forensic implications of the corrupt activities act/executive … · 2006. 12. 12. · implications...

Implications of the Corrupt Activities Act/Executive Ethics Act

7 December 2006

FORENSIC

ADVISORY

Herman de BeerDirector, Forensic

Johannesburg, South Africa7 December 2006

Herman de BeerDirector, Forensic

Johannesburg, South Africa7 December 2006

1© 2006 KPMG Services (Proprietary) Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. FSP no. 8484. All rights reserved.

The Legal Framework

� The Prevention and Combating of Corrupt Activities Act, 12 of 2004 (“Corrupt Activities Act”)

− Enacted: 27 April 2004

� The Executive Member’s Ethics Act, 82 of 1998 (“Executive Ethics Act”)

− Enacted: 28 October 1998

� Executive Ethics Code:

− Became effective: 28 July 2000


The Question

� How effective are these in combating corrupt and unethical

conduct?

and more specific

� Are they effective in assisting the prosecution of offenders in

the corruption market?


My Approach

� Practical review of the corruption market

� Determine and review the:

− “Big six classical excuses (defenses) for corrupt/unethical

conduct”

� Do these legislative measures effectively address these

excuses?


The Big Six

1. “It was a loan”

2. “I/He could not influence the process”

3. “There is no prejudice – the best person got the job”

4. “…but everybody is doing it”

5. “He did not intend to corrupt me”

6. “I am not benefiting”

Big crooks use the double-barrel


Corruption Defense 1

“It was a loan”


“It was a loan”

Shaik’s plea:

“…Zuma confided in me…had serious financial problems…was however insistent that he will only accept my assistance on the understanding that whatever funds I may spend on his behalf, will be repaid to me…”


“It was a loan”

Shaik’s evidence

“…all of the payments have been accurately recorded against the loan account between the Deputy President and myself…”



“I/He could not influence the process”



Shaik’s plea:

“On the 18th November 1998 when the preferred bidders were announced, Zuma was an MEC in the Kwa-Zulu Natal Legislature and had no power or duty with regards to the arms acquisition process…”



Shaik’s evidence:

“Mr Zuma could not influence a defense preferred bidder, as he did not.”



“There is no prejudice – the best person got the job”


“There is no prejudice – the best person got the job”

� I recused myself – although I am the HOD/Senior Manager

� The process was checked out by KPMG – independent party

� Nobody lost money – the winning contractor was the best and he is sharing his profits with me



“…but everybody is doing it!”


“…but everybody is doing it!”

� It is excepted and expected practice:

− To eat out

− To socialise

− To go on a hunting trip

− To go on overseas visits

� “So called business courtesies”

� Routine governmental activity – USA – Foreign Corrupt Practices Act



“I did not know he wanted to corrupt me”


“I did not know he wanted to corrupt me”

� The money was intended for my political party

� I never discussed it with him in detail – it just arrived



“I am not benefiting”


“I am not benefiting”

� My wife has her own life, company/business – ask her

� I have no control over my extended family

� I am a “sleeping partner”


The Corrupt Activities Act

� Section 3: General Offence of Corruption

� Section 25: Defenses

� Section 24: Presumptions

� Section 10: Unauthorised gratification

� Section 17: Public officer – private interest in contract/investment

� Section 34: Reporting of suspicion of corruption


Section 3: General offence of corruption

� Any person who:

− Accepts or offers to accept or

− Gives or offers to give

� Any gratification for himself or another

� To act in a manner

− That amounts to illegal, dishonest or biased … conduct

− That amounts to abuse of position

− That amounts to a breach of trust

− That amounts to violation of law/rules

− That achieves an unjustified result

− That achieves improper inducement


Section 3: General offence of corruption

Commentary:

� Gratification definition wide: include loan or any benefit

� Once you agree – committed the crime

� Biased conduct – enough

� Violations of rules sufficient – not necessarily unlawful conduct

� To act in a manner does not require actual action – all intention – proof by inference


Section 24: Presumptions

� If the state can show that it took reasonable steps to link the payment to any unlawful excuse and it can not

� Then – court can presume, in absence of evidence to the contrary, it was done for corrupt reason

Commentary:� Assist prosecutions


Section 25: Defenses

If charged under this act is it not a defense to say:� I did not have the power, authority or opportunity to act

� I did not intend to act

� I failed to act

Commentary� Will blast the majority of the big six


Section 10: Unauthorised gratification

� Any person who is party to employment relationship

� And who accepts or agree to accept

� Any unauthorised gratification for his own /others benefit

� In respect of that party (receiver) doing any act

� In relation to that person’s powers or duties


Section 10: Unauthorised gratification

Commentary:� You don’t have to do anything wrong

� It is the accepting with an intention that is punished

� Unauthorised – must be contained in the organisation/department rules

� Examples:

− “not allowed to accept any gift”

− “must declare it”


Section 17: Private Interest

� Any public officer who acquires or holds a private interest in any:

− Contract

− Investment

� That emanated from or is connected with the public body in which he is employed is guilty of crime

� Condition:

− The conditions of employment must prohibit the acquiring or holding


Section 17: Private Interest

Commentary:� Definition of “Private Interest” – not only shareholding – wider context

� Should be included in employment conditions

� Cancels out many defenses


Section 34: Reporting of suspicion of corruption

� Any person who holds a position of authority

� And who knows or ought to have known or suspect that another committed

− Corruption (any crime in CPA)

− Theft/Fraud/Extortion

− Involving more than R100k

� Must report to police official


Section 34: Reporting of suspicion of corruption

Commentary:� Knowledge and suspicion – low threshold

� Personal obligation

� Will make people talk

� Assist with prosecution


Executive Ethics Act

� Section 2: Code of Ethics

� Section 4: Complaints


Section 2/4: Code of Ethics/Complaints

� President issued – Ethics Code – 2000

� Applicable to:

− Cabinet to MEC’s

� Public Protector must investigate breaches

� President refer findings to National Assembly or Provincial Assemblies


Section 2: Code of Ethics

Require:� Act in good faith

� No other paid work

� Avoid conflict of interest

� Not compromise the credibility of office

� Declare financial interests

� Detail – in Code of Ethics

� Failure/False statements – will contribute to Fraud

Presenter’s contact details

Herman de Beer

KPMG Services (Pty) Ltd (South Africa)

+27 011 647-7110

[email protected]

www.kpmg.co.za

forensic implications of the corrupt activities act/executive … · 2006. 12. 12. · implications...

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