Prinsloo v S (827/2011) [2015] ZASCA 207; [2016] 1 All SA 390 (SCA); 2016 (2) SACR 25 (SCA) (4 December 2015)

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[2015] ZASCA 207
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Prinsloo v S (827/2011) [2015] ZASCA 207; [2016] 1 All SA 390 (SCA); 2016 (2) SACR 25 (SCA) (4 December 2015)

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THE SUPREME COURT OF
APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case No:
827/2011
In
the matter between:
MARIA
JOHANNA PRINSLOO

FIRST

APPELLANT
HERBERT
HENRY PRINSLOO

SECOND APPELLANT
MARIA
JOHANNA LEMSTRA

THIRD APPELLANT
GERRIT
LEMSTRA

FOURTH APPELLANT
WILLEM
JACOBUS PELSER

FIFTH APPELLANT
IZABEL
ENGELBRECHT

SIXTH APPELLANT
and
THE
STATE

RESPONDENT
Neutral
citation:
Prinsloo
& others v State
(827/11)
[2015] ZASCA 207
(4 December 2015)
Coram:
Brand
JA and Fourie and Eksteen AJJA
Heard:
18
November 2015
Delivered:
4
December 2015
Summary
:
Criminal Law – unlawful multiplication scheme conducted in
contravention of various statutory provisions and the common law
─
whether such activities constituted a pattern of racketeering
activity in contravention of sections 2(1)
(b)
,
2(1)
(e)
,
2(1)
(f)
and 4 of the Prevention of Organised Crime Act 121 of 1998 (POCA) ─
elements to be proved by the State to secure convictions
under
relevant provisions of POCA ─ whether
dolus
or
culpa
required ─ proper approach. Sentence ─ whether
interference by court of appeal is justified.
ORDER
On appeal from
:
North Gauteng Division of the High
Court,
Pretoria
(Pretorius J and assessors sitting as court of
first instance):
The first accused
(i) Counts 77176-86246
The appeal against the
convictions on these counts is upheld to the extent that the order of
the trial court is set aside and the
following substituted therefor:
‘
Skuldig
aan een klagte van die oortreding van artikel 42 van die
Koöperasiewet 91 van 1981.’
(ii) Counts 197708-199747
The appeal is upheld
and the convictions and sentence imposed on these counts are set
aside.
(iii) Counts 200664-218636
The appeal against the
convictions on these counts is upheld to the extent that the order of
the trial court is set aside and the
following substituted therefor:
‘
Skuldig
aan een klagte van die bedryf van ‘n skadelike sakepraktyk.’
(iv) Count 218683
The appeal against the
conviction on this count is upheld to the extent that the order of
the trial court is set aside and the following
substituted therefor:
‘
Skuldig
aan diefstal ten bedrae van R91,1 miljoen.’
(v) Save as
aforesaid, the appeal of the first accused against her convictions
and the sentences imposed, is dismissed.
The second accused
(i) Counts 77176 to 86246
The appeal against the convictions on
these counts is upheld to the extent that the order of the trial
court is set aside and the
following is substituted therefor:
‘Skuldig aan een klagte van die
oortreding van artikel 42 van die Koöperasiewet 91 van 1981’
(ii) Counts 197708 to 199747:
The appeal is upheld and the convictions
and sentence imposed on these counts are set aside.
(iii) Counts 200664 to 204797
The appeal is upheld and the convictions
and sentence imposed on these counts are set aside.
(iv) Counts 204798 to 218636
The appeal against the convictions on
these counts is upheld to the extent that the order of the trial
court is set aside and the
following is substituted therefor:
‘Skuldig aan een klagte van die
bedryf van ’n skadelike sakepraktyk.’
(v) Count 218637
The appeal is upheld and the conviction
and sentence imposed on this count are set aside.
(vi) Save as aforesaid the appeal of the
second accused against his convictions and sentences imposed is
dismissed.
Accused 3
(i) Counts 48 to 949; counts 144337 to
188910; and counts 197708 to 199747
The appeal is upheld and the convictions
and sentences imposed on these counts are set aside.
(ii) Counts 200664 to 218636
The appeal against the convictions on
these counts is upheld to the extent that the order of the trial
court is set aside and the
following is substituted therefor:
‘Skuldig aan een klagte van die
bedryf van ’n skadelike sakepraktyk.’
(iii) Save as aforesaid the appeal of
accused 3 against her convictions and the sentences imposed is
dismissed.
Accused 4
(i) Counts 77176 to 86246
The appeal against the convictions on
these counts is upheld to the extent that the order of the trial
court is set aside
and the following is
substituted therefor:
‘Skuldig aan een klagte van die
oortreding van artikel 42 van die Koöperasiewet 91 van 1981’
(ii) Counts 197708 to 199747
The appeal is upheld and the convictions
and sentence imposed on these counts are set aside.
(iii) Counts 200664 to 218636
The appeal against the convictions on
these counts is upheld to the extent that the order of the trial
court is set aside and the
following is substituted therefor:
‘Skuldig aan een klagte van die
bedryf van ’n skadelike sakepraktyk.’
(iv) Count 218637
The appeal is upheld and the conviction
and sentence imposed on this count are set aside.
(v) Count 218683
The appellant is sentenced to 10 years’
imprisonment on this count and it is ordered that the sentence is to
run concurrently
with the sentence imposed on counts 2 and 3.
(vi) Save as aforesaid the appeal of
accused 4 against his convictions and the sentences imposed is
dismissed.
Accused 5
(i) Counts 144337-188910
The appeal is upheld
and the convictions and sentences imposed on these counts are set
aside.
(ii) Count 218653
The appeal against the
conviction is upheld to the extent that the order of the trial court
is set aside and the following substituted
therefor:
‘
Skuldig
aan die oortreding van artikel 75(1)
(a)
van die Inkomstebelastingwet 58 van 1962.’
(iii) Save as
aforesaid, the appeal of accused 5 against his convictions and the
sentences imposed, is dismissed.
Accused 6
(i) Counts 144337-188910
The appeal is upheld
and the conviction and sentences imposed on these counts are set
aside.
(ii) Count 218682
The appeal is upheld
and the conviction and sentence imposed on this count are set aside.
(iii) Counts 54534-59033
The typographical
error in the summary of the trial court of the counts in respect of
which accused 6 was acquitted, is corrected
to reflect the acquittal
of accused 6 on counts 54534-59033.
(iv) Save as
aforesaid, the appeal of accused 6 against her convictions and the
sentences imposed, is dismissed.
(v) Count 218657 ─
The State’s appeal
The appeal of the State
against the sentence imposed on this count is upheld. The sentence is
set aside and the following substituted
therefor:
‘
Aanklag
218657 ─ Bedrog ─ 12 jaar gevangenisstraf.’
JUDGMENT
Fourie and Eksteen
AJJA:
Introduction
[1] In 1919 Italian
immigrant Charles Ponzi of Boston, Massachusetts, United States of
America, devised a scheme by which he enticed
some 11 000
Bostonians to invest approximately US$20 million with him, promising
exceptionally high rates of return within
a short period of time by
purchasing international reply coupons from other countries and then
redeeming them in the US for postage
stamps. Initially he was able to
pay these exorbitant returns to previous investors by simply drawing
from the capital investments
received from subsequent investors.
However, seeing that the scheme was not based upon any viable
underlying economic enterprise,
it eventually had to collapse when no
more investors could be persuaded to make further investments. Hence,
schemes of this nature
have, down the years, become known as Ponzi
schemes.
[2] This appeal has
its origin in a similar scheme which had been conducted during the
period 1 March 1998 to 22 May 2002, initially
only within the Vaal
Triangle area 60 kilometres south of Johannesburg, but was later also
countrywide. The scheme was initiated
by the first appellant, but
subsequently the second to sixth appellants became involved at
different times and in different capacities.
It is common cause that
during the four years of its existence, approximately R1,5 billion
was invested in this scheme and upon
its demise scores of investors
had lost all their money and were left destitute. The State contended
that, what the appellants
had conducted, was a Ponzi or
multiplication scheme, and in view thereof a plethora of criminal
charges were preferred against
them. In fact, the final indictment
contained no less than 218 683 charges.
[3] The appellants,
to whom we will conveniently refer as ‘the accused’, were
arraigned on these charges in the North
Gauteng High Court,
Pretoria
and their trial commenced before Pretorius J and
two assessors on 27 July 2009. The accused pleaded not guilty to all
the charges,
but after hearing evidence, Pretorius J, on 8 June 2010,
found each of them guilty on a large number of the counts preferred
against
them. We will in due course refer to the specific counts, but
should mention that the accused were found not guilty on some 1 000

counts. They were subsequently sentenced to terms of effective
imprisonment, ranging from 25 years to 5 years. We will also in
due
course return to the sentences so imposed.
[4] The accused are
appealing, with the leave of the court a quo, against such
convictions and sentences. The State, also with the
leave of the
court a quo, appeals against the sentence imposed on accused six in
respect of count 218 657.
Dramatis Personae
[5] The first accused
was the main role player in the scheme. She initiated the scheme in
1998, and it is common cause that, at
all times, she was at the
forefront of this enterprise.
[6] The second
accused joined the scheme in the first half of 2001and acted as a
public official or an office bearer of two entities
utilised to
conduct the scheme. He married the first accused in December 2001.
They were divorced during the course of the trial.
[7] The third accused
is the daughter of the first accused. She joined the scheme in April
1998 and acted as a public official or
an office bearer of four of
the entities involved in the scheme.
[8] The fourth
accused is the husband of the third accused and the son-in-law of the
first accused. He joined the scheme in January
1999 and acted as a
public official or an office bearer of three of the entities utilised
to conduct the scheme.
[9] The fifth accused
is the son of the first accused. He joined the scheme in July 1998
and acted as a public official or an office
bearer of two of the
entities utilised to conduct the scheme.
[10] The sixth
accused is the niece of the first accused. She joined the scheme in
October 1998 and acted as a public official or
an office bearer of
two of the entities utilised to conduct the scheme.
Chronology of relevant
events
[11] The accused did
not (and could not in view of the uncontested objective evidence)
seriously contest the notion that the scheme
operated by them was in
fact a Ponzi scheme. The evidence clearly showed that the underlying
cash loan businesses conducted by
the first accused, never generated
sufficient income to meet or sustain the interest payments to be made
to investors. In the result
investors’ capital was used to
satisfy the interest commitments. The essence of the business of the
scheme was the taking
of deposits, initially at a return of 20 per
cent per month but later mostly at a return of 10 per cent per month.
As a matter
of course, the scheme was therefore insolvent
ab
initio
and constituted a Ponzi scheme.
[12] We do not
consider it necessary for purposes of this judgment, to engage in a
detailed summary of all the events giving rise
to the charges
preferred against the accused. This laborious task had been
undertaken by the trial judge who produced an exceptionally
detailed
judgment of 1 159 pages. We will merely refer to the events
constituting the factual matrix necessary for the consideration
of
the appeals brought by the respective accused.
[13] Reverting to the
nature and extent of the scheme, it appears that the first accused
commenced her cash loan business in March
1998 under the name and
style of Finsure Consultants. Investments were procured from the
public at an initial return of 20 per
cent per month. In October
1998, the business was converted to a close corporation styled MP
Finance CC t/a Finsure Consultants.
The first accused was the only
member, but on 29 December 1998, the members’ interest was
restructured so that she held 60
per cent and the third and fifth
accused, 20 per cent each.
[14] In the period
between 1 March 1998 and 28 February 1999 deposits by investors of
R1,57 million were received, whilst R1,4 million
was owed to the
investors in interest. This was not reflected in the financial
records of the close corporation for the 1999 tax
year. They
reflected a gross income of R176 478 only with a nett profit of
R10 608 before tax.
[15] On 29 February
2000 deposits were held in an amount of R20,65 million. The interest
commitment for the period between 1 March
1999 and 29 February 2000,
was R14,9 million. This was yet again not reflected in the financial
records of the close corporation,
which reflected a gross income of
R1,7 million with a nett profit of R4 530 before tax.
[16] Following an
inspection by the Department of Trade and Industry (the DTI) on 10
May 2000, the first accused represented in
writing to the DTI that:
(a) all investors were
repaid on 11 and 12 May 2000;
(b) the investors were
family members and friends who were shareholders and paid dividends
based on profits; and that
(c) there were only
33 investors who invested a total amount of R682 750.
[17] However, as it
transpired subsequently, members of the public who had invested in
the scheme, did not receive payment of their
investments and on 13
May 2000 the total value of these investments was approximately R37
million.
[18] During May 2000,
a new entity entered the fray, namely, a company by the name of
Madikor Twintig (Pty) Ltd (Madikor). On 18
May 2000, documentation
was lodged with the registrar of companies, appointing the first,
third, fifth and sixth accused as directors
of Madikor.
[19] In the period
between 10 May 2000 and 17 January 2001, 2
450 deposits to the value of R131
million were received from members of the public by Madikor. While
‘investments certificates’
were issued for deposits
received in Finsure Consultants and MP Finance CC, ‘share
certificates’ were issued for deposits
received by Madikor.
However, during the period June 2000 until April 2002, investor
statements were issued in the name of ‘MP
Financial Services’.
These statements listed all investments by and payments to investors,
irrespective of the entity used
or the fact that an investment in one
entity may have been converted to an investment in another.
[20] On 25 October 2000 an
enquiry was made by the South African Reserve Bank (the SARB). This
resulted in a written response by
the attorneys of the first accused
on 11 December 2000, in which it was -
(a) acknowledged that
deposits were taken in contravention of the Banks Act 94 of 1990 (the
Banks Act); and
(b) undertaken that
deposits received would be repaid by 15 January 2001, of which proof
would be submitted to the SARB in January
2001.
A list of 105
investors of the amount of R2 996 700 was attached to this
letter. However, it is common cause that, on
11 December 2000, there
w
ere
in fact 2 461 a
ctive investments
with a total value of more than R126 million, while the underlying
business of the scheme at no stage realised
sufficient profit to
service the resulting debt payable to these investors at a rate of
R13,4 million per month. Needless to say,
investors were not repaid
as had been undertaken in the letter addressed to the SARB.
[21] On 19 March 2001
an application for membership dated 30 January 2001, was filed on
behalf of MP Finance SACCO with the Savings
and Credit Co-operative
League (SACCOL). It appears from the application that an inaugural
general meeting of MP Finance SACCO
was held on 15 January 2001,
where it was decided that the first accused would act as its
chairperson and the third accused as
treasurer. The fourth accused
signed the application as ‘member’. However, on 26 March
2001, SACCOL refused the application
for membership.
[22] Notwithstanding
the refusal of the application lodged by MP Finance SACCO, deposits
were taken from investors in the name of
this unregistered entity. It
is common cause that, in 2001, registered savings and credit
co-operatives were only allowed to take
deposits up to a maximum of
R9,9 million. However, during the period between 1 January 2001 and
21 August 2
001,
5 483 de
posits to the value of
R308,5 million by investors were taken by the unregistered entity, MP
Finance SACCO.
[23] On 4 June 2001,
a shelf company was converted to a public company and renamed
Martburt Financial Services Ltd (Martburt), in
which 10 000
ordinary shares were issued. Of these 6 000 were allocated to
the first accused
and
1 000 to
each of the second, third,
fourth and fifth accused. The latter four accused were also appointed
as directors of Martburt. Although
the sixth accused was never
officially appointed as a director, she was held out to be one in the
documentation of Martburt. A
draft prospectus made prov
ision
for 2 000 shar
es with a nominal
value of R1 each, linked to debentures of R4 999, to be issued
to the public for a total amount of R10 million.
[24] However, during
the period between 4 June 2001 and 31 October 2001, approximately 4
500 deposits from investors to the value
of R290,9 million were taken
by Martburt. In addition, 3 451 debentures to the value of R155,7
million were issued in Martburt’s
name and 841 investments to
the value of R44,3 million were transferred from Madikor and MP
Finance SACCO to Martburt.
[25] On 6 June 2001
inspectors appointed in terms of
s 11(1)
of the
South African Reserve
Bank Act 90 of 1989
, inspected the business of Martburt. A legal
representative of Martburt then admitted that deposits were taken in
contravention
of s 11(1) of the Banks Act. It was represented to
the inspectors that between R10 million and R12 million was owed to
investors.
This was untrue. On 6 June 2001 the actual amount owing in
respect of approximately 5 890 investments was in the order of R320
million. The explanation proffered on behalf of Martburt was that the
draft prospectus ‘legalised’ the taking of deposits.
This
was also untrue since the R10 million to be raised through the issue
of debentures would not have covered the R320 million
owed to
investors. At that meeting of 6 June 2001, an instruction was given
by the inspectors that no further deposits may be taken
from the
public.
[26] The following
day the inspectors instructed the first accused to repay deposits
under the control of the managers appointed
in terms of s 83(1) of
the Banks Act. The first accused represented to the inspectors that
R10,7 million was owing to investors,
while at that stage the amount
owing in respect of approximately 6 006 investments, was
approximately R325 million. When confronted
with the fact that not
all investors were reflected on the investors’ list dated 7
June 2001, it was represented to the inspectors
on 10 July 2001 that
R11,6 million was owed to the investors. This was another blatant
untruth. As at 10 July 2001, approximately
R362 million was owed to
investors. On 1 August 2001, the amount owed to investors exceeded
R375,1 million.
[27] After the
meeting of 6 June 2001, investors’ files were removed from the
principal place of business at Madikor Building
and, over the next
year, the files were again moved, also to the farm of the sixth
accused. Various agents were appointed to deal
with payments to
investors and with new investments.
[28] As from 1 August
2001, deposits were further taken in the name of the entity M & B
Co-Operative, with membership certificates
being issued to investors.
An application for registration of M & B Co-Operative dated 25
September 2001, was lodged with the
registrar. According to the
application, the second accused would be the chairperson and the
fourth accused a director of the co-operative.
However, the
application was never approved and M & B Co-Operative was never
registered. That notwithstanding, 9 071 deposits
of the value of
R542,7 million were taken in the name of this entity during the
period between 1 August 2001 and 1 March 2002.
In addition, 92
investments in other entities to the value of R6,1 million were
transferred to this non-existent entity.
[29] During late 2001
to the beginning of 2002 a company named Africa’s Best 173
(Pty) Ltd was converted to a public company
with its name changed to
Krion Financial Services Limited (Krion). This was yet another
vehicle utilised for the taking of deposits
from investors. Moreover,
investments made in previous entities were converted to investments
in Krion. A registered prospectus
was issued for Krion and 100 000
N-Ordinary shares
[1]
valued at 1c each were offered at a premium of R999.99 from 5 March
2002 to 4 June 2002. Therefore, R100 million could potentially
be
raised should this offer be fully subscribed. It should be borne in
mind, however, that the R100 million which had to be raised
in this
manner would still have been insufficient to cover the amount of
R796,2 million owed by the scheme to investors as at 8 February

2002. As it turned out, Krion received 8 797 applications for 908 600
shares to the value of R58,4 million from new investors and
receipts
were issued for a further R57 million with no corresponding
applications for shares. It followed that a total amount of
R115,4
million was received by Krion in respect of new investments of which
only R24,3 million found its way to the Krion bank
account.
[30] The total value
of investments in Krion (including conversions, new investments and
money received without corresponding application
for shares) amounted
to R965 million. It will be recalled that only 100 000 shares to
the value of R100 million were issued
in terms of the prospectus,
with the result that the offer was over-subscribed by R865 million.
Therefore, R865 million ought to
have been repaid to potential
investors after the closing of the offer on 4 June 2002. But, on that
date only R3,7 million was
left in the Krion bank account. It would
appear that the balance of the investments placed with Krion was used
to pay investors
in respect of investments made with other entities
involved in the scheme.
[31] The inevitable
result of the aforegoing was the liquidation of all the entities
which formed part of the scheme, during June
2002. The different
entities were treated as one for purposes of liquidation and joint
liquidators were appointed for the ‘MP
Finance Groep BK’.
[32] It is convenient
at this stage to briefly summarise the purchase and or transfer of
assets in the names of various trusts.
The individual transactions
are relevant to certain charges preferred against the accused, to
which we will return. Four trusts
were involved and we proceed to
summarise the acquisitions made by each of them.
The PT Vennote Familie
Trust
[33] The fourth
accused was the settler and donor of this trust established on
23 August 1999. He also acted as a co-trustee
of the trust.
[34] The following assets,
most of which were immovable properties, were purchased in the name
of the trust:
(a) 6B Delius Street, SW 5,
Vanderbijlpark, purchased on 17 November 1999 for R380 000.
(b)
2B Delius Street, SW 5, Vanderbijlpark, purchased on 1 December 1999
for R1 019 685
million.
(c) Ardenwold Gasthaus and
Waenhuis Danssaal, purchased on 19 April 2000 for R330 000.
(d) Remaining Extent of
Extent 7 of the farm Van Wyk, no 584, purchased on 19 April 2000 for
R400 000.
(e) Extent 13 of the farm
Van Wyk, no 584, purchased on 19 April 2000 for R100 000.
(f) Small Holding 52,
Ardenwold Agricultural Holdings, purchased on 10 October 2000 for
R305 000.
(g) Grootvaal Properties
(Pty) Ltd, the shareholding of which was purchased on 10 October
2000 for R1 731 215. The
company owned the building
utilised as head office by the scheme, later known as the Madikor
Building. The first, third, fifth
and sixth accused were appointed as
directors of the company with effect from 11 November 2000.
(h) Moneyline 399 (Pty)
Ltd, the shareholding of which was purchased on 11 October 2000
for R1 546 135. The company
owned section no 9 in the
sectional development known as Maraldi. The first accused was
appointed as a director of the company
with effect from 11 October
2000 and third, fifth and sixth accused from 7 November 2000.
(i) Moneyline 385 (Pty)
Ltd, the shareholding of which was purchased on 11 October 2000 for
R900 000. The company owned section
no 11 in the development
known as Maraldi. The first accused was appointed as a director of
the company with effect from 11 October
2000 whilst third, fifth and
sixth accused were thus appointed from 7 November 2000.
(j) Extent 14 of the farm
Van Wyk, no 584, which was purchased on 28 March 2001 for R150 000.
(k) Section no 6 Baltimore
Mansions, Vanderbijlpark, which was purchased during May 2001 for a
purchase price which, with interest,
amounted to R915 025.
We should add that
the first and fourth accused represented the trust in concluding
several of the aforementioned agreements of
purchase.
Jakia Trust
[35] This trust was
established on 3 July 2001. The sixth and seventh accused, Hendrik
Engelbrecht, the latter being the husband
of the former – both
acted as trustees. The following assets were purchased in the name of
the trust:
(a) Extent 8 of farm
Parkerton, which was originally purchased on 23 February 1999 in the
name of the seventh accused for R874 455.
On 19 April 2002, the
mortgage bond registered over the property was cancelled and the
property was transferred to the trust.
(b) Extent 1 of the farm
Midden, which was originally purchased on 16 August 1999 in the name
of the seventh accused for R588 000.
On 19 April 2002 the
mortgage bond registered over the property was cancelled and the
property was transferred to the trust.
(c) Extent 3 of the farm
Parkerton , which was originally purchased on 14 August 2000 in the
name of the seventh accused for R300 000.
On 19 April 2002 the
mortgage bond registered over the property was cancelled and the
property was transferred to the trust.
(d) Extent 4 of the farm
Parkerton, which was originally purchased on 4 December 2000 in the
name of the seventh accused for R268 800.
On 19 April 2002 the
property was transferred to the trust.
(e) Farm Salomina’s
Rust and farm Morgenzon, purchased on 7 August 2001 for R1,4 million.
[36] For the sake of
completeness we should mention that the seventh accused was also
found guilty and sentenced on two of the preferred
charges against
the accused, but has not sought leave to appeal.
Anja Boerdery Trust
[37] This trust was founded
on 3 July 2001 and sixth and seventh accused acted as its trustees.
The following assets were purchased
in its name:
(a) Farm Verwachting,
purchased on 7 August 2001 for R1 020 331.
(b) Farm Ausker’s
Dale and farm Erfdeel, purchased on 22 October 2001 for R334 189.
Izarich Trust
[38] The trust was founded
on 3 July 2001, and sixth and seventh accused acted as its trustees
as well. The following assets were
purchased in its name:
(a) Extent 1, 2 and the
Remaining Extent of the farm Altyddaar 630, originally purchased on
13 November 2001 in the name of the
seventh accused for R1,1 million.
On 3 April 2002 the property was transferred to the trust.
(b) The Remaining Extent,
and the Remaining Extent of Extent 1, of the farm Klapperrandjie 394,
purchased on 15 June 2001 for R940 000.
(c) Portion 10 of Erf 2408
Uvongo, originally purchased on 6 January 2001 in the name of accused
6 for R600 000. On 3 April
2002 the property was transferred to
the trust.
(d) Extent 2 of the farm
Bulskop 363, purchased on 13 January 2002 for R410 000.
(e) Erf 1244 Shelly Beach,
purchased on 1 March 2002 for R650 000.
(f) Remainder of Erf 1241
Shelly Beach, purchased on 1 March 2002 for R1,35 million.
(g) Remainder of the
farm Sweet Home 479, purchased on 3 May 2002 for R1,040 million.
[39] The cumulative
total of the aforementioned assets acquired by the various trusts had
been virtually R18 million. The purchase
considerations were paid
from the funds deposited by investors of the scheme in the names of
the various entities utilised in conducting
the scheme. There were no
loan agreements concluded between the trusts and those entities.
The convictions and
sentences
[40] The accused were
not criminally charged for operating the Ponzi scheme, as suggested
by counsel for the first accused in her
heads of argument. What they
were charged with, are offences committed by them in the process of
conducting the scheme. These included
various statutory and common
law offences, as we will in due course show. We proceed to deal
separately with the specific counts
on which each accused had been
convicted and the sentences imposed in respect thereof.
First accused
Counts 1 and 2
[41] It is convenient
to consider counts 1 and 2 together, as they encompass offences
concerning racketeering activities under s
2 of the Prevention of
Organised Crime Act 121 of 1998 (POCA). Such activities are defined
under a ‘pattern of racketeering
activity’, which means
the planned, on-going, continuous or repeated participation or
involvement in any offence referred
to in Schedule 1 of POCA, and
includes at least two offences referred to in Schedule 1 of which one
of the offences occurred after
the commencement of POCA and the last
offence occurred within ten years after the commission of such prior
offence referred to
in Schedule 1.
[42] Count 1 is a charge
framed under s 2(1)
(f)
of POCA, which provides that:
‘
Any
person who manages the operation or activities of an enterprise and
who knows or ought reasonably to have known that any person,
whilst
employed by or associated with that enterprise, conducts or
participates in the conduct, directly or indirectly, of such

