About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Western Cape High Court, Cape Town
SAFLII
>>
Databases
>>
South Africa: Western Cape High Court, Cape Town
>>
2016
>>
[2016] ZAWCHC 88
|
|
S v Van Staden and Others (SS15/2010) [2016] ZAWCHC 88 (27 June 2016)
THE
REPUBLIC OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE HIGH COURT, CAPE TOWN)
CASE
NO: SS15/2010
DATE:
27 JUNE 2016
In
the matter between:
THE
STATE
And
JOHANNES
ERASMUS VAN STADEN & 5 OTHERS
JUDGMENT:
27 JUNE 2016
VELDHUIZEN
J et Assessors
:
[1]
Accused 1, 2, 3 and 5 are indicted before
us on various counts under the Prevention of Organized Crime Act 121
of 1998 (‘POCA’)
as well as under the common law.
[2]
The state has conceded that forgery charges
in counts 63 to 167 amount to a splitting or duplication and that a
conviction is, therefore,
not sought on these charges. In our view
these concessions were correctly made.
[3]
In count 1 it is alleged that accused 1 and
2 had contravened s2(1)(f) of POCA in that they had managed the
operation or activities
of an enterprise whilst they knew or ought
reasonably to have known that such enterprise’s affairs was
conducted through
a pattern of racketeering activity.
[4]
Count 2 charges all four the accused with a
contravention of s 2(1)(e) of POCA in that they had, whilst managing
or employed by
or associated with an enterprise, had conducted or
participated directly or indirectly in the conduct of such
enterprise’s
affairs through a pattern of racketeering
activity. In the alternative to count 2 it is alleged that they had
contravened s2(1)(d)
of POCA in that they had acquired or maintained,
directly or indirectly an interest in or control of an enterprise
through a pattern
of racketeering activity.
[5]
Count 3 alleges a contravention by accused
1, 2, 3 and 5 of section 4 of POCA. In the alternative they are
charged firstly with
a contravention of s5 of POCA, secondly with a
contravention of s6 of POCA, thirdly with a contravention of s2(1)(a)
of POCA, fourthly
with a contravention of s2(1)(b) of POCA and
fifthly a contravention of s2(1)(c) of POCA
[6]
In count 4 it is alleged that accused 1
committed the crime of fraud in that he had wrongfully and with
intent to defraud made certain
representations to one Mattheus
Adriaan Johan Annandale and/or Mercedes-Benz Commercial Vehicles
which caused them to suffer prejudice
whilst he knew that one or more
of the representations were false. In the alternative it is alleged
that he had contravened s 18(2)(a)
of Act 17 of 1956 in that he
had conspired to commit the fraud alleged in the main count.
[7]
Counts 5 and 6 also charge accused 1 with
the crime of fraud in that he had wrongfully and with intent to
defraud made certain representations
to one Martin Horn and/or
Processing Solutions Industry CC that Indo Atlantic Seafoods (Pty)
Limited amongst others intended installing
a plant for the processing
of fish whilst he knew that one or more of the representations were
false thereby causing them prejudice.
Alternatively to these two
counts the accused is charged with a contravention of s 18(2)(a) of
Act 17 of 1956 in that he had
conspired to commit the fraud
alleged in the main counts.
[8]
Count 7 is also a charge of fraud. It is
alleged that accused 1 had defrauded Helga Pheiffer and/or
Andrew Blaine and/or V&A
Waterfront Properties (Pty) Ltd in that
he had fraudulently represented that Indo-Atlantic Seafoods (Pty)
Limited would rent certain
premises whilst he knew that the last
mentioned company would not honour its agreement with V&A
Waterfront Properties (Pty)
Ltd. He is again charged in the
alternative with the commission of a contravention of s 18(2)(a) of
Act 17 of 1956.
[9]
Counts 8 and 9 charges accused 1 with
fraud. It is alleged that he had made certain fraudulent
misrepresentations to PAM Refrigeration
Marine & Industrial (Pty)
Limited to its prejudice.
[10]
Count 10 also alleges that accused 1
defrauded Martin Horn and/or Processing Solutions Industry CC
[11]
Counts 11 to 15 also charges accused 1 with
fraud in that he had during 2005 made certain fraudulent
misrepresentations to Diane
Rall and/or Johan Bierman and/or Dekko
Coatings (Pty) Limited and caused them to act to their prejudice.
Here too contraventions
of s 18(2)(a) of Act 17 of 1956 are
alleged in the alternative.
[12]
In counts 16 to 50 it is alleged that
accused 1, 2, 3 and 5 had defrauded the South African Revenue
Services (SARS) regarding claims
for the repayment of input Value
Added Tax. In the first alternative it is alleged that the accused
had firstly committed theft
or secondly a contravention of s 59(1)(a)
of the Value Added Tax Act 89 of 1991 (VAT Act) or thirdly a
contravention of s59(1)(d)
of the VAT Act or fourthly s 18(2)(a) of
Act 17 of 1956.
[13]
Count 51 alleges that accused 1, 2 and 3
committed fraud against the SARS and alternatively that they had
contravened s 18(2)(a)
of Act 17 of 1956.
[14]
In count 52 it is alleged that accused 1, 2
and 3 had defrauded the SARS. This count contains three alternative
charges under the
VAT Act and lastly an alternative under s 18(2)(a)
of Act17 of 1956.
