Last week’s high court judgment rejecting the National Prosecuting Authority’s (NPA) decision to drop charges against former crime intelligence head Richard Mdluli (he was at one point investigated for fraud, murder and other things) is something investors should pay attention to.
Without effective investigation and prosecution of serious financial crime, our investment markets are doomed. The judgment told us we should be very worried about how well our prosecutors are doing.
It exposes a shocking level of rot in the NPA. The man who made the irrational decision to drop the charges is also the man who is supposed to be in charge of prosecuting white-collar crime in South Africa: the head of the specialised commercial crimes unit, Lawrence Mrwebi. I have often in this column bemoaned the appallingly weak investigation and prosecution of serious financial crimes.
As evidence, consider the disastrous Fidentia prosecution that resulted in little more than a slap on the wrist for former Fidentia CEO J Arthur Brown. The judge in that case was scathing about the quality of the prosecution that had been run.
At least that got to court.
Millions have been lost by investors in companies such as JCI, Blue Financial Services, African Dawn, Alliance Mining, Tigon (which authorities have been trying to prosecute), Pinnacle Point, and more. Despite an abundance of evidence in these cases, usually collected through forensic probes financed by the shareholders who have lost the money, I have yet to find a serious effort by the police to do anything about them.
I know of criminal charges laid, for example, in the Blue Financial Services case, in which not a single investigative step was taken by the police.
Essentially, if you can dress up the theft of hundreds of millions by using some slightly sophisticated financial chicanery, you can get away with it because our investigators and police are too bewildered and obsessed with their own infighting to do anything about it. As an investment community, we should react with outrage. Capital markets depend entirely on respect for contract. Strong investigation and prosecution is essential to maintain that respect. At the moment we don’t have it.
BY STUART THEOBALD
STUART THEOBALD studied at Rhodes University.
Article Source: Business Day