How do we get a handle on white collar crime?

South Africa is at war with itself. Stories about fraud, corruption, financial mismanagement and tax evasion surface in the press on a daily basis. The frequency of incidents and the huge sums involved are cause for alarm. Every South African citizen l

We end up paying more tax because of the large number of businesses and individuals who evade it either by fiddling their returns or simply operating under the tax net. We suffer losses to our pensions and retirement funds when millions disappear due to theft and poor administration.

We receive less in salaries and bonuses because of losses suffered by our employer. And worst of all, we receive less in social services grants because there are so many holes in the administration of the system. The number of reported cases of social grant and pension fraud run into the hundreds of thousands.

Billions of investor's money up in smoke

There have been so many massive financial scandals recently, that its difficult to know where to begin. The recent Fidentia scandal is a good place to start. The wrongdoings in this case must go far beyond the enrichment of a single person. Imagine how many individuals must have turned a 'blind' eye for R689 million to 'disappear'! 

With Fidentia, like all other financial scandals, those responsible for making decisions about investor's funds totalling millions (if not billions) of rand are not prepared to accept responsibility.

There are many unanswered questions. How did more than R1 billion of the Mineworkers Provident Fund find its way to Fidentia in the first place? Why did some of the trustees of the Living Hands Trust hold positions in Fidentia? Did the Transport Education and Training Authority (TETA) exercise enough caution before investing their spare funds? And why did this organisation have so much cash floating around?

Huge fraud and tax evasion cases are commonplace

A number of high profile individuals have run into trouble with the law for financial misconduct. A prominent case involves David King, who was arrested in 2001 for tax evasion. The sum involved is a whopping R2.5 billion! Six years since his arrest, the case was once again postponed on the 28 February 2007.

Ironically, King has had to request the court to release seized funds to pay for his defence. Many believe this plea of poverty is nothing more than posturing on his part.

More recently, Hendrik Delport has become the target of the state's biggest ever asset seizure bid. Delport is accused of manipulating VAT and excise duty claims (in a scam known as round-tripping) and could owe SARS in excess of R264 million.

The Asset Forfeiture Unit will attempt to seize R370 million in assets from the thirteen accused and 36 companies involved.  

Justice is far too soft!

If you're wealthy or politically well connected you can simply run rings around South Africa's criminal justice system. High profile individuals seem to either stay out of jail or pay fines instead of going to jail.

The first step involves drawing out the case for as long as possible. Flush with the proceeds of alleged criminal activities, these individuals can afford to take the trial through every appeal avenue available to them.

If a guilty verdict is inevitable they simply negotiate the best possible cash settlement instead. Considering the size of the monetary benefit for their transgressions, the fines dished out are a mere slap on the wrist.

There have been some positive developments in the fight against financial crime. In this year's budget speech, Trevor Manuel issued an appeal to the various regulatory bodies to step up their action against transgressors. Hopefully the criminal justice systems turnaround time will be substantially improved in years to come.

Editor's thoughts:
There have been many suggestions that morality in South Africa is on the decline. The Moral Regeneration Campaign was a great idea - but unfortunately entrusted to the wrong person. White collar crime will have to be tackled on many fronts including the justice system, regulatory bodies and the individual. How should South Africa tackle issues of declining morality? Send your comments to gareth@fanews.co.za.