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Zondo Commission: We can recover the State Capture loot — here’s how


Paul Hoffman SC is a director of Accountability Now.

The waiting for the State Capture Commission report is over, the time for action on the recovery of the loot of State Capture is now. Departments of state and state-owned enterprises are now fully justified in taking steps to recover the loot of State Capture wherever it may be found in the world.

The first tranche of the three-part report of the State Capture Commission is in the public domain, the whole report is due to be available by the end of February 2022. Serious analysis will take many years and much consideration.

At this early stage, it is a relief to be able to record that the commission confirms three main points. Firstly, that State Capture in South Africa is real, secondly, that there has been a great deal of criminal activity deserving of the attention of the criminal justice administration and thirdly, that the loot of State Capture should be recovered urgently.

The third point is the most urgent and should be addressed by the entities that are the victims of State Capture as their first priority. Departments of state and state-owned enterprises (SOEs) are now fully justified in taking steps to recover the loot of State Capture wherever it may be found in the world. This is not necessarily a matter for the criminal justice administration, where a heavy onus of proof applies.

The civil law does offer remedies, as can be seen from the activities of the SIU in connection with the looting of Eskom.

The availability of Mareva Injunctions or “freezing orders” in most relevant jurisdictions around the world is an avenue open to government and to SOEs for the purpose of recovering loot through the civil courts of the world.

This is how it works: the looted entity engages specialist attorneys and forensic auditors to track and trace the destination in which the loot of State Capture currently finds itself, whether in cash, investments or assets acquired using loot. These “track and trace” steps are taken with a view to approaching foreign courts having jurisdiction to issue an order preventing dissipation of loot. These orders can be made in respect of loot of all kinds and in respect of assets (whether movable or immovable) acquired using the loot.

The forensic tracing of the loot and assets purchased with it takes place using sophisticated IT with the necessary artificial intelligence to do so (this facility and the necessary technology is not generally available to the NPA, hence the delays in the VBS Bank matters). Using the SWIFT banking system and account details it is possible to track and trace loot no matter how many times it is moved to conceal it.

As the proceedings are of civil nature in the courts around the world, it is not necessary to discharge the high criminal threshold of “proof beyond a reasonable doubt” in the application to freeze the assets traced.

The experience in practice is that once a freezing order is obtained the looter sued realises the game is over and does not oppose the forfeiture of and seizure by the creditor of the frozen assets.

The procedure is available in Dubai. Google “Mareva Injunction Dubai” for a fascinating trip through cyberspace detailing how the remedy is used in the Emirates.

It is neither necessary nor desirable to wait for the outcome of criminal proceedings, or indeed review proceedings in respect of the SCC report, before invoking the Mareva Injunction procedures. Indeed, the element of surprise and the need for a rapid response both render it desirable to allow the civil case to precede the institution of any possible criminal proceedings.

The claimant in each case in South Africa is either the looted SOE or the department of state, province or municipality that has been looted. A resolution instructing the local lawyers to institute the proceedings must be placed before the foreign court hearing the application for the freezing order. It is even possible to create a special purpose vehicle (SPV) for the recovery process. This affords comfort to those who fear retribution from the State Capturers who are sued for their loot.

Other civil remedies can also be considered. Lord Peter Hain has suggested that the bankers to the looters are culpable in law for ignoring or even facilitating suspicious transactions. Certainly, those auditors and accountants, lawyers and consultants (here’s looking at you, Bain) who participated in, facilitated or turned a blind eye to the corrupt activities could also be sued for damages for aiding and abetting the politically exposed persons who are usually implicated in looting. As most of them are insured, success in court translates into payment, not empty judgments.

It is pretty obvious that government should forthwith consider the use of the Mareva Injunction as a means of recovering the loot of State Capture wherever it may be found in the world. If necessary, an SPV or multiple SPVs can be created for this purpose. In the local courts, an anti-dissipation order a la Knox-D’Arcy (the leading case on the topic) is an available remedy. Experience teaches the international debt collectors that it is unusual for the looters to retain loot in the area of jurisdiction in which it is purloined.