[15]
Counts 53 to 60 are also fraud charges
which are brought against accused 1, 2, 3 and 5. These too involve
claims that were made
with regard to VAT claims. Here too there are
alternative charges under the VAT Act and lastly under s 18(2)(a) of
Act 17
of 1956.
[16]
Also count 61 alleges fraud was committed
by accused 1, 2, 3 and 5 with regard to claims for the repayment of
input VAT. This count
contains a first alternative count of theft two
alternative counts under the VAT Act and lastly an alternative count
under s18(2)(a)
of Act 17 of 1956.
[17]
In count 62 it is alleged that fraud was
committed by accused 1, 2 and 3 with regard to the VAT return for the
period 08/06 dated
18 October 2006.
Here
too there are four alternative charges under the VAT Act and a fifth
under s 18(2)(a) of Act 17 of 1956.
[17]
In counts 63 to 73 accused 1, 2, 3, and 5 are charged with forgery
with regard to documents that were seized from Vogue House
on 27
November 2008.
The
alternative charge is under s 18(2)(a) of Act 17 1956.
[18]
Counts 74 to 111 are forgery charges which are brought against
accused 1, 2, 3, and 5.
This
relates to documents that were seized from the premises at 18 Fraser
Street Somerset-West on 27 November 2008.
The
alternative charge in under s 18(2)(a) of Act 17 of 1956.
[19]
Counts 112 to 167 are also forgery charges which are brought against
accused 1, 2, 3, and 5.
This
relates to documents that were stored on the server at Vogue House.
The
alternative charge is again under s 18(2)(a) of Act 17 of 1956.
[20]
In counts 168 to 171 accused 1 and 5 are charged with a contravention
of section 58(d) of the Value Added Tax Act, 89 of 1991
in that they
failed to pay over VAT.
The
alternative charge is under s 18(2)(a) of Act 17 of 1956.
[21]
In counts 172 to 178 accused 1 and 5 are charged with a contravention
of paragraph 30(1)(i) of the Fourth Schedule to the Income
Tax Act,
58 of 1962 in that they failed to submit EMP 201 returns.
In
the first alternative the charge is a contravention of section
75(1)(a) of the Fourth Schedule to the Income Tax Act, 58 of 1962.
The
second alternative is a contravention of s 18(2)(a) of Act 17 of
1956.
[22]
In counts 179 to 181 accused 1and 5 are charged with a contravention
of paragraph 30(1)(b) of the Fourth Schedule to the Income
Tax Act in
that they failed to pay over employee’s tax.
The
first alternative is under the Income Tax Act and the second under s
18(2)(a) of Act 17 of 1956.
[23]
In counts 182 to 184 all the accused are charged with the reckless
conduct of business of Indo-Atlantic Seafoods, Indo-Atlantic
Shipping
and Indo-Atlantic Group Holdings in contravention of s 424(3) of the
Companies Act, 61 of 1973.
[24]
It is common cause that during the period from 2005 to 2008 in all 35
claims for the repayment of input-VAT were presented
to SARS by Indo
Atlantic Seafoods (Pty) Limited. It is also common cause that these
claims were largely false and accuse 1 conceded
that all the claims
in respect of Isotherm were false. Of these claims only the last
three were not paid. Also of interest is the
fact that the zero rated
VAT for export sales of fish gradually grew. This was of course
necessary because there had to be an explanation
of what happened to
the fish that was purchased and for which input VAT was claimed. It
is necessary to refer to each of
these claims separately.
Claims
[25]
On 5 July 2005 a VAT return was submitted
by Indo Atlantic Seafoods for the period February 2005. The total
input amount claimed
and paid was R814 679.17. This
included input tax claims in respect of:
(a)
the V & A Waterfront for R672 000,
R19 147.27, R31 770.30, R2 094.46; and
(b)
a claim of R82 486.04 in respect of
PSI Engineering.
[26]
Also on 5 July 2005 a VAT return was
submitted for the period April 2005. An amount of R111 010.77
was claimed for input VAT.
This included rental, amounting to
R95 310.91, in respect of the V & A Waterfront. The sum of
R111 010.77 was paid.
[27]
On 17 August 2005 a claim was submitted for
the period June 2005
The
input tax claimed and paid was R33 358.32. This included an
amount of R31 770.30 for rental in respect of the V &
A
Waterfront.
[28]
On 29 September 2005 a return for the
period August 2005 was submitted. The input tax claimed and paid was
R3 384 877.00 which
included an amount of:
(a)
R2 520 000.00 in respect of Pam
Refrigeration; and
(b)
R59 721.42 rental paid to the V &
A Waterfront.
[29]
For the period October 2005 an amount of
R4 320.25 was claimed for business expenses. This was accepted
by SARS.
[30]
The next claim was for the period December
2005. Total input tax of R836, 884.35 was claimed and paid. This
included a claim of
R826 747.60 in respect of seven Mercedes
Benz trucks.
[31]
On 27 March 2006 a claim for the period
February 2006 was submitted. It was for R2 122, 829.05. Included
in this claim was:
(a)
an amount of R1 008 000 for the
purchase of a fishing vessel, the Capensis;
(b)
R350 000 for the purchase of the
vessel Cecil G. White from Sea Point Fishing; and
(c)
Four claims for inspection and consultation
fees paid to Southern Ocean Marine Corporation. This amounted to
R317 163.00.