enterprise’s affairs through a pattern of racketeering
activity, shall be guilty of an offence.’
[43] The first accused is
the only accused charged under s 2(1)
(f)
of POCA and, as
Bozalek J held in
S v De Vries & others
2009 (1) SACR 613
(C) para 380, the State, in order to prove count 1, must prove the
following elements:
(a) that an ‘enterprise’
existed;
(b) that the accused
managed the operations or activities of the enterprise;
(c) that a ‘pattern
of racketeering activity’ took place; and
(d) that the accused
knew or should reasonably have known that a pattern of racketeering
activity took place.
[44] Count 2, which was
preferred against all the accused, is framed under s 2(1)
(e)
of POCA, which reads as follows:
‘
Any
person who, whilst managing or employed by or associated with any
enterprise, conducts or participates in the conduct, directly
or
indirectly, of such enterprise’s affairs through a pattern of
racketeering activity, within the Republic or elsewhere,
shall be
guilty of an offence.’
[45] In
S v Eyssen
2009 (1) SACR 406
(SCA), Cloete JA explained the essential difference
between the offence in ss
(e)
and that created in ss
(f)
,
as follows in para 5:
‘
The
essence of the offence in ss
(e)
is that the accused must conduct (or participate in the conduct) of
an enterprise’s affairs. Actual participation is required

(although it may be direct or indirect). In that respect the
subsection differs from ss
(f)
,
the essence of which is that the accused must know (or ought
reasonably to have known) that another person did so. Knowledge,
not
participation, is required. On the other hand, ss
(e)
is wider than ss
(f)
in that ss
(e)
covers a person who was managing, or employed by, or associated with
the enterprise, whereas ss
(f)
is limited to a person who manages the operations or activities of an
enterprise. . . .’
[46] In considering
both counts 1 and 2, it has to be borne in mind that ‘manage’
is not defined in POCA and therefore
bears its ordinary meaning,
which in this context is: ‘1 [To] be in charge of; run. [Or] 2
Supervise staff. [Or] 3 [To] be
the manager of a (sports team or a
performer).’ See the
Concise
Oxford English Dictionary
10 ed (2002)
sv ‘manage’
[47] The word ‘enterprise’
is defined in s 1 of POCA as follows:
‘
.
. . includes any individual, partnership, corporation, association,
or any other juristic person or legal entity and any union
or group
of individuals associated in fact, although not a juristic person or
legal entity.’
As stated by Cloete
JA in
Eyssen
para 6, it is difficult to envisage a wider definition. A single
person as well as every other type of connection between persons

known to the law or existing in fact are included.
[48] With regard to
count 1, it is common cause that the first accused managed the
operation or activities of the scheme. It was
her brainchild and at
all relevant times she was at the forefront of its day to day
activities. The court a quo aptly described
her as ‘die
dryfveer en moederbrein van die onderneming’. It was not
disputed by her that the activities conducted
through the various
entities utilised by the scheme, constituted an ‘enterprise’
as defined in s 1 of POCA. The evidence
showed that the accused were
all consciously associated for the purpose of conducting the scheme
for their common benefit. The
first accused also did not seriously
dispute the finding of the court a quo that a ‘pattern of
racketeering activities’
as defined in s 1 of POCA, had taken
place in conducting the business of the scheme. As will become clear
in due course, a multitude
of offences referred to in Schedule 1 of
POCA had been committed by the accused in conducting the scheme
through its various entities,
which offences had occurred prior to
and after the commencement of POCA and within a ten year period as
prescribed by POCA.
[49] The remaining
element that the State had to prove for a conviction of the first
accused on count 1, is that, whilst managing
the operations or
activities of the scheme, she knew or ought reasonably to have known
that a pattern of racketeering activity
took place. The submission on
behalf of the first accused at the trial and on appeal, was that a
contravention of s 2(1)
(f)
of POCA requires
mens rea
in the form of intention (
dolus
)
and that negligence (
culpa
)
is not a sufficient form of
mens rea
for a contravention of the provision.
[50] The court a quo
rejected this submission and held that negligence is a sufficient
form of
mens rea
for a contravention of s 2(1)
(f)
.
However, it appears from para 1222 of the judgment that the court a
quo, in fact, held that the first accused ‘het sonder
twyfel
geweet dat hulle (the second to sixth accused) in diens van die
onderneming was en dat hulle deelgeneem het aan die onderneming
se
sake deur hierdie patroon van rampokkery’. This amounts to a
finding that the first accused had the necessary
mens
rea
in the form of intention. In our
view, the evidence overwhelmingly supports a finding that the first
accused had the necessary
mens rea
in the form of
dolus
.
In managing the affairs of the scheme by leading from the front, she
had been fully aware that the affairs of the scheme had been

conducted through a pattern of racketeering activity. Apart from
common law crimes such as theft and fraud having been committed
in
the furtherance of the business of the scheme, a multitude of
statutory offences were also committed and the excuse of the first

accused that she had not been aware of the unlawfulness of such
conduct, does not only ring hollow, but was correctly rejected
as
false beyond any reasonable doubt.
[51] We are further
of the view that, in any event, the wording of POCA and in particular
s 2(1)
(f)
makes it clear that
culpa
is a sufficient form of
mens rea
for a contravention of this subsection. In
S
v Arenstein
1964 (1) SA 361
(A) at
366C-D, it was reiterated that the degree of blameworthiness required
for a culpable violation of a statutory prohibition
must in the first
place be sought in the language used by the lawgiver. In the absence
of any words expressly indicating the particular
mental state
required, the degree of
mens rea
must depend on that foresight or care which the statute in the
circumstances demands.
[52] The offence in
terms of s 2(1)
(f)
is committed by a person managing the operation or activities of an
enterprise and who knows or ought reasonably to have known
that the
enterprise’s affairs are conducted through a pattern of
racketeering activity. The plain wording of the subsection
requires
mens rea
in the form of either
dolus
or
culpa
.
As explained by Albert Kruger in
Organised
Crime and Proceeds of Crime Law in South Africa
(2008) at 148, the words ‘ought reasonably to have known’
introduce the element of reasonableness, which must be assessed

objectively. No subjective intent or
dolus
eventualis
is required. The question is
whether the fictional reasonable person, the
diligens
paterfamilias
, would have known. See
also Jonathan Burchell
Principles of
Criminal Law
4 ed (2014) at 874.
[53] The view that
culpa
would suffice for a contravention of s 2(1)
(f)
, is underscored
by s 1(3) of POCA which states:
‘
For
the purposes of this Act a person ought reasonably to have known or
suspected a fact if the conclusions that he or she ought
to have
reached are those which would have been reached by a reasonably
diligent and vigilant person having both─
(a)
the general knowledge, skill, training, and experience that may
reasonably be expected of a person in his or her position; and
(b)
the general knowledge, skill, training and experience that he or she
in fact has.’
[54] In our view
there is also no doubt that, in the present circumstances, the first
accused ought reasonably to have known that
the scheme’s
affairs were conducted through a pattern of racketeering activity.
Therefore, we find that the first accused
in any event had the
necessary
mens rea
in the form of
culpa
for a contravention of s 2(1)
(f)
of POCA.
[55] At the hearing
of the appeal, counsel for the first accused raised a legal
contention which had not been canvassed at the trial.
She submitted
that s 2(1)
(f)
‘is aimed primarily at punishing persons who control others,
whilst knowing they are committing crimes, [but] refrain themselves

from engaging in criminal conduct’. Therefore, the submission
continued, the first accused could not be convicted of contravening
s
2(1)
(f)
as
she had personally participated in the activities of the scheme. Put
differently, counsel submitted that, where an accused is
shown to
have personally participated in the conduct of an enterprise through
a pattern of racketeering activity, he or she ‘does
not fulfil
the definition of s 2(1)
(f)
’.
[56] In our view, the
intention of the legislature, as gathered from the plain wording of
POCA, is to hold those involved in organised
crime liable for the
different roles played by them in the conduct of an enterprise’s
affairs through a pattern of racketeering
activity. These include
managing (s 2(1)
(f)
)
and personal participation in (s 2(1)
(e)
),
the affairs of the enterprise. As commented by Bozalek J in
De
Vries
at 397-398, there appears to be
no good reason why a person who both manages and participates in the
affairs of the enterprise
directly, should only be liable for one of
the two roles.
[57] We are in
agreement with counsel on behalf of the State that, in construing the
provisions of POCA, and in particular s 2(1)
(e)
and
(f)
, a
liberal or broad construction is to be preferred. This would be in
accordance with the broad objectives of POCA set out in the
preamble
thereto. In
National Director of Public
Prosecutions & another v Mohamed NO & others
[2002] ZACC 9
;
2002 (4) SA 843
(CC) paras 14-16 the Constitutional Court, with
reference to its preamble, emphasised the importance of POCA to curb
the rapid
growth of organised crime, money laundering, criminal gang
activities and racketeering which threatens the rights of all in the

Republic and presents a danger to public order, safety and stability,
thereby threatening economic stability. To curtail the ambit
of s
2(1)
(e)
and
(f)
,
as suggested by counsel for the first accused, would, in our opinion,
be contrary to the intention of the legislature.
[58] Further, with
regard to the intention of the Legislature, we should emphasise that
the South African Legislature was strongly
influenced by models of
organised crime legislation in the USA (see Burchell op cit at 873 fn
1), in particular the RICO statute
(Racketeer Influenced and Corrupt
Organisations Statute enacted as Title IX of the Organised Crime
Control Act of 1970). In
S v De Vries &
others
2012 (1) SACR 186
(SCA) para 43,
this court stressed the ‘considerable assistance’ to be
gained from the jurisprudence of the United
States dealing with RICO,
in interpreting POCA. In
Sedima, SPRL v
Imrex Co
473 US 479
(1985) at 497-498,
the US Supreme Court emphasised that, by reason of RICO’s
‘expansive language and overall approach’,
the statute
‘is to be read broadly’.
[59] Apart from the
above, we, in any event, see no reason why the legislature would have
intended to restrict the prosecution of
persons under s 2(1)
(f)
of POCA solely to those managers who have not dirtied their hands by
personal acts of participation in the conduct of the affairs
of the
enterprise. Such a construction would lead to an absurdity, where the
manager of a multi-billion rand racketeering enterprise
who has had
minimal personal active participation, would only be liable for the
minimal participation role under s 2(1)
(e)
and not under s 2(1)
(f)
for the extensive managerial role played in a highly successful
criminal enterprise.
[60] We therefore
conclude that this submission of counsel for the first accused is
without merit. It follows, in our view, that
the court a quo
correctly found the first accused guilty on count 1 and that her
appeal in this regard should fail.
[61] This brings us
to count 2, ie the contravention of s 2(1)
(e)
of POCA. What the State was required to prove is that, whilst
managing an enterprise (the scheme) the first accused directly or

indirectly participated in the conduct of the scheme’s affairs
through a pattern of racketeering activity. As emphasised
above, this
court in
Eyssen
at 409c-d (para 5) held that the essence of the offence referred to
in s 2(1)
(e)
is actual participation (be it direct or indirect) in an enterprise’s
affairs, as opposed to knowledge, not participation,
which is the
essence of an offence in terms of s 2(1)
(f)
.
[62] In dealing with
count 1 above, we have already found that an enterprise (the scheme
through its various entities) existed which
was managed and
controlled by the first accused while conducting its affairs through
a pattern of racketeering activity. What remains,
is the element of
participation on the part of the first accused, a topic which we have
also broached in dealing with count 1.
It would suffice to say that
the evidence overwhelmingly shows that the first accused actively and
directly participated in the
scheme’s affairs; in fact, she was
the heart and soul of the business of the scheme and knowingly
participated in contravening
various statutory provisions and
committing common law crimes, as set out below. As pointed out by
counsel for the first accused
in her heads of argument, the first
accused’s name ‘. . . appears on all certificates as the
owner or main shareholder
of the organisation. At no stage did the
first appellant attempt to avoid participation in the organisation
and its activities.
She was at the forefront of this enterprise at
all times’. It follows, in our view, that the remaining element
of participation
on the part of the first accused has also been
proved beyond reasonable doubt.
[63] We should add
that, as in the case of count 1, counsel for the first accused
submitted that the State failed to prove that
she had the necessary
criminal intent in the form of
dolus
to contravene the provisions of s 2(1)
(e)
of POCA. In our view, this submission fails to take proper account of
the definitional elements of this statutory contravention,
ie
participation in the affairs of an enterprise through a pattern of
racketeering activity. As emphasised in
Eyssen
,
participation in the affairs of the enterprise is the offence. Kruger
op cit at 13, observes that an accused ‘is guilty
by virtue of
(a) being involved in an enterprise (being part of the group of
racketeers), and (b) being involved in the commission
of two or more
predicate offences’ listed in Schedule I of POCA.
[64] To summarise, it
is now well-settled that the essence of the offence in terms of s
2(1)
(e)
of
POCA is participation through a pattern of racketeering activity and
not knowledge. Once it is proved that the accused has participated
in
the conduct of an enterprise’s affairs through a pattern of
racketeering activity, ie by committing two or more predicate

offences listed in Schedule I of POCA, he or she is guilty of a
contravention of s 2(1)
(e)
of POCA. There is no need for a further inquiry, as suggested on
behalf of the first accused, as to an additional
mens
rea
requirement over and above the
mens
rea
required by the predicate offences.
[65] It is
significant to note that the courts of the USA, in considering the
offence of participation in RICO, have held that the
relevant section
of RICO (s 1962 (c)), ‘imposes no additional
mens
rea
requirement beyond that found in
the statutory definitions of the predicate crimes’. See
United
States v Biasucci
[1986] USCA2 233
;
786 F.2d 504
(1986)
(US Court of Appeals, Second Circuit) para 8;
United
States v Boylan
[1980] USCA2 374
;
620 F.2d 359
(1980) (US
Court of Appeals, Second Circuit) para 5. In
United
States v Scotto
[1980] USCA2 178
;
641 F.2d 47
(1980) (US
Court of Appeals, Second Circuit) para 4-6, it was reiterated that ‘.
. . no specific intent to engage in an unlawful
pattern of
racketeering prohibited by RICO is required.’
[66] In
S
v Green & others
, an unreported
decision of the Durban and Coast Local Division of the High Court
(Case no.the first accused CC 39/02  delivered
on 27 March 2002)
it was held that, in order to satisfy the element of
mens
rea
for the offence under s 2(1)
(e)
of POCA, ‘it must be a prerequisite that the accused had
knowledge of the pattern of racketeering activity and, with knowledge

of the activity, associated himself and participated in one or more
of the offences’. Insofar as
Green
requires proof of knowledge on the part of the accused of the pattern
of racketeering activity, in addition to his or her participation
in
two or more of the predicate offences, it wrongly introduces an
additional
mens rea
requirement for the offence created in s 2(1)
(e)
of POCA. In addition, the decision in
Green
does not accord with the principle enunciated by this court in
Eyssen
,
that the essence of the offence in terms of s 2(1)
(e)
of POCA is ‘actual participation’ in an enterprise’s
affairs, as opposed to ‘knowledge not participation’

which is the essence of an offence in terms of s 2(1)
(f)
of POCA.
[67] It follows, in
our view, that the State has beyond reasonable doubt proved the
elements of the offence under s 2(1)
(e)
of POCA and the appeal of the first accused against her conviction on
count 2 should fail.
Count 3
[68] This count
relates to the offence created in terms of s 2(1)
(b)
of POCA, namely that any person who receives or retains any property,
directly or indirectly, on behalf of any enterprise, and
knows or
ought reasonably to have known that such property derived or is
derived from or through a pattern of racketeering activity,
shall be
guilty of an offence.
[69] The court a quo
found the first accused guilty on this count and although she had
been granted leave to appeal in respect thereof,
the appeal on this
count was not pursued. No more need to be said in this regard, and
there is no reason why this conviction should
not be confirmed.
Counts 4-13
[70] The immovable
properties acquired by the PT Vennote Familie Trust (see para 34
above) form the subject matter of these counts.
The counts are framed
in terms of s 4 of POCA, which deals with the activity commonly
known as money laundering. Each of the
counts relates to one of the
properties acquired by the trust with the money deposited by
investors in the scheme. The essence
of each of counts 4-13 is that
the first accused had knowingly concealed the money derived from or
through a pattern of racketeering
activity by acquiring the
properties with that money. It is common cause that the first accused
was involved in deciding to acquire
the properties in the name of the
trust. In fact, she and accused 4 concluded most of these
transactions on behalf of the trust.
In her evidence the first
accused conceded that she was instrumental in acquiring the
properties for the trust and that she was
aware that all of the
properties were purchased with funds deposited in the scheme by
investors.
[71] The purchase of
the property referred to in count 4 differs from the other nine
counts in that the money utilised was the interest
earned by accused
3 and 4 on their investment which they had made in the scheme. The
proceeds were utilised to purchase the relevant
property and it was
registered in the name of the trust. This occurred with the full
knowledge and consent of the first accused.
The result, however, is
the same as in the case of the other counts under this rubric, ie the
money utilised for the purchase of
the property was derived through a
pattern of racketeering activity, ie the business of the scheme.
[72] In respect of
all these counts it was the money derived from the business of the
scheme that was concealed by utilising it
to acquire fixed property.
This constituted a contravention of s 4 of POCA. Counsel for the
first accused, however, approached
these counts from a different
perspective, namely that the fixed property acquired by the trust in
each instance was the ‘property’
for purposes of s 4
of POCA. She submitted that there was no attempt on the part of the
first accused to disguise or conceal
the nature, source, location,
disposition or movement of these properties or the ownership thereof.
Therefore, the submission continued,
the State failed to prove a
contravention of s 4 of POCA.
[73] There is no
merit in this submission. These counts pertained to the disguising or
concealing of the proceeds of the unlawful
activities
in
casu
, namely money derived from the
scheme through its various entities.
[74] It follows that
the appeal against the convictions on counts 4-13 should also fail.
Count 27
[75] The first
accused was convicted on this count of the offence of conducting the
business of a bank in contravention of the provisions
of s 11(1) of
the Banks Act 94 of 1990 (the Banks Act). She has not pursued her
appeal against this conviction and there is no
reason why the
conviction should not be confirmed.
Count 28
[76] The first
accused was convicted on this count of fraud with regard to wilful
misrepresentations made to Dr Dekker and
Mr van den Bergh during
the period 8 May 2000 - 16 May 2000. The first accused has not
pursued her appeal against this conviction
and there is no reason why
it should not be confirmed.
Counts 29 and 30
[77] These are two
counts of fraud. The first relates to a written misrepresentation
made by the first accused through her attorney
on 11 December 2000,
grossly understating the total value of investments made in the
scheme.  The second similarly pertains
to a written
misrepresentation made on 14 December 2000 by the first accused
through her accountant, once again grossly understating
the total
value of investments made in the scheme.
[78] The first
accused does not dispute that, in respect of both counts, the
definitional elements of the crimes in question have
been proved.
However, on appeal, the first accused belatedly submitted that there
was an undue duplication of convictions in respect
of these two
counts. In our view, there is no merit in this submission. Although
the motive underlying the misrepresentations may
have been similar,
namely to prevent the authorities from investigating the scheme, it
cannot be denied that the two instances
consist of separate
independent acts each with its own separate intention to deceive.
They cannot be regarded as one continuing
crime. Reference can be
made to
Vorster v S
1976 (2) PH H.202 (AD), in which it was held that a systematic course
of conduct which consists of separate independent acts of
the same
nature (in that case the accepting of bribes) need not be treated as
a single offence.
[79] We therefore
find that there was no duplication of convictions and that the appeal
against these convictions should fail.
Counts 31, 32, 33, 35,
36, 37 and 38
[80] Counts 31, 32,
35 and 37 are fraud charges while counts 33, 36 and 38 are
contraventions of s 84(8)
(c)
of the Banks Act (wilfully furnishing a manager appointed in terms of
the Banks Act with false information). All of the counts
relate to
misrepresentations made by the first accused during the period 6 June
2001 to 1 August 2001, to duly appointed inspectors
or managers
appointed in terms of the Banks Act. The first accused concedes that
she wrongfully and unlawfully made these misrepresentations
by
grossly understating the number and value of the total investments
made in the scheme, but contends that her intention throughout
was
the same, namely to prevent the business of the scheme being closed
down.
[81] It was therefore
submitted on her behalf that she had acted with a single intent and
ought only to have been convicted on one
count of fraud and one count
of contravening s 84(8)
(c)
of the Banks Act.
[82] This submission,
once again, confuses the motive for the offences with the element of
intention required for criminal liability.
The first accused may have
had the motive or purpose in mind to prevent the closure of the
business of the scheme, but on four
separate occasions during a
period of two months and acting in response to four separate
requests, she intentionally misled each
of the representatives by
making separate and independent misrepresentations. Each of these
misrepresentations constituted separate
independent acts amounting to
separate offences of fraud and the contravention of s 84(8)
(c)
of the Banks Act. In the relevant circumstances the independent acts
cannot be treated as a single offence.
[83] We are
accordingly of the view that the court a quo correctly found the
first accused guilty of the separate offences mentioned
in these
counts. It follows, in our view, that there is no merit in the appeal
of the first accused against her convictions on
these counts.
Count 34
[84] This count
refers to a contravention of s 84(8)
(d)
of the Banks Act, ie the failure of the first accused to comply with
a reasonable request made to her by Mr Bredenkamp, a
manager
duly appointed in terms of the Banks Act. It is common cause that on
7 June 2001 Bredenkamp requested the first accused
to bank all cash
received in the course of the business of the scheme. This she failed
to do and on 10 July 2001 Bredenkamp discovered
R3 057 420
in cash kept in three safes by the first accused at her residence.
The first accused has not advanced any
argument on appeal and her
conviction on count 34 ought to be confirmed.
Counts 39 and 40
[85] The count of
fraud (count 39) and the contravention of s 84(8)
(c)
of the Banks Act (count 40), respectively, have their origin in a
letter addressed to PriceWaterhouseCoopers (PWC) by Mr Cossadianos,
a
bookkeeper who represented the first accused at the relevant time.
The letter, dated 8 February 2002, was prepared and written
by
Cossadianos pursuant to a meeting between the first accused and
representatives of PWC appointed as managers to the business
of the
scheme in terms of s 84(1) of the Banks Act. The purpose of the
letter written by Cossadianos to PWC was to provide a complete
and
comprehensive list of investors and agents to PWC. Cossadianos,
acting on behalf of the first accused, advised PWC in the letter
that
there were 167 investments made in the scheme to a total value of R11
002 934. It is common cause that, as at 8 February
2002, the
actual value of investments in the scheme was more than R796 million.
It is further common cause that, had the true state
of affairs been
conveyed to PWC during February 2002, immediate steps would have been
taken to close the scheme down so as to prevent
investors from
suffering further losses.
[86] The court a quo
found that this constituted a material misrepresentation which was
false to the knowledge of the first accused
and she was thus
convicted of fraud and the statutory offence of providing false
information to the managers appointed in terms
of s 84(1) of the
Banks Act.
[87] At the hearing
of the appeal a two-pronged attack was launched by counsel for the
first accused against the convictions on
these counts. First, she
submitted that the State failed to prove that the first accused had
made the misrepresentation, particularly
in view of the failure of
the State to call Cossadianos as a witness. Secondly, she submitted
that, as PWC accepted that the information
to be provided by
Cossadianos would be inaccurate, the letter of Cossadianos did not
constitute a misrepresentation.
[88] We believe that
the attempt of the first accused to distance herself from the content
of the letter written by Cossadianos,
is rather disingenuous. She
testified that Cossadianos was at her office where she handed all the
investor files to him with a
request to audit same and to prepare the
letter required by PWC. She testified that she and Cossadianos ‘het
saam gewerk
as vennote’ and that a ‘dag of twee later’
she did have sight of the incorrect information sent to PWC by
Cossadianos,
but she did not set the record straight with PWC as she
‘was bang hulle maak my besigheid toe’. It follows that,
not
only was the first accused the source of the information that
Cossadianos supplied to PWC, but she had in any event ratified the