The role of the National Treasury in all this is to inform and to encourage the victims of looting to take steps for recovery of looted funds and assets with a view to reducing the considerable pressure under which the public purse currently finds itself. The waiting for the SCC report is over, the time for action on the recovery of the loot of State Capture is now.

As regards the matter of criminal investigation and prosecution of those the report identifies as, at least on the face of it, or “prima facie”, as lawyers like to say, involved in malfeasance connected to State Capture, the way forward is not as clear and simple as the civil proceedings route. This is because State Capture has broken our national capacity for investigating and prosecuting serious corruption. Hollowed out institutions and saboteurs of sound prosecutions are crippling the ability of the state to hold the corrupt to account.

The report notes that the fundamental reform of the criminal justice administration is beyond its mandate, but it does suggest consideration be given to establishing what it calls an Anti-Corruption Agency to deal with procurement irregularities.

Government will have to consider these recommendations and the other proposals that are in circulation at present. The NEC of the ANC has called for the urgent establishment of a stand-alone permanent and independent anti-corruption agency. The DA wishes to reform the investigative capacity of the state as regards corrupt activities while Accountability Now has proposed the new Chapter Nine Integrity Commission to prevent, combat, investigate and prosecute serious corruption.

It seems likely that the ideas of the ANC, DA and those suggested by Accountability Now can be made to merge in the crucible of parliamentary debate so as to give birth to a constitutionally compliant new body that deals with serious corruption in matters above a determined monetary threshold. The time for that parliamentary debate is now.

As State Capture has been found to be real, the response of government to the need for criminal investigation needs to be formulated “diligently and without delay” as C 237 puts it. This is no longer a matter for the long game; the proverbial can should not be kicked further down the road. The work involved in achieving cross-party consensus on properly implementing the binding criteria set in the Glenister litigation as long ago as 2011 can no longer be put off or dithered over.

 The danger is that the malaise of corruption still threatens to graduate into “something terminal”, as the Chief Justice put it in the last Glenister judgment in 2014. Delay is not indicated. The need to address the culture of impunity, the incidence of serious corruption without consequences and the sustained looting by State Capturers can no longer be tolerated either by government or by society. If our politicians wish to be re-elected, they have no choice, they need to address the issues now or be consigned to political oblivion by a most patient electorate which, by now, has surely had enough of the theft from the poor, which is the essential ingredient of State Capture. DM


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All Comments 7

  • Just as I was throwing up my arms in despair and exasperation (as many other lay people have no doubt also) , at the comically slow CR ‘long game’ approach, Paul with clear and some explicit detail … has revived an ember of hope … that something can be done about the unbelievable corruption that has destroyed this country. Thank you ! NOW … for the people required to set this ball in motion pronto, so that that ember can glow again . Just a silly question … will it work in jurisdictions like Khazakstan, (or would it better to define it as Putinstan?) or other Russian enclaves/satellites, where it is alleged the Gupta mafia is moving their ill gotten gains to ?

    • OR for that matter the Xi enclaves (Sri Lanka is the latest example) ? We have to acknowledge the new ‘rulers of the world’, now that US influence or dominance is waning ! Apologies to the many other would be ‘rulers’ like Modhi, Erdogan, Bolsonaro etc – all macho males !

  • As the ultimate victims of State Capture are the South African taxpayers, is a class action by the taxpayers to have assets frozen under the Mareva Injunctions, feasible? A website administered by a trusted institute (who could also represent them) inviting participants to join the class action, is likely to appeal to many citizens ‘gatvol’ of the State’s inertia. Verification of the participants by way of a tax number (and a donation) should surely legally suffice.

  • SARS could also attach funds much sooner than a criminal case would take, not sure how they cooperate with US and international tax and banking agencies, but likely at root level.

  • Very good article Paul. But I just wonder how much of the looting that took place via state capture has already find another home, like Dubai, or Russian satellites, or for that matter, simply melted away like ice-cream, like Kanu suggested. We know these corrupt individuals have a love for luxuries, like expensive cars, multi-million rand properties, etc. but through certain banks much of the looting could even have found a way to Switzerland. The Zondo report will give many ample time to find another destination, or even safely buried somewhere in money bags (the Bosasa way).

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