LAW AND ORDER OP-ED
How the NPA’s new weapon can help combat corporate corruption
The National Prosecuting Authority’s corporate alternative dispute resolution policy directive is set to enhance South Africa’s anti-corruption efforts in line with international best practices.
The National Prosecuting Authority has published its corporate alternative dispute resolution (C-ADR) policy directive to explain how alternative dispute resolution can assist in fighting corruption, allowing companies to self-report.
The publication of this directive demonstrates the NPA’s commitment to the constitutional principle of transparency, as well as its intention to provide clear guidance for companies seeking to self-report and enter into such resolutions.
South Africa recently joined the global movement towards using non-trial resolutions (NTRs) to resolve multijurisdictional corruption cases when it concluded a resolution with the multinational SAP, in terms of its C-ADR directive.
Read more in Daily Maverick: Special Tribunal orders Germany’s SAP to pay R500m in restitution after ‘Gupta-linked’ Eskom contracts
The alternative dispute resolution approach has always been a part of the NPA’s prosecution policy and has been applied in many aspects of the NPA’s work over the years.
However, the C-ADR directive provides clarity to an innovative form of NTR for corporate corruption. This approach is a key step towards broader accountability for corruption as it incentivises companies to:
- Acknowledge responsibility for corruption;
- Make financial restitution;
- Hand over information that can be used to criminally prosecute individuals, especially within the company; and
- Improve their corruption prevention and detection systems (known as anti-corruption compliance programmes).
Prosecution of individuals
NTRs are a type of public-private cooperation, a method prescribed by the UN Convention against Corruption to improve the effectiveness of anti-corruption enforcement. Methods of public-private cooperation require transparent and full disclosure by implicated parties. They are used in serious, complex corruption cases because these are uniquely difficult to solve without help “from the inside”. The legal entity of the company is the “person” on the inside, providing information that can be used to prosecute individuals, including its former directors.
This needs to be clearly understood: The resolution is a decision not to prosecute, only the legal entity. Individual persons, including former directors, will still be investigated and may be prosecuted on the basis of the information or evidence, including that provided by the legal entity.
The use of NTRs has resulted in increased levels of anti-corruption enforcement globally. They are used by many countries including Brazil, Britain, Canada, France, Germany, Kenya, Malaysia and the Netherlands.
NTRs are endorsed by the Organisation for Economic Co-operation and Development, which has released recommendations encouraging member states, of which South Africa is one, to use NTRs to resolve corruption cases in ways that are transparent and accountable. The UN Office on Drugs and Crime has also noted the increasing rate of NTRs and encouraged countries to adopt a principled approach to their use. The NPA has done this by developing a C-ADR policy directive that is in line with international law and the South African Constitution.
The Zondo Commission of Inquiry into Allegations of State Capture also recommended the use of NTR-type approaches, namely deferred prosecution agreements. The Department of Justice and Constitutional Development is in the process of developing this legislation. In the meantime, the National Prosecuting Authority (NPA) must continue with its work and has a duty to innovate, within the current legal framework, to uphold the rule of law, reclaim stolen money fast and prosecute people for serious corruption. There is an added benefit of incentivising enhanced corporate governance, extending the reach of law enforcement beyond agencies themselves.
The use of NTRs enhances broader accountability, ensures immediate results, and sends a clear message that crime does not pay. The criminal justice system needs to follow an often protracted process to prove criminal responsibility in complex multijurisdictional financial crimes. NTRs are typically much quicker to finalise than trials, saving time and resources for the NPA, delivering justice and reclaiming stolen state money sooner.
Among other benefits, the NPA will not incur the high legal costs required to prosecute companies in complex corruption cases which can take many years to conclude. In addition, NTRs support associated criminal investigations into individuals since companies must cooperate with the NPA or the SA Police Service, and provide evidence on the conduct of these individuals. A further advantage is that NTRs incentivise increased voluntary compliance with anti-corruption standards by companies.
Restitution and rehabilitation
NTRs are a more advanced form of justice than punishment — they incorporate elements of restitution and rehabilitation. As a result, companies which may be victims themselves can continue to operate and thus unemployment does not arise as collateral damage if a company closes.
There is a pressing need for the NPA to cooperate with leading enforcers of foreign bribery laws such as the US, UK and France. These countries exercise jurisdiction over companies in all parts of the world. For example, when a company subject to the jurisdiction of the US Department of Justice (DoJ) is implicated in a corruption scandal in another country, this triggers an investigation by the DoJ. The DoJ often makes it a condition of an NTR with the company that it first makes financial restitution to the country in which the offence occurred. This pressure by the DoJ is a critical factor in companies deciding to cooperate and pay back stolen money.
The NPA has opportunities to participate in these multijurisdictional corporate resolutions, “punching above its weight” by cooperating with more powerful countries. A failure by the NPA to take the opportunities on offer to reclaim stolen money and get information about perpetrators would have a seriously negative impact on South Africa’s fight against corruption, in particular, State Capture — a consequence the NPA is not willing to endure.