blatant misrepresentation contained in the letter. As submitted on
behalf of the State, the common thread in the
modus
operandi
employed by the first accused,
is that she repeatedly grossly understated the size of the business
for fear that it would be closed
down. In this instance the
misrepresentation was that the value of the scheme was a mere 1, 38
per cent of its actual value of
more than R796 million.
[89] We fail to
appreciate why, in these circumstances, there would have been a duty
on the State to call Cossadianos as a witness;
on the contrary, if
there was any exculpatory explanation for the compilation of this
grossly understated list of investors, the
first accused ought to
have called Cossadianos to provide such explanation. Furthermore, if
the first accused did, as she testified,
afford Cossadianos access to
all the investor files, it is inconceivable that he would have
understated the value of the scheme
by some 98, 62 per cent.
[90] To this one
should add the evidence of Carel Bothma, who testified on behalf of
the State, that the first accused had instructed
him to create loan
documents, which she urgently required, to the value of R10 million
or R11 million, apparently for an audit
to be conducted by
Cossadianos. His evidence was not disputed by the first accused and
it appears that the falsely created loan
documents made up a
substantial part of the list of investments which accompanied the
letter of Cossadianos dated 8 February 2002.
It is also common cause
that R17 million of the purported loans reflected in the list of
investments, did not exist. In view of
the aforesaid, we find that,
not only did the State prove that the first accused was the source of
the false information submitted
to PWC, but also that she was aware
that the material misrepresentation had been made on her behalf and
failed to declare the true
state of affairs to PWC.
[91] The second
submission on behalf of the first accused in respect of these counts,
namely that no misrepresentation had been
made, as PWC acknowledged
that the investor list would ‘not be accepted as accurate or a
true reflection in any way’,
is equally without merit. The
letter written by PWC after the meeting of 22 January 2001, records
that Cossadianos would provide
PWC with a document specifying the
extent of the investments obtained, loans and/or investments made and
the application in general
of funds received as investments by the
first accused and her entities. PWC confirmed ‘that the above
document will not be
regarded as the final and true reflection of
accounts, but will be used by PWC in the decision making process
regarding the course
of action, if any, to be followed’.
[92] It is therefore
clear that PWC would have relied on the document to decide the future
of the businesses of the scheme. The
PWC letter certainly did not
grant the first accused and Cossadianos carte blanche to mislead PWC
to the extent that the value
of the investments were reflected as a
mere 1, 38 per cent of their actual value. We should also add that
this belated defence
was not raised at the trial nor was it relied
upon by the first accused as a ground of appeal when she applied for
leave to appeal.
[93] In view of the
aforesaid we conclude that the State had proved the guilt of the
first accused beyond reasonable doubt and that
her appeal against the
conviction on counts 39 and 40 should fail.
Count 41
[94] This count upon
which the first accused was convicted, was also one of fraud. The
first accused has not pursued her appeal
in this regard. The evidence
clearly shows that yet another material misrepresentation was made to
the appointed managers by the
first accused through her attorney that
investments of only R409 000 had been received by M & B
Co-Operative, while the
true value of the investments received at
that date amounted to R541 million.
[95] The court a quo
correctly convicted the first accused on this count and the
conviction should be confirmed.
Counts 42 and 43
[96] Count 42 is one
of fraud, while count 43 is a contravention of s 84(8)
(c)
of the Banks Act, both emanating from
misrepresentations made by the first accused through her attorney.
The court a quo found the
first accused guilty on both counts, but on
appeal counsel for the first accused has not advanced any argument in
respect of these
counts.
[97] We accordingly
do not have to dwell on these counts, save to say that they form part
of the pattern of grossly understating
the magnitude of the scheme by
the first accused, and misrepresenting to the authorities that all
investors had indeed been paid
out, whereas this was not the case.
[98] There is no
doubt that the court a quo correctly convicted the first accused on
these counts and the convictions should be
confirmed.
Counts 45-46
[99] These counts of
fraud relate to a range of misrepresentations made in the conduct of
the business of the various entities utilised
by the scheme. The
court a quo found the first accused guilty on both counts. Counsel
for the first accused has not presented any
argument on appeal in
regard to these counts. There is, in our view, no basis for a finding
that the court a quo misdirected itself
in this regard. Therefore the
convictions ought to be confirmed.
Counts 48-949, 950-3385
and 8071-11694
[100]
Each of these three groups of counts referred to contraventions of
s 135(3)
(a)
of
the
Insolvency Act 24 of 1936
, by the first accused in her capacity
as a director or officer of one or more of the corporate entities
through which the scheme
conducted its business during the period 1
March 1998 to 31 October 2001. These corporate entities were
subsequently liquidated
and
s 135(3)
(a)
of the
Insolvency Act, read
with s 425 of the Companies Act 61 of
1973 (1973 Companies Act), provides that an insolvent (or director or
officer of an insolvent
company) who has contracted debts without an
expectation of ability to pay such debts, shall be guilty of an
offence.
[101]   The
court a quo found the first accused guilty on one count of
contravening
s 135(3)
(a)
of the
Insolvency Act in
respect of each of the three groups of
counts. The evidence shows that debts were incurred by the corporate
entities through which
the first accused conducted the business of
the scheme, in circumstances where there was no expectation at all of
an ability to
pay same. These convictions have not been attacked on
appeal and there is no reason why same should not be confirmed.
Counts 20568-20768,
20769-24392 and 24393-33265
[102]   The
12698 counts constitute contraventions of s 84(8)
(d)
of the Banks Act, in respect of which the court a quo found the first
accused guilty as charged. What the counts referred to are
instances
where the first accused failed to comply to the best of her ability
with reasonable requests made by the managers appointed
to the
scheme, that no further deposits were to be accepted from investors
in the scheme. The first accused does not dispute that
the
definitional elements of the offences had been proved by the State,
and the only issue raised on appeal is that there was an
undue
duplication of convictions on these counts.
[103]   In
this regard counsel submitted that the first accused had taken a
decision to disregard the request of the manager
not to take further
investments. This resulted in 12698 different instances where she or
her co-accused or her agents took investments
contra the request not
to do so. The decision of the first accused was based on her
intention to proceed with the scheme as usual
in order to prevent it
from collapsing. Therefore, the submission continued, there was a
duplication of convictions in that the
charges were based on ‘the
same culpable fact’.  However, as submitted on behalf of
the State, counsel for the
first accused again confuses the motive
for the crimes with the element of
mens
rea
required for criminal liability.
Although these counts were generic in nature, each count related to a
distinct or separate act
with different victims or complainants,
dates and amounts and was not based on the same culpable fact. There
was a different intent
or
mens rea
formed in respect of each separate act in disregard of the manager’s
request not take further investments.
[104]   In
the result there was no duplication of convictions and the appeal of
the first accused in regard to these counts
should fail.
Counts 33266-34167,
34168-36617, 39068-44550, 50034-54533, 59034-68104, 188911-197707
[105]   These are
counts of fraud relating to the investments made by investors in all
the entities through which the
scheme was conducted. The
misrepresentations upon which the State relied were made by the first
accused by means of the investment
certificates and agreements issued
to investors, and included the following:
(a) that the entities could
lawfully take investments from the public.
(b) that fixed percentage
returns and return amounts were lawfully offered.
(c) that investors legally
acquired shares in Madikor, whereas it was common cause that such
entity was a private company and could
not lawfully issue shares to
the general public.
(d) that MP Finance SACCO
was a member of or registered with SACCOL, whereas it was never
registered as such.
(e) that investors
legitimately acquired shares or membership in MP Finance SACCO,
whereas the entity never existed.
(f) that investors
legitimately acquired shares in Martburt, whereas its prospectus was
never registered or distributed. Moreover,
the draft prospectus made
provision for share certificates to the value of R10 million to be
issued, while 4500 certificates to
the value of more than R290
million had in fact been issued.
(g) that investors
legitimately acquired shares or membership in M & B Co-Operative,
whereas the entity was never registered.
[106]   Moreover,
under cross-examination, the first accused admitted that:
(a) she did not state to
investors that the investments were illegal.
(b) she effectively
guaranteed a fixed return, irrespective of how her business
performed.
(c) she did not state to
investors that if her business performed poorly, capital would have
to be used to pay interest returns
on investments.
(d) she did not state to
investors that their investments or deposits were taken in
contravention of the Banks Act or the former
Usury Act 73 of 1968.
(e) she did not state to
investors that a multiplication scheme was being operated in
contravention of the Unfair Business Practices
Act 71 of 1988.
(f) she never stated
to investors that the modus operandi employed by her in conducting
the scheme was that investor capital had
to be used to pay the
interest returns to investors.
[107]
These misrepresentations caused investors to invest in the scheme to
their financial prejudice. In fact, the first
accused admitted that,
had the investors known the true state of affairs, they would not
have invested in the scheme.
[108]   The
court a quo found the first accused guilty on all these counts of
fraud. On appeal, it was submitted on behalf
of the first accused
that the State had failed to prove the misrepresentations on which it
relied. It was contended that, in attempting
to prove the
misrepresentations, the State relied on the similar fact evidence of
25 investors, but that this was insufficient
to prove the actual
misrepresentation in respect of each count. In our view this
submission fails to take account of the fact that
the
misrepresentations upon which the State rely, were made in writing as
per the investment certificates and agreements. The presentation
of
the similar fact evidence of the 25 investors was only for the
purpose of showing that investor certificates and agreements

containing these misrepresentations were issued to investors. In our
view this evidence regarding the misrepresentations, together
with
the admissions made by the first accused in her evidence, as well as
the undisputed evidence of prejudice or potential prejudice
caused to
investors, proves beyond reasonable doubt that the first accused had
defrauded the investors referred to in these counts.
[109]   We
should mention that, with regard to counts 188911-19707 (relating to
Krion) the first accused admitted during
cross-examination that the
misrepresentations and facts deliberately withheld from investors,
were also made and withheld by her
at meetings held with investors
and agents at various locations countrywide.
[110]
Counsel for the first accused further argued that, in respect of all
the counts, there has been an undue duplication
of convictions. In
particular, she submitted that, where individual investors made
re-investments and transfers from one entity
to the other, these were
made on the investor’s own initiative and not as a result of
any further false representation made
to the investor by the first
accused. However, each investment or re-investment was accompanied by
its own documentation and accompanying
new intention on the part of
the first accused, with the result that there was no duplication of
convictions.
[111]
Finally, in this regard, it was submitted on behalf of the first
accused that she believed that she had acted
lawfully after seeking
advice from her legal advisors. However, the record of the trial
shows that the first accused had misrepresented
the true state of
affairs of the business of the scheme to all the parties that she had
approached for legal advice. She could
therefore not have had any
honest belief in the legal advice obtained in this manner.
[112]   It
follows, in our view, that the appeal against the conviction of the
first accused on these counts should also
fail.
Counts 77176-86246
[113]   The
first accused was charged with 9 071 counts of contravening s 42 of
the Co-Operative Act 91 of 1981 (the Co-op
Act), in carrying on
business under the name of M & B Co-Operative without being
registered as a co-operative. Section 42 provides
that any person
carrying on business under a name in which the word ‘co-operative’
or the abbreviation ‘co-op’
is included without being
incorporated as a co-operation under the Co-op Act, shall be guilty
of an offence. It is common cause
that the first accused conducted
business under the name and style of M & B Co-Operative Limited
without being registered as
a co-operative. However, the State
charged her separately for every transaction concluded under the name
of the co-operation whereby
investments were received from investors
in the scheme. On appeal it was submitted on behalf of the first
accused that, in charging
her with 9071 counts, a duplication of
convictions had taken place.
[114]   It
seems to us that there has been an improper duplication of
convictions in this instance. Section 42 of the
Co-op Act provides
that the ‘carrying on of business’ in this manner
constitutes the offence. This would imply the
conduct of a business
in which more than one transaction is concluded. It therefore appears
to us that, what the legislature intended
to criminalise, is the
actual carrying on of the business under the name of an unregistered
co-operative and not each and every
separate transaction concluded in
the course of such business.
[115]
Counsel for the State has referred us to the heading of s 42 which
reads ‘improper use of word “co-operative”
etc., an
offence’. This, counsel submitted, is an indication that each
and every improper use of the word ‘co-operative’

constitutes a separate offence and that the conviction of the first
accused in respect of all 9071 counts is accordingly in order.
We do
not agree. As appears from the body of s 42, it is the carrying on of
the business in this manner which is criminalised,
which conduct of
necessity would include a range of transactions to constitute the
carrying on of a business.
[116]   We
are therefore of the view that, in respect of these counts, the
appeal ought to succeed to the extent that
the first accused should
only be convicted on one count of contravening s 42 of the Co-op Act.
Counts 144337-188910
[117]   On
these counts the first accused was convicted of contravening the
provisions of s 83(3)
(a)
of the Banks Act, in failing to comply with a written direction
issued by the Registrar of Banks on 7 June 2001. In terms of this

direction she and the entities then forming part of the scheme were
directed to repay all monies obtained from investors, including,
if
possible, any bank interest that may lawfully have accrued on such
amount. The repayment of these amounts to investors had to
be made
under the control of Mr Strydom of PWC.
[118]   The
44 573 counts of contravening this section were based on the payments
of interest and dividends made to the
investors after the date of the
direction, without the knowledge or permission of Mr Strydom. These
payments amounted to R1 020
billion. It was not disputed by the first
accused that such payments were made, but counsel on her behalf
submitted that these
payments of interest or dividends were not
covered by the written direction and therefore could be lawfully made
to investors.
We do not agree with this submission. As mentioned
earlier, the written direction expressly refers to all monies
obtained from
investors including interest that may lawfully have
accrued on such amounts. Therefore such interest, or ‘dividends’

as it was often referred to, could only be paid to investors subject
to the management and control of PWC.
[119]
Counsel for the first accused further submitted that PWC never put
any procedure in place whereby repayments could
be made to investors
under the supervision of PWC. However, Mr Bredenkamp of PWC testified
that investors could not be paid out
at that stage because the
solvency of the scheme had to be maintained. The monies could only be
repaid to investors once the solvency
of the scheme was established.
As the first accused had continuously grossly understated the
magnitude of the scheme, it was impossible
for PWC to ascertain the
solvency of the scheme.
[120]
Finally, counsel for the first accused submitted that an improper
duplication of convictions had taken place and
the first accused
should only have been convicted of one contravention, in that she had
one intention only, namely to proceed with
the business of the scheme
as usual and therefore to make these payments to investors. As we
have previously pointed out, this
submission confuses the motive of
the first accused with the element of
mens
rea
required for criminal liability.
Her motive may have been to proceed with business as usual, but in
respect of each payment so
made, she had a separate intention in
respect of a separate beneficiary and in a separate amount. There was
accordingly no improper
duplication of charges.
[121]   It
follows that the appeal against the convictions on these counts
should fail.
Counts 197708-199747
[122]
These counts represent charges brought against the first accused for
contravening s 104(1)
(d)
of the Income Tax Act 58 of 1965 (Income Tax Act), by failing to pay
secondary tax on companies (STC) to the South African Revenue
Service
(SARS). The charges relate to STC at the rate of 15 per cent deducted
from ‘dividends’ payable to investors
in Krion. However,
no Krion shares had been allotted to investors at the time when such
‘dividends’ were calculated
and paid. Therefore no STC
was payable to SARS.
[123]   The
trial court found the first accused guilty on the main count of
contravening s 104(1)
(d)
of the Income Tax Act, but the State readily conceded that she ought
not to have been so convicted. The State submitted that she
ought to
have been convicted on the alternative counts of theft of the amounts
so deducted and which had not been paid over to
SARS. However, during
argument counsel for the State conceded that it had failed to prove
that the first to fourth accused had
the intention to appropriate the
amounts so deducted and therefore the alternative charge of theft of
the monies deducted had not
been proved.
[124]   It
follows that the appeal of the first accused in this regard should
succeed and that she be acquitted on these
counts.
Counts 200564-200663 and
200664-218636
[125]   The
parties are agreed that the judgment of the court a quo contains a
typographical error indicating that the
first accused was found
guilty on counts 200564 to 200663. In fact, the accused were all
discharged on these counts in terms of
s 174 of the Criminal
Procedure Act 51 of 1977 (the CPA). Clearly, what the court a quo
intended to do was to convict the first
accused on counts 200664 –
218636, committed during the period 9 June 1999 to 1 March 2002.
[126]
First accused does not dispute that she satisfied the definitional
elements of the offences enumerated in counts
200664 to 218636. These
relate to the conducting of a harmful business practice declared in
terms of para 2 of GN 1134 of 1999,
promulgated in
GG
20169, 9 June 1999 under s 12(6) of the Consumer Affairs (Unfair
Business Practices) Act 71 of 1988, namely the offering or promising

