By Kotie Geldenhuys
Over the last couple of years, far too many institutions and businesses in South Africa have taken on the unmistakable stench of moral rot. Corporate giants such as VBS Mutual Bank, Bosasa and Steinhoff have traded blue chip credibility for white-collar callousness. Although there is a general perception that white-collar crime does less harm than violent crimes, it is not true. White-collar criminals are often as powerful, callous and dangerous as other violent criminals. These heartless, selfish super predators are wreaking havoc in the South African society.
The international auditing firm, PwC's biennial Global Economic Crime and Fraud Survey - 7th South African edition, that was published on 3 March 2020, reported on looking at economic crime in South Africa and how it impacts the country's business landscape. The report shows that South Africa's rate of reported economic crime of 60% remains significantly higher than the global average rate of 47%. According to the report, India and China reported the highest occurrence of economic crime, also referred to as white-collar crime, with South Africa ranking third in the group of countries with the highest reported economic crime in the world (Brothwell, 2020). This report mentions that the rate of reported economic crime has dropped from 77% in 2018 to 60% in 2020 (PwC, 2020). However, according to the national crime statistics which were released by the SAPS in September 2019, commercial crime (white-collar crime) had increased to its highest level in six years. There has been a 14.4% increase with 83 823 reported cases, compared to the previous report year (SAPS, 2019). (Refer to a more detailed article about this survey published on p54 and p55.)
White-collar crime extends beyond the private sector and in South Africa, it is extremely prevalent, even on the highest levels of government. White-collar crime in government is perceived as the biggest threat to business and investment, overtaking unemployment, the infrastructure backlog and labour instability (Jooste, 2015). A serious weakness in South Africa’s investment profile is the likelihood of dishonest dealings by public servants (Roodt, 2016).
What is white-collar crime?
White-collar crime, also referred to as commercial, financial, economic and corporate crime (Budhram and Geldenhuys, 2017), can describe a wide variety of crimes, which all typically involve crimes committed through deceit and motivated by financial gain. According to INTERPOL, it ranges from basic theft or fraud committed by individuals with ill-intentions to large scale operations masterminded by organised criminals with a foot on every continent (www.interpol.int/en/Crimes/Financial crime). White-collar crime is regarded as a non-violent crime that enriches its perpetrators financially. According to the Federal Bureau of Investigations (FBI), these crimes are characterised by deceit, concealment or violation of trust and are not dependent on the application or threat of physical force or violence. The motivation for these crimes is to obtain or avoid losing money, property or services, or to secure a personal or business advantage (FBI, Nd).
Reportedly coined in 1939, the term “white-collar crime” is now synonymous with the full range of fraud committed by business and government professionals. White-collar crime has been associated with the educated and affluent ever since the term was first coined by sociologist Edwin Sutherland, who defined it as “crime committed by a person of respectability and high social status in the course of their occupation”. The understanding and scope of white-collar crime have evolved and include an array of different crimes that did not form part of the original concept. The range of white-collar crimes has also vastly expanded as new technology and new financial products and arrangements have inspired a host of new offences (Chen, 2020a).
Even though the general reference, also in this article, is to white-collar crime, the SAPS uses the term commercial crime which includes the criminal acts of fraud, embezzlement, theft of trust funds, corruption, forgery, uttering, moneay laundering and certain computer-related and cybercrimes, as well as statutory offences relating to finance, trade, commerce, business, corporate governance, tax, corruption, money laundering and the proceeds of crime and intellectual property, but excludes the physical misappropriation (theft) of moveable property. The SAPS also distinguishes between general, less serious commercial crime and serious commercial crime (Budhram and Geldenhuys, 2017).
In recent years, high-profile white-collar crimes include the Steinhoff and Sharemax scandals. The case involving Barry Tannenbaum, the man who has been dubbed South Africa’s Bernie Madoff for his role in orchestrating the biggest Ponzi scheme in South African history, resulted in a loss of more than R12 billion. The scheme ran between 2005 and 2009 but collapsed because Barry Tannenbaum, who moved to Sydney in 2007, was unable to pay investors. However, he claimed in 2015 that he was the victim of a conspiracy and accused lawyer Dean Rees, who fled to Switzerland, of being the real perpetrator (News24, 2015). The Krion case where more than 14 000 investors lost more than R1.5 billion between 1998 and 2002, is another example of how people enriched themselves, without caring about their victims. In June 2010, Marietjie Prinsloo, the mastermind behind this scheme; her husband, Herbert; her daughter, Maria and son-in-law, Gerrit Lemstra; her son, Willem Pelser and niece, Izabel Engelbrecht, were sentenced in the High Court in Pretoria to between 25 and five years’ incarceration on more than 200 000 charges ranging from racketeering to fraud. They appealed their sentences, but in December 2015 three Appeal Court judges said that the damage caused by the mastermind’s conduct both financially and emotionally could not be over-emphasised and that her effective sentence of 25 years’ incarceration was, despite her age, (at that stage she was already in her 60s) not unreasonable (De Lange, 2015).