Exports
to the tune of R2 812 500.00 is reflected
[32]
On 7 June 2006 input tax of R2 016 116.06
was claimed and paid for the period April 2006. This included:
(a)
three false Southern Ocean Marine
Corporation invoices amounting to R617 014.30; and
(b)
three invoices from Isotherm amounting to
R1 339 275.62.
false
exports of R28 102 085 were declared.
[33]
For the period June 2006 input tax of R653,
364.46 was claimed on 7 July 2007. This included:
(a)
an input from Isotherm for R503 862.24;
and
(b)
one from Southern Ocean Marine Corporation
amounting to R43 855.00.
All
these claims were paid.
Exports
were indicated as R8 959 244.00 which was false.
[34]
On 31 August 2006 a return was submitted
for the period August 2006 claiming input tax of R5 451 511.30.
Included in this claim
was:
(a)
Three input VAT claims in respect of
Southern Ocean Marine Corporation amounting to R1 594.208.00;
and
(b)
Four input VAT claims in respect of
Isotherm amounting to R3 450 758.56.
The
claims were paid.
The
return also indicated zero rated outputs of R51 633 659.00.
[35]
For the period October 2006 input tax of
R10 476 739.77 was claimed on 21 November 2006. These included:
(a)
a claim of R8 189 415.63 in
respect of Isotherm; and
(b)
R2 125 917.38 in respect of
Southern Ocean Marine Corporation.
The
claim was paid.
The
export sales are indicated as R118 922 199.00.
[36]
On 22 December 2006 a return was submitted
for the period November 2006. Input tax of R5 568 564.92
was claimed and
paid.
(a)
R4 067 187.14 was claimed in
respect of three Isotherm invoices; and
(b)
R1 326 074.44 for one Southern Ocean Marine
Corporation invoice.
Exports
are reflected as R42 405 959.00.
[37]
For the period December 2006 input tax of
R11 158 896.53 was claimed and paid. This claim consisted
of:
(a)
a claim of R9 618 154.98 in
respect of five Isotherm invoices; and
(b)
R1 425 551.48 for one Southern
Ocean Marine Corporation invoice.
Exports
are reflected as being R88 748 334.00.
[38]
For the period January 2007 input tax of
R7 980 227.69 was claimed on 23 February 2007. The claim
was paid.
(a)
Payment of R7 204 127.49
was claimed in respect of four Isotherm invoices; and
(b)
R701 890.00 in respect of one Southern
Ocean Marine Corporation invoice.
Exports
were reflected as being R56 640 675.00.
[39]
On 20 March 2007 input tax of
R12 430 958.76 was claimed for period February 2007.
R12 359 293.09 was claimed
in respect of five Isotherm
invoices. The claim was accepted.
Exports
were declared as being R145 605 663.00.
[40]
On 19 April 2007 a return was presented for
the period March 2007 claiming input tax of R9 212 863.92 of which
R8 953 979.73
was in respect of four Isotherm invoices. The
claim was accepted and paid by SARS.
Exports
declared were R124 618 557.00.
[41]
For the period April 2007 input tax of
R9 771 503.02 was claimed on 25 May 2007 and paid.
R9 485 233.65
were in respect of four Isotherm invoices.
Exports
declared R104 640 803.00.
[42]
On 25 June 2007 input tax of R12 486 966.53
was claimed for the month of May 2007. This included R12 430 156.19
in respect of false Isotherm invoices.
The
return reflected exports to the tune of R127 479 406.00.
[43]
For June 2007 input tax of R10 583 835.90
was claimed on 26 July 2007. Of this amount R10 569 176.41
was claimed
and paid out in respect of four Isotherm invoices.
The
exports are reflected as R109 542 622.00.
[44]
For July 2007 input tax of R10 851 938.67
was claimed on 24 August 2007. It included R10 778 577.69
for four
Isotherm invoices.
Exports
of R92 869 891.00 were declared.
[45]
For August 2007 input tax of R10 982 702.78
was claimed on 25 September 2007. Included was a claim of
R10 969 197.51
for four Isotherm invoices.
Export
sales declared amounted to R115 868 870.00.
[46]
Input tax of R12 929 059.65 was
claimed on 25 October 2007 for the month of September 2007. It was
accepted and R12 839 761.02
was in respect of four Isotherm
invoices.
Exports
declared amounted to R118 655 390.00.
[47]
On 23 November 2007 a return for October
2007 was presented. Therein input tax of R10 517 309.18 was
claimed of which
R10 335 628.97 consisted of four Isotherm
invoices.
It
reflected exports as R105 594 381.00.
[48]
For November 2007 input tax of
R10 205 450.58 was claimed on 21 December 2007. Part of the
claim was for three Isotherm
invoices amounting to R9 910 078.56.
Exports
indicated as R100 449 417.00.
[49]
On 25 January 2008 input tax of
R12 375 341.73 was claimed for December 2007. It was paid.
Of this R12 269 992.74
was claimed for four Isotherm
invoices.
Exports
were indicated as R125 546 940.00
[50]
Input tax of R10 484 845.95 was
claimed on 25 February 2008 for January 2008. R10 434 388.58
was for three Isotherm
invoices.
The
return reflects exports as R101 695 676.00.
[51]
For the month of February 2008 input tax of
R9 533 920.07 was claimed on 25 March 2008 and
R9 433 113.92 was
in respect of four Isotherm invoices.
The
figure for exports are indicated as R114 754 604.00
[52]
For the period March 2008 input tax of
R11 016 334.36 was claimed on 25 April 2008. R10 986 306.62
was claimed
for four Isotherm invoices.