or guaranteeing to pay an annual effective interest rate exceeding
the repo rate
[2]
determined by the South African Reserve Bank by more than 20 per
cent.
[127]
Counsel for the first accused, however, submitted that she should
only have been convicted on one count and not
on 17972 individual
counts. She contended that the intention of the legislature was to
proscribe harmful business practices, which
implies the practice of
the business in its entirety and not each separate transaction. We
believe that counsel is correct in her
submission, particularly in
view of the wording of GN 1134 which declares the harmful business
practice to be ‘the operation
of or participation in a
multiplication scheme. . . .’ This necessarily implies the
existence of a multiplication scheme
the operation of which
constitutes the harmful business practice. We therefore conclude that
what the legislature intended to proscribe
is the operation of the
multiplication scheme as such and not to criminalise each individual
offer made in contravention of the
Notice as a separate offence. In
fact, counsel for the State fairly conceded that this interpretation
is reasonably justified.
[128]   It
follows that, in respect of the counts under this rubric, the first
accused ought to have been convicted on
one count only and not on
17972 individual counts.
Counts 199748 to 200563;
218683 and 47
[129]   The
first group of counts represents 815 unauthorised payments made by
the first accused from the Krion bank account
to settle amounts due
to pre-existing investors in the scheme in respect of interest and or
capital repayments and or cash withdrawals.
This amounted to R20
million. Each of these counts of theft was in respect of a different
amount paid to different investors. It
appears that the court a quo
correctly convicted the first accused on these counts.
[130]
Count 218683 deals with the theft of the money accompanying all
applications for shares in Krion, allegedly amounting
to R908,5
million. However, the State concedes that theft in the amount of
R908,5 million had not been proved. What does appear
from the common
cause facts, is that approximately R115,4 million of new investor
money was received in respect of applications
for shares in Krion, of
which R24,29 million was deposited in the Krion bank account. It
follows that the quantum of count 218683
should only be R91,1
million. It appears to be common cause that this amount was
misappropriated by the first accused and therefore
her conviction on
the count of theft in respect thereof should stand, but for the
lesser amount of R91, 1 million.
[131]
Count 47 is one of fraud, in that the first accused induced Mr van
Wyk, a director of Krion, to issue three Krion
cheques to the value
of R1, 7 million, R1 million and R3, 3 million, respectively. The
first accused represented to Van Wyk that
the cheques were to be used
for a legitimate business purpose whilst they were actually used to
make interest payments to existing
investors in the scheme.
[132]   The
first accused did not dispute the above, nor that she satisfied the
definitional elements of the crimes in
question, but pointed to the
fact that she had been convicted on counts 199748, 199749 and 199751
of theft of the same amounts
represented by the same three cheques
which are the subject matter of count 47. She contends that it is not
legally permissible
to find her guilty on a charge of fraud where she
has already been convicted of theft in regard thereto. We do not
agree. In these
instances both the intention to defraud and the
intention to commit theft were proved. In such event it is
permissible to convict
an accused of both fraud and theft, even if
the separate counts ‘depend on the same factual finding’.
See
S v Boesak
[2000] ZASCA 112
;
2000 (1) SACR 633
(SCA) para 71.
[133]   It
follows that, subject to what is said above in regard to the quantum
of count 218683, the appeal of the first
accused against her
conviction on the counts under the above rubric, should fail.
Counts 218637, 218638,
218639 and 218682
[134]   The
first accused was convicted under these counts for knowingly being a
party to the reckless carrying on of
the business of the corporate
entities utilised in the conduct of the scheme. This constituted
contraventions of
s 64(2)
of the
Close Corporations Act 69 of 1984
and s 424 of the 1973 Companies Act, respectively, and included the
entities MP Finance CC, Madikor, Martburt and Krion.
[135]   No
argument was presented on behalf of the first accused in regard to
these counts, and as the evidence overwhelmingly
shows the reckless
participation of the first accused in the business of these corporate
entities, the convictions ought to be
confirmed.
Counts 218660 and 218661
[136]   On
these counts the first accused was convicted on the alternative
charge of contravening s 104(1)
(a)
of the Income Tax Act, in being instrumental in the making of false
statements in the income tax returns submitted on behalf of
MP
Finance CC for the tax years 1999 and 2000.
[137]
Counsel for the first accused did not address us on these counts and
there is no reason why the convictions should
not be confirmed.
Counts 218641 and 218642
[138]
These two counts of fraud relate to the misrepresentations made by
the first accused in her 1999 and 2000 income
tax returns, by grossly
understanding her taxable income. The misrepresentations caused
substantial prejudice to SARS and the trial
court found the first
accused guilty on both counts.
[139]
Counsel for the first accused did not address us on these counts and
there is no reason why the convictions should
not be confirmed.
The first accused ─
Sentence
[140]   The
relevant sections of POCA contravened by the first accused,
respectively triggered the following prescribed
maximum sentences:
(a) Sections 2(1)
(f)
,
2(1)
(e)
and 2(1)
(b)
─ A fine of R1 billion or
imprisonment for life.
(b) Section 4 ─
A fine of R100 million or 30 years’ imprisonment.
[141]   The
provisions of
s 51(2)
(a)(i)
of the
Criminal Law Amendment Act 105 of 1997
, read with
Part 2
of
Schedule 2 thereto, prescribe a minimum sentence of 15 years’
imprisonment in respect of a first offender, such as the
first
accused, with regard to an offence relating to, inter alia, fraud and
theft involving more than R500 000. A court is
obliged to impose
this minimum sentence unless there are substantial and compelling
circumstances justifying the imposition of
a lesser sentence.
[142]   The
trial court had due regard to these prescribed sentences in
sentencing the first accused. On each of counts
1 to 3, ie the
contravention of
sections 2(1)
(f)
,
2
(1)
(e)
and
2
(1)
(b)
of POCA, she was sentenced to 20 years’ imprisonment. In
respect of the ten counts of contravening
s 4
of POCA, the first
accused was sentenced to 10 years’ imprisonment on each count.
On seventeen of the fraud counts and two
counts of theft she was also
sentenced to 10 years’ imprisonment on each count. With regard
to the remainder of the convictions
she was sentenced to periods of
imprisonment ranging from 3 years to six months. The cumulative
effect of the various sentences
of imprisonment was ameliorated by
ordering that several sentences are to be served concurrently, to the
extent that the first
accused has to serve an effective term of 25
years’ imprisonment.
[143]   On
appeal counsel for the first accused did not argue that the trial
judge, in exercising her sentencing jurisdiction,
had misdirected
herself in any respect. What was submitted, is that the effective
sentence of 25 years’ imprisonment is shockingly
inappropriate
to the extent that it merits interference by this court. It is trite
that, absent any material misdirection by the
trial court,
interference by a court of appeal is only justified where there is a
striking, startling or disturbing disparity between
the trial court’s
sentence and that which the appellate court would have imposed. See
S
v Sadler
2000 (1) SACR 331
(SCA) para
8. It follows that, even if the court of appeal is of the view that
it would have imposed a lesser sentence, interference
is only
justified if it is convinced that the trial court could not have
reasonably passed the sentence which it did.
[144]   A
reading of the trial court’s judgment on sentence shows that
the learned judge had due regard to all the
personal and other
mitigating factors of the first accused, including her clean record;
the fact that the matter had dragged on
for seven years before the
trial commenced; that she has suffered emotionally and is financially
ruined, as well as the impact
that her incarceration would have on
her and her adopted minor child. We should, however, add that the
first accused and the other
accused were in custody for only four
days awaiting trial, whereafter they were released on bail.
[145]   The
trial judge carefully weighed these factors against the nature,
gravity and magnitude of the crimes and the
devastating financial and
emotional effects the scheme had on some 14 000 investors and
concluded that the only suitable sentence
was one of effective
imprisonment for a considerable period of time. In sentencing the
first accused to an effective term of 25
years’ imprisonment,
the trial judge took into account that she was the driving force of
this illegal scheme who showed no
remorse or any sympathy for the
investors, particularly those who had invested R908 million in Krion
which could not be recovered.
[146]   In
our view, this is a matter in which the element of deterrence plays
an important role when considering a suitable
sentence. In
particular, the sentence should serve as a deterrent to those who may
consider launching illegal multiplication schemes
of this nature. The
common theme of these Ponzi schemes is that the hard-earned financial
means of others, often the elderly and
financially naïve members
of society, are invested in the scheme on the strength of outrageous
returns offered which cannot
be sustained due to the lack of a viable
economic enterprise underpinning the scheme. The devastating effects
which this scheme
had on investors was graphically illustrated by the
evidence of some 25 investors who had been financially ruined and now
have
to rely on the generosity of family and others to make ends
meet. As recorded earlier, the trial court found that the first
accused
had shown no remorse or sympathy for the plight of these
investors.
[147]   A
further aggravating factor is the cynical approach of the first
accused to the directives of the authorities
to cease taking
investments and to repay investors. She fraudulently misrepresented
the extent of the scheme by grossly understating
the number and value
of the total investments made in the scheme. These misrepresentations
initially persuaded the authorities
not to close the scheme down. As
a consequence the investors suffered further losses. She blandly
testified that she repeatedly
understated the size of the business of
the scheme for fear that it would be closed down. In one instance the
misrepresentation
was that the value of the scheme was a mere 1,38
per cent of its actual value of more than R796 million. Apart from
these misrepresentations,
the first accused had no hesitation, when
confronted by the authorities, to merely change the vehicle through
which the scheme
was conducted in an attempt to deceive the
authorities and to prevent them from closing the scheme down.
[148]   We
should conclude by saying that the damage caused by the conduct of
the first accused, both financially and
emotionally, can hardly be
over-emphasised. Therefore, we share the view of the trial court that
a substantial period of direct
imprisonment is called for. The
sentence of 25 years’ effective imprisonment is a heavy
sentence, particularly also bearing
in mind the fact that, when
sentenced, the first accused was 56 years old. Her relatively high
age was taken into account by the
trial court as well as the fact
that she requires medication for high blood pressure and cholesterol.
We do not believe that the
first accused should necessarily be
considered as a person of old age, but, in any event, in
S
v Zinn
1969 (2) SA 537
(A) at 541-542,
Rumpff JA held that ‘old age when accompanied by loss of mental
capacity is a ground for mitigation, but
generally speaking old age
is not a ground for leniency’.
[149]   In
our view it cannot be said that the court a quo acted unreasonably in
imposing a term of 25 years effective
imprisonment. Having regard to
all the relevant circumstances, there is no striking, startling or
disturbing disparity between
the trial court’s sentence and
that which we would have imposed had we been the court of first
instance. On the contrary,
we would have been inclined to impose a
sentence of the same order. We conclude that the effective sentence
of 25 years’
imprisonment imposed upon the first accused is not
disproportionate to the crime, the personal circumstances of the
first accused
and the interest of society. In the result the appeal
of the first accused against her effective sentence of 25 years’
imprisonment
should fail. Finally, we should add that the limited
success that the first accused had on appeal, does not impact at all
on her
effective sentence of 25 years’ imprisonment.
The second accused
Count 2 (Contravention of
Section
2(1)
(e)
of POCA)
[150]   It is common cause
that the second accused was both associated with and employed by the
scheme. He is a former
business banker with 34 years’
experience in banking. For approximately 10 years prior to his
employment in the scheme he
served as a funding manager for ABSA bank
sourcing fixed term investments.
[151]
He made his first investment in the scheme on 1 February 2001. From
March 2001 he introduced a number of new investors
to the scheme and
received commission on such referrals. He resigned his employment
with ABSA bank during July 2001 and took up
full time employment in
the scheme with effect 1 August 2001. His role in Martburt and M &
B Co-Operative has been set out
earlier herein. The application form
for the registration of M & B Co-Operative was completed and
signed by the second accused
and he attested to an affidavit
verifying the content thereof. It is not in dispute that the
application contained false information
in respect of the number of
members and the extent of the investments.
[152]
The second accused was appointed to oversee the activities of the
various agents appointed after 6 June 2001 and
to verify the
correctness of the documentation prepared by them in taking deposits
from the public. In this capacity he was therefore
exposed to the
extent and terms of each investment taken. He knew what the extent
was of each interest commitment. He personally
signed six investment
certificates in Martburt and 337 membership certificates in M & B
Co-Operative
[153]
In dealing with accused no 1 above we have set out the requirements
for a conviction under
s 2(1)
(e)
. On behalf of the the second
accused it was argued that the State had failed to prove that the
second accused knew that his participation
in the scheme amounted to
a pattern of racketeering. The argument is essentially the same as
that advanced in respect of the first
accused. In the case of the
second accused he has been convicted of a number of predicate
offences listed in Schedule 1 of POCA,
some requiring
dolus
and others requiring culpa in order to establish liability. The
second accused had the required
mens rea
in each case to
commit the various predicate offences as fully set out below. We have
already found that no further
mens rea
is required. The
offences of which the second accused has been convicted form part of
the pattern of racketeering which characterised
the activities of the
scheme. The second accused was therefore correctly found to have
‘participated in the affairs of the
scheme through a pattern of
racketeering.’
Count 3 (Contravention of
section
2(1)
(b
) of POCA)
[154]   The second accused was
convicted of a contravention of
s 2(1)(b)
of POCA which provides
that:
‘
Any
person who: receives or retains any property, directly or indirectly
on behalf of an enterprise; and knows or ought reasonably
to have
known that such property derived or is derived from or through a
pattern of racketeering activity; . . .  shall be
guilty of an
offence.’
[155]   Counsel for the second
accused submitted that in order to be convicted under
s 2(1)(b)
of
POCA the State is required to prove beyond reasonable doubt that the
accused received or retained property directly or indirectly
as part
of his planned, ongoing, continuous or repeated participation or
involvement in offences listed in Schedule 1 to POCA.
The submission
does not accord with the definitional elements of the offence. The
provisions of the section are clear. Once it
is established that the
accused received or retained property directly or indirectly on
behalf of the scheme the only remaining
issue is whether he knew, or
ought reasonably to have known, that such property derived or is
derived from or through a pattern
of racketeering activity. His
participation in such activity is irrelevant.
[156]   It is common cause
that the second accused received money on behalf of the scheme. It is
not disputed that it
derived from a pattern of racketeering activity.
[157]   The only question
which arises is whether the second accused knew or ought reasonably
to have known that such
money derived from a pattern of racketeering.
The provisions of
s 1(3)
of POCA are set out earlier herein (para
53). The second accused was a de facto office bearer in the form of a
director and or
chairperson of entities and purported entities which
formed part of the scheme. Under these circumstances the law expects
of him
to take reasonable steps to acquaint himself with the
provisions of the law that govern his responsibilities (
S v
Pouroulis
1993(4) SA 505 (W) at 604C-E;
S v International
Computer Broking and Leasing Pty Ltd & another
1996 (3) SA
582
(W);
S v Longdistance
(
Natal) (Pty) Ltd & others
1990 (2) SA 277
(A) at 283G.) A director of a company has a duty to
acquire and maintain a sufficient knowledge and understanding of the
company’s
business to enable him to properly discharge his
duties (cf
Halsbury’s Laws of England
vol 14 5 ed (2009)
para 549. It is well established that a ‘Director of a Company
. . . has a duty to observe the utmost good
faith towards the
company, and in doing so, to exercise reasonable skill and diligence’
(
Howard v Herrigel & another
NNO
[1991] ZASCA 7
;
1991 (2) SA 660
(A)). A Director is accordingly required to exercise an independent
judgment and to take decisions according to the best interests
of the
company as his principal. (
Fisheries Development Corporation of SA
Ltd v Jorgenson & another
1980 (4) SA 156
(W) at 163E).
[158]
The second accused must for purposes of
s 1(3)(a)
of POCA be judged
according to the general knowledge, skill, training and experience of
a director of companies engaging in the
business of deposit taking.
[159]
The second accused’s actual knowledge, skill, training and
experience in the banking sector has been recorded
earlier. For
purposes of
s 1(3)(b)
, he is an experienced banker and he was
constrained to concede under cross-examination that he knew that he
was contravening the
Banks Act in taking a deposit. He has personally
been convicted of numerous offences set out in Schedule 1 of POCA. In
the circumstances
we are satisfied that the trial judge correctly
concluded that the second accused ought reasonably to have known when
he accepted
money on behalf of the enterprise that it derived from a
pattern of racketeering activity.
Count 27 (Contravention of section
11(1) of the Banks Act)
[160]   The second accused was
convicted of contravening the provisions of s 11(1) of the Banks Act
in that he, together
with his co-accused, conducted the business of a
bank in the name of various entities which were not registered as a
bank.
[161]   Section 11(1) of the
Banks Act provides that:
‘
Subject
to the provisions of s 18A no person shall conduct the business of a
bank unless such person is a public company and is
registered as a
bank in terms of this Act.’ The provisions of s 18A are not
material to the appeal. ‘The business of
a bank’ is
defined in the Banks Act to mean:
‘
(a)
the acceptance of deposits from the general public (including persons
in the employ of the persons so accepting deposits) as
a regular
feature of the business in question. . . .’
[162]   The material portion
of the definition of ‘deposit’ in the Banks Act provides:
‘
An
amount of money paid by one person to another subject to an agreement
in terms of which─
(a)
An equal amount or any part
thereof will . . .  unconditionally be paid, either by the
person to whom the money has been so
paid or by any other person,
with or without a premium, . . . at specified or unspecified dates or
in circumstances agreed to by
or on behalf of the person making the
payment and the person receiving it; and
(b)
. . . interest will be payable
thereon at specified intervals or otherwise,
notwithstanding
that such payment is limited to a fixed amount or that a transferable
or non-transferable certificate or other instrument
providing for the
repayment of such amount mutatis mutandis as contemplated in
paragraph
(a)
or for the payment of interest on such amount mutatis mutandis as
contemplated in paragraph
(b)
is issued in respect of such amount . . . .’
[163]
Counsel for the second accused submits however that the state has
proved only four instances where he has received
deposits and
accordingly that he has not taken deposits from the general public as
a regular feature of the business.
[164]
The argument is misplaced. The business is the scheme. The scheme
has, as a regular feature of its business, taken
deposits from the
general public without ever being registered as a bank. The business
was conducted through various entities from
time to time including
Martburt and M & B Co-Operative. The second accused personally
signed 343 ‘investment certificates’
and agreements to a
total value of approximately R20,5million and 971 ‘investment
certificates’ and agreements were
issued in M & B
Co-Operative under the name of the second accused. The ‘investment
certificates’ are in the form
of agreements in terms of which
the capital amounts and the interest would be repaid as envisaged in
the definition of a ‘deposit’.
By signing these documents
the second accused was actively engaged in taking deposits as defined
in the Banks Act.
[165]
In the result the second accused was correctly convicted of this
offence.
Count 45 (Fraud)
[166]   The second accused was
convicted of fraud arising from misrepresentations made to JT van Wyk
and AJ van Wyk (the
Van Wyks) in respect of the intended goals of
Krion at a meeting held in January 2001.
[167]
Mr AJ van Wyk (Van Wyk) was the only witness on behalf of the State
who testified in respect of the meeting in
January 2002 at which the
said representations are alleged to have been made. The evidence of
Van Wyk revealed that the second
accused, an old acquaintance,
approached him during December 2001 and indicated to him that he
wanted the Van Wyks to become involved
as directors in a company to
be formed in which he would have an interest. During January 2002 the
first accused, second accused
and one Cossadianos travelled to
Klerksdorp and met with Van Wyk, a chartered accountant and his
brother, an attorney. The second
accused introduced Cossadianos as
their forensic accountant and business advisor and the first accused
confirmed this.
[168]
It is not challenged on behalf of the second accused that
misrepresentations were made nor that they were prejudicial.
Counsel
for the second accused raised two arguments. Firstly it is contended
that Van Wyk was a single witness, that his evidence
should therefore
be treated with caution and that an adverse inference should have
been drawn against the state by virtue thereof
that his brother, who
was present at the contentious meeting, did not testify. The second
argument is that the misrepresentations
were made by Cossadianos and
the first accused and that the trial judge erred in finding that the
second accused associated himself
with the misrepresentations.
[169]   Van Wyk was a single
witness in respect of these issues. He was also a suspected
accomplice and was warned in
terms of s 204 of the CPA. His evidence
must therefore be treated with caution. It is often stated in respect
of single witnesses
that their evidence should be clear and
satisfactory in every material respect (See
R v Mokoena
1932
OPD 79
at 80) In
S v Sauls & others
1981 (3) SA 172
(A) at
180E-G, however, this court held:
‘
There
is no rule of thumb test or formula to apply when it comes to a
consideration of the credibility of the single witness (see
the
remarks of Rumpff JA in
S
v Webber
). The trial
judge will weigh his evidence, will consider its merits and demerits
and, having done so, will decide whether it is
trustworthy and
whether, despite the fact that there are shortcomings or defects or
contradictions in the testimony, he is satisfied
that the truth has
been told. The cautionary rule referred to by De Villiers JP in 1932
[
R v
Mokoena
1932 OPD 79
at 80] may be a guide to the right decision but it does
mean “that the appeal must succeed if any criticism, however
slender,
of the witnesses’ evidence were well-founded”
(per Schreiner JA in
R
v Nhalapo
(AD 10
November 1952) quoted in
R
v Bellingham
1955 (2)
SA 566
(A) at 569.) . . .’
[170]
The trial court recognised that his evidence was to be treated with
caution. It found that he was an honest and
careful witness. It
concluded that he gave careful consideration to the questions put to
him and made concessions where necessary.
It found that he remained
consistent throughout cross-examination and did not contradict his
version. There is therefore merit
in the submission on behalf of the
State that Van Wyk was a reliable and credible witness and his
evidence was clear and satisfactory
in every material respect.
Counsel for the second accused acknowledges that there is no material
criticism of the evidence of Van
Wyk (nie te veel kritiek teen sy
getuienis). It is argued, nevertheless, that the trial judge ought to
have drawn an adverse inference
against the state because, so the
argument goes, he need not have been a single witness.
[171]
Counsel for the second accused argues that during the course of
cross-examination Van Wyk declared on a number
of occasions that he
was unable to answer the questions put and that his brother could
testify in that regard. It is not, however,
suggested that any of
these issues in respect of which Van Wyk was unable to testify in
cross-examination are material to the State’s
case. It is not
contended that there was any inherent improbability in Van Wyk’s
evidence which his brother was able to clarify
(compare
S v
Texeira
1980 (3) 755 (A) 763H-764C). In the circumstances the
State was not obliged to call Van Wyk’s brother. A prosecutor
is not
expected to produce all the evidence which he has at his
disposal and he is entitled to decide what he considers to be
sufficient
to discharge the onus which he is required to discharge.
In all the circumstances the argument cannot be sustained.
[172]
We turn to the second argument raised on behalf of the second
accused. The circumstances leading up to the misrepresentations
are
set out in paragraph 165 above. Although the second accused did not
play an active role in the meeting thereafter he was present

throughout. The intentions with Krion were explained by the first
accused and Cossadianos. The second accused did not correct the
false
representations made in the course thereof.
[173]
The intentions of Krion set out in the prospectus for the company
accorded with the presentation made by the first
accused, but were
far removed from that which the first accused, to the knowledge of
the second accused, truly intended to do.
The question which arises
is whether the second accused through his conduct made any
misrepresentation.
[174]   Fraud is constituted
by the unlawful and intentional making of a misrepresentation which
causes actual prejudice
or which is potentially prejudicial to
another (See C R Snyman
Criminal Law
5 ed (2013) at 530).
Although misrepresentations are, more often than not, made by express
verbal statements a misrepresentation
could equally be made by
silence in circumstances where there is a duty to speak. In
S v
Mbokazi
1998 (1) SACR 438
(N) at 445
f-i
Thirion J
explained:
‘
Misrepresentation
may however take a variety of forms. They may be made by entries in
books or records (
S v
Heyne & others
1956 (3) SA 604
(A)) or by conduct or even by silence when there is a
duty to speak. It would seem to me that the remarks of Lord Halsbury
in
Aaron’s
Reef’s Ltd v Twiss
1896 AC 273
(HL) which are quoted with approval in
S
v Ressel
1968 (4) SA
224
(A) are also apposite in the present case:
“
It
is said there is no specific allegation of a fact which is proved to
be false. Again I protest, as I have said, against that
being the
true test. I should say, taking the whole thing together, was there a
false representation? I do not care by what means
it was conveyed ─
by what trick or device or ambiguous language; all those are
expedients by which fraudulent people seem
to think they can escape
from the real substance of the transaction. If by a number of
statements you intentionally give a false
impression and induce a
person to act upon it, it is not the less false, although if one
takes each statement by itself there may
be a difficulty in showing
any specific statement is untrue”.’
[175]
The second accused clearly created the impression in the mind of Van
Wyk that he and the first accused were business
partners and that
Cossadianos was their business adviser and accountant. The second
accused was indeed instrumental in obtaining
the consent of the Van
Wyks to act as directors for the company. In the circumstances, by
virtue of the situation created by the
second accused the Van Wyks
were left under the impression that the presentation was made on
behalf of the first and the second
accused. For these reasons an
obligation arose for the second accused to correct the false
representations made.
[176]
On behalf of the second accused, however, it is further argued that
there is no evidence that she was indeed aware
of the true state of
affairs. The evidence does not support this argument. The second
accused’s functions in overseeing the
agents is set out in para
152 above.
[177]
At the time of the inaugural meeting of M & B Co-Operative he was
aware that all the previous investors in
Martburt would simply be
transferred to M & B Co-Operative because the SARB had not
approved of Martburt. By December 2001,
when it was evident that M &
B Co-Operative had not been registered as a cooperative he was fully
aware that the purpose for
the creation of Krion was to transfer all
the investors who invested money in Martburt and M & B
Co-Operative to Krion. They
would continue to receive their interest
as agreed in their original agreements. The conclusion is inescapable
that he did know
of the true state of affairs. He chose not to
disclose this to the Van Wyks.
[178]
For these reasons the submission of counsel for the second accused
cannot succeed.
Count 47 (Fraud)
[179]   The second accused was
convicted of fraud. It was held that he and others, made false
representations at a meeting
on 16 April 2002, either personally or
through Cossadianos to Van Wyk in order to induce him to sign cheques
in the amounts of
R1million, R1,7million and R3,3million respectively
in the name of Krion.
[180]
Again the State relies on the evidence of Van Wyk in respect of the
events which occurred at the meeting on 16
April 2002. Van Wyk kept
contemporaneous notes of the discussions in the meeting which were
handed up in evidence and which support
his evidence. Again it is
argued that the trial court erred in failing to draw an adverse
inference against the State by virtue
of the failure to call
Cossadianos and one Vlok who were present at the meeting and could
have confirmed the evidence of Van Wyk.
Vlok was the first accused’s
personal body guard and was later appointed as a director in Krion.
The role of Cossadianos
is set out earlier. The reasoning set out in
paragraph 169 to 170 above finds equal application in this regard.
[181]   Cossadianos and Vlok
are firmly vested in the camp of the appellants. There is every
reason to believe that their
evidence may not support that of Van
Wyk. It is, however, not the function of a prosecutor to place
contradictory evidence before
a court and expect the court to find
its way through the maze. In
S v Van der Westhuizen
2011 (2)
SACR 26
(SCA) para 11 this court stated that:
‘
[I]t
is the obligation of the prosecutor firmly but fairly and
dispassionately to construct and present a case from what appears
to
be credible evidence, and to challenge the evidence of the accused
and other defence witnesses with a view to discrediting such

evidence, for the very purpose of obtaining a conviction. That is the
essence of a prosecutor’s function in an adversarial
system and
it is not peculiar to South Africa. . .’ (Footnote omitted.)
[182]
It was therefore not the obligation of the prosecutor to call
witnesses who are firmly vested in the camp of the
accused. In view
of the court finding that Van Wyk’s evidence was the truth and
that it was clear and satisfactory, this
argument cannot succeed.
[183]   Counsel for the second
accused argues further that the trial court erred in its factual
findings and that it ought
to have been held that she was merely a
passive observer at the meeting. The approach to factual findings in
an appeal was correctly
set out by Jones J in
S v Leve
2011
(1) SACR 87
(ECG) at 90
g-i
where he explained:
‘
The
trial court’s findings of fact and credibility are presumed to
be correct, because the trial court, and not the court
of appeal, has
had the advantage of seeing and hearing the witnesses, and is in the
best position to determine where the truth
lies. See the well-known
cases of
R v Dhlumayo
& another
1948
(2) SA 677
(A) at 705 and the passages which follow;
S
v Hadebe and Others
1997 (2) SACR 641
(SCA) at 645; and
S
v Francis
1991 (1)
SACR 198
(A) at 204c-f. These principles are no less applicable in
cases involving the application of a cautionary rule. If the trial
judge
does not misdirect himself on the facts or the law in relation
to the application of a cautionary rule, but, instead, demonstrably

