The National Prosecuting Authority (NPA) recently enhanced its approach to alternative dispute resolution through the development of a cutting-edge new policy directive aimed at corporations. This approach will significantly strengthen the NPA’s corruption-fighting arsenal and better position it to hold corrupt actors to account.
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, especially the poor and vulnerable. Economic recovery is a pressing priority for South Africa and all its people.
In adopting this approach, South Africa joins the global movement towards resolving complex corruption cases involving corporations, often in collaboration with authorities from other countries.
One advantage that such resolutions have over trials is that international cases can be resolved between several authorities simultaneously.
In the recent SAP case, South Africa has benefited from its cooperation with the United States Department of Justice (US DOJ). The US played the leading role in investigating and litigating against SAP, a global financial services giant. This led to SAP entering into a three-year deferred prosecution agreement (DPA) with the US DOJ in a US federal court for conspiracy to violate the Foreign Corrupt Practices Act (FCPA), involving bribes paid in South Africa.
A DPA is a contract between the US authorities and a company implicated in criminal conduct. The US DOJ files charges with the court, but simultaneously requests that the prosecution be postponed to allow the company to demonstrate its good conduct.
The DPA prescribes that the company will pay a fine, hand over information and improve its anti-corruption compliance programme. If, over the next three years, the company complies with the terms of the DPA, the DOJ will move to dismiss the filed charges. If the company breaches the agreement, the DPA allows prosecutors to enter a guilty plea. This three-year time period gives significant teeth to resolutions and enforces compliance by companies.
The Zondo Commission recommended that South Africa promulgate legislation providing for DPAs. While waiting for legislative reform, the NPA has been proactive and, with technical support from the Organisation for Economic Co-operation and Development (OECD) and other local and international experts, the NPA developed a corporate alternative dispute resolution policy directive to provide for a limited form of non-trial resolution.
For companies to be eligible for a corporate alternative dispute resolution with the NPA, they 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 corporation must also undertake a robust corporate compliance enhancement programme to prevent such criminality from recurring.
Importantly, the resolution is only a decision not to prosecute a corporate entity. Individual persons may still be prosecuted and will no longer be able to hide behind corporations to escape personal liability and prosecution. The resolution provides a framework for corporations to take responsibility without necessarily jeopardising the operations of the entire business and its employees.
In terms of such resolutions, companies will be obliged to name responsible individuals, cooperate with investigations by providing evidence and commit to actions to improve corporate governance and the ethical conduct of employees.
A strong incentive
The decision not to prosecute the company may be reversed at any stage where there is non-compliance with the terms of a resolution. There is therefore a strong incentive for a company to comply with the resolution and fulfil its undertakings.
Corporate alternative dispute resolutions, or non-trial resolutions (NTRs), are used extensively to combat complex multi-jurisdictional corruption cases. They are one type of public-private cooperation, an approach to combating corruption recommended in the UN Convention against Corruption (Uncac).
This approach is endorsed by the OECD and has become the predominant method of enforcement in foreign bribery cases among all 44 Uncac signatories. It offers companies an opportunity to rehabilitate themselves without causing further damage to the countries in which those offences were committed.
Corporate alternative dispute resolutions put the onus on companies to self-police the actions of their staff to avoid being barred from operating or compromised by prosecution. Research conducted by the OECD demonstrates that corporations that entered into NTRs significantly enhanced their governance and accountability systems. These approaches serve as both the carrot and the stick.
One of the most effective uses of a non-trial resolution took place in Malaysia, after the plundering of huge sums of money from 1Malaysia Development Berhad (1MDB), a strategic development agency. A total of $4.5-billion was raised in a corrupt 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 NTRs with the three companies for the repayment of all the money. The former prime minister was sentenced to 12 years in prison. His cronies were also prosecuted. The head of Goldman Sachs Malaysia was fined $45-million and sentenced to 10 years in prison. Malaysia is still pursuing additional compensation for the damage done to its economy.
The NPA’s corporate alternative dispute resolution policy directive takes into account our obligations under the Constitution and the powers granted to the NPA. It is also in line with global best practice.
In terms of the recently concluded landmark resolution by the NPA with SAP, the global financial services giant will return more than R2-billion to South Africa for the criminal roles of its former directors and employees of its SA subsidiary in corruption and related offences to secure work in South Africa. In arriving at this resolution, the NPA strongly collaborated with the DPCI (the Hawks), which is conducting investigations into SAP.
The company provided the NPA with vital information to pursue investigations and 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, had 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 SOEs like Transnet and Eskom, and our big metros which are desperately trying to fund their turnaround plans to recover from the debilitating effects of State Capture.
The corporate alternative dispute resolution policy directive is a significant leap forward in South Africa’s crime-fighting strategies.
It represents a more sophisticated form of law enforcement that enlists business as a partner to increase corporate accountability in a country that has been bled dry by corporate collusion during the State Capture era.
It enhances the rule of law, and as more companies come forward, it will encourage a corporate culture of zero tolerance for corruption and increased self-reporting.
It will also ensure money is returned. The lives of all South Africans will be improved, especially the poor and vulnerable, who are disproportionately affected by the ravages of corruption, as we rebuild our economy. Finally, it will contribute to restoring trust and confidence in our law enforcement agencies. DM