Karen Harverson
Corporate fraud is on the increase and it’s costing companies millions of rands each year. In many cases, companies are reluctant to bring a criminal case against the perpetrator — frequently an employee.
“Companies are scared to bring criminal charges for a number of reasons, be it their reputation, lack of knowledge of criminal processes or the stigma of going to court,” says Eskom corporate investigations department senior adviser, Christo Giani.
He says a company may prefer to hold an internal disciplinary hearing and thereby dismiss the employee, or in some cases, negotiate a package to pay the person to leave.
Very often, if the company wants to be compensated for the loss, it will institute a civil case against the person.
“However, this can prove to be expensive as the company has to hire an attorney to argue the case,” says Giani.
Instead, he suggests the company proceed with a criminal case, which means the public prosecutor takes on the case against the individual, and the state bears the cost.
“Even if the person is found not guilty, the company is not liable for costs or open to a defamation case against it by the person, provided all the facts of the case were honestly presented,” says Giani.
Although a criminal conviction does not mean the company will be compensated for the losses incurred by the fraud, it is then able — on the basis of the criminal conviction — to instruct the public prosecutor to apply for a section 300 judgment.
According to section 300 of the Criminal Procedure Act, any convicted person who has caused damage and or losses to another person through his crime, may on request by the victim in certain circumstances be ordered to compensate the victim.
“Many companies are unaware of this option — – they can save legal costs by instituting a criminal prosecution and still get monetary restitution by applying for a section 300 judgment.”
The amount awarded to the victim (the company) will depend on the court in which the case is heard: a magistrate’s court may only award a maximum of R20 000 in damages while a regional court may not exceed R200 000.
“If you apply for section 300, you lose the right to institute further actions, so if you find after the judgment there were further losses, then you have 60 days to notify the court to withdraw the judgment so that you are in a position to launch a civil case,” says Giani.