subjects the evidence to careful scrutiny, a court of appeal will not
readily depart from his conclusions.’
[184]
The events leading up to the meeting on 16 April 2002 serve to place
the role of the second accused at the meeting
in its context. On 10
April 2002 the second accused forwarded a fax to Van Wyk in which he
requested the payment of a cash cheque
in the amount of R1,7 million
by no later than 12 April 2002. He stated in the communication that
agents were waiting for capital
to pay out the clients. Van Wyk
refused to sign the cash cheque and directed numerous enquiries to
Cossadianos in respect of this
request. Shortly thereafter the second
accused called Van Wyk and intimated that it was no longer necessary
to sign the said cheque.
On 12 April a further letter followed from
accused 4 regarding the signature of cheques. It is against this
background that the
meeting was held on 16 April 2002 when the
misrepresentations were made. Subsequent to the meeting the first
accused has acknowledged
that she required these cheques in order to
pay out interest and capital to investors. This accords with the
letter sent by the
second accused on 10 April. We are therefore not
persuaded that the trial court erred in finding that the second
accused knew that
Krion money was being used to pay out investors in
previous entities.
[185]
In an endeavor to persuade Van Wyk to sign the cheques the first
accused represented to Van Wyk that money was
needed to be advanced
to micro lending franchises. The second accused did nothing to
correct this misrepresentation. Cossadianos
further represented to
Van Wyk that a covering bond over immovable property of the PT
Vennote Familie Trust would be registered
as security. The second
accused assured Van Wyk that the property adjacent to the Ardenwold
Guesthouse had been valued at R10million
and that the guesthouse was
worth at least R5million. This, the second accused denied, however,
his participation is borne out
by the contemporaneous notes kept by
Van Wyk during the meeting. The second accused furthermore presented
at the meeting with a
banking slip confirming that an amount in
excess of R6million was held in the Krion account to meet the payment
of the cheques.
The trial court concluded that he had associated
himself with the misrepresentations made. We find no misdirection on
the part
of the trial court and accordingly are disinclined to
interfere with the finding of the trial court.
[186]
Finally counsel for the second accused argues, in any event, that the
State has failed to establish beyond reasonable
doubt that any
representation made by the second accused in fact moved Van Wyk to
sign the cheques. Causation, however, is not
a requirement for a
conviction for fraud. Even if the state has failed to prove that the
misrepresentation resulted in actual prejudice
a conviction may still
follow provided it is established that the representation was
potentially prejudicial in that it involved
the risk of prejudice.
(See Snyman op cit at 535 and
R v Kruse
1946 AD 524
at
533-534;
S v Judin
1969 (4) SA 425
(A) 435.) For these reasons
the argument cannot succeed.
Counts 77176 ─ 86246 (9071
counts of unauthorized use of the word ‘cooperative’.
[187]
These counts relate to the alleged conduct of a cooperative without
it having been registered. It is not disputed
that the second accused
acted as chairperson of M & B Co-Operative and took numerous
deposits in the name of the co-operative
which was never registered.
9071 Investment certificates were issued in the name of M & B
Co-Operative hence the 9071 convictions.
Two arguments were raised by
counsel for the second accused. First it is argued that although the
trial court dealt with these
charges in the judgment (and held the
second accused liable) it failed to pronounce a verdict at the
conclusion of the judgment.
Therefore it is contended that the second
accused is entitled to be acquitted.
[188]
Section 322(1) of the CPA provides:
‘
In
the case of an appeal against a conviction or of any question of law
reserved, the court of appeal may─
(a)
. . .
(b)
give such judgment as
ought to have been given at the trial . . .’
[189]   Counsel for the State submitted that the court is
entitled to give the judgment which the trial court ought to
have
given. He contended that it is manifestly clear that the trial court
intended to convict the second accused as is evidenced
by the reasons
and the imposition of sentence. In the circumstances it was submitted
that s 322 of the CPA is applicable.
[190]   The trial court held that the second accused as a
director of M & B Co-Operative ought to have been aware
of
legislation which applies to co-operatives. It recorded that he
acknowledged that he knew that the co-operative was not registered

and he proceeded to issue 337 investment certificates in the
co-operative.
[191]   These factual findings are common cause. A finding
that the second accused is entitled to his acquittal by virtue
of the
failure of the trial judge to formally record his conviction would be
contrary to the factual findings made. Such an approach
would
undermine the administration of justice. In these circumstances we
consider that the argument on behalf of the second accused
cannot
succeed
[192]
The second argument raised is, assuming that the first argument
fails, that the conviction on 9071 counts constitutes
a duplication
of convictions. This is dealt with under the first accused and the
same considerations find application. In the circumstances
the second
accused was incorrectly convicted of 9071 charges. He ought to have
been convicted on one count only.
Counts 197708 – 199747 (2040
charges of contravening s 104 (1)(3) of the Income Tax Act.
[193]   These counts have been
fully dealt with earlier (paras 122-123). For the reasons stated the
appeal against these
counts must succeed.
Counts 199748 ─ 200563 (816
counts of theft)
[194]   The subject matter of
these charges is set out earlier in respect of the first accused
(para 129).
[195]
The events surrounding the creation of Krion are discussed earlier
(paras 29-30, 167 and 175). Van Wyk was the
only director with
signing powers on the Krion account. The co-signatory was one Nel,
one of the trustees of the Share Family Trust
and a long standing
friend of the second accused. The Share Family Trust owned the
controlling shares in Krion. Nel had not been
apprised of any
functions which he was required to fulfill on behalf of the trust and
there is no evidence of any attendance of
any management meetings on
behalf of the Trust with regard to Krion.
[196]
Nel agreed to act as a co-signatory for Krion on the condition that
Van Wyk would sign all cheques prior to being
presented to him for
signature. Nel accordingly relied on Van Wyk to ensure the propriety
of the cheques.
[197]
On 16 April 2002 at the meeting referred to earlier herein Van Wyk
revealed a reluctance to sign any cheques on
behalf of Krion without
a full motivation from Cossadianos and provision of appropriate
security. At the request of Cossadianos
and without any reference to
Van Wyk the second accused thereafter arranged with ABSA Bank for
accused 4 to obtain authority to
affect internet banking transfers.
In these circumstances the trial judge concluded that the second
accused knew full well that
Van Wyk would be unwilling to consent to
the authorization given to accused 4 to make payments from the Krion
account and that
the second accused knew what payments were intended
to be made.
[198]
Counsel on behalf of the second accused submitted that the trial
court committed various misdirections in respect
of the evidence.
Firstly the second accused testified that he did in fact attempt to
consult Van Wyk in this regard. He telephoned
Van Wyk to discuss the
matter with him. Van Wyk, however, so his evidence goes, was in Port
Nolloth. Although the second accused
spoke to Van Wyk the telephone
connection was of such poor quality that the line was interrupted
before he was able to discuss
the matter with Van Wyk. In this regard
he is contradicted by the first accused who states that they were
unable to make contact
with Van Wyk. Van Wyk, when he testified,
denied that he was ever in Port Nolloth. This evidence was not
challenged by the second
accused in cross-examination and the trial
court found the second accused to be an unsatisfactory witness. It
accepted the evidence
of Van Wyk.
[199]
On behalf of the second accused it is again contended that Van Wyk is
a single witness in this regard and that
an adverse inference ought
to have been drawn against the State by virtue of the failure to call
Van Wyk’s wife who was able
to confirm whether he was in Port
Nolloth or not. There is no merit in the argument and the
considerations in respect of single
witnesses set out earlier find
application here too.
[200]
It is further argued that the trial court misdirected itself in
respect of the extent of the second accused’s
involvement in
the establishment of Krion. The involvement of the second accused is
set out above (paras 167 and 175). Again the
trial judge did not
misdirect herself in this regard and we find no grounds to interfere
with the factual finding of the trial
court.
[201]
Counsel for the second accused argues further that the court erred in
concluding that the second accused knew
that Van Wyk would not
approve of the authorisation given to accused 4. This must be seen in
the light of the events preceding
the meeting of 16 April and the
events at the meeting which are discussed earlier (para 184-5). The
trial court furthermore considered
both the inability of the second
accused to explain why it was necessary for internet banking services
to be approved at all and
to provide any logical explanation for why
it was so urgent that it could not, on his version, wait for Van Wyk
to return from
Port Nolloth. We find no misdirection on the part of
the trial court.
[202]
Finally, it is argued on behalf of the second accused that the 815
counts of theft constitute a duplication of
convictions. Reliance is
placed on
S v Verwey
1968 (4) SA 683
(A). Verwey was an
attorney charged with one count of theft arising from a general
deficit in his trust account. In the alternative
he was charged with
nine individual counts of theft in respect of the theft of monies
deposited by nine individual clients in his
trust account. Verwey was
convicted of seven counts of theft on the alternative charges. An
appeal to the Supreme Court [now the
High Court] failed. In a further
appeal this court held the convictions to be irregular. It held that
money which was paid into
the trust account by individual clients
became consumed in the trust account and no longer existed as
separate identifiable amounts.
Moreover the State had failed to prove
seven withdrawals corresponding to the amounts deposited by the
complainants. It could not
be determined in the circumstances whether
any particular withdrawal constituted the theft from any of the
individual complainants.
Rather, amounts were paid into the trust
account from time to time and withdrawn from time to time. The
balance dwindled and the
accordingly the accused ought to have been
convicted of a single count of theft based on the general deficit in
the trust account.
[203]
The facts in the present matter are markedly different. In this case
money was held in the bank account of Krion
for and behalf of Krion.
Each withdrawal made by accused 4 as a result of the facility
arranged by the second accused constituted
a separate identifiable
appropriation from the Krion account. Each transfer was made to a
different pre-existing investor in one
of the earlier entities or
purported entities used to conduct in the scheme. Each such transfer
required a fresh intention to be
formed. In the circumstances
counsel’s argument cannot succeed.
Counts 200664 ─ 218636 (17973
counts of conducting a harmful business practice being a
multiplication scheme)
[204]   It is conceded on
behalf of the State that the second accused ought not to have been
convicted on counts 200664
to 204797. In respect of counts 200664 to
200683 he was discharged at the end of the State’s case in
terms of
s 174
of the
Criminal Procedure Act. He
could therefore not
subsequently be convicted. Counts 200664 to 204797 relate to events
prior to 28 May 2001 when the second accused
was not involved in the
scheme. Counts 204798 to 218636 remain.
[205]
On behalf of the second accused two arguments are raised, firstly
that the multiple counts constitute a duplication
of convictions and
secondly, in any event, that it has not been proved beyond reasonable
doubt that the second accused knew that
he was engaged with a
multiplication scheme.
[206]
The first argument on behalf of the second accused is considered
earlier herein in respect of the first accused.
For the reasons set
out the second accused was wrongly convicted of multiple counts. He
is guilty of a single offence only.
[207]
Turning to the second argument advanced it has been recorded earlier
that the second accused was a director of
Martburt and the
chairperson of M & B Co-Operative. The legal implications flowing
from the duties of directors has been discussed
(para 157). He
personally had investment in the scheme and knew of the interest
which was paid. The second accused’s participation
in the
scheme, including his referral of investors from March 2001, for
which he was paid commission, his function in supervising
the agents
who collected deposits and his exposure to the extent of the deposits
and interest payments made are indicative of knowledge
of the nature
of the scheme. The trial court’s finding in this regard is
therefore correct.
[208]
In the result the convictions in respect of counts 200664 to 218636
should be set aside and substituted with a
single conviction for
conducting a harmful business practice.
Counts 218637; 218639 and 218682
relate to reckless trading in MP Finance CC, Martburt and Krion.
[209]
The second accused was convicted of reckless trading in MP Finance
CC. He was never a member of MP Finance CC
and was not involved in
the scheme when MP Finance CC was utilised as a vehicle. In the
circumstances the State has correctly conceded
that the second
accused ought not to have been convicted on this count.
[210]   I turn to the alleged
contravention of s 424 of the Companies Act in respect of Martburt.
Section 424(1) of the
Companies Act provides:
‘
When
it appears . . .  that any business of the company was or is
being carried on recklessly or within intent to defraud creditors
of
the company . . . or for any fraudulent purpose, the court may, . . .
declare that any person who was knowingly a party to the
carrying on
of the business in the manner aforesaid, shall be personally
responsible . . .  for all or any of the debts or
other
liabilities with the company . . . .’
[211]
Section 424(3) provides that any person who was knowingly a party to
the carrying on of the business of the company
in such manner is
guilty of an offence. On behalf of the second accused it is
acknowledged that he was indeed a director of Martburt,
however, it
is argued that the evidence establishes that the second accused did
not act in such capacity. The argument need only
to be stated to be
rejected. The second accused accepted the directorship in Martburt
and his acceptance thereof gives rise to
certain obligations in law.
To the extent that he did not act as the law requires of a director
to act it constitutes a dereliction
of his duty. His failure to act
in the manner in which it was expected of a director can therefore
not assist the second accused.
[212]
Counsel of behalf of the second accused proceeded to argue that the
only involvement of the second accused in
Martburt which has been
established on the evidence was the acceptance of a single deposit
and the signature of six ‘investment
certificates’ which
he signed.
[213]
Even if this was correct (which it is not) it constitutes
participation in the reckless conduct of the business
of Martburt.
(Compare
Gordon v Standard Merchant Bank Ltd
1984 (2) SA 519
(C)). He knew that the taking of deposits constituted the business of
Martburt and he personally participated in accepting deposits
with
full knowledge that it constituted a contravention of the Bank’s
Act. He was aware that Martburt offered 10 per cent
per month on any
investment and he referred investors to Martburt on that basis. At no
time did the second accused attempt to ascertain
that Martburt was
able from its income to service such investments. The objective facts
are that it could not. The conclusion is
inescapable that he was
knowingly a party to carrying on the business recklessly.
[214]
In the result the appeal on this count should be dismissed.
[215]
In respect of Krion the second accused was not a director. It is
argued on his behalf that the State has failed
to prove beyond
reasonable doubt that he had the intention to be party to the
reckless conduct of the business of Krion. Again,
counsel downplays
the involvement of the second accused. It is not in dispute that he
was involved in establishing Krion, identifying
and appointing
directors for Krion, identifying and appointing trustees in the Share
Family Trust which held the controlling interest
in Krion, arranging
for the opening of the Krion bank account, obtaining authorisation
for internet banking on the Krion bank account
and obtaining the
signature of Mr Nel on the documents which were signed to enable the
second accused to arrange for accused 4
to perform internet
transfers. He was present at the meetings held with investors where
it was explained to investors that previous
investments were merely
to be converted to investments in Krion for no consideration. He knew
that payments were carried out on
the Krion bank account whereas no
business in Krion had been commenced and whereas Krion had not
realised any profit by such time
and he actively sought to persuade
Van Wyk to sign such cheques.
[216]
For these reasons the argument of counsel cannot succeed.
Sentence
─ Second accused
[217]
We have held that the convictions and sentence in respect of counts
197708 to 199747; counts 200664 to 204797
and count 218637 are to be
set aside.
[218]   We have held too that counts 77176 to 86246
constitute a duplication of convictions and that the appellant ought

to have been convicted on one count. The trial court took these
multiple counts together for purposes of sentence and imposed a

globular sentence of one year imprisonment. Similarly, in respect of
counts 200664 to 218636 the trial judge took the offences
together
for purposes of sentence and imposed a sentence of three years
imprisonment. Whilst the 971 counts in the former instance
and the
17973 counts in the latter have been reduced to one offence in each
case it is merely the result of the interpretation
of the relevant
statutory provisions. The factual findings in respect of the conduct
of the second accused which is to be punished
in each case remains
materially undisturbed. In these circumstances we do not consider
that the sentence in these instances merit
interference.
[219]
In respect of the second accused therefore the appeal against the
convictions succeeds to a limited extent only.
In respect of
sentence, however, this does not assist the second accused as the
effective sentence imposed remains undisturbed.
This is so as the
sentences which are affected and which are set aside were in any
event to run concurrently with the sentences
imposed in respect of
counts 2, 3, 45 and 47.
[220]   In argument before us counsel for the second
accused did not contend for any misdirection on the part of the
trial
judge. He has confined his argument to the submission that the
effective sentence is so disturbingly severe in the circumstances

that this court should interfere with the sentence imposed. Counsel
has further confined his argument to the sentences imposed
in respect
of counts 2 and 3 (contraventions under POCA) and 45 and 47 (fraud).
The sentence imposed in respect of these four counts
determines the
effective sentence as all other sentences imposed in respect of the
remaining offences were to run concurrently
with these. The second
accused was sentenced to an effective term of imprisonment of 12
years.
[221]   In respect of count 2 and 3 the second accused was
sentenced to 10 years imprisonment in each case of which 3
years were
conditionally suspended. The sentences were ordered to run
concurrently. The second accused was therefore sentenced
to an
effective 7 years’ imprisonment in respect of these offences.
The trial court’s analysis of the second accused’s

involvement and participation in the scheme is essentially correct.
It is true that she stated in her judgment on sentence that
the
second accused was also involved in MP Finance Sacco, however, the
error is not material. It is immaterial because she correctly

recorded that he only became involved in the scheme in May 2001 and
that he actively participated in all the activities of the
scheme
thereafter. She recorded too that the second accused actively
participated in the making of false representations in the

application for the registration of MP Finance Sacco. The reference
was clearly intended to be a reference to the registration
of M &
B Co-Operative. Despite the erroneous references to MP Finance Sacco
her analysis of his active involvement in the scheme
correctly
reflects his conduct.
[222]
Although these errors are alluded to in heads of argument before us
counsel for the second accused, fairly, did
not seek during argument
to make anything of these errors.
[223]
Count 47 was a fraud relating to cheques in the amount of R6million.
A discretionary minimum sentence of 15 years
imprisonment applies to
the offence. The trial court held that substantial and compelling
circumstances do exist to deviate from
the prescribed sentence and it
imposed a lesser sentence. Even where substantial and compelling
circumstances are found to exist,
however, the standardized sentence
set out by the legislature in the Criminal Law Amendment Act must
serve as a point of departure
in the assessment of sentence.
[224]
The trial court gave careful consideration to the personal
circumstances of the second accused and the interest
of society in
the imposition of sentence on these counts. It considered that he was
a first offender and of an advanced age at
67 years. It gave
consideration to his career in finance and to the extent of his
involvement in the scheme. It recognised that
he lost his pension in
the scheme and that he lost his material possessions in consequence
of his arrest. The crimes of which the
second accused has been
convicted under POCA are, however, serious offences. In our view the
trial judge correctly assessed the
conduct of the second accused in
the affairs of the scheme and weighed same against his personal
circumstances and the interests
of society. In the circumstances we
are not of the view that the sentence imposed on these counts is so
severe as to warrant the
interference by this court.
Third and fourth accused
It is convenient to consider the appeals
of accused 3 and 4 together.
Count 2 (Section 2(1)
(e)
of
POCA)
[225]   Counsel on behalf of
accused 3 and 4 submitted that the State has failed to prove that
accused 3 or 4 had knowledge
of the unlawfulness of their conduct.
[226]
The argument on behalf of accused 3 and 4 is predicated on the
assumption that it is necessary for the State to
prove that the
accused had the intention to participate in the conduct of the scheme
through a pattern of racketeering activity.
The question of the
required mens rea for a contravention of the provisions of s 2(1)
(e)
of POCA has been considered earlier. The foundational submission
for the argument on behalf of accused 3 and 4 is therefore incorrect.

The issue to be determined is whether accused 3 Scheduleand 4 had the
mens rea to commit the predicate offences listed in Schedule
1 to
POCA.
[227]
Accused 3 was both employed by and associated with the scheme and was
an active participant in the conduct of
the affairs of the scheme
from the inception. Her membership of MP Finance CC and directorships
at Madikor Twintig and Martburt
is set out above as is her role in MP
Finance Sacco. According to the personnel list of MP Finance seized
by the administrators
appointed by the SARB she is reflected as the
Financial Director with effect from 1 June 1998. She completed the
cash book in respect
of the micro lending business from 1999 and she
personally signed investment certificates as from November 2000.
[228]
Initially accused 3’s efforts were concentrated in the micro
lending division until April 2001. She knew
what the income of the
micro lending business was. In April 2001 she was transferred to the
investment division, initially in training.
There she was exposed to
all the investment files, the calculating of interest to be paid out
monthly and the extent of the deposits
made. As from 7 June 2001 she
was committed on a full time basis in the investment division. She
was aware of the investigation
by the DTI while she was a member of
MP Finance CC in May 2000. She professes to have been comforted by
the first accused’s
assurance that the matter was all sorted
out. She was present in the meeting with the inspectors appointed by
the SARB on 6 June
2001. She was accordingly witness to the admission
made by the legal representatives on behalf of the first accused that
the scheme
was contravening the provisions of the Banks Act. She
witnessed the representation by the first accused that approximately
R10million
to R12million was owing to investors. This she must have
known to be false as she had personally signed investment
certificates
in the amount of R17million prior to that date. She was
present too when the instruction was given that no further deposits
may
be taken. Notwithstanding this instruction and her knowledge of
the contravention of the Banks Act she actively continued, after
a
brief interlude, taking deposits on behalf of the scheme. She
witnessed the dramatic change in the modus operandi of the scheme

