THE USE OF CIVIL LAW IN COMBATING CORRUPTION WILLIE HOFMEYR HEAD: SPECIAL INVESTIGATING UNIT

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1 THE USE OF CIVIL LAW IN COMBATING CORRUPTION WILLIE HOFMEYR HEAD: SPECIAL INVESTIGATING UNIT 1. INTRODUCTION In modern societies much of criminal conduct now take place behind closed doors. The bad guys discovered that you do not have to rob or kill somebody in order to steal his money. It is not necessary to leave a blood soaked corpse behind resulting in an emotional hunt to have you prosecuted. The bad guys discovered that in many instances a much richer loot can be misappropriated by acts of corruption with the added advantage that if you cover your tracks well enough, the situation might be that the victim might not even realize that he or she was the victim of crime. The result was that worldwide there has been a tendency of growth in the field of economic crime and corruption. I use the word corruption in the wider sense, meaning not only bribery, but also a wide range of unlawful conduct affecting the state and even institutions in the private sector. New battlefields have therefore been established and new types of weapons are being utilised by the bad guys. 2. THE NORMAL WAY OF COMBATING CORRUPTION The first line of attack in combating corruption is the criminal justice system, and a successful prosecution is certainly first prize. It not only leaves society with a sense of vindication, but it is also a strong deterrent against would-be perpetrators. Practice has, however, shown that the criminal justice system alone does not to contain sufficient weaponry to ensure victory over the perpetrators of corruption. Corruption is normally committed in a clandestine manner to ensure that it is as difficult as possible to discover. Even if it is discovered, complex schemes are used to unsure that it is difficult to prove.

2 The result is that it is often extremely difficult to obtain sufficient evidence to secure a conviction. This problem is compounded by the logical scarcity of eyewitnesses, the need to rely on admissible documentary evidence, the shortage of skilled prosecutors in this field and the burden of having to prove your case beyond a reasonable doubt. The confidence of society is often dented even further because courts often do not impose very serious sentences for economic crime, despite legislation that prescribes a 15 year sentence for economic crime involving more than R Finally, in prison perpetrators are often released from prison long before they have served the sentences imposed by the courts. The result is that the public is left with the perception that the bad guys outgun the authorities and that crime pays. Thus it became clear that society needs more weapons in our arsenal to fight corruption. 3. THE EMPIRE STRIKES BACK One innovation to address this problem was the setting up of the Asset Forfeiture Unit to focus on depriving criminals from their ill-gotten gains. It has made already made a significant impact and has helped to combat the perception that crime pays. Another innovation, and one that is unique in the world, was to set up the Special Investigating Unit, which will form the subject matter of the rest of this presentation. 4. THE SPECIAL INVESTIGATING UNIT (SIU) The innovative concept behind the SIU was to use the process of civil law as a weapon in the fight against corruption. The idea is not to take the place of the criminal justice process, but to supplement it. An example of the advantages that the civil process holds can be found in the well-known matter of OJ Simpson. You will recall that in that matter Simpson was acquitted of murder charges in 2

3 the criminal trial. However, the family of his wife won a subsequent civil case against him by proving that he murdered his wife. This was possible because in the different onus of proof applicable in civil and criminal cases. In a criminal case the state has to prove guilt beyond reasonable doubt, while in a civil case the Plaintiff only has to prove his case on a balance of probabilities. Thus in the Simpson case the evidence was not good enough to prove the case beyond a reasonable doubt, but it was good enough to win the civil case. It is also important that one can use both the civil process and a criminal prosecution at the same time. It is therefore not necessary to make to decide on the one route or the other, and, as in the Simpson case, civil process can be used even after criminal matters have been concluded. There is a common perception that corruption always involves criminal conduct, and can therefore be combated with the criminal justice system. This, however, is not the case. For example, a person may act unlawfully, but may not have the intention to commit the unlawful act. He will be civilly liable, but would not be guilty of a crime. Of course, there are also many cases where you may be convinced that criminal activity took place, but you do not have the evidence to prove this beyond a reasonable doubt. The evidence may, however, be sufficient strong to win a civil case. Let us look at some practical examples in the area of fraud. To convict a person, you need evidence to prove all the elements of this crime. If you fail to prove beyond reasonable doubt that the accused person had the subjective intent to defraud, your prosecution will be fail. In civil proceedings there are, however, a number of further alternatives available: (a) Even if you could not prove subjective intent beyond reasonable doubt you would still be successful if you proved your case on a balance of probabilities; 3