Again
exports are indicated as R133 384 386.00
[53]
On 23 May 2008 input tax for the period
April 2008 in the sum of R11 061 995.35 was claimed.
R10 802 347.29
was represented as being in respect of four
Isotherm invoices.
The
exports are indicated as R150 431 105.
[54]
For the period May 2008 Input tax of
R12 157 303.88 was claimed.
This
included an amount of R12 026 212.22 that was claimed for
five Isotherm invoices whilst exports are reflected as
having been
R152 712 813.
[55]
For June 2008 input tax of R10 990,305.97
was claimed on 25 July 2008. This included an amount of
R10 792 335.83
that was claimed for five Isotherm invoices.
Exports
are stated to have been R143 611 747
[56]
For July 2008 input tax of R12 807 930.35
was claimed on 25 August 2008 this included an amount of
R12 758 695.88
that was claimed and paid in respect of
Isotherm invoices.
The
exports are stated to be R162 245 544.
[57]
For August 2008 input tax of R10 956 902.46
was claimed on 25 September 2008. The return stated that five
Isotherm invoices
accounted for R10 898 027.37 of the
claim.
Exports
are reflected as R139 628 887.
This
claim and those that followed were not paid because the returns were
queried and under investigation.
[58]
On 24 October 2008 input tax of
R9 707 699.01 was claimed for September 2008. This included
an amount of R9 632 584.79
that was claimed in respect of
Isotherm invoices.
The
exports were stated as R165 941 451.
[59]
Lastly a return for the period October 2008
was lodged and input tax of R10 086 727.42 was claimed.
This included an amount
of R10 024 148.26 for Isotherm
invoices..
Exports
again were stated to have been R89 786 401.
[60]
Thus all the claims save those for August,
September and October were paid by SARS.
[61]
The total amount for the false Isotherm
invoices came to R263 062 017.97 (i.e. 93% of the false
claims). The actual amount
paid out by SARS was R250 362 792.03.
The zero rated exports were also hugely inflated and accused 1
conceded that the
figure is closer to R98m as Mr. Scholtz had
testified.
ACCUSED
1
[62]
In evaluating the evidence of accused 1 we
keep in mind that he was required to testify about matters that had
occurred many years
ago and that one cannot expect that he would have
perfect or even good recall of the detail of his actions over this
period. Having
said this, I must immediately say that we are of the
opinion that accused 1 was a very bad witness. He was evasive and
relied on
his memory failing him when it suited him. He not only gave
contradictory evidence but, at times, lied.
[63]
It is common cause that accused 1 was the
registered representative vendor with SARS of Indo Atlantic Seafoods
(Pty) Limited, Indo
Atlantic Shipping Limited and Southern Ocean
Marine Corporation (Pty) Limited and therefore legally responsible
for their VAT returns.
The question we have to answer is this: was he
also responsible for the false claims which were presented in these
returns? To
answer this question it is helpful to look at some of the
transactions that underlie the VAT returns. At the end of the day we,
of course, have to view the evidence as a whole and not in watertight
compartments.
[64]
It was put in cross-examination of the
handwriting expert, Capt. Olsen, that accused 1 may have signed one
or two of the VAT returns
and later that he would deny having signed
any of the returns forming the basis of the charges against him. The
accused, during
his bail application, had admitted to signing fifteen
returns. In this court he admitted that he had signed the majority of
VAT
returns.
[65]
With regard to counts 5, 6 and 10 the state
called Mr. Marin Horn who was the managing director of Processing
Solutions Industry
CC. They distributed food processing equipment
mainly to the fishing industry. He testified that accused 1 contacted
him in early
2005 and asked him to supply custom made equipment. He
met accused 1 and the erstwhile accused 4 at the Waterfront. The
request
was that they manufacture and install a fish processing line
on the vacant floor of a building in the Waterfront. His quote was
accepted by accused 1 and he submitted an invoice. Later accused 1
informed him that they also required a second faster line. He
again
submitted a quotation which was accepted by accused 1. He again
submitted an invoice at the request of accused 1. He was
told that
the invoice was required for financing purposes. He was later again
contacted and asked to supply Indo Atlantic Seafoods
with
refrigerated containers. His quotation was also accepted and he
issued a pro forma invoice. As the deposits were not paid
the work
was never done.
[66]
Accused 1 admitted that the company did not
have the funds to pay for the installation and work and also did not
expect that funds
would be forthcoming in the near future. The state
submitted that accused 1 was guilty of the fraud alleged counts 5 and
6 in that
his conduct caused PSI, at least potential prejudice. With
regard to count 10 Horn was asked to value certain equipment on
premises
in Hout Bay. To this end he engaged the services of a civil
engineer and paid for it. The state submits that this constituted
fraud
and that actual prejudice was caused because PSI was never
reimbursed.
[67]
Horn testified that he would never have
issued the invoices if he knew that they would form the basis of a
claim for input VAT.
[68]
The VAT return presented on July 2005
included a claim of R82 486.04 in respect of PSI Engineering.
[69]
Mr. Evert Potgieter, the Managing director
of the company Pam Marine and Industrial Refridgeration, testified
that he was contacted
by accused 1. He was asked to inspect premises
at East Pier in the Waterfront where accused 1 wanted to install a
chill room. After
the company had issued the first invoice accused 1
promised that payment would be effected within a week. Over a period
of time
negotiations took place because accused 1 wanted to upgrade
the facility. Further quotations were given and eventually accused 1
accepted the third one. During September 2005 and at accused 1’s
request a pro forma invoice in the sum of R20 520 000
was
submitted for financing purposes. He testified that he would not have
issued an invoice if he knew it would be used to claim
a VAT refund.