which occurred at 6 June 2001 by the appointment of agents to conduct
the collection of deposits and the payment of interest She
witnessed
the removal of the investment files from the offices of the scheme in
order to hide them from the inspectors on the same
day that the
inspectors visited. She has been convicted of a number of predicate
offences listed in Schedule 1 of POCA. Her participation
through a
pattern of racketeering is manifestly established.
[229]
Accused 4 joined the scheme in January 1999. His involvement with the
establishment of the MP Finance Sacco and
M & B Co-Operative and
his directorship in Martburt is recorded above. He was employed in
the scheme as personnel manager.
Over the period November 2000 to
February 2002 he signed 11 248 investment certificates in an amount
in excess of R632,6million.
[230]
He was, as recorded earlier, the founder and a trustee of the PT
Vennote Familie Trust. Assets which were purchased
in the trust from
17 November 1999 are recorded above. Accused 4 performed the computer
functions in the scheme and was personally
involved in all the
amendments and variations to the investors certificates and related
documentation on each occasion that the
scheme shifted from one
entity to the next. He was accordingly employed and associated with
the enterprise and participated in
the conduct of its affairs from
1999. The submission to the contrary on behalf of accused 4 can
therefore not be sustained.
[231]
Accused 4 bore knowledge of the draft prospectus of Martburt. The
prospectus provided for the issuing of debentures
to the sum of
R10million. Accused 4 personally issued ‘debentures’ to
the value of R92million in Martburt. He issued
‘investments
certificates’ in MP Finance Sacco without ever taking any steps
to determine whether the Sacco had in
fact been registered. He knew
of the instruction given by the inspectors appointed by the SARB that
no further deposits from the
public should be taken. In the face
hereof he issued 659 further ‘investment certificates’ in
the name of Martburt
to the total value of R40,7million after 6 June
2001. He issued 8317 investment certificates in the name of M & B
Co-Operative
to the value of R488,6million without ever ascertaining
whether M & B Co-Operative had been registered. He too has been
convicted
of a number of predicate offence listed in Schedule 1 of
POCA.
[232]
In the circumstances his participation through a pattern of
racketeering is established.
Count 3 (Section 2(1)
(b)
of
POCA)
[233]   Counsel for accused 3
and 4 does not dispute that accused 3 and 4 received or retained
property directly and indirectly
on behalf of the enterprise. The
sole argument advanced is that the trial court erred in finding that
these appellants knew, or
reasonably ought to have known that such
property derived or is derived from or through a pattern of
racketeering activity.
[234]   The role of accused 3
is set out in paras 227 and 228 above. She conducted the bookkeeping
of the cash loan business
from February 1999 for Finsure Consultants.
During cross-examination she was confronted with an extract from the
cash books as
at 31 March 1999 which revealed:
The
total amount received from investors was R987 531.63.
The
total amount of money lent out was R87 614;
The
gross income from repayment of loans was R101 344.02.
[235]
All investors received 20 per cent per month on their investments at
that stage. From the aforesaid figures it
follows that the gross
profit from the cash loan business amounted to R13 730.02. It is
therefore apparent from the cash books
in 1999 that the enterprise
was not able to sustain the payment of interest to investors.
[236]
Accused 3, as a director of Madikor Twintig and Martburt, had a duty
to acquaint herself with the legal provisions
governing the affairs
in the area in which the companies conducted business and to make the
necessary enquiries in order to determine
that the company’s
business is conducted within the perameters permitted. The trial
court found that accused 3 conveniently
failed to make further
enquiries from legal representatives or from the inspectors appointed
from the SARB when enquiries were
clearly called for. In these
circumstances it is not open to her to shield behind her alleged
ignorance of the pattern of racketeering.
(See
Stannic v SAMIB
Seven Underwriting Managers Pty Ltd
2003 [3] All SA 257 (SCA) at
paras [16]-[17]. See also
S v Kasie
1963 (4) SA 742
(W) at
748H-749A)
[237]
The provisions of s 1(3) of POCA finds application in determining
whether accused 3 ought reasonably to have known
that the property
was derived from a pattern of racketeering. For purposes of s 1(3)(a)
she is to be judged as a director of companies
engaging in deposit
taking.
[238]
In respect of s (1)(3)(b) she in fact had knowledge of the cash book
of the micro lending business in 1999, the
financial statements of MP
Finance CC for 1999 and 2000 and the extent of interest which was
offered to investors and which she
and accused 4 derived from the
scheme. Whilst she had no tertiary education accused 3 had
matriculated with commercial law, business
economics and accounting
as subjects. In all the circumstances we find that the trial court
correctly held that accused 3 knew
or ought to have known that the
property received derived from a pattern of racketeering.
[239]
Accused 4 too was a director of Martburt. As the founder of the PT
Vennote Familie Trust he acted as trustee from
its inception. The
properties which were purchased in the name of the trust are recorded
above. He signed the contracts on each
occasion. On each occasion the
money, in cash, was derived from the scheme and on each occasion no
agreement was concluded between
the trust and any of the entities.
None of the loans were ever repaid.
[240]
His role in the conduct of the scheme is set out in paras 229 to 230
above.
[241]
Accused 4 acknowledges that prior to 6 June 2001 he became aware of a
letter addressed to the first accused by
the SARB dated 25 October
2000 in which the SARB stated that it had reason to believe that the
first accused was conducting the
business of a bank without being
registered as such. He took no steps to determine the lawfulness of
the business.
[242]
For purposes of s 1(3) of POCA he too is to be judged as having
the general knowledge, skill, training and
experience of a director
of companies engaging in the business of deposit taking and, in
respect of funds received in the trust,
of a trustee managing the
affairs of others.
[243]
In these circumstances the evidence is overwhelming that accused 4
knew or ought reasonably to have known that
the monies received by
him as trustee derived from a pattern of racketeering. In his case
too the argument of lack of knowledge
cannot succeed.
Counts 4, 5, 6, 7 and 8, 12 and 13
(Fourth accused ─ Money Laundering)
[244]   The subject matter of
these convictions has been discussed earlier in respect of the first
accused. The transactions
in issue occurred between 17 December 1999
and May 2001.
[245]
Two arguments are advanced on behalf of accused 4. Firstly it is
contended that the trial court erred in concluding
that accused 4
knew or ought reasonably to have known that the ‘property’
was derived from unlawful activity and secondly
that the court erred
in concluding that the transactions had or were likely to have the
effect of concealing or disguising the
nature, source or movement of
the said property or the ownership thereof.
[246]
Accused 4 took up employment with MP Finance CC at a salary of R3000
pm which he received in cash without any
deduction. He had resigned
his previous employment and invested an amount of R90 000.00 which
derived from his pension payout in
1999. Within the first year his
investment grew to R436 000.00. He was a branch manager in one of the
micro lending outlets and
was aware that the micro lending business
was not generating profits. In August 1999 he again invested a
further R1000.00 in the
scheme. According to the investment documents
the investment would grow to R9000.00 within a year. He therefore
knew of the extravagant
benefits which he derived from the scheme and
that the scheme offered returns on investments which were not
sustainable.
[247]
In the circumstances by August 1999 he knew that the micro lending
business generated little or no profits. He
knew too that the scheme
offered unsustainable returns on investments.
[248]
Section 9 of the Trust Property Control Act 57 of 1988 requires of
the trustee in the performance of his duties
and the exercise of his
powers to act with the care, diligence and skill which can reasonably
be expected from a person who manages
the affairs of another. It is
recorded earlier herein that it is not in dispute that the monies
utilised for the purchases of the
immovable property in question was
derived from the scheme.
[249]
For purposes of s 1(3)(a) of POCA accused 4 should be judged as a
trustee managing the affairs of another with
the knowledge and
exposure which accused 4 had had to the operation of the scheme prior
to the relevant dates and the manner in
which the transactions
occurred.
[250]
The trial court correctly held that accused 4 knew or ought
reasonably to have known that the money derived from
unlawful
activity.
[251]
The second leg of the argument advanced is predicated upon the same
misguided assumption which underlies the argument
on behalf of the
first accused, namely, that the property in issue is the immovable
property purchased. The assumption is erroneous.
The property in
issue, as set out in the charge sheet, is the money deriving from the
scheme which was utilised for the purposes
of purchasing the
properties. The manner in which the money was advanced and
transactions were concluded reveal overwhelmingly
that they had, or
were likely to have the effect of concealing or disguising the
nature, source or movement of the money used to
effect the purchase.
[252]
The appeal against the convictions on these counts can therefore not
succeed.
Count 27 (Third and fourth accused –
Contravention of s 11(1) of Banks Act)
[253]   The relevant
provisions of the Banks Act are set out earlier. The sole argument
advanced on behalf of accused
3 and 4 is that they did not act with
the necessary
mens rea
and ought therefore not to have been
convicted.
[254]
The argument is founded on the simplistic
submission that the evidence reveals that they believed at all times
that the first accused
would sort out the problems relating to the
Banks Act.
[255]
There are two difficulties with this argument. Firstly, accused 3 was
aware in May 2000 when the Department of
Trade and Industry visited
the first accused that the Banks Act posed difficulties to the
continued conduct of the scheme. Accused
3 and 4 were present at the
meeting on 6 June 2001 when the inspectors appointed by the SARB met
with the first accused. They were
aware that legal representatives
for the first accused acknowledged that the scheme was contravening
the provisions of the Banks
Act and they witnessed the instruction
given that no further deposits were to be taken. Accused 3 and
accused 4 continued to take
deposits after 6 June 2001 with full
knowledge of the confession made at the meeting on 6 June. Both
proceeded to take deposits
without attempting to ascertain from the
inspectors appointed by the SARB whether their difficulties had been
addressed. With knowledge
of the difficulties being presented by the
Banks Act they participated in M & B Co-Operative and took
deposits in the name
of M & B Co-Operative without M & B ever
being registered as a co-operative. In the circumstances, even
accepting their
confidence in the ability of the first accused to
overcome the difficulties posed by the Banks Act in due course, they
proceeded
to conduct the business of a bank in the interim without
ever ascertaining the nature of the problem posed by the Banks Act
nor
enquiring whether the first accused had succeeded in her
endeavours to overcome these difficulties.
[256]
The second difficulty with the argument is to be found in their
directorships of Madikor Twintig (accused 3) and
Martburt (accused 3
and 4) respectively. The legal duties of directors are fully
canvassed earlier and in these circumstances it
cannot avail accused
3 and 4 to seek cover in the confidence which they had in the first
accused.
Count 31 (Fraud)
[257]   The
conviction relates to the meeting which occurred on 6 June 2001 with
the inspectors appointed by the SARB.
During the meeting and in the
presence of accused 3 and 4 the first accused represented to the
inspectors that she held in total
an amount of approximately
R10million to R12million in investments and that the said amount was
committed in her micro lending
business. The trial court held that
accused 3 and 4 associated themselves with this representation and
failed to reveal the true
extent of the scheme nor that the micro
lending business had never generated sufficient income to pay the
interest commitment which
the scheme had in fact made to investors.
[258]
In truth, at the time, the scheme had taken approximately R320million
in investments, very little of which was
invested in the micro
lending business and indeed the micro lending business did not
generate an income remotely sufficient to
service the interest
commitment made to investors. The monthly interest commitment of the
scheme as at 6 June 2001 amounted to
R38,4million.
[259]
Accused 3 acknowledged that she was present at the meeting. It is not
in dispute that she failed to correct the
misrepresentations. Counsel
for accused 3 argues that the trial court erred in holding that
accused 3 was aware that the representations
were false.
[260]
The functions of accused 3 in the investment division of the scheme
and the extent of investment certificates
which she had personally
signed prior to 6 June 2001 are not in dispute. Her obligations as a
director of Madikor Twintig and Martburt
have been fully discussed.
[261]
In the circumstances we find no misdirection on the part of the trial
court and are disinclined to interfere with
its finding that accused
3 did know that the investments held by the scheme as at 6 June 2001
were substantially in excess of R10million
to R12million.
[262]
She knew too that the micro lending division did not generate income
remotely sufficient to service the interest
commitment. In this
regard her exposure to the financial records has been recorded
earlier.
[263]
In these circumstances the argument on behalf of accused 3 cannot
succeed.
[264]
The only argument advanced on appeal on behalf of accused 4 is that
he did not know of the representations nor
that they were false as it
is argued that he was not present in the meeting at the time when the
misrepresentations were made.
It is common cause that he was not
present throughout the duration of the meeting and that he arrived
after the meeting had commenced
together with Bredenkamp, who was
present in the meeting when the representations were made.
Accordingly it occurred after he and
accused 4 had arrived in the
meeting. The trial court accepted the evidence of Bredenkamp in this
regard. We accordingly find no
basis to interfere with the factual
finding of the trial court.
[265]
In the result the appeal against the convictions on this count cannot
be sustained.
Count 47 (Fraud –
Fourth accused)
[266]   The
circumstances material to this charge are set out earlier herein in
respect of the second accused. It relates
to the representations made
to Van Wyk in the meeting on 16 April 2002, which were directed at
persuading Van Wyk to sign certain
cash cheques in the name of
Krion.  Accused 4 does not dispute that he was present at the
meeting on 16 April 2002, nor that
the misrepresentations relied upon
by the State were made. The argument advanced on behalf of accused 4
is that he did not really
pay attention to the discussions at the
meeting and that he did not participate in the discussions and
accordingly that he did
not associate himself with the
representations and therefore he did not have the mens rea to commit
fraud.
[267]
The events leading up to the meeting on 16 April 2002 are again
material for the consideration of the argument
raised. Reference has
been made earlier to the letter addressed to Van Wyk by the second
accused on 10 April 2002. On 12 April
2002 accused 4 directed a
letter to Van Wyk recording that Trade Stuff 2064 CC (the close
corporation managing the guesthouse)
had applied for a loan in the
amount of R2million, that R300 000 was to be paid in cash and a
cheque was requested from Van
Wyk in the amount of R1.7million. The
letter was written on a Krion letterhead and signed by accused 4 on
behalf of the loans department.
It was as a direct consequence of
this letter that Van Wyk requested the meeting on 16 April.
[268]
Prior to the meeting and on 16 April accused 4 addressed a further
letter to Van Wyk now under the heading ‘Diverse
Loans’.
In this letter accused 4 requested Van Wyk to sign three additional
cheques, one in the amount of R10 000 for
alleged accounting
fees and two further cheques in the amount of R1million and
R3,3million respectively allegedly for ‘Corporate
Loans’.
Again the letter was written on a Krion letterhead and signed by
accused 4 on behalf of the loans department. Accused
4 was reflected
in the Krion prospectus as the ‘loans manager’. He
accordingly held a de facto management position
in Krion. He
therefore owed a duty to Krion. The purpose of the meeting was to
discuss these two letters and to persuade Van Wyk
to sign the
requested cheques. The representations in the letters as to the
purpose of the cheques were false.
[269]
The trial judge correctly found that the argument advanced on behalf
of accused 4 cannot be sustained. We find
no reason to interfere with
the finding of the trial court.
Counts 48 to 949
(contravention of
s 135(3)
(a)
of the
Insolvency Act –
Third
accused); counts 950 to 3385 (contravention of
s 135(3)
(a)
of the
Insolvency Act – Third
accused); and counts 8071 to
11694 (contravention of
s 135(3)
(a)
of the
Insolvency Act
– Third
and fourth accused)
[270]
These three groupings of charges relates to contraventions of
s 135(3)
(a)
of
the
Insolvency Act in
MP Finance CC, Madikor and Martburt
respectively. The factual background to these charges is set out
earlier in respect of the
first accused (para 100).
[271]
Section 135(3)
(a)
of
the
Insolvency Act prescribes
that an insolvent shall be guilty of an
offence if, prior to the sequestration of his/her estates, he/she
contracted any debt of
R15 000 or more or debts to the aggregate
of R50 000 or more without any reasonable expectation of being
able to discharge
such debt or debts.
[272]   The
section is to be read together with s 425 of the Companies Act.
The relevant portion of the section provides:
‘
If
any person who is or was a director or officer of a company in
respect of which a winding-up order has been granted . . . and
which
is unable to pay its debts, has committed any act or made any
omission in relation to any assets . . . of such company, which
act
or omission, if such act had been committed or such omission had been
made by a person whose estate was sequestrated on the
date upon which
the winding-up of such company commenced, . . . would have
constituted an offence under the law relating to insolvency
such past
or present director or officer shall be guilty of such offence . . .’
(Section
64 of the Close Corporation Act stipulates for these provisions of
the Companies Act to apply to Close Corporations, with
necessary
adaptation)
[273]
The only argument advanced in respect of accused 3 in respect of
counts 48 to 949 is that she could not have lacked
the reasonable
expectation that MP Finance CC would be able to pay its debts as all
the investments were made with ‘Marietjie’
(the first
accused) and not with MP Finance CC. MP Finance CC, therefore, did
not incur any liability. The argument cannot be sustained.
The
objective evidence reveals that 902 separate agreements were
concluded between investors and MP Finance CC as represented by
the
first accused to the total value of approximately R40.7million.
[274]
Section 135(3)
(a)
),
however provides for it to be an offence where an insolvent (or then,
in terms of s 425 of the Companies Act, a director or officer
of a
company) has prior to sequestration (or liquidation in the case of a
company) contracted a debt without any reasonable expectation
of
being able to discharge the debt. Accepting that accused 3 was an
officer or director (in the context of a close corporation,
a member)
the evidence shows that she did not sign any investment certificate
prior to November 2000. The charges relate to the
period March 1998
to 17 May 2000. In these circumstances counsel for the State conceded
that it has not been shown that accused
3 contracted any debt in the
name of the close corporation. Her conviction on this count must
therefore be set aside.
[275]
Counts 950 to 3385 are formulated under the same legal provisions in
respect of investments made in Madikor. Again
the argument raised on
behalf of accused 3 is limited to the single issue raised in respect
of counts 66 to 949. Again the argument
cannot be sustained. The
objective evidence shows that 2 450 separate agreements were
concluded between individual investors
and Madikor, as represented by
the first accused, to the total value of R131million. These
investments were made in the period
10 May 2000 to 17 January 2001.
The interest obligation of the scheme as at 14 December 2000, in the
name of Madikor, amounted
to R13,5 million per month whilst the
income generated from the micro loan industry amounted to just
R2 472 415 for the
year. It is not in dispute that third
accused signed a number of these investment certificates and thereby
contracted debts in
the name of Madikor.
[276]
The knowledge of accused 3 of the cashbook of MP Finance CC in March
1999 and the financial statements for the
year 1999 and 2000 is set
out earlier. She does not dispute, nor could she, that she knew that
there could be no reasonable expectation
that Madikor would be in a
position to pay the debts which she incurred. She was accordingly
correctly convicted of one offence
relating to these charges.
[277]
Counts 8071 to 11694 are formulated in terms of the same legal
provisions but in respect of Martburt. In this
instance both accused
3 and 4 were convicted of one offence. On behalf of accused 3 and 4
the same argument is advanced as was
advanced on behalf of accused 3
in respect of the earlier charges under this section.
[278]
In this instance four thousand five hundred separate agreements
between investors and Martburt were concluded
during the period 8
June 2001 to 31 October 2001 to the total value of R290,9million.
Both accused 3 and 4 were directors of Martburt
at the time and both
signed investment certificates thereby contracting debts. They could
not have had any expectation that Martburt
would be in a position to
pay these debts. They were therefore correctly convicted of one
offence in respect of these charges.
Counts 20568 ─
33265
[279]
Accused 3 and 4 do not appeal against the findings under these
counts.
Count 33266 ─
36617; 50034 ─ 54533; and 59034 to 68104
[280]
Accused 3 and 4 were acquitted on all of these charges.
Notwithstanding their acquittal the trial court held in
the course of
the judgment that accused 3 and 4 were fully involved in the
commission of these offences. In these circumstances
it is argued on
behalf of accused 3 and 4 that their appeal against this finding
should be sustained.
[281]
The argument is misguided. Leave to appeal has not been granted in
respect of individual findings in the course
of the reasoning of the
trial judge and generally such an appeal is incompetent. An appeal in
a criminal case is only against the
conviction of an accused or
against the sentence imposed. There is therefore no merit in this
argument.
Counts 77176 –
86246 (contravention of s 42 of the Cooperative Act ─ Fourth
accused)
[282]
Accused 4 was convicted of conducting the business under the name and
style of a co-operative and using the word
co-operative in
contravention of s 42 of the Act. Although the argument is not
raised on behalf of accused 4 that these convictions
constitute a
duplication of convictions, we have held earlier that the accused
ought to have been convicted of only one count.
This redounds to the
benefit of accused 4 too.
[283]
The sole argument advanced on behalf of accused 4 is once again, that
accused 4 did not culpably conduct business
under the name of M &
B Co-Operative Ltd and in fact investments were made under the name
of ‘Marietjie’ (the first
accused). Again the argument is
misguided. The enterprise entered into 9 071 agreements in the
name of ‘M & B Kooperasie
Bpk’ and/or M & B
Co-Operative Ltd' to the total value of approximately R541,7m.
Accused 4 signed 8 285 of these
documents clearly in the name of
M & B Co-Operative Ltd. The appeal on these counts accordingly
succeeds only to the extent
that accused 4 is convicted of one
offence only.
Counts 144337 ─
188910 (contravention of s 83(3)
(a)
of the Banks Act ─
Third accused)
[284]
Accused 3 was convicted of the contravention of s 83(3)(a) of
the Banks Act. The merits of the charges are
not addressed by accused
3 in the appeal. Yet it is submitted on behalf of accused 3 that the
State, in its heads of argument at
the trial, conceded that accused 3
should be discharged on these counts. In these circumstances counsel
for accused 3 in argument
requested her acquittal by the trial court.
The court nevertheless convicted accused 3. In these circumstances
counsel for accused
3 contends that the court failed to afford the
defence an opportunity to address the court on these charges and that
this constitutes
a gross irregularity which entitles accused 3 to be
acquitted on the charge. The State conceded that the conviction
should be set
aside.
[285]
We are in agreement. While the trial court is not bound by the
concession made by the State in its argument, an
accused’s
right to a fair trial demands that the trial court must at least
indicate to the defense that it may not be inclined
to accede to the
view of the prosecution. In the absence of such an indication defence
counsel may rightly conclude that court
accepts the concession made
by the prosecution. In the result these convictions must be set
aside.
Counts 197708 ─
199747 (contravention of s 104(1) of the Income Tax Act ─ Third
and fourth accused)
[286]   The
position in respect of the convictions on these counts is identical
to that of the second accused which is
set out earlier herein. In the
circumstances the convictions should be set aside.
Counts 199748 ─
200563 (Theft ─ Third and fourth accused)
[287]
These convictions relate to the cash withdrawals and monies
transferred from the Krion bank account by internet
transfer effected
by accused 4 pursuant to the authority obtained through the
assistance of the second accused which is set out
earlier herein. An
amount of R20 090 001,78 was withdrawn from the Krion
account, predominantly in favour of various
pre-existing investors in
entities or purported entities operated by the scheme. It is not in
dispute that the money was so withdrawn
nor that it was unauthorised.
On behalf of accused 3 and 4 it is argued that they did not have the
mens rea to commit theft. Counsel
argues that they worked for the
first accused, and it was her business and she took the decisions.
Reliant on their own evidence
it is submitted on their behalf that
they obeyed and believed that the first accused would sort out the
legal difficulties.
[288]
Accused 3 and 4 knew that the money deposited into Krion bank account
originated from new investors to acquire
shares in Krion. Accused 3
was actively involved in the calculation of monthly interest payments
to be made to investors. She calculated
the amounts to be paid from
the Krion account. Accused 4 carried out the internet transactions.
They accordingly both knew that
the payments were in respect of
interest due to pre-existing investors. Both accused had known since
6 June 2001 that the scheme
had been prohibited from taking new
investments. Both actively participated in the continued collection
of new deposits. They were
aware of the dramatic changes in modus
operandi of the scheme which occurred on 6 June as set out earlier
herein. The evidence
of the witness Els, which was not challenged in
cross-examination, was to the effect that accused 3 instructed the
agents appointed
to pay interest due to investors from subsequent
deposits received.
[289]
Accused 4 had sought to persuade Van Wyk to sign a number of cash
cheques, as set out earlier herein and he was
present at the meeting
on 16 April 2001 where Van Wyk was persuaded to sign such cheques. In
these circumstances the conclusion
is inescapable that accused 3 and
4 knew that they were acting unlawfully. That being so it is not open
to the accused to rely
on instructions given by the first accused.
(See
S v Shepherd & others
1967 (4) SA 170
(W) at 177H-178B;
S v
Sixishe
1992 (1) SACR 624
(CkA) at
626b-c;
Snyman supra
at page 139). In the circumstances the appeal cannot succeed.
Counts 200664 ─
218636 (Commission of harmful business practise ─ Third and
fourth accused)
[290]   In
this instance too the simplistic argument is raised on behalf of
accused 3 and 4 that they did not have the
mens rea to commit the
offence in question. Accused 3 and 4 were both directors in Martburt
and accused 3 was also a director in
Madikor Twintig. Accused 3 was
furthermore a member in MP Finance CC. The obligations of directors
to the companies concerned has
been dealt with earlier herein and
finds equal application under these charges. For those reasons the
argument cannot succeed.
For the reasons set out earlier herein,
however, the convictions fall to be set aside and to be substituted
by a single conviction.
Count 218637 (Reckless or fraudulent
carrying-on of business of corporation – Third and fourth
accused)
[291]   Accused 3 and 4 were
convicted of contravening
s 64(2)
of the
Close Corporations Act. The
material portion of
s 64(1)
provides:
‘If it at any time appears that
any business of a corporation was . . .  carried-on recklessly,
with gross negligence
or with intent to defraud any person or for a
fraudulent purpose, a court may . . . declare that any person who was
knowingly a
party to the carrying-on of the business in any such
manner, shall be personally liable for all or any such debts or
liabilities
. . .’
[292]
Section 64(2)
renders it an offence for any person to knowingly be a
party to the carrying-on of the business of the corporation in such a
manner.
[293]
Again the sole argument advanced on behalf of accused 3 and 4 is that
they were not knowingly party to the conduct
of the business of MP
Finance CC in a reckless, gross negligent or fraudulent manner in
that the investments were not made in the
close corporation, but in
the name of ‘Marietjie’. For the reasons set out in
paragraph 273 above the argument cannot
succeed.
[294]
Accused 3 was a member of the close corporation. She had an
investment in the scheme and was aware of the interest
rates paid at
the time. She referred other investors to the scheme. She signed the
financial statements of the close corporation
and kept the cash books
of the corporation. She was therefore aware of the financial position
of the close corporation. In the
circumstances we consider that it
was correctly held that she was knowingly a party to the conduct of
the business of the close
corporation. It is not in dispute (nor can
it be) that the business was carried on for fraudulent purpose. In
the circumstances
we consider that accused 3 was correctly convicted.
[295]
Accused 4, however, was not a member of the close corporation. He
took up employment with the close corporation
in January 1999. After
3 months training he became the manager of one of the micro lending
outlets. He later became aware that
his branch of the the micro
lending business generated little or no income. He did have an
investment in the scheme and knew of
the interest generated by his
investment. That constitutes the material evidence against him.
Counsel for the State was constrained
to concede during argument that
there was insufficient evidence to have justified the conclusion that
he was knowingly a party
to the carrying on of the business of the
close corporation in a reckless or fraudulent manner.
[296]
The trial court approached this charge on the basis that the second
accused, 3, 4, 5 and 6 were fully involved
in the business of the
first accused which was comprised of the unlawful taking of deposits
from the public. This conduct she found
was fraudulent and their
participation therein persisted at a time when they knew they were
acting fraudulently.
[297]
This charge, however, relates only to the business of the close
corporation. The business was conducted through
the vehicle of the
close corporation until May 2000. The participation upon which the
trial court appears to have relied is participation
in the scheme
which, in the case of accused 4, occurred much later. The State’s
concession made during argument is therefore
fair and the conviction
of accused 4 on this count must be set aside.
Count 218638, 218639 and 218682
(Accused 3 and 4 ─ contravention of s 424(3) of the Companies
Act ─ reckless trading
in Madikor Twintig, Martburt and Krion
respectively.)
[298]   The provisions of s
424 are set out earlier herein in respect of the second accused. In
respect of these convictions
too the refrain by counsel on behalf of
accused 3 and 4 persists that the evidence establishes that the
business was not conducted
in the name of Madikor Twintig, Martburt
or Krion but in the name of ‘Marietjie’. For reasons
fully set out earlier
herein the argument in respect of Madikor
Twintig and Martburt is misplaced. Accused 3 was a director of
Madikor Twintig and both
accused 3 and 4 were directors of Martburt.
Both accused 3 and 4 signed investment certificates in respect of
Madikor Twintig and
in Martburt. They were therefore both actively
engaged in the business of Madikor Twintig and Martburt. Neither
Madikor Twintig
nor Martburt generated any meaningful income from
which the interest on the deposits taken by accused 3 and 4 could be
serviced.
Accused 3 was convicted in respect of counts 218638 and
218639 whilst accused 4 was convicted of the latter count. We are
accordingly
of the view that accused 3 and 4 were correctly
convicted.
[299]
Neither accused 3 nor accused 4 were directors in Krion. Accused 4
was, however, the manager of the loans department
in Krion. Their
participation in the reckless or fraudulent conduct of the affairs of
Krion is set out in paras 288 to 289 above.
For these reasons their
appeal on count 218682 cannot succeed.
Count 218648 (Contravention of the
provisions of s 75(1)
(a)
of the Income Tax Act ─ Third
accused)
[300]   Accused 3 was
convicted of the contravention of the provisions of this section. She
does not appeal against this
conviction.
Count 218683 (Fourth accused ─
theft)
[301]   Accused 4, together
with the first accused, was convicted of theft in the amount R908,5
million. The State conceded
that the amount of R908,5 million had not
been proved. The figures are discussed earlier herein in respect of
the first accused
where it was concluded that the first accused ought
to have been convicted of theft in the amount of R91,1 million. On
behalf of
the State it is argued that the conviction of accused 4 in
such an amount should also be confirmed.
[302]
The only argument raised by counsel on behalf of accused 4 is yet
again that accused 4 was merely employed by
the first accused, did
not take decisions, merely carried out instructions and always
believed that the first accused would sort
out the difficulties. This
argument we have already rejected. In the result the appeal in
respect of this count must be dismissed.
Count 218660 and 218661
(Contravention of Section 104(1)
(a)
of the Income Tax Act ─
Third accused)
[303]   In argument before us
counsel for accused 3 indicated that he had omitted in his heads of
argument to deal with
counts 218660 and 218661. These were counts of
fraud arising from her signature to the financial statements of MP
Finance CC for
the tax years 1999 and 2000 respectively. It is not in
dispute that the financial statements grossly misrepresented the
financial
position of the close corporation nor that accused 3, as
member of the close corporation, signed off the statements. Accused 3
contended, however, that she did not verify the contents of the
statements before signature and merely signed same, without reading