4 (b) If the evidence is such that you are unable to prove subjective intent to defraud, but you can show a negligent misrepresentation, that would constitute a proper cause of action in civil proceedings; (c) Even if you cannot prove intent to defraud or a negligent misrepresentation, you may still be successful in civil action if you could prove on a balance of probabilities that there was an innocent misrepresentation. Civil litigation obviously does not give one the satisfaction of putting perpetrator behind bars. However, through civil law the state can recover assets that have been unlawfully lost, can save state assets from going missing and safeguard state assets which stand a chance of being lost. It should be remembered that perpetrators of corruption almost invariable commit these acts for profit, and in many cases it is most effective to hit them where it hurts, namely in their pockets. Procurement is generally an area where the civil process can be used fruitfully. Procurement for the state is one of the largest areas of business in any country, and by its very nature there is a good deal of scope for corruption. An example is that contracts awarded irregularly can be set aside, as was the case in a matter relating to the privatisation of the payment of social pension in the Eastern Cape. A Provincial Tender Board awarded this contract to two private companies and it was calculated that the cost of this tender award would amount to approximately R400 million. Many allegations were made regarding the process followed in awarding this tender and there were also many allegations relating to unlawful and / or criminal behaviour by certain parties. Ultimately no evidence could be found which would justify any criminal prosecutions. However, more than sufficient evidence was uncovered to enable the SIU to have the contract set aside. Evidence was found that showed that the cheapest tender would have been only R220 million and that, together with a number of other factors, lead to a finding that the Tender Board did not apply its mind properly before making such an award. 4

5 The basis for setting this contract aside and saving the state a large amount was found in a number of different causes of action. These included an allegation that the contract was against the public interest, that statutory procedures were not followed, that the award materially differed from the tender specifications and that the Tender Board did not apply its mind properly during its deliberations. Even though these grounds constituted causes of action in civil law none of them amounted to the criminal conduct. 5. HOW DOES THE SIU WORK? In creating the SIU, the government created an entity which not only can investigate allegations of corruption, but can also institute civil litigation to remedy the situation. The SIU employs people from different disciplines, e.g. former police officers, accountants, computer experts, etc along with a number of lawyers. Following a multi-disciplinary approach, investigations are aim to establish whether civil liability exist. The Act requires that the SIU refer any criminal conduct uncovered by investigations to the prosecutorial authorities. The investigations of the SIU are co-ordinated with other law enforcement agencies to avoid duplication and to ensure that the full combined weight of the law enforcement agencies is used. The SIU is given a number of powers. It is empowered to institute civil litigation and is also given powers of search and seizure. A particularly useful power is the ability to subpoena people to appear before it for questioning or to produce documents At such questionings a member of the Unit can put questions to a potential witness and such witness is compelled to answer all questions put to him. Even if the answers might incriminate the witness, he is still compelled to answer those questions, with the proviso that such evidence could not later be used against such a person in any criminal proceedings. This power is a particularly effective weapon and experience has shown that a fairly high percentage of matters are being settled as early as this questioning stage. The reason is that in those instances where it 5

6 is apparent that somebody has no defence against a claim, a settlement can be reached there and then and the lengthy and sometimes costly further litigation can be avoided. Litigation emanating from the investigations of the SIU takes place before a Special Tribunal. This Tribunal operates in a manner very similar to the High Court and in fact at present uses exactly the same rules conducting proceedings before it. The purpose of having a Special Tribunal is to ensure preference when it comes down to the setting down of matters in order to avoid delays as a result of full court roles. It is suggested that a similar advantage could be obtain from having a specialist division of a High Court or for that matter to have a Specialist Court hearing the matters at hand. 6. CONCLUSION The introduction of the SIU has been very successful. Duly audited reports show that billions of rands have been either recovered or saved through this process. It gives the authorities an extra weapon in this much needed battle against corruption. 6