The NPA’s new smart weapon for fighting corruption
The National Prosecuting Authority (NPA) has enhanced its approach to alternative dispute resolution through the development of a cuttingedge policy directive aimed at corporations.
This will significantly strengthen the NPA’s corruption-fighting arsenal and better position us to bring corrupt actors to book. In a country ravaged by corruption that has caused untold socioeconomic harm, this approach will assist in speedily recovering money derived from corruption, so that it can be used for the benefit of our people. Economic recovery is a pressing priority for South Africa and its poor and vulnerable.
With this directive, South Africa joins the global movement towards resolving complex corruption cases, often in collaboration with authorities from other countries. One advantage over traditional trials is that international cases can be resolved among several authorities at the same time.
In the recent case involving German software giant SAP, South Africa has benefited from cooperation with the US department of justice. The world’s primary enforcer of antibribery laws, the US played the leading role in investigating and litigating against SAP. This led to SAP entering a three-year deferred prosecution agreement in a US federal court for conspiracy to violate the Foreign Corrupt Practices Act, a case involving bribes paid in South Africa.
A deferred prosecution agreement is a contract between the US authorities and a company implicated in criminal conduct. The department of justice files charges with the court, but simultaneously requests the prosecution be postponed to allow the company to demonstrate its good faith.
The agreement prescribes that the company will pay a fine, hand over information and improve its anticorruption compliance programme. If, over the next three years, the company complies with the terms, the department of justice will move to dismiss the filed charges. If the company breaches the agreement, prosecutors can restart the case. This three-year period gives significant teeth to resolutions and enforces compliance by firms.
The Zondo state capture commission recommended that South Africa promulgate legislation providing for deferred prosecution agreements. While waiting for legislative reform, with technical support from the Organisation for Economic Cooperation & Development (OECD) and local and international experts, the NPA developed a “corporate alternative dispute resolution” policy directive to provide limited nontrial resolutions.
To be eligible, companies must voluntarily disclose all facts and information related to corruption and related offences, admit full responsibility, return all funds gained from the offences and pay reparations. The firm must also follow a robust compliance-enhancement programme to prevent such criminality from recurring.
Importantly, the resolution is only a decision not to prosecute a corporate entity. Individuals may still be prosecuted and will no longer be able to hide behind corporations to escape personal liability. The resolution provides a framework for corporates that may have unintentionally been drawn into corrupt acts to take responsibility without necessarily jeopardising the entire business and its employees.
Companies will be obliged to name responsible individuals and commit to improving corporate governance and the ethical conduct of employees. The decision not to prosecute the company may be reversed at any stage where there is noncompliance with the terms of a resolution. There is therefore a strong incentive for a company to comply with the resolution and fulfil its undertakings.
These alternative dispute resolutions, or nontrial resolutions, are used extensively in complex multijurisdictional corruption cases. They are one type of public-private co-operation, an approach to combating corruption recommended in the UN Convention Against Corruption. This approach is endorsed by the OECD, and has become the predominant method of enforcement in foreign bribery cases among all 44 signatories of the UN Convention. It offers companies an opportunity to rehabilitate themselves without causing further damage to the countries in which those offences were committed.
Alternative dispute resolutions put the onus on companies to self-police the actions of their staff to avoid being barred from operating or being compromised by prosecution. OECD research demonstrates that corporates that have entered into such agreements significantly enhanced their governance and accountability systems. These approaches serve as both carrot and stick.
One of the most effective uses of a nontrial resolution was in Malaysia, after the plundering of $4.5bn (R85bn) from 1Malaysia Development
Berhad (1MDB), a strategic development agency, in a scheme involving a former head of state, local businessmen, Goldman Sachs, KPMG and Deloitte.
The funds needed to be repaid, with interest, threatening the country’s credit rating. The country entered into nontrial resolutions with the three companies for the repayment of all the money. The former prime minister was sentenced to 12 years in jail. His cronies were also prosecuted. The head of Goldman Sachs Malaysia was fined $45m and sentenced to 10 years in jail. Malaysia is still pursuing additional compensation for the damage done to its economy.
The NPA’s alternative dispute resolution policy directive takes into account our obligations under the constitution. It is also in line with global best practice. There is no doubt that the policy will be challenged in court by those implicated in state capture-related cases. We are confident it will withstand judicial scrutiny.
The NPA recently concluded a landmark resolution with SAP to return more than R2bn to South Africa in restitution for corruption and other offences committed by former directors and employees of its South African subsidiary to secure contracts. The company provided the NPA with information vital to the possible prosecution of the implicated individuals and, as part of the resolution, will continue to do so. The information is currently being analysed.
Without the resolution, we may never have known how the South African employees and directors of this global firm, with operations in more than 130 countries, conspired with corrupt individuals and companies to pay kickbacks in exchange for contracts. We may not have recovered the money that was lost. Now some of those funds will be returned to state-owned entities such as Transnet and Eskom, and to big metros trying to fund their turnaround plans to recover from the effects of state capture.
The dispute resolution policy directive is a significant leap forward in crime fighting, a more sophisticated form of law enforcement that enlists business as a partner to increase corporate accountability in a country that was bled dry during the state capture era.
It enhances the rule of law, and as more companies come forward, it will foster a corporate culture of zero tolerance for corruption and encourage one of increased self-reporting. It will also ensure money is returned. The lives of all South Africans will be improved, especially the poor and vulnerable, as we rebuild our economy. Finally, it will contribute to restoring trust and confidence in our law enforcement agencies.
No doubt the policy will be challenged in court by those implicated in state capture-related cases. We are confident it will withstand judicial scrutiny