To participate in these international resolutions, the NPA urgently needed to develop a mechanism to deal specifically with corporate entities within its alternative dispute resolution framework, while the Department of Justice and Constitutional Development developed legislation in terms of which the NPA could accept the money and information that was on offer by the companies. It responded by developing the C-ADR directive.
As stated above, this policy directive is an extension of the National Prosecution Policy, which states that prosecutors may decide not to prosecute a case when it is in the public interest to do so, considering factors such as where the offender has made restitution. In line with the constitutional principle of legality, the C-ADR policy directive provides more specific criteria for prosecutors to decide whether a company has made sufficient restitution for a decision to be made concerning prosecution purposes.
Exemplary cooperation
For a company to benefit from a corporate resolution, it will have to demonstrate exemplary cooperation with the NPA, as well as enhanced internal governance. The company will also have to make appropriate financial restitution and hand over sufficient information to aid the State’s investigations and future prosecutions.
This instrument will not be used for companies where the wrongdoing has been pervasive and is ongoing. The NPA, for instance, may consider whether the company has dismissed implicated directors and taken civil and/or disciplinary steps against them. The company will also have to demonstrate improvements to its anti-corruption compliance programme which prevent and detect misconduct, such as improved data-driven risk detection systems and whistle-blower protection. This instrument is intended for companies that have erred, yet have taken steps that demonstrate the will and capacity to make amends to society and become good corporate citizens.
A criminal conviction — obtained in a trial or a plea bargain — can harm a company’s reputation, causing financial distress and potentially leading to collapse, with disastrous implications for employees and shareholders. Bearing in mind the social and economic consequences of such collapse, the NPA’s C-ADR directive may provide deserving companies with an opportunity to make amends in appropriate cases.
South Africa’s new legal and policy framework is a more holistic approach to combating corruption that addresses multiple priorities at the same time: strengthening the hand of prosecutors and incentivising public-private cooperation, while helping to create the conditions for a thriving economy in which companies uphold better standards of corporate governance.
The C-ADR directive ushers in a new era of partnership between law enforcement and the private sector in combating corruption together for the economic recovery of the country. DM
Adv Ouma Rabaji-Rasethaba is Deputy National Director of Public Prosecutions: AFU, Adv Rodney de Kock is Deputy National Director of Public Prosecutions: NPS, Dr Tebello Thabane is a senior lecturer at the UCT Law Faculty and Colette Ashton is a member of the Advisory Committee on Criminal Procedure Reform Investigation.
Layer upon layer upon layer of new thoughts, new think-tank ‘innovations’, new meetings and new strategies and new rules that amount to absolutely nothing. The NPA exists only on paper and will remain there until someone crumples it up and tosses it. Hopefully their failed Bathoi will also end up in the bin.
The National ‘ANC CADRE CULPRITS’ Protection Authority!
I Rest My Case!
The final admission that our justice system is unable to successfully investigate, prosecute and convict corruption. Something like “we cant detect corruption, if someone points it out we cant properly investigate it, if somehow a complete investigation drops in our laps (e.g. from investigative reporting) we cant properly prosecute it and get a conviction, so please please just confess to your crimes”
Hmmm…. I’m thinking of a case in a company that I worked for at the time. One of the clerical staff had figured out a clever scam that involved reporting the sale of shares by directors, then a few minutes later reporting that they had changed their mind, then doing something with the VAT that was paid back (details are fuzzy now and I’m not an accountant).
This was picked up by another person in the company. The company, to their credit, put protection around the whistle blower because there were credible threats, but the matter was always treated as strictly internal and no disclosure was made other than an eventual charge of embezzlement.
Because, of course, it was an internal matter and so no need to drag the company’s name and reputation through the mud.
Except it wasn’t. This was a top 40 JSE listed company, and it’s profits were affected by these wrong doings. And pension and investment funds were buying into this company because it’s a top 40 share.
There is no such thing as victimless corruption. Millions of rands were lost before the scheme was uncovered, and so people’s savings were affected, and not positively.
Too much of this stuff goes unreported. If the company is not listed then it is purely an internal matter between the shareholders and they can decide how they want to proceed. In all other cases it seems that there should be a disclosure, and so the companies can be helped to put better controls in place.
But Bob what’s your issue
An excellent way forward. I hope it gets the continuing institutional support that it deserves.
We don’t want non-prosecutial resolution, we want the bad guys on trial and in prison.
Ho hum. It remains to be seen whether this initiative produces the desired effect. Indications that this will be so aren’t good, given the NPA’s fumbling and uniquely apathetic approach to state capture prosecutions, especially the very many low-hanging fruit that they could already have harvested. More than five years on, the “capacity constraints” excuse is wearing condom-thin.
Then there’s the callously blasé treatment of whistleblowers whose moral imperatives quickly ensure that they become pariahs for daring to rock the boat. How does this programme fix this issue?