It is quite clear that the Indo Atlantic group could not pay for any
of this work. It is also important here to note
that the Indo
Atlantic group of companies had been evicted from the premises in
July 2005. There was, therefore, no possibility
of any work being
done at the premises.
[70]
Two companies, Aluship and Surmon Fishing
rented premises in the Waterfront at the East Pier. After the 2
concerns fell in arrears
with their rent accused 1 negotiated with
Ms. Helga Pfeiffer to take over their lease for the remaining period.
In the agreement
he also undertook to pay their arrear rental which
amounted to R4.8m. The arrear rental was never paid and only
two payments
in the sums of R50 000 and R12 000 were made.
The Indo Atlantic group was evicted during June or July 2005 and the
premises
were cleared out. Ms. Pfeiffer identified 10 invoices
which had been issued and testified that these would not have been
issued
if they knew that payment would not be forthcoming.
[71]
During 2005 Mattheus Annandale was
contacted by the erstwhile accused 4. After negotiations, 7 trucks
were ordered. He was asked
to supply invoices so that financing could
be arranged. In January 2006 the vehicles were ready for delivery but
in March or April
it became clear that the Indo Atlantic group would
not honour its obligations and the vehicles were sent back to the
factory. Mercedes
Benz Commercial Vehicles suffered a substantial
loss.
[72]
During 2005 and 2006 Mr. Francis Pretorius
was a shareholder of Dolphin Whisper Trading (Pty) Limited which
operated a fishing vessel
Capensis. ABSA Bank financed the purchase
of the vessel and it was the owner. During 2005 the bank had the
vessel arrested. After
its arrest, Pretorius had a meeting with
accused 1 and 4 with the view that it would be arranged for the
taking over of the company
as well as the financing of the Capensis.
Nothing came of the negotiations and the vessel was, eventually sold
as scrap. Pretorius
testified that he had no knowledge of the invoice
for the purchase of this vessel and that he could in any event not
have sold
the vessel as the bank was the owner thereof and it was
under arrest. This invoice was clearly false. According to him
the
price was over inflated because it could not have been worth more
than R1.6 million.
[73]
Mr. Leroy Julius, a member and director of
Sea Point Fishing CC testified that the company in 2003 bought a
vessel named Cecil G.
White for R2.12m. It was an old vessel and had
some damage. In 2004 the vessel was declared to be unseaworthy and in
2008 it was
sold as scrap for R60 000. He had no knowledge of
Indo Atlantic and denied that Sea Point Fishing had issued the
invoice exhibit
‘SS’. This invoice was also clearly
false.
[74]
Accused 1 professed that he knew very
little of the financial side of the companies. This is not true. He
was well aware of every
payment the company received from SARS.
Simple arithmetic shows that if the Seafoods claims were correct it
must have, over the
period covered by the claims, bought fish to the
value of R1.78 billion. The accused conceded the impossibility that
such huge
purchases could have been made.
[75]
In all these transactions the hand of
accused 1 is evident. The part he plays runs like a golden thread
through all of them. This
finding is also supported by the evidence
of accused 3 that once he had received the spreadsheets from Ms
Claudia Mannel, accused
1 supplied the false information which
appeared at the end of the VAT control account.
[76]
Then we have the emails which accused 1
sent to accused 3 during the period 14 to 17 November 2008 when the
VAT claims were under
investigation by SARS. These emails
unequivocally show that accused 1 knew that there were no supporting
invoices for claims in
respect of Isotherm and that he then attempted
to enlist the aid of accused 3 to create false invoices to support
the claims.
[77]
What happened to the money that SARS had
paid? We know that 90% of the payments flowed to the Indo Atlantic
companies. Accused 1
bought a game farm and game in the name of the
Swordfish Trust, a family trust of the accused. It was paid for by
the Indo Atlantic
group. An aeroplane was also bought in the name of
the trust and all the motor vehicles were registered in the name of
the trust.
A flat was bought for his daughter. The accused could not
explain how the companies, being separate legal persona, could
legally
transfer the money for these transactions. Then he and his
family travelled to Mauritius in a chartered jet. The cost of all of
this came to about R500 000. We simply do not believe the
accused when he says that it was a business trip. It is clear to
us
that the accused lived in luxury on the money that SARS claims
provided.
[78]
All these facts and circumstances lead us
inexorably to the conclusion that accused 1 had put in place and
implemented the scheme
whereby SARS was defrauded.
[79]
This brings us to the individual counts.
The state asks that accused 1 be convicted on counts 1, 3, 4 to 15,
16 to 19, 21 to 50,
61 and 62 and lastly on counts 182 to 184.
[80]
It was conceded that accused 1 cannot be
convicted on counts 2, 20, 51 and 52, 53 to 60, 63 to 167 and 168 to
181. This concession
is, in our opinion, a sensible one and correct.
[81]
Count 1 alleges a contravention of s
2(1)(f) of POCA, in that the accused did at least from 2005 until
2008 wrongfully and unlawfully
manage the operation or activities of
an enterprise whilst knowing or ought reasonably to have known that
any person, whilst employed
by that enterprise, conducts or
participates in the conduct, directly or indirectly, of such
enterprise’s affairs through
a pattern of racketeering
activity.
