By Mandy Smith
Jack Bloom, Democratic Alliance leader in the Gauteng Legislature, has suggested that those implicated for not reporting the Carl Niehaus forgery could extend beyond Gauteng Premier Paul Mashatile to include all executive members of the legislature who had any knowledge of wrongdoing and said nothing
“This could include the four MECs whose signatures were forged, provided they knew of the forgery and did nothing about it,” says Mandy Smith, partner in the White Collar Crime practice area at commercial law firm Bowman Gilfillan.
At the same time, Smith questions whether or not the executives mentioned by Bloom fall squarely within the definition of “persons who hold positions of authority” as contemplated in the Prevention and Combating of Corrupt Activities Act (PCCA) Act.
Earlier this month, Mashatile was charged in terms of Section 34 of the PCCA Act for allegedly failing to report attempted fraud by Niehaus, the former Chief Executive of the Gauteng Economic Development Agency (GEDA).
It has been reported in the press recently that during 2005, when Niehaus held the office of Chief Executive of GEDA, he wrote a fraudulent letter to Blue Label Manager Pierre Swart to secure a loan. Niehaus allegedly admitted to having forged the signatures of four Gauteng MECs – Mashatile in his capacity as former Finance MEC; Ignatius Jacobs, the Finance MEC; Angie Motshekga, the Education MEC; and Khabisi Mosunkuthu the MEC for Agriculture, Environment and Conservation.
Niehaus allegedly admitted to writing the fraudulent letter and handing it over. Niehaus then confessed to Mashatile, who allegedly told him to resign or face disciplinary action. Mashatile allegedly did not report the forgery to the South African Police Services at the time.
The PCCA Act came into effect in April 2004. Smith points out that section 34 of the Act requires that any “person who holds a position of authority” who knows, ought to have known or merely has a suspicion that a person in their organisation has committed corruption, theft, fraud, extortion, forgery or uttering a forged document must report this to any police official if the amount involved is R100 000 or more.
In practice, once the matter has been reported at any police station, the docket will be transferred to the Commercial Crime Unit of the South African Police Services.
Smith emphasises that anyone in authority who knows of such a crime and does not report it will himself be guilty of an offence. The penalty is a fine or imprisonment of up to 10 years. The court may also impose an additional fine of up to five times the value of the gratification.
“Presuming the loan applied for by Niehaus was over R100 000, the forgery and uttering of a forged document that has been allegedly admitted to by Niehaus would have been reportable by a person who holds a position of authority as defined in the PCCA Act,” says Smith.
The definitions in Section 34 of a “person who holds a position of authority” include “any person who is responsible for the overall management and control of the business of an employer”.
“The Courts may interpret Section 34 narrowly and they may not extend the obligation to report economic crime to persons holding a portfolio unrelated to the business, such as the MEC for Education who is not responsible for the overall management and control of GEDA, albeit that she may be an executive member of the legislature.”
Yet, says Smith, Section 34 is not limited to those who are in positions of senior authority; people like directors, partners, municipal managers, heads of department, members of boards and CEOs.
“Section 34 also includes any person in a managerial or supervisory position in the organisation. Hence, take heed. Criminal liability may attach to us personally should we not report economic crime that we know or suspect may have occurred.