To which one can also add the SAPS’s and DPCI’s venality, ham-fisted investigations, and deplorable arrogance in dealing with the public.
A type of precedent for this scheme already exists where companies above a certain size must publish a corporate ethics policy that is publicly accessible and employ a so-called “ethics officer” or two. The problem with this approach, which sounded grand when it was proposed, is that it hinges on the ethics officers’ loyalties. It soon became clear that these officers’ primary duty is to shield their company from bad press to the extent that they actively suppress and even undermine reports from internal whistleblowers, and do their level best to deflect away from external reports of company malfeasance. I have twice experienced this firsthand.
So, with all of the above problems in mind, the best of luck this new system.
STOP the regular monthly salaries of the NPA, the judges and the police and pay them commission for every successfull prosecution!
A farmer is paid for his pumpkins, a baker is paid for his bread, a butcher is paid for his meat … if they don’t PRODUCE there’s no income.
Why pay the NPA, judges, police a monthly salary that is NOT commensurate to their successfull prosecutions?
Why do they get paid HIGH salaries when their successfull prosecution rate is so low?
SA can’t afford the current judicial system … it’s not worth 5% of the hard earned taxmoney spent on it.
Can’t we replace these LAZY FATCATS with artificial intelligence (AI)?
AI can process a million times more data than these legal eagles, within seconds! AI can cast an internationally correlated verdict within minutes!
AI don’t make mistakes, work 24/7, don’t need pension and medicine, can’t be bribed …
Justice is too important to be left to the discretion of the judiciary.
Bring in the ‘bots!
Amen
Andre, just a quick comment: I like most of what you suggested, just a quick correction regarding AI that you totally misunderstood, i.e. AI (whichever version or flavor you try, has some inbuilt bias in it – similar to Communism/Nazism/Socialism/Tribalism/Feminism/Masochism/LBGTQ+++++/Cadrism/Cabalism/etc (reminds me of the manifesto and actions of the Democrats in the USA and some Republicans as well) which skews the response/decision/”opinion” of the AI Response. AI is NOT creative at all – it can only regurgitate previous opinions of the developers of the AI System as to what its relevant biases are and is in other words censored responses – no real logical reasoning with different opinions to its own biases – very much like the Kremlin/CCP/Venezuela/Cuba/Iran/etc. With all AI currently, the built-in biases of its “creators” are filtering what its “steals” from its myriad of articles it assesses and just summarize what it is meant to summarize, not what is the real logical best option/decision. AI will kill real creativity and creative solution-based thing which could lead to real workable solutions by weighing the real pros and cons of every situation. Example, my own bias towards the “pro-life/pro-death” is in favor of “Pro-Life” but I understand the wishes of a terminally ill person that asks for an “assisted-death” to lessen the suffering – I can reason both ways – AI does not do that at all – it always leans towards what it was programmed to lean towards.
Chris, a correction: AI instances such as ChatGPT aren’t programmed with an inherent bias inherited from their creators. That is is a misrepresentation or misunderstanding of how theses models work.
LLM AIs are basically Google with an eloquence module tacked on as a front end that collates and summarises search results. The bias creeps in as a result of the relevance ranking algorithms that are used. For example, Google rates the popularity of search result content higher than that result’s factual reliability, based on how many people click the different search result links. It’s like a massive ad populum fallacy. (Google Scholar uses more impartial criteria such as the authors’ or articles’ citation index.)
There is a similar positive feedback loop in operation with AIs where more popular output, as rated by users, is used more frequently for related queries.
There are “sandboxed” versions of AIs that are fairly well isolated from this kind of influence but they come at a price.
A great initiative supported by international experience. Let’s hope it is successful. More importantly, it emphasises that corruption is not the preserve of the public service. Corporate corruption enables public service corruption and vice versa.
This is not going to pass the Constitutional master 😒
A section 204 witness is indemnified at the end of a
criminal trial after the court has considered all the evidence and after the court has certified itself that the section 204 witness has been truthful with the court.
The C-ADR indemnifies a confessed corporate criminal outside the criminal justice system even before the trial commences. What makes it even worse is that it imposes punitive penalties on the company as a punishment. Sentencing is a prerogative of the court.
According to OECD Council Recommendations, the Non-trial resolutions should be subject to robust oversight by a judicial, independent public, or other relevant competent authority, including law enforcement authorities. This stringent oversight is critical to ensure that non-trial resolutions are conducted fairly and transparently and that all parties’ rights are protected. It also serves as a strong pillar of public trust and confidence in the resolution process, reinforcing the effectiveness of the legal system’s checks and balances.
The oversight authority should have the power to review and approve the terms of the non-trial resolution, including any sanctions or remedial measures imposed, and to ensure that the resolution is consistent with the principles of due process, transparency, and accountability. Additionally, the oversight authority should have the authority to monitor the resolution’s implementation and take appropriate action if there are any violations or non-compliance.