Jail time for direc­tors

Three-year prece­dent won’t hin­der NPA prose­cut­ing of­fend­ers

Finweek English Edition - - INSIGHT - LEANI WES­SELS leaniw@fin­media24.com

SO THERE WAS a lit­tle hoo-ha about some al­leged car­tel-like be­hav­iour back when you were still the di­rec­tor of a com­pany. The fuss has died down since and you’re safely en­sconced within the perime­ter of Fan­court. Fore! Be­cause the Na­tional Prose­cut­ing Au­thor­ity (NPA) is play­ing ac­cord­ing to a whole dif­fer­ent set of rules to the Competition Com­mis­sion and is champ­ing at the bit to get a few ex-direc­tors into prison.

Web­ber Wentzel lawyers Martin Vers­feld and Daryl Din­g­ley say direc­tors who dish the goods on them­selves to the Competition Com­mis­sion dur­ing car­tel in­ves­ti­ga­tions in re­turn for im­mu­nity can still be pros­e­cuted by the NPA. Im­mu­nity or no im­mu­nity, don’t col­lect your “get out of jail free” card.

This lit­tle loop­hole may have se­ri­ous im­pli­ca­tions for the ef­fec­tive­ness with which the com­mis­sion is tar­get­ing col­lud­ing in­dus­tries. The com­mis­sion has a well­re­sourced team in­ves­ti­gat­ing the com­plex and su­per se­cret go­ings-on of bil­lion rand in­dus­tries. So far the im­mu­nity card has been in­cred­i­bly help­ful in get­ting direc­tors to “fess up” about any col­lu­sion. How­ever, you can bet no­body will be queu­ing to lift their skirts only to face the real risk that in­for­ma­tion may be used against them a few years down the line.

“Un­be­known to them (direc­tors) the ‘con­fes­sional’ the com­mis­sion of­fers isn’t all it ap­pears to be,” says Vers­feld. The lawyers say the NPA can – and in all prob­a­bil­ity will – haul direc­tors back into court (if needs be from the com­fort of their re­tire­ment) for any fraud, corruption or rack­e­teer­ing that took place in com­pa­nies un­der their watch. “The NPA is al­ready in­volved in in­ves­ti­ga­tions of that na­ture,” says Vers­feld.

So what con­sti­tutes fraud, corruption or rack­e­teer­ing? Vers­feld and Din­g­ley use the ex­am­ple of a group of phar­ma­ceu­ti­cal com­pa­nies ten­der­ing for the sup­ply of vac­cines to the State. If the par­ties agree on the pric­ing out­come, the un­sus­pect­ing re­cip­i­ent – in this case, the State – would end up pay­ing more for a prod­uct than it would have had the process been com­pet­i­tive. In short, the State will have been de­frauded. If the self-same par­ties were to re­peat their fraud­u­lent be­hav­iour on five or more sep­a­rate oc­ca­sions it would con­sti­tute rack­e­teer­ing, which car­ries with it the pos­si­bil­ity of life im­pris­on­ment and a penalty for the firms con­cerned of up to R1bn.

Mean­while, en­sure the com­pany you work for has no his­tor­i­cal ex­po­sure to car­tel be­hav­iour, en­sure sys­tems are in place to pre­vent fu­ture trans­gres­sions and com­mis­sion an an­nual au­dit to mon­i­tor that the cur­rent sys­tems in place are ap­pro­pri­ate for the kind of risks you’re will­ing to take. In that re­gard, re­mem­ber that al­though the com­mis­sion can only reach back three years from the date on which the con­duct ceased, the NPA can throw the book at you for con­duct you en­gaged in up to 30 years ago.

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