Jail time for directors
Three-year precedent won’t hinder NPA prosecuting offenders
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.