the documents because the first accused asked her to sign. The trial
court held that she failed to take reasonable steps to verify
the
content of the statements before signing. At the same time the trial
judge concluded that the State had failed to ‘prove
all the
elements’ against accused 3. In the context of the judgment
‘all the elements’ clearly relates to elements
of the
crime of fraud.
[304]
On behalf of accused 3, it is argued that by finding that the State
had failed to prove all the elements the trial
judge intended that
she be acquitted. In proclaiming the verdict however, the court
convicted accused 3 on the alternative count,
which was formulated
under s 104(1)(a) of the Income Tax Act 58 of 1962, (which was in
force at the time).
[305]
The alternative charge alleged that the accused had inter alia, with
intent to assist another to evade tax, signed
a tax return submitted
to SARS without having reasonable grounds to believe that the return
was true. The express finding of the
trial court that accused 3 had
failed to take reasonable steps to verify the content of the
financial statements, which were submitted
to SARS, seem to us to
have justified the conviction on the alternative count. The belated
argument on behalf of accused 3 is therefore
without merit.
Sentence ─ Third accused
[306]   Accused 3 too has
enjoyed limited success in the appeal against her convictions. In her
case too the success enjoyed
on the merits has no impact on the
effective sentence imposed. Accused 3 was sentenced to 15 years’
imprisonment in respect
of each of counts 2 and 3 and in each case 3
years of the 15 was conditionally suspended. She was accordingly
sentenced to an effective
term of imprisonment of 12 years on each
count and it was ordered that the sentences should run concurrently.
All the remaining
sentences imposed were ordered to run concurrently
with the sentences imposed in counts 2 and 3, thus resulting in an
effective
term of imprisonment of 12 years.
[307]   Counsel for accused 3
does not contend for any misdirection on the part of the trial judge.
Rather, it is argued
that the sentence imposed is shockingly
inappropriate in all the circumstances.
[308]
Again the trial court has given careful consideration to the personal
circumstances of accused 3 and to the interest
of society having
regard to the nature and severity of the offences in issue. No
purpose could be served by repeating same herein.
The maximum
sentences prescribed by the legislature in respect of the convictions
under POCA has been recorded earlier. These offences
are very serious
offences and the predicate offences of which she has been convicted
include 816 counts of theft, reckless or fraudulent
conduct of
Madikor Twintig, Martburt and Krion, contraventions of the Banks Act
and the Unfair Business Practices Act.
[309]
In matters of serious commercial crimes such as those involved in the
present instance the personal circumstances
of the accused must
necessarily yield to the interest of society. Under these
circumstances we do not consider the sentence imposed
to be so severe
as to justify the intervention by this court.
Sentence ─ Fourth accused
[310]   Accused 4 has
similarly enjoyed limited success in the appeal against his
convictions. In his case too the convictions
and sentences which are
to be set aside does not affect the effective sentence imposed upon
him. The second accused was sentenced
to 15 years imprisonment each
on the counts 2 and 3. The terms of imprisonment in respect of counts
2 and 3 were ordered to run
concurrently and all the sentences
imposed on the remaining counts of which he was convicted were
ordered to run concurrently with
the sentences imposed on count 2 and
3. He was accordingly sentenced to an effective 15 years’
imprisonment.
[311]
Accused 4 was convicted of theft of R91,1million (count 218683),
however, no sentence was imposed. Generally it
is undesirable for a
court of appeal to impose sentence without reference to the trial
court. In the present instance, however,
thirteen years have already
lapsed from the time of the initial arrest of the appellants. A
reference back to the trial court would
result in a further delay
which, on the facts of the matter would not serve the interest of
justice and cannot be justified.
[312]
The offence carries with it a discretionary minimum sentence of 15
years imprisonment. The trial judge considered
the facts of the case
and concluded that substantial and compelling circumstances do exist
which justify a deviation from the prescribed
sentences. Hence the
sentence of 10 years imprisonment imposed in respect of count 47. We
accept her finding in this regard. The
trial court further convicted
the first accused of the same offence (theft) and imposed a sentence
of 10 years imprisonment.
[313]
Although the trial court convicted the first accused and 4 of theft
of R908million we have held that they ought
to have been convicted of
R91,1 million. The sentence imposed in respect of the first accused
remains unaltered however. In this
matter parity of sentence dictates
that accused 4 too should be sentenced to 10 years’
imprisonment which it is ordered will
run concurrently with the
sentence imposed in respect of counts 1 and 2.
[314]
On behalf of fourth accused too it is not submitted that the trial
court has committed a misdirection. It is argued
that the effective
term of imprisonment, 15 years, is so severe as to induce a sense of
shock.
[315]
The offences of which he has been convicted are numerous and serious.
The predicate offences of which he was convicted
and which give rise
to his conviction on counts 2 and 3 include offences of money
laundering (s 4 of POCA) to the value of approximately
R8 million,
two counts of fraud and eight hundred and seventeen counts of theft
in an amount which exceeds R100 million.
[316]
The trial court has given recognition to the severity of the offences
and has carefully weighed this against his
personal circumstances.
Again, no purpose would be served by repeating same herein. Again the
nature of the offences demands that
personal circumstances yield to
the interest of society. In the result we do not consider that there
is a striking, startling or
disturbing disparity between the sentence
imposed by the trial court and that which we would have imposed. The
appeal against sentence
must therefore fail.
Fifth accused
Count 3
[317]
This is a contravention of s 2(1)
(b)
of POCA, ie receiving or retaining property on behalf of an
enterprise, while accused 5 knew or ought reasonably to have known,

that such property is derived from a pattern of racketeering.
According to accused 5 he was aware that the first accused conducted

a business in which she accepted investments and paid interest
thereon and was involved in a micro
lending business, but he had no
further knowledge of the nature thereof, nor was he involved in its
day to day affairs. The evidence,
however, paints a different
picture. He had a 20 per cent interest in MP Finance and in due
course acquired a 20 per cent member’s
interest in MP Finance
CC. He was also a director of Madikor from 9 May 2000 and referred to
as the ‘sales director’
of Marburt in its draft
prospectus. He executed documentation on behalf of those entities and
signed investment certificates to
the value of R9 837 million.
He assisted in the conduct of the business of the scheme as is shown
by his presence at Madikor
building, the main place of business of
the scheme. He was also involved in removing investors’ files
from Madikor Building.
In addition, he introduced potential investors
to the first accused, thereby earning commission.
[318]   The
receipt and retention of money from investors on behalf of the
scheme, as we have found earlier, was derived
through a pattern of
racketeering activity by virtue of the contravention of s 11(1) of
the Banks Act; s 135(3)
(a)
of the
Insolvency Act and
para 2 of Notice 1135 of 1999 promulgated
in terms of s 12(6) of the Consumer Affairs (Unfair Business
Practices) Act 71 of 1988.
[319]
Having regard to the nature and extent of the involvement of accused
5, detailed above, we cannot fault the conclusion
of the court a quo
that accused 5 knew or ought reasonably to have known that the
investments so received or retained were derived
from or through a
pattern of racketeering activity, in contravention of s 2(1)
(b)
of POCA.
[320]
Therefore the appeal of accused 5 against his conviction on count 3
should fail.
Count 27
[321]
Section 11(1) of the Banks Act is clear; no person may conduct the
business of a bank unless such person is a
public company and is
registered as a bank. The business of a bank is defined as, inter
alia, the acceptance of deposits from the
general public. Accused 5,
as shown earlier, was not only actively involved in securing
investments from the public, but was aware
at all times that this was
the very nature of the business of the scheme conducted through its
different entities. He was a member
of MP Finance CC and a director
of Madikor Twintig, and therefore duty bound to take all reasonable
care to establish whether or
not the business of the scheme was
permitted by law. See
S v De Blom
1977 (3) SA 513
(A) at 532G. This he woefully failed to do and, in
our view, the court a quo correctly found him guilty on count 27.
Therefore
the appeal of accused 5 against his conviction on count 27
has to fail.
Counts 144337 –
188910
[322]   At
the trial the State, during argument, conceded that accused 5 ought
to be acquitted on these counts. However,
the trial judge, without
affording accused 5 an opportunity to address her on any doubt that
she may have had in acquitting accused
5, found him guilty and
proceeded to impose sentence on these counts. The State submitted,
correctly, that the appeal of accused
5 against his conviction and
sentence on these counts should succeed, as this failure of the court
a quo constituted a serious
infringement of his constitutional right
to a fair trial.
Counts 200664 –
218636
[323]
Accused 5 submits that he merely worked for the first accused in her
business, believing that she had sorted out
any problems related to
the lawfulness thereof, and therefore did not have the necessary
mens
rea
to commit the offence of conducting
a multiplication scheme which paid interest at an annual rate of more
than 20 per cent in excess
of the REPO rate. We have already found
that accused 5 indeed played an active role in the conduct of the
business of the scheme
and are in agreement with the finding of the
court a quo that, in the circumstances, it is clear that accused 5
had full knowledge
of the fact that this exorbitant rate of interest
by far exceeded that paid by commercial banks on deposits made by
them. In addition,
even if accused 5 was not aware of the
unlawfulness of this conduct (which we find difficult to believe,
seeing that the average
rate of interest paid to investors at that
stage was 10 per cent per month ─ as opposed to a maximum REPO
rate of 14,91 per
cent per annum), he dismally failed to take any
steps to determine whether or not this was permitted by law. (Cf
S
v De Blom
, supra).
[324]   It
follows that the appeal of accused 5 against his conviction on these
counts should fail.
Count 218637
[325]
Section 64(2) of the Close Corporation Act 69 of 1984 declares the
reckless, grossly negligent or fraudulent carrying-on
of the business
of a close corporation, to be an offence. It is common cause that, at
the relevant time, accused 5 was a member
of MP Finance CC and
involved in its business, which entailed the conduct of an unlawful
multiplication scheme. We have already
dealt with the manner in which
the business had been conducted, and have to agree with the court a
quo that it was ‘om die
minste te sê roekeloos’.
[326]
Counsel for accused 5 submitted that it was the first accused, and
not him, who had conducted the business of
this corporation, but we
have already held that there is no merit in this line of argument.
[327]
Therefore, the appeal of accused 5 against his conviction on this
count should fail.
Counts 218638; 218639
and 218682
[328]
Section 424(3) of the Companies Act 61 of 1973 declared the reckless
or fraudulent conduct of the business of
a company to be an offence.
It is common cause that, at the relevant time, accused 5 was a
director of Madikor Twintig and the
‘sales director’ of
Martburt. He was also involved in the administration of the business
of Krion. The business of
these companies was, as in the case of the
other entities of the scheme, the unlawful conduct of a
multiplication scheme in which
accused 5 participated. There is no
doubt, as held by the court a quo, that accused 5 was aware of the
unlawfulness of the business
of the scheme or, at least, that such
business was conducted in a reckless manner, with accused 5 being an
active participant.
[329]   The
submission on behalf of accused 5, that he was not involved in the
conduct of those corporate entities, is
clearly devoid of any merit.
[330]
Therefore, the appeal of accused 5 against his convictions on these
counts should fail.
Count 218653
[331]   The
State concedes that the evidence does not support the conviction of
accused 5 on the main count of contravening
s 104(1)
(d)
of the Income Tax Act. However, it was submitted on behalf of the
State that the alternative charge to the main count, namely that
of
failing to submit a tax return for the 2001 year of assessment, in
contravention of s 75(1)
(a)
of the Income Tax Act, was proved by the evidence of Mr Pierre
Moolman of SARS, which showed that no tax return was submitted by

accused 5 for the 2001 tax year. Counsel for accused 5 has not
addressed us in regard to this count and there is, in our view,
no
basis for a finding that the trial judge misdirected herself in
convicting accused 5 on this count. The appeal should according
fail.
Counts 218660 and 218661
[332]   On
these two counts accused 5 was convicted on the alternative charge of
contravening s 104(1)
(a)
of
the Income Tax Act, in being instrumental in the making of false
statements in the income tax returns submitted on behalf of
MP
Finance CC for the tax years 1999 and 2000. In this regard counsel
for the fifth accused, who also appeared for the third accused,

repeated the argument on his behalf that we have considered in paras
303 to 305 above. For these reasons there is no basis why
the appeal
against these convictions should not be dismissed.
Sentence ─ Fifth
accused
[333]
This accused was found guilty of only one contravention of POCA,
namely s 2(1)
(b)
thereof. As mentioned previously, a maximum sentence of a fine of R1
billion or imprisonment for life is prescribed. The trial
court
sentenced accused 5 to ten years’ imprisonment for the
contravention of s 2(1)
(b)
of POCA of which five years were suspended for a period of five
years. In respect of the remainder of the convictions accused 5
was
sentenced to various terms of imprisonment ranging from one year to 3
months. The court a quo ordered that all the sentences
are to be
served concurrently with the sentence imposed for the contravention
of s 2(1)
(b)
of POCA. In the result accused 5 was sentenced to an effective term
of five years’ imprisonment.
[334]
Counsel for accused 5 submitted that this effective sentence is
shockingly inappropriate entitling this court
to interfere. Counsel
suggested that consideration should be given to an alternative
sentence of imprisonment under
s 276(1)
(i)
of the
Criminal Procedure Act. It
was also suggested that the lesser
role played by accused 5 in the conduct of the scheme and the
overbearing influence of his mother,
the first accused, are factors
to be taken into account, as well as the fact that he suffers from
dyslexia.
[335]   The
trial judge took full account of all the mitigating factors in favour
of accused 5, including those mentioned
above. This moved her to
impose an effective sentence of 5 years’ imprisonment. In our
view there is no room for a finding
that the trial judge acted
unreasonably in arriving at the sentence. She had to weigh these
mitigating factors against the active,
although limited role played
by accused 5 in the conduct of the business of the scheme. In this
regard it should be borne in mind
that he personally signed
investment certificates to the value of nearly R10 million. He was
also instrumental in removing the
investors’ files from Madikor
building when the authorities stepped in and directed that the
activities of the scheme should
cease. In our opinion it cannot,
having regard to all the relevant circumstances, be said that the
sentence imposed by the trial
court induces a sense of shock. On the
contrary, had we been the court of first instance, we would have been
inclined to impose
an effective sentence of imprisonment of at least
five years.
[336]   We
bear in mind that, as indicated above, the conviction and sentence of
accused 5 on counts 144337-188910 are
to be set aside. However, the
sentence imposed in respect thereof is only three months’
imprisonment which had to be served
concurrently with the effective
sentence of 5 years’ imprisonment imposed under
s 2(1)
(b)
of POCA. Therefore the setting aside of this sentence has no impact
upon the effective sentence imposed upon accused 5.
[337]   In
the result the appeal of accused 5 against his effective sentence of
five years’ imprisonment should
fail.
Sixth accused
Count 2
[338]
Counsel for accused 6 submitted that she ought to have been acquitted
on the charge of contravening
s 2(1)
(e)
of POCA. He argued that, although accused 6 may have been associated
with the first accused, she was not associated with the scheme
or
enterprise conducted by the first accused, nor did she participate in
the operation or management of the enterprise itself.
In the latter
regard counsel submitted that
s 2(1)
(e)
of POCA requires involvement in the ‘rigtinggewende optrede of
werksaamhede van die onderneming’. For this submission
reliance
was placed on
Reves v Ernst & Young
[1993] USSC 26
;
507 US 170
(1992) where it was held that to conduct or participate in
the conduct, directly or indirectly, of an enterprise’s affairs

(as required by
s 1962
(c)
of RICO, the counterpart of
s 2(1)
(e)
of POCA), participation ‘ in the operation or management of the
enterprise itself’ is required which entails that ‘some

part in directing the enterprise’s affairs is required’.
[339]
However, as emphasised by counsel on behalf of the State, it should
be borne in mind that
Reves
concerned the civil RICO liability of an independent accounting firm
which rendered accounting services in terms of a contractual

relationship with an alleged corrupt co-operative. The accountants
were not involved in the decision-making process of the co-operative,

but allegedly failed to perform their accounting obligation with the
necessary care and skill. It was held that RICO civil liability
did
not attach to the accountants as they were not part of the decision
making process through which the co-operative’s affairs
were
conducted. It should be immediately apparent that the facts in
Reves
differ markedly from those in the instant matter where all the
accused, including accused 6, were part and parcel of the corrupt

enterprise and themselves engaged in criminal activities, thereby
furthering the objectives of the enterprise.
[340]   We should
add that, post-
Reves
, the United States courts have
consistently made it clear that an accused need not be part of the
enterprise’s management
or control group to be criminally
liable under
s 1962
(c)
of RICO. In
United States v Oreto
37 F.3d 739
(1994) (US Court of Appeals, First Circuit) para 64, eg
it was cautioned that:
‘
Reves
is a case about the liability of outsiders who may assist in the
enterprise’s affairs. Special care is required in translating
Reve
s’
concern with “horizontal” connections ─ focusing on
the liability of an outsider adviser ─ into
the “vertical”
question of how far RICO liability may extend within the enterprise
but down the organizational ladder.’
Further, in para 66 the
following was said:
‘
We
think Congress intended to reach all who participate in the conduct
of that enterprise, whether they are generals or foot soldiers.
. . .
The Statute requires neither that a defendant share in the
enterprise’s profits nor participate for an extended period
of
time, so long as the predicate act requirement is met.’
[341]   As
we have emphasised above, a contravention of
s 2(1)
(e)
of POCA is proved where it is shown that the accused has participated
in the conduct of an enterprise’s affairs through a
pattern of
racketeering activity, ie by committing two or more predicate
offences listed in Schedule I of POCA. There is no requirement
that,
for a contravention of
s 2(1)
(e)
of POCA, one must participate in the operation or management of the
enterprise itself. There is accordingly no justification for
the
submission that
s 2(1)
(e)
of POCA requires involvement in the ‘rigtinggewende optrede of
werksaamhede van die onderneming’.
[342]   The
further submission that the scheme and its business was that of the
first accused and that accused 6 did not
participate in its affairs,
but merely concerned herself with her own affairs, is similarly
without justification. It is common
cause that accused 6 was actively
involved in the conduct of the affairs of the scheme. She appears to
have been the favourite
of the first accused at least until the
second accused appeared on the scene. Accused 6 was one of the first
investors in the scheme
and subsequently canvassed investors in her
capacity as a highly successful agent. In May 2000 she was appointed
as a director
of Madikor. In the temporary absence of the first
accused, she acted as manager of the business of the scheme, with
signing powers
on the cheque account and was from early on allowed to
sign investment certificates. She became so heavily involved in the
administration
of the scheme that she had to employ additional staff
members to assist her. The first accused promised her that she would
be appointed
as a director of Martburt and although that did not
happen, she was identified as one of the directors on Martburt’s
letterhead.
[343]   The
evidence shows that the first accused kept accused 6 abreast of
developments, including the problems experienced
with the authorities
regarding the nature of the business of the scheme. Her standing in
the hierarchy as second in charge of the
business of the scheme, is
confirmed by the fact that, when it was decided to hide investors’
files from PWC, she was instrumental
in hiding same, also at the farm
of her and accused 7. There she continued to operate the business of
the scheme. It is common
cause that, during her tenure, she
personally signed 521 investment certificates to the value of more
than R28,1 million. During
the period February 2000 to October 2000
she was the only person, apart from the first accused, who personally
signed investment
certificates. She also assisted with the
administration of payments to be made to investors. To this one
should add the evidence
of the first accused, that she appointed the
second accused to 6 as directors of the ‘oorkoepelende
onderneming’ to
assist her in operating the scheme.
[344]   In
this manner accused 6 actively participated in the scheme’s
affairs and thereby furthered the objectives
of the scheme. It is
clear to us that she shared a common business objective with the
first accused and the other accused, who
at different stages played
different roles in conducting the business of the scheme. In so
doing, accused 6 personally committed
the predicate offences which
make up the pattern of racketeering activity. These crimes are dealt
with more fully hereunder and
include contraventions of the Banks
Act,
Insolvency Act, Unfair
Business Practices Act,
Close
Corporations Act, Companies
Act and common law crimes.
[345]   In
our opinion the above clearly shows the association of accused 6 with
the scheme by directly participating
in its conduct through a pattern
of racketeering activity. However, counsel for accused 6 further
submitted that accused 6 ought
to have been acquitted by virtue of
the failure of the State to prove that she had the necessary
intention in the form of
dolus
to contravene s 2(1)
(e)
of POCA. There is no merit in this submission, as it seeks to
unjustifiably introduce an additional
mens
rea
requirement for a contravention of
s 2(1)
(e)
of POCA. We reiterate what has been said before, that, once it is
proved that an accused has participated in the conduct of an

enterprise’s affairs through a pattern of racketeering
activity, ie by committing two or more predicate offences listed in

Schedule 1 of POCA, he or she is guilty of a contravention of s
2(1)
(e)
of
POCA. This the State has proved in regard to accused 6 and there is
no need for a further inquiry as to an additional
mens
rea
requirement over and above the
mens
rea
required by the predicate offences
committed by her.
[346]   We
therefore conclude that the State has, beyond reasonable doubt,
proved the elements under s 2(1)
(e)
of POCA and the appeal of accused 6 against her conviction on count
2, should fail.
Count 3
[347]   The
crux of the argument on behalf of accused 6 on this count of
contravening s 2(1)
(b)
of POCA, is that she ought to have been acquitted as the State had
failed to prove
dolus
and actual knowledge on her part that the money received from
investors were derived from or through a pattern of racketeering

activity. This submission overlooks the express wording of s
2(1)
(b)(ii)
,
that the offence is committed where an accused knows or
ought
reasonably to have known
(own emphasis)
that the property received or retained on behalf of an enterprise was
derived from or through a pattern of racketeering
activity.
[348]   As
mentioned earlier, the receipt and retention of money from investors
on behalf of the scheme was derived from
or through a pattern of
racketeering activity, including the contravention of various
statutory provisions and the commission of
the common law crimes of
theft and fraud. Accused 6 personally committed some of these
offences, and we agree with the conclusion
of the court a quo that,
having regard to the evidence as a whole, the State has proved beyond
reasonable doubt that accused 6
knew or ought reasonably to have
known that the investments so received or retained, were derived from
or through a pattern of
racketeering activity.
Counts 15 and 17-26
[349]
Accused 6 is the only accused convicted of these contraventions of s
4 of POCA (money laundering). It is common
cause that the proceeds
derived by accused 6 from her participation in the activities of the
scheme, namely commission on investments
procured by her and interest
or ‘dividends’ earned on her own investments, amounted to
some R27 million during the
period 15 June 2001 to 3 May 2002.
This enabled her to purchase immovable properties in the name of
three trusts, ie the Anja,
Izarich and Jakia trusts. This income of
accused 6 was derived from the unlawful activities of the scheme
which conducted its affairs
through a pattern of racketeering
activity.
[350]
Having regard to the pivotal position occupied by accused 6 in the
management of the business of the scheme, we
have no doubt that the
court a quo correctly held that she knew, or at least ought
reasonably to have known, that the money so
received by her formed
part of the proceeds of the unlawful activities of the scheme, and
that she therefore knew, or ought reasonably
to have known, that the
acquisition of these properties through the trusts, would have the
likely effect of disguising the unlawful
source of the money. As
pointed out by the court a quo, there was no documentation, such as
loan agreements, disclosing the source
of the funds utilised to
purchase the properties. Therefore, the only reasonable inference is
that the purchase of the properties
in the name of the trusts was
designed to conceal the illegal source of the funds. This conclusion
is underscored by the fact that
accused 6, in her affidavit filed in
her sequestration proceedings, falsely stated that her income of
approximately R2 million
together with her husband’s farming
income had been utilised to pay the total purchase prices, whilst
failing to disclose
that her income received through the unlawful
activities of the scheme during that year exceeded R27 million, which
was used to
purchase these properties. In the result the appeal of
accused 6 against her convictions on these counts should fail.
Count 27
[351]
Counsel for accused 6 conceded that the constituent elements of this
count, ie conducting the business of a bank
without being registered
as such, had been proved. It is common cause that accused 6 was
actively involved in conducting the business
of a bank by taking
deposits from members of the public. It is also clear from the
evidence that accused 6 failed to take any steps,
or at least any
adequate steps, to establish whether or not this business of the
scheme was permitted by law. See
S v De
Blom
1977 (3) SA 513
(A) at 532G.
[352]
Counsel for accused 6, however, submitted that her conviction on
count 27 constituted an undue duplication of
convictions, having
regard to her conviction on charges of the contravention of the
Unfair Business Practices Act 71 of 1988, ie
counts 200664 –
218636, referred to hereunder. In our view this submission has no
merit. As pointed out by counsel for the
State, the elements of
conducting the business of a bank without being registered as such,
in contravention of s 11(1) of the Banks
Act, differ from the
operation of, or participation in, a multiplication scheme in
contravention of paragraph 2 of Notice 1135
promulgated in terms of
the Unfair Business Practices Act. Also, as reiterated in
S
v Whitehead and Others
2008(1) 431
(SCA), ‘a single act may have numerous criminally relevant
consequences and may give rise to numerous offences’.

