White collar crime

There has been a number of significant corporate failures in South Africa that are attributable to misrepresentations and fraud perpetrated by directors and, in some instances, the controlling mind of entities that are set up with their primary purpose being to fleece unwary investors of their hard earned cash.

One such scheme that sticks in everyone’s memory is the saga of the Masterbond Group of Companies where widows and orphans were literally stripped of their savings and future income streams.  In the words of the Honourable Mr Justice M C Nel in “The Final Report of the Commission of Enquiry into the affairs of the Masterbond Group  and Investor Protection in South Africa” published in April 2001 states in the introduction, “During the late eighties and early nineties the system designed to protect investors in South Africa failed and many investors lost their entire life savings”.   He describes the failure of the Masterbond Group  of Companies which over a number of years attracted about R1 billion by promising secure investments,  as being engaged in highly speculative project s which generated little or no return.    The Nel Commission of Enquiry was appointed following public outcry.

Whilst the legislature has enacted a new Companies Act, the Financial Advisory and Intermediary Services Act and the Prevention and Combatting of Corrupt Activities Act, the system still fails to bring perpetrators  of commercial crime to book.  Possible criminal sanction does not even phase such perpetrators who are simply permitted to devise schemes and rob the unsuspecting public of their hard earned cash and savings

The supreme law of the land, the Constitution of the Republic of South Africa provides that “the objects of the police service are to prevent, combat and investigate crime, to maintain public order, to protect and serve the inhabitants of the Republic and their property, and to uphold and enforce the law”.  The President is tasked with appointing the National Commissioner of the Police Service to control and manage the Police Service.   Despite these provisions, sadly there is little precaution combating and investigation of white collar crime.   Furthermore, there can be no effective prosecution if a proper investigation by properly trained and knowledgeable investigators are carried out.

One prime example is where a director/s of a Company that has been placed into liquidation commits offences in terms of the Companies Act.    When this occurs, the liquidators report the commission of such offices to the Master of the High Court, who refers the matter to the National Prosecuting Authority.    Few if any prosecutions are being investigated but alone prosecutions brought by the National Prosecuting Authority  who are understaffed with enormous case loads and op top of it, underpaid.   The failure of the system to bring perpetrators to book is highlighted by the bringing of the investigation and charges brought against J. Arthur Brown in respect of the Fidentia saga. Despite million of rands having been spent on the prosecution of Mr Brown, prosecutors only managed to secure a fine of R150 000.00 as a penalty as against the hundreds of millions that appear still to be unaccounted for.

With Ponzi  schemes  being the order of the day and countless investors losing millions to commercial fraudsters and con artists, one would expect  that the authorities would make it a priority to remove such fraudsters and con artists from our economy and put them behind bars where they belong.

Thus it seems nothing has really changed since the Nel Commission Report. Despite all the legislative enactments, the system continues to fail investors by permitting perpetrators of white collar crime to ply their trade without consequence.