[82]
Each one of the Indo Atlantic group of
companies, as well as accused 1, fall clearly within the definition
of “enterprise”
in s 1 of POCA. The fraud committed on
SARS also falls squarely within the definition of “pattern of
racketeering activity”.
POCA does not define what is meant by
“managed”, but it is clear that accused 1 managed the
operation or activities
of the Indo Atlantic group of companies
whilst he was the direct cause or at the very least participated in
the frauds on SARS
that were committed over this period and therefore
not only participated but in fact managed the pattern of racketeering
activity.
[83]
We are satisfied that the state has proved
the guilt of accused 1 on this count beyond a reasonable doubt.
[84]
Count 3 alleges a contravention of s 4 of
POCA. It is clear that accused 1 knew that the money that SARS
paid into the account
of S&D Consulting was the proceeds of
unlawful activities. We are not satisfied that the agreement which
accused 1 and 2 entered
into was done with the purpose of concealing
or disguising the nature or source of the money that was paid by
SARS. Accused 1 ought,
however, to have known that the agreement had
or was likely to have the effect of concealing or disguising the
nature or source
of the funds. He is, therefore, found guilty on
count 3 of a contravention of s 4 of POCA.
[85]
Count 4 to 15 refer to various agreements
which accused 1 entered into or negotiations which he had with
the complainants.
[86]
Count 4 relates to the agreement which was
entered into with Mr. Annandale of Mercedes Benz. At this stage,
that is November
2005, it was clear that the Indo Atlantic group was
in no position to pay for the vehicles it ordered and would not be in
the position
to pay for them in the foreseeable future. It is our
conclusion that this transaction was part and parcel of accused 1’s
scheme to obtain invoices so that he could present them to SARS and
that he never had any intention of honouring the purchase agreements.
He is, therefore, found guilty on count 4.
[87]
The initial instructions to Mr. Martin Horn
of Processing Solutions Industry CC for the installation of a fish
processing plant
form the basis of counts 5 and 6. The instructions
were given in February 2005. It is significant that the invoices
issued by him
were only utilised in July 2005 to claim input VAT. The
instruction for the valuation of the plant in Hout Bay, forming the
basis
of count 10, followed much later. Although the conduct of
accused 1 is highly suspicious, it cannot in our view be found
beyond
reasonable doubt that accused 1, when issuing the initial
instructions and when asking for the valuation, had the intention to
defraud. In the result he is found not guilty on counts 5, 6 and 10.
[88]
Count 7 involves the lease agreement which
was entered into with V&A Waterfront Properties (Pty)
Limited in respect of
the property at East Pier Road, Quay No 7, V&A
Waterfront. Before we can convict the accused on this count we have
to be satisfied
that, when entering into the agreement, he had no
intention of paying the agreed rent. It is clear that the Indo
Atlantic Group
of companies was in dire financial straits at that
time. We can, however, not find that accused 1, from inception, had
no intention
of paying the rent. The fact that the company defaulted,
cannot be used ex post facto to supplement this shortcoming. In the
result,
he is found not guilty on count 7.
[89]
Counts 8 and 9 are, however, different.
Negotiations and the acceptance of the quotes from PAM Refrigeration
Marine & Industrial
(Pty) Limited for the installation of a
refrigeration plant in part took place when the Indo Atlantic Group
had already been evicted
from the premises. We have come to the
conclusion that accused 1 had no intention of paying for this work.
The fact that the complainant
did not install or purchase the
equipment does not mean that no prejudice was suffered. Quite a bit
of work was done inspecting
and calculating the cost of the work and
this is sufficient to satisfy the prejudice requirement to constitute
fraud. We are satisfied
that accused 1 committed fraud and he is
convicted on counts 8 and 9.
[90]
The agreements entered into with Dekko
Coatings for renovations to the premises occupied by the Indo
Atlantic Group forms the basis
of counts 11 to 15. The agreements for
the renovations were entered into early in 2005. It is clear that
extensive work, for which
it was never paid, had been done by the
complainant. We are not satisfied that it can be found that accused 1
never intended to
pay for the work at the time when the agreements
were entered into and he is, therefore, found not guilty on counts 11
to 15.
[91]
Counts 16 to 19 and 21 to 50 relate to the
fraud perpetrated on SARS. As stated above it is common cause that
the VAT returns referred
to in these charges were all false and were
presented as a result of a scheme which accused 1 had put in place
and employed to
defraud SARS. There can, in our view, be no doubt as
to his guilt and he is convicted on counts 16 to 19 and 21 to 50.
[92]
Next are counts 61 and 62. During October
2006 a VAT return was submitted by Indo Atlantic Shipping for the
period August 2006.
Included in the return was a claim for input VAT
in respect of Isotherm and Dekko Coatings. This conduct forms the
basis of count
61. The claim was selected for screening by Mr.
Malcolm Wrench and on 24 October 2006 the documents to
substantiate
the claims were faxed to him. This conduct forms the
basis of count 62. The claim in the sum of R1 104 778 was
paid.
It is common cause that the Isotherm invoices were false. The
invoices for Dekko Coating were more than a year old and accused 1
was well aware that they had not been paid. We are satisfied that
accused 1 was instrumental in submitting this claim and that
he is
guilty of fraud as alleged in count 61. The facts relied on in count
62 is merely a continuance of the fraud already committed
and in our
view merely and extension thereof. Accused 1 is found not guilty on
count 62.