Therefore, the appeal of accused 6 against her conviction on count 27
should fail.
Counts 950-3385
[353]
Accused 6 was found guilty on one count of contravening
s 135(3)
(a)
of the
Insolvency Act, read
with s 425 of the 1973 Companies Act, by
contracting debts on behalf of Madikor Twintig prior to its
liquidation without there
being a reasonable expectation of
discharging such debts.
[354]   It
will be recalled that accused 6 was a director of Madikor Twintig.
The undisputed evidence of Mr Strydom of
PWC shows that, during the
period 10 May 2000 to 17 January 2001, Madikor Twintig incurred debts
by accepting investments to the
value of R131 million, while its
liability for interest to be paid to investors, as at 14 December
2000, amounted to R13,5 million
per month. Nobody, and in particular
not the directors of Madikor Twintig, could reasonably have believed
that the company would
have been able to discharge the debts owed to
its investors.
[355]
Accused 6 personally signed 104 investment certificates issued by
Madikor Twintig to the value of more than R7,4
million. The
certificates confirmed that the investments were loans to Madikor and
were, therefore, debts contracted by accused
6 on behalf of Madikor.
It follows that the submission on behalf of accused 6, that she was
not aware that debts were contracted
by receiving these investments,
is devoid of any merit.
[356]   The
further submission that accused 6 did not have any knowledge of the
financial position of this entity, similarly
has no merit,
particularly in view of the central role played by accused 6 in her
capacity as a director, in the conduct of the
affairs of Madikor
Twintig.
[357]   We
are further of the view that the reasons already furnished in dealing
with count 27 above, apply,
mutatis
mutandis
, to the belated defence of an
undue duplication of convictions raised by accused 6 in respect of
these counts.
[358]   We
therefore conclude that the appeal of accused 6 against this
conviction should also fail.
Counts 8071-11694
[359]
Accused 6 was found guilty on one count of contravening
s 135(3)
(a)
of the
Insolvency Act, read
with s 425 of the 1973 Companies Act, by
contracting debts on behalf of Martburt prior to its liquidation,
without there being
a reasonable expectation of Martburt discharging
these debts. Accused 6 does not deny that she was actively involved
in the conduct
of the business of the scheme, which included the
entity Martburt. As mentioned earlier, she not only canvassed
investments, but
effectively partook in the management of the day to
day business of the scheme, and to facilitate this role she had
signing powers
on the cheque account. She also does not dispute that
Martburt incurred debts prior to its liquidation in circumstances
where there
was no reasonable expectation of discharging same.
[360]
However, what was submitted on behalf of accused 6, is that she was,
at the relevant time of the contracting of
these debts on behalf of
Martburt, not a director of Martburt; therefore the State has failed
to prove that she falls within the
ambit of s 425 of the 1973
Companies Act. It will be recalled that, although the first accused
undertook to have accused 6 appointed
as a director of Martburt, no
formal appointment was made.
[361]   It
has to be borne in mind that s 425 of the 1973 Companies Act did not
only include a director of a company,
but ‘any person who is or
was a director or officer of a company . . .’. The indictment
in respect of these counts
refers to accused 6 as a director and/or
officer (‘direkteur en/of beampte’) of Martburt. In s1
(c)
of the 1973 Companies Act, an ‘officer’ of a company was
defined as including ‘any managing director, manager
or
secretary thereof’. It is so that accused 6 was not formally
appointed as a director or manager of Martburt, nor did she
receive a
salary for services rendered to this company, but for all intents and
purposes she was a
de facto
manager of Martburt. This is convincingly shown by the evidence,
including accused 6’s own evidence.
[362]
Jennifer A Kunst, Professor Piet Delport and Professor Quintus
Vorster (eds)
Henochsberg on the
Companies Act 61 of 1973
(Service Issue
33, 2011), vol 1 at  921, states, with reference to
R
v Kaloo
1941 AD 17
at 19-21, that in
the context of s 425 ‘officer’ includes one who was
appointed as an officer and one who was an officer
de
facto
. In
Kaloo
the
de facto
manager of a company was also prosecuted for a contravention of s
135(3)
(a)
of the
Insolvency Act and
this court held, with regard to s 185 of
the Companies Act 46 of 1926 (worded similarly to s 425 of the 1973
Companies Act), that
a defence based on the fact that he had not been
formally appointed  as a manager, had no merit. The court held
that s 185
(now s 425) applies both to persons who were appointed as
managers or officers and to persons who were managers or officers
de
facto
.
[363]   We
therefore conclude that the appeal against the conviction of accused
6 on this count, should fail.
Counts 54534-54542 and
59034-59303
[364]
Some confusion has arisen as to whether the court a quo had found
accused 6 guilty on these counts, but, as pointed
out by counsel on
behalf of the State, the court a quo did actually acquit accused 6 on
these charges and no sentence was imposed
in respect thereof. A
typographical error in listing the counts on which accused 6 had been
acquitted has given rise to the confusion,
but no more need to be
said in this regard.
Counts 144337-188910
[365]   The
State has correctly conceded that, as in the case of accused 5, the
appeal of accused 6 against her conviction
and sentence on these
counts (contraventions of s 83(3)
(a)
of the Banks Act) should succeed, by virtue of the infringement of
her constitutional right to a fair trial.
Counts 200664-218636
[366]
Counsel for accused 6 submitted that these counts of contravening
para 2 of Notice 1135 of 1999, promulgated under
Act 71 of 1988 ought
to have constituted one single count and not 17972 separate counts.
[367]   We
have, in dealing with the appeal of the first accused (see paras
127-128 above), furnished our reasons why
an accused ought to be
convicted of only one offence of contravening the provisions of
Notice 1135 of 1999, when operating a multiplication
scheme offering
an effective annual interest of 20 per cent and more above the REPO
rate to a number of investors on different
dates.
[368]   In
the result we find that, in respect of the counts under this rubric,
the first accused ought to have been convicted
on one count only and
not on 17972 individual counts.
Count 218637
[369]
Accused 6 was convicted in her capacity as a party who knowingly
carried on the business of MP Finance CC in a
reckless, grossly
negligent or fraudulent manner, in contravention of
s 64(2)
of the
Close Corporations Act 69 of 1984
. It is common cause that accused 6
contracted debts in the name of MP Finance CC at an effective
interest rate ranging from 60
per cent to 791 per cent per annum.
There is no doubt that these returns could never be sustained. By 13
May 2000, the close corporation
had contracted debts to the total
value of approximately R37 million with an interest commitment of
more than R4 million per month.
We have earlier described the active
involvement of accused 6 in the affairs of the entities through which
the scheme was conducted,
and there is no doubt that such affairs,
including that of MP Finance CC, had been conducted in a grossly
reckless manner. As pointed
out by counsel on behalf of the State,
the business of MP Finance CC was carried on recklessly in
contravention of s 11(1) of the
Banks Act,
s 135(3)
(a)
of the
Insolvency Act and
para 2 of Notice 1135 promulgated under Act
71 of 1988.
[370]
There is, in our view, no merit in the appeal of accused 6 against
her conviction on this count.
Counts 218638 and 218639
[371]
These convictions of contravening s424(3) of the 1973 Companies Act
(reckless or fraudulent conduct of the business
of a company) related
to Madikor and Martburt.
[372]   It
is common cause that accused 6 was a director of Madikor and, as we
have repeatedly emphasised, she was actively
involved in the conduct
of the business of this company and Martburt. She was, according to
the evidence, knowingly a party to
the carrying on of the business of
these companies in a reckless manner, within the context of this
statutory provision.
[373]
Counsel for accused 6 submitted that she was only in name a director
of Madikor. However, in our view, the evidence
as already dealt with
hereinbefore, shows that her contribution to the business of this
company was substantial. This is underscored
by the fact that she had
personally signed 104 investment certificates in Madikor to the total
value of more than R7,4 million.
She was similarly heavily involved
in the conduct of the business of Martburt; in fact she was reflected
as being a director on
the company’s letterhead. This
involvement is borne out by the fact that she had signed 27
investment certificates in the
name of Martburt to the value of some
R1,2 million.
[374]   We
further conclude that, as in the case of MP Finance CC, the business
of the two companies here concerned was
carried on in a grossly
reckless manner.
[375]
Therefore the appeal of accused 6 against her conviction on these
counts should fail.
Count 218682
[376]   The
State conceded that there is insufficient evidence to sustain the
conviction of accused 6 on this count, ie
the reckless conduct of the
business of Krion. In our view this concession was correctly made, as
the evidence does not show that
she had actively participated in the
business of Krion.
[377]   The
appeal against this conviction should accordingly succeed.
Count 218656
[378]
Accused 6 was convicted on this count of a contravention of s
104(1)
(d)
of the Income Tax Act, by failing to register as a taxpayer for the
2000 tax year, in order to evade the paying of income tax.
[379]   It
is not in dispute that, when she became liable to register as a
taxpayer in 2000, accused 6 had failed to do
so. It is also common
cause that the income of accused 6 for the 2000 tax year exceeded
R1,358 million. This income was never declared
to the SARS, not even
after she had registered as a taxpayer in 2001. SARS was therefore
precluded from raising an assessment on
this income and accused 6
never paid income tax on it.
[380]
Accused 6 submitted that her taxable income at the relevant time was
insufficient to require her to register as
a taxpayer. This is
plainly not true. The income level which required registration as a
taxpayer at the relevant time, was R40 000.
Her taxable income
by far exceeded this amount. Her counsel conceded that there is no
merit in the explanation for her failure
to register as a taxpayer
for the 2000 tax year, but submitted that the State had failed to
prove that she intended thereby to
evade the paying of income tax.
This submission is similarly without merit. As submitted on behalf of
the State the only reasonable
inference to be drawn from her failure
to register is that she intended thereby to evade the payment of
income tax.
[381]   In
our view the appeal against her conviction on this count should
accordingly fail.
Count 218657
[382]
Accused 6 was found guilty of tax fraud on this count, by wilfully
and intentionally under-declaring her taxable
income for the 2001 tax
year to have been R300 000 while it is common cause that her
taxable income for that tax year was
in excess of R3,7 million.
[383]   The
evidence shows that accused 6 and 7 and their bookkeeper, Mr Theuns
van der Merwe, had colluded to defraud
SARS in an attempt to
alleviate their income tax problems. In his written heads of argument
counsel for accused 6 rather euphemistically
stated that this conduct
‘laat veels te wense oor’. In fact, it was nothing less
than a planned fraud, and the explanation
of accused 6 at the trial,
that she had requested Van der Merwe not to submit the 2001 tax
return, rings hollow. Van der Merwe
could not recall receiving such a
request and this version is, in any event, gainsaid by accused 6’s
own affidavit in her
sequestration proceedings in which she declared
‘Uit Aanhangsel “F” hiertoe blyk dit ook met respek
dat ek my
inkomste gedurende die tersaaklike belastingjaar (2001)
verklaar het, en dat daar inkomstebelasting daarop betaal is.’
No
attempt was made by her in the affidavit to disclose that her
taxable income had been grossly under-declared.
[384]   We
therefore conclude that the court a quo correctly found accused 6
guilty on this count and that her appeal
in this regard should fail.
Sentence ─ Sixth
accused
[385]
This accused was sentenced to 15 years’ imprisonment of which
three years were suspended for a period of
five years, on each of the
convictions under s 2(1)
(e)
and s2(1)
(b)
of POCA. It was ordered that these sentences be served concurrently.
In addition, accused 6 was sentenced to ten years’ imprisonment

on each of counts 15 and 17-26, ie the contravention of s 4 of POCA,
which sentences were to be served concurrently. On the remainder
of
her convictions she was sentenced to periods of imprisonment ranging
from two years’ imprisonment to three months’

imprisonment. It was ordered that all these sentences were to be
served concurrently with the sentences imposed in respect of counts
2
and 3. This resulted in an effective term of imprisonment of 12
years.
[386]   On
appeal counsel for accused 6, as in the case of the other accused,
did not submit that the trial judge had
misdirected herself in
exercising her sentencing jurisdiction. He confined himself to the
submission that the effective sentence
of 12 years’
imprisonment is shockingly inappropriate to the extent that it merits
interference by this court.
[387]   The
trial judge had due regard to all the personal and other mitigating
factors of accused 6, but in weighing
same against the nature,
gravity and magnitude of the crimes and the disastrous financial and
other effects the scheme had on its
investors, concluded that the
only suitable sentence was one of effective imprisonment for a
considerable period of time. In our
view, having regard to the role
played by accused 6 in the conduct of the business of the scheme as
recorded above, it cannot be
said that the trial judge acted
unreasonably in imposing this sentence. In this regard it should be
borne in mind that accused
6 often acted as the manager of the
business of the scheme with signing powers on the cheque account and
was from early on allowed
to sign investment certificates. During the
period of her involvement, she personally signed 521 investment
certificates to the
value of more than R28 million. When it was
decided to hide investors’ files from PWC, she was instrumental
in hiding same,
also at the farm of her and accused 7. There she
continued to operate the business of the scheme.
[388]   In
our view the evidence as a whole regarding the participation of
accused 6, certainly justifies a sentence of
this order. Further, had
we been the court of first instance, we would have imposed an
effective sentence of similar duration.
We should add that the
limited success enjoyed by accused 6 on appeal has no impact at all
on her effective sentence of 12 years’
imprisonment.
[389]   It
follows that the appeal of accused 6, against her effective sentence
of 12 years’ imprisonment, should
be dismissed.
[390]   We
now turn to the appeal of the State against the sentence of two
years’ imprisonment imposed upon accused
6 in respect of count
218657. As recorded earlier, accused 6 was found guilty of tax fraud
on this count by under-declaring her
taxable income for the 2001 tax
year to have been R300 000, while her taxable income for that
year was in excess of R3,7 million.
[391]
Counsel for the State submitted that the sentence of two years’
imprisonment imposed on accused 6 on this
charge induces a sense of
shock. It was further submitted that the trial court materially
misdirected itself in not giving due
weight to the nature and
seriousness of the offence and the financial prejudice of more than
R3,7 million caused thereby.
[392]   It
should be borne in mind that a minimum sentence of 15 years’
imprisonment is prescribed for this offence
in terms of the
Criminal
Law Amendment Act 105 of 1997
. It appears that the trial court
regarded the length of time it took to bring the case to finality, as
well as the clean record
of accused 6 as substantial and compelling
circumstances justifying a lesser sentence than 15 years’
imprisonment in respect
of this count. The State submitted that these
factors pale into insignificance when weighed against the aggravating
circumstances,
particularly having regard to the nature and extent,
as well as the financial implications, of the crime.
[393]
Upon reflection, we are in agreement with the submission on behalf of
the State. The imposition of a sentence
of merely two years’
imprisonment, having regard to the aforementioned aggravating
circumstances and in the light of the
prescribed minimum sentence of
15 years’ imprisonment, certainly induces a sense of shock. In
our view there is a striking
disparity between the sentence of two
years’ imprisonment imposed by the trial court and that which
we, had we been the court
of first instance, would have imposed. It
seems to us that a sentence of two years’ imprisonment for a
tax fraud of R3,7
million, sends out the wrong message that,
notwithstanding a minimum prescribed sentence of 15 years’
imprisonment, defrauding
SARS in such a substantial amount does not
warrant a heavy sentence. In our opinion the appeal of the State
ought to succeed and
the sentence of two years’ imprisonment is
to be substituted by one of 12 years’ imprisonment. As was the
case with
the sentence imposed by the trial court, it should be
served concurrently with the sentence imposed in respect of counts 2
and
3, the effective term of imprisonment thereby remaining one of 12
years.
Orders
[394]
As a result the orders as set out above will issue.
________________________
P B FOURIE
ACTING JUDGE OF
APPEAL
_______________________
J W EKSTEEN
ACTING JUDGE OF
APPEAL
Brand
JA
[395]   I
have had the advantage of reading the joint judgment by my brothers
Fourie and Eksteen AJJA (the majority).
Save for one exception I
agree with their reasoning and their conclusions. The exception
relates to the conviction of the first
accused on both counts 1 and 2
under
sections 2(1)
(e)
and
2
(1)
(f)
of POCA. I do not believe that she should be convicted under both
these sections on the same facts. To do so would constitute a

duplication of convictions.
[396]
Since this is a minority judgment which would in any event have no
material impact on the outcome of these proceedings,
I propose to
motivate my point of view without unnecessary elaboration. As
explained by Cloete JA in
S v Van Eyssen
supra
para 5, which is quoted
in
extenso
by the majority in para 45
above, the essence of the offence in
(e)
is participation in the affairs of the
enterprise. The crux of
(f),
on the other hand, is knowledge, not participation. Or, as Cloete JA
formulated it, the essence of
(f)
is
that ‘the accused must know (or ought reasonably to have known)
that another person did so
’
(my emphasis).
[397]   In
S v
Whitehead
2008 (1) SACR 431
(SCA) para 39 Navsa and Van Heerden
JJA proposed the following approach in this regard:
‘
In contesting
multiple convictions it is often submitted that they are premised on
the same set of facts. This is, in fact, the
so-called “evidence
test” sometimes applied by the courts in determining whether or
not there is a duplication of convictions.
This test enquires whether
the evidence necessary to establish the commission of one offence
involves proving the commission of
another offence.
In
this regard, Bristowe J, in the case of
R
v Van der Merwe
1921 TPD 1
at 5 pointed
out that “. . . if the evidence necessary to prove one criminal
act
necessarily
involves evidence of another criminal act, those two are to be
considered as one transaction.
But if
the evidence necessary to establish one criminal act is complete
without the other criminal act being brought in at all then
the two
are separate crimes
.”’
(Emphasis added.)
[398]   Logic dictates that,
participation in racketeering activities will always include
knowledge of those activities.
While one can have knowledge without
participation, the converse is not possible. Of necessity, the
conviction of a manager under
(e)
must
involve a criminal act in terms of
(f)
.
In order to participate in racketeering activities for purposes of
(e)
, the
wrongdoer must have knowledge, proof of which in itself will amount
to proof of the offence under
(f)
.
It is true that the elements of the two offences are in certain
respects different, but that in itself, is no answer to an objection

of duplication where, as in this case, the greater necessarily
includes the lesser. An accused convicted of murder on the basis
of
dolus eventualis
will
almost inevitably also be guilty of culpable homicide because the
wider concept of negligence will of necessity embrace the
narrower
concept of legal intent. Yet, no-one will think of convicting the
accused of both. In so far as
S v De
Vries and others
2009 (1) SACR 613
(C)
para 397-398 goes the other way, it was in my view wrongly decided.
[399]   The scenario contemplated by the
majority in para 59 seems to envisage a manager who participated in
some of the
activities of the enterprise but not in others of which
he or she had knowledge only. In these circumstances I can find no
objection
to a conviction of
(e)
on the basis of the former and of
(f)
on the basis of the latter. The point is that in those circumstances,
the two convictions will not be premised on the same set
of facts.
The problem arises where, as in this case, the knowledge proved for
purposes of
(f)
derives from the very participation which founded the conviction in
(e).
In
these circumstances a conviction of both, in my view, offends against
the duplication of convictions rule. The fact that the
provisions of
POCA must in principle be afforded a liberal or broad construction
does not, in my view, detract from this rule which
is a salutary one
based on fairness to an accused person which is a tenet of our
Constitution.
_________________
F D J BRAND
JUDGE OF
APPEAL
APPEARANCES:
For First Appellant:
L
Augustyn
Instructed by:
Justice Centre, Pretoria
Justice Centre, Bloemfontein
For Second
Appellant:        H F Klein
Instructed by:
Justice Centre, Pretoria
Justice Centre, Bloemfontein
For Third, Fourth and
Fifth
Appellant:

W A Smit
Instructed by:
Justice Centre, Pretoria
Justice Centre, Bloemfontein
For Sixth
Appellant:
C de Beer
Instructed by:
Justice Centre, Pretoria
Justice Centre, Bloemfontein
For
Respondent:
G C Nel (with
him A V Rossouw and D W M Broughton)
Instructed by:
Director of Public Prosecutions, Pretoria
Director of Public Prosecutions, Bloemfontein
[1]
N-Ordinary shares are the same as ordinary
shares, except that they give shareholders minimal or no voting
rights. They often
trade at a discount to Ordinary shares and
although they are likely to cost less, they pay out the same
dividends as Ordinary
shares. See information on the Johannesburg
Stock Exchange website in this regard at
www.jse.co.za
,
accessed on 27 November 2015.
[2]
The repo rate is the repurchase rate. This is the interest rate
charged by the South African Reserve Bank (SARB) on short-term
loan
facilities provided to South African banks. The SARB uses the repo
rate in its refinancing framework to influence short-term
market
interest rates, economic aggregates such as spending, economic
growth and inflation. See in this regard an information
paper by the
SARB entitled
The role of the prime rate and the prime-repurchase
rate spread in the South African banking system
available on the
SARB website at
www.resbank.co.za
, accessed on 30 November
2015.