SERJEANT AT THE BAR
The brouhaha around the arrest of Tony Yengeni has restored some much-needed confidence in this country’s ability to prosecute corruption wherever it might be sourced.
But if the press coverage is to be believed, Yengeni risked much for relatively little; even Hansie Cronje appeared to pocket far more than Yengeni and questions have often been raised as to why Cronje risked his entire career for the relatively paltry amounts that he has disclosed as being his ill-gotten gains.
By contrast, the private sector is far better when it comes to crooks who truly know their business. For a long time there have been suggestions of insider trading, profiting from share dealing by ferreting information that only technically falls outside the statutory definition of insider trading, VAT fraud, income-tax evasion and appalling standards of corporate governance at the expense of shareholders.
Over the past year alone the following high-profile cases have made the headlines: Metcash and VAT; Nail and proposed huge options to four directors; Nedbank and the Didata benefit to a few directors; Fedsure and corporate governance; the collapse of Regal Bank; the collapse of LeisureNet and the saga surrounding Irvin Khosa.
Most of these cases did not involve any criminal activity indeed the only cases that could possibly be so classified are Metcash (but that case has been settled so the public will never know if anyone was so guilty), Regal and LeisureNet, which are currently the subject of inquiries, and Khosa of whom we will doubtless find out more in the future.
The point of this litany of corporate problems is that they reflect a lack of corporate integrity that is as great, if not far greater, than is the case in the public sector.
Take the widely published allegations relating to the conduct of Peter Gardener and Rod Mitchell, the joint CEOs of LeisureNet. If these allegations are proved, it would mean that the business of a public company was conducted as personal fiefdom in which liability for VAT was evaded, company money was employed for the personal use of Mitchell and Gardener and, more damning, a foreign acquisition was made by the company without the shareholders knowing that Mitchell and Gardener were significant shareholders of the very foreign entity that LeisureNet purchased. If the later allegation is correct, LeisureNet lost R40-million on this acquisition while the joint CEOs earned R8-million each.
On any account, LeisureNet may well constitute a far more systematic problem than that of Yengeni. Agreed that as a senior public representative, should Yengeni be convicted, it would reveal an appalling breach of the confidence that the public is entitled to place in its representatives.
But the LeisureNet allegations point toward a venality in our corporate culture that jeopardises this country’s reputation as a safe haven for investment.
It shows that even with senior professionals as non-executive directors (Joe Pamensky, well-known accountant who advises many of the super-rich, was the non-executive chairperson of LeisureNet) corporate governance can reach rock-bottom standards.
Recently the Institute of Directors published the second King report on corporate governance. The thrust of the findings was that the provision of better information by the company and more careful policing of corporate risk by the board of directors can contribute to better corporate governance.
Placing all the governance eggs in the non-executive basket is a futile ploy. Rogue executives will always be able to circumvent the supervision of non-executives, most of whom sit on numerous boards apart from fulfilling busy work schedules pursuant to their primary employment.
What is required is proper policing and criminal action. When last was a corporate crook placed behind bars for a long term of imprisonment?
The role of the Scorpions is important in this area. Whereas another agency can deal with the Pagads and the drug lords of our society (for here undercover policing is the vital ingredient), the Scorpions as a unit of lawyers and financial experts should coordinate work with the South African Revenue Service, the Financial Services Board and a revamped office of the Registrar of Companies to ensure that corporate crime is properly investigated and prosecuted.
A thorough investigation into public corruption, such as the arms deal, is important for the preservation of accountable and honest government.
For this reason, it is only right that the public continue to press for adequate steps to be taken. But standards of integrity in corporate life are equally important for the preservation of a vibrant and productive economy. Currently these standards appear to be in lockstep with those of some of our politicians. Urgent action is needed.
Ensuring that the Scorpions concentrate efforts in this area will ensure that a proper deterrent is put in place. This will improve corporate integrity far more than will vaguely couched efforts for legal reform of the Company’s Act.