[93]
Lastly, there are counts 182 to 184. It is
alleged that the accused is guilty of reckless trading in
contravention of s 424(3) read
with s 424(1) of Act 61 of 1973.
That accused 1 managed and controlled all three companies i.e. Indo
Atlantic Seafoods (Pty)
Limited, Indo Atlantic Shipping Limited and
Indo Atlantic Group Holdings (Pty) Limited cannot be doubted. He kept
a tight reign
on all the finances and major creditors were not paid
unless he approved. During 2008 and 2009 the three companies were
liquidated.
The companies were only kept alive with the ‘VAT
refunds’ that were paid by SARS. Major creditors were not paid.
Rental
payments to V&A Waterfront Properties were not paid and so
to Dekko Coatings and the companies that were responsible for the
exports to mention but a few. It is clear that the companies not only
experienced cash flow problems but were in fact trading in
insolvent
circumstances. Despite this fact, accused 1 syphoned off funds for
his family trust and to fund his lavish lifestyle.
It is clear that
accused 1 used company funds as if it belonged to him personally,
Large amounts were credited to his loan account.
There can be little
doubt that when he appropriated the money he knew that the companies
were financially in dire straights. This
conduct in our view
constitutes reckless trading within the meaning of the section of the
Act. He is accordingly, convicted on
counts 182 to 184.
ACCUSED
2
[94]
Early in 2005 accused 2 was approached by
accused 1 to render bookkeeping and accounting services through his
firm S&D Consulting
for the Indo Atlantic group. Accused 1
accepted the offer and proceeded to render the services. His fees
were, however, not paid
and it was then that accused 1 made the offer
that accused 2 be paid 10% of all VAT refunds plus his fees for
work done. This
offer was accepted by accused 2. It is important to
note that the 10% offer did not originate from accused 2. It
also cannot
be overlooked that initially accused 2 ‘s 10% share
of the refunds did not amount to much it only escalated later when
the
VAT refunds increased substantially. It was accused 1’s
suggestion that they enter into the agreement. At best for the state
the acceptance of the offer by accused 2 could be described as
opportunistic. The agreement itself was, however, not illegal.
[95]
In August 2005 the First National Bank
closed the account of Indo Atlantic Seafoods (Pty) Limited. It was
then agreed with accused
2 that the refunds would be received into
the bank account of S&D Consulting. Accused 2 would then
deduct the 10% as well
as the fees earned and pay over the balance as
directed. In August 2005 the prescribed forms VAT119i and VAT 126
were lodged with
SARS. On 29 August 2005 the first refund from SARS
was paid into S&D’s account. This agreement resulted in
accused 2
receiving approximately R37m over and above the fees
earned over a period of about three years. Again this was not an
illegal arrangement.
The procedures of SARS in fact allow for such an
arrangement. It was the fact that the 10% agreement resulted in
payments amounting
to R37 over the period of about 3 years which
attracted the attention of the investigators. As stated it is our
view that it can
at best be described as opportunistic and even
greedy.
[96]
The evidence of accused 2 regarding the
agreement and later arrangement that the refunds be paid into the S&D
account cannot
be rejected and certainly cannot be said to be false
beyond reasonable doubt.
[97]
We are of the view that accused 2 was a
good witness. The state submitted that accused 2 was an evasive
witness and that he also
failed to answer direct questions. That is
not our impression. Making due allowance for the long lapse of time
since these events
occurred we find that accused 2 acquitted himself
well in the witness box. There was nothing untoward in his demeanour
which may
have alerted us to the fact that he was not being truthful.
He answered all questions to the best of his ability and where
clarification
of the question was needed he asked for it and answered
it.
[98]
Other than the arrangement referred to
above accused 2 had no part in the management or the day to day
business or operations of
the Indo Atlantic group. He relied solely
on the information and documentation supplied to him by the
companies’ employees.
He never got to the point where he could
do a full and complete audit of the accounts of the Indo Atlantic
group.
[99]
That he was not actively engaged in the
business of the Indo Atlantic group is also borne out by the fact
that over the whole period
he only received about 20 emails regarding
the companies and only actively participated in 6 of them. The state
relied heavily
of the emails of 1 to 8 July 2008 and 14 to 17
November 2008. The first batch of invoices relate to turnover
invoices and accused
2’s advice in that regard. If the emails
are read in context then and in our view the accused was simply
giving sound advice
to his client regarding zero rated invoices and
in the later email requested the Isotherm purchase invoices because
these are the
invoices which the SARS inquiry related to.
[100]
As far as the second string of invoices is
concerned the evidence shows that, although accused 2 is indicated as
a recipient, he
never responded to any of them. On 12 November 2008
he advised his client of SARS’s requirements. He thereafter
went overseas
and was away during the period that the emails were
sent.
[101]
In asking for a conviction on s 2(1)(f) of
POCA it was submitted that accused 2 should at least have
reasonably concluded that
SARS was being defrauded. It is true that
R37m over the period of three years is indeed a very large sum of
money to receive for
the simple act of the use of one’s banking
account. It must, however, be kept in mind that the initial payments
were not
large. It was only later that the refunds grew and
concomitantly accused 2’s share thereof. He seldom visited
the offices
of his client but on the occasions that he did he saw,
what was by all appearances, a healthy and wealthy company. It
occupied
luxury offices with a large number of employees. He came to
know that the company had purchased a game farm, and an aeroplane. By
all appearances, the Indo Atlantic group of companies was a
successful group making huge profits. He no doubt would also have
been aware of the zero rated exports, which were reflected on the VAT
returns. This certainly painted a glowing picture of a company
that
was financially strong with a huge market share.
[102]
It also is not unreasonable for someone in
accused 2’s position to accept that SARS had done a proper
evaluation of the VAT
claims otherwise they would not have paid the
refunds.
[103]
It is a very important fact that accused 2
only came into the picture after the fraud on SARS had been on-going
for some time. It
is true that one can certainly join in an existing
scheme of criminal activity but in this case it is unlikely that that
is what
happened here. There are invoices which could not possibly
have been created on the advice of accused 2. If he had been
involved,
these invoices would not have contained the mistakes which
they reflect. Except for two emails which accused 2 sent to SARS in
2008 and his visit to them on 6 November 2008 there is no evidence
that he had any further contact with SARS. This flies in the
face of
the state’s stance that he was narrowly involved in persuading
SARS to pay the refunds.
[104]
In our view there were no facts or
circumstances on which he should have concluded that the refunds were
tainted or out of the ordinary.
He is accordingly, found not guilty
of all charges.
ACCUSED
3
[105]
This brings me to accused 3. The question
we have to answer is: was accused 3 a party to the presentation
of the false claims
or did he have knowledge of their falsity
and despite his knowledge nevertheless went ahead and presented the
VAT returns
to SARS?
[106]
Accused 3 was initially, during June 2005,
employed by the accounting firm of accused 2 in Somerset West. He
commenced working for
the Indo Atlantic group of companies towards
the end of 2006 and the beginning of 2007. On 1 March 2007 Ms.
Claudia Mannel was
employed by the Indo Atlantic group and her duty
was mainly to prepare the VAT control account. It is, however,
significant that
this account goes back to 2005; a period well before
Mannel or accused 3 was employed by Indo Atlantic. It is also clear
that accused
3 stood under the instructions of accused 1.
[107]
In approaching his evidence we have to keep
in mind that accused 3 was required to recall matters that stretched
over more or less
three years and go as far back as 2005. It would be
remarkable if his evidence were without blemishes. He was not an
impressive
witness during his evidence in chief. His evidence given
under cross examination stands in contrast to his evidence in chief.
He
was initially nervous and he did not always answer the questions
satisfactorily. Under cross examination he improved markedly and
turned out to be a good witness. The reason for his nervousness is
probably to be found in the fact that he knew he had admittedly
failed to pay tax on the bonuses he had received and he also knew
that he had completed the VAT returns which, as it turned out,
contained false information. With the exception of a few matters we
are satisfied that his evidence can be accepted.
[108]
The procedure that was followed for the
completion of the VAT returns was that accused 3 was presented with a
spread sheet of all
invoices that qualified for claiming input VAT.
Once he had received these accused1 would then give him the figures
constituting
the further claims. These figures constituted the false
input VAT claims. Accused 3 denied that he was aware of the falsity
of
this part of the claim and he simply accepted accused 1’s
figures. It is common cause that towards the end i.e. from about
July
2008 accused 3 became very uncomfortable with the claims. When he
voiced his concerns with accused 1 and also the erstwhile
accused 6
he was assured that it was in order and accused 6 assured him that it
was not his responsibility. Eventually he sought
to distance himself
from these claims by firstly threatening to resign and eventually
resigning from the Indo Atlantic group of
companies on 30 October
2008. No doubt the situation with regard to irate unpaid creditors
who continuously complained to him also
contributed to his
unhappiness.
[109]
We have to keep in mind that the completion
of the VAT returns was only a small part of the tasks that accused 3
was required to
perform. There can be little doubt that his attention
was for the most part occupied with the other daily financial matters
of
the group and towards the end dealing with the complaints of
unpaid creditors. Eventually he, like the erstwhile accused 6,
became uncomfortable with the large refunds that were received from
SARS.
[110]
It is important to note that accused 3 was
not intricately involved in the day to day running of the companies.
He was, after being
released by S&D Consulting, employed by Indo
Atlantic Group Holdings and not Indo Atlantic Seafoods or Indo
Atlantic Shipping.
Although he completed the VAT returns he did not,
save for the February 2005, April 2005, June 2005, 6 June 2006,
August 2006 and
November 2006 returns, sign any of them. These six
returns were signed by him whilst still in the employ of S&D
Consulting.
The vast majority were signed by accused 1. No false
invoices were found on accused 3’s computer. The false invoices
that
were found at Vogue House were on the server under the folder
‘My Documents’ which contained a sub-folder ‘Johan’.
[111]
Save for the bonuses which were paid to
accused 3, which were clearly not insignificant amounts, he received
very little benefit
from the refunds paid by SARS.
[112]
In the result we are not satisfied that the
state has proved its case against accused 3 and he is acquitted on
all charges.
ACCUSED
5
[113]
We do not think it necessary to spend much
time analysing the evidence regarding accused 5. He was an excellent
witness and there
is simply no evidence implicating him in any of the
crimes he is charged with. He is accordingly, found not guilty on all
charges.
SUMMARY
[114]
In summary:
(a)
Accused 1 is convicted on counts 1, 3, 4,
8, 9, 16 to 19, 21 to 50, 61 and 182 to 184. He is acquitted on all
other charges; and
(b)
The other accused are found not guilty on
all charges.