Sentencing in Commercial Crime:

Shifting Priorities

While the trend in sentencing those guilty of violent crime is towards harsher sentences, those facing charges of commercial crime and corruption have the prospect of relatively light sentences. However the extent of commercial crime and corruption suggests that more suitable and reflective sentencing should be considered, given the financial and non-financial losses incurred by victims. The transformation of South Africa’s criminal justice system offers an opportunity to review how courts sentence commercial crime and corruption cases.

One of the challenges in making a case for changing sentencing for crimes of corruption is that there is a lack of available information on the number of cases tried and convicted and on the sentences passed. Thus this article uses some examples to try to illustrate that often sentences for commercial crime and fraud do not appear to match the severity of the crimes.

Fraud

Fraud involves the deceiving or misleading of the victim through misrepresentation or other means. Even though the courts acknowledge the seriousness of commercial crime in our society, the attitude towards sentencing remains less clear. In an example, the sentence resulting from a case which involved a large amount of money from exchange control fraud was a fine and suspended sentence, as the court found that no "harm" had resulted from the conduct of the accused.

In the recent case against Allan Boesak, the court again demonstrated its reluctance to impose severe sentences without the possibility of parole. The court sentenced Boesak to eight years in prison for theft and fraud involving more than R1.3 million in foreign donor funds, of which two years of the sentence will run concurrently. In another example, a court sentenced a man to eight years imprisonment for defrauding victims of R9.75 million on the stock exchange. After 21 months in prison he was released after soliciting his friends to donate R500 000 to build recreational facilities at the Krugersdorp prison.

Corruption

The Corruption Act of 1992 has been important in the fight against corruption. It defined corruption, created a list of punishable offences and defined both passive and active corruption. By identifying both active and passive corruption, the Act shows that corruption is committed not only by the person who gives the bribe but also by the person who receives it. The following examples indicate trends in court sentencing of people who contravene the Corruption Act.

In one case, a bank clerk was convicted of contravening the Corruption Act by divulging the account numbers of two customers of the bank to an outsider who used the information to draw R36 000 from these accounts. The accused received R3 500 in exchange for the information. The court initially sentenced the woman to four years imprisonment, with two years suspended. However an appeal court found that additional circumstances — including it being a first offence and evidence of clear remorse — set aside the initial sentence and replaced it with a sentence of four years imprisonment suspended for five years on condition that she underwent correctional supervision.

In another case, a member of the South African Police’s Narcotics Bureau was charged with approaching a car dealer offering to withdraw charges against the dealer’s family for dealing in mandrax if he gave the constable four tyres. The defendant received a four year sentence, with two years suspended.

These cases are reflective of the courts resistance to consider corruption a serious offence. The legal precedents on fraud and corruption sentencing also reflect some of the basic problems of the criminal justice system.

The criminal justice system needs to move away from thinking of commercial crime and corruption as "soft" crimes which do not have corporeal effects on victims. However there is also a debate around whether or not criminal law can control commercial crime. It is claimed that there is little empirical evidence to show that criminal law can effectively deter the perpetrators of commercial crime.

The private sector, for example, often uses in-house investigations to deal with cases of corporate fraud and corruption to avoid going through the criminal court system. There are two main reasons for this approach:

Companies want to preserve their reputations and fear negative consumer reactions to fraud and corruption; and



There is a lack of confidence among business in the criminal justice system to effectively prosecute commercial crimes.

The concern of business that courts do not see the seriousness of commercial crime is evidenced by the fact that in the past twelve months the courts have not imposed any sentence that exceeds 10 years’ imprisonment without parole for a commercial crime or corruption case.

In order for the situation to improve, there needs to be a greater appreciation of the financial and non-financial costs of these crimes. These can include increasing unemployment, health hazards to workers and consumers (for example, housing scandals), damages to the physical environment and the social costs of the erosion of the moral base of our society.

One of the steps in recognising the seriousness posed by unimpeded corruption and fraud is for the courts to respond calculatingly to those cases brought before them. The judiciary should put into practice the "zero tolerance" approach to corruption and commercial crime that has become the basis of anti-corruption policy in South Africa.

Nceba Gomomo,
Institute for Security Studies