S v Brown (681/2013) [2014] ZASCA 217; [2015] 1 All SA 452 (SCA); 2015 (1) SACR 211 (SCA) (1 December 2014)

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[2014] ZASCA 217
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S v Brown (681/2013) [2014] ZASCA 217; [2015] 1 All SA 452 (SCA); 2015 (1) SACR 211 (SCA) (1 December 2014)

THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
CASE NO: 681/2013
Reportable
In
the matter between:
THE
STATE
...............................................................................................................................
Appellant
and
JOSEPH
ARTHUR WALTER
BROWN.
…........................................................................
Respondent
Neutral
Citation:
S v Brown
(681/2013)
[2014] ZASCA 217
(1 December 2014)
Coram:
Navsa ADP, Brand, Ponnan, Theron and
Zondi JJA
Heard:
5 November 2014
Delivered:
1 December 2014
Summary:
Appropriate sentence in respect of two counts of fraud – on
first count, misrepresentations by asset manager to investor
that
assets were being managed in accordance with mandate – assets
in excess of R200 million – on second count misrepresentation

to shareholders of an entity that administered pension funds and the
underlying assets that purchase price would be paid from purchaser’s

own cