandal (and the many other private sector scandals) have not been arrested or prosecuted yet.

It is for the same reason that it is not yet clear how many of the people directly or indirectly implicated in Advocate Terry Motau’s report will ever be prosecuted. The report concludes that there was wide ranging criminality in the conduct of the affairs of both VBS Bank and Vele Investments, that “VBS and Vele have been operated as a single criminal enterprise”, and that “those who have been identified as participating and benefitting from this criminal enterprise be charged and prosecuted”.

The report suggest that the following people ought to be prosecuted for their involvement in this criminal enterprise:

  • those that have been responsible for the fraudulent cover-up constituted by the publication of the fraudulent audited financial statements;
  • those who have stolen money from VBS and Vele;
  • those who benefitted from the receipt of funds through theft or fraud;
  • those who have committed crimes involving corruption, whether as the maker of bribes or as the recipient of bribes; and
  • Those implicated in tax fraud and other tax related crimes.

It is important to take note of a few preliminary points before considering the various denials and half-denials of those implicated in the report.

First, because VBS Bank and Vele Investments have been operated as a single criminal enterprise, and because the report lists 27 names of those who received money from this criminal enterprise either directly or indirectly, it is not a complete denial of the claims in the report if you merely deny that you ever received money directly from VBS. It is a bit like being accused of stealing vegetables from somebody’s garden, then denying that you ever stole tomatoes from that garden. What about the pumpkins, green beans and spinach you took?

Second, those who have directly or indirectly been implicated in the report and may fear criminal prosecution (regardless of how likely this is to happen given the lack of skill and perceived lack of political will at the Hawks and the NPA), find themselves in a difficult situation. They are not sure what they should deny and how careful they should be when they deny something because they do not know what evidence have already been gathered against them.

This is because the Reserve Bank did not publicly release the annexures attached to the report. These annexures remain secret in order not to compromise the criminal investigations that is currently underway. These annexures include: the forensic accountants’ report; a summary of material testimony; transcripts of testimony; and (potentially most incriminating) exhibits in the form of bank statements, details of bank transfers, and other documents.

An implicated person would not want to incriminate him or herself by denying something in a manner that could easily be disproved later with the assistance of evidence already known to investigators. This is perhaps why none of the implicated people have issued a blanket denial to the effect that: “I did not receive an unearned benefit, channelled to me in any way whatsoever, from VBS or Vele, either directly, or indirectly via an intermediary or intermediaries, either into my own account or into another account I have access to.”

The theft and fraud (allegedly committed by those in charge of VBS and Vele investments and by the KPMG auditor who covered up the theft and fraud) are straightforward legal concepts so I need not discuss them here.

But the report raises questions about various possible offences committed in contravention of the Prevention and Combatting of Corrupt Activities Act and the Prevention of Organised Crime Act.

Some people implicated in the report are alleged to have received “commissions” because they assisted VBS to secure unlawful deposits from various municipalities. The allegation is that they abused their positions (as political party officials or as elected officials in municipalities) to secure unlawful deposits for VBS in return for a bribe. If this can be proven, these individuals would be convicted of corruption in contravention of section 3 of the Prevention and Combatting of Corrupt Activities Act.

Section 3 states that you are guilty of corruption if you (a) give or accept a “gratification” with the aim of (b) acting or influencing another person to act in a corrupt manner. You will act in a corrupt manner if, among other things, you abuse a position of authority or abuse your power. The definition is a bit more complicated than this, but at the heart of the crime is the offering of a bribe as an unauthorised or improper inducement to do or not to do anything or to accept a bribe as an improper inducement to do or not to do something.

There is little doubt that both the person offering the “commission” (read bribe) and the person accepting the “commission” (read bribe) could be found guilty of the crime of corruption. The only question is whether enough evidence could be gathered to prove this beyond reasonable doubt and – perhaps more importantly – whether the Hawks and the NPA have the skills and the political will to find such evidence and to prosecute the culprits.

It would also constitute corruption if you directly or indirectly received money from VBS or Vele in exchange for a promise that you would use your office or position to try and protect VBS and or Vele by whatever means from criminal or other investigations. An MP who directly (or indirectly through some front company or account) received money or another benefit from VBS or Vele with the understanding that he or she would to use his or her position as MP to try and protect VBS and/or Vele would also be guilty of corruption.

But what about those individuals who did not pay or receive bribes, but did directly or indirectly (say, through an intermediary) receive money from the criminal enterprise of VBS and/or Vele? Could such individuals be criminally prosecuted? The answer is yes. There are two relevant legal provisions that might be used to prosecute such individuals.

First, section 4 of the Prevention of Organised Crime prohibits money laundering. Money laundering occurs, for example, when you try to disguise the nature, source, location, disposition or movement of the money, while you knew or reasonably ought to have known that the money forms part of the proceeds of unlawful activities. This means if X wishes to give stolen money to Z, and Y agrees to receive the money and then to pass this on to Z, then Y would be guilty of money laundering if he or she knew or reasonably ought to have known that the money was the proceeds of unlawful activity.

But, second, section 6 of the same Act is even more straight forward as it states that any person who acquires; uses; or has possession of, property (including money) and who knows or ought reasonably to have known that it is or forms part of the proceeds of unlawful activities of another person, shall be guilty of an offence. In the case of stolen money, it would not matter that the money was not directly received from the person who stole it – as long as the accused knew or reasonably ought to have known that the money was stolen.

If even half of what is contained in the report is correct, it would be shocking if no one is successfully prosecuted for this heist. But because members of the public have not been provided with the evidence on which the report was based and as it is not clear that the Hawks and the NPA will have the skills and political will to pursue this vigorously, it is not possible for members of the public to say with certainty at this point who (if anyone) will be convicted of criminal offenses for actions related to the VBS/Vele criminal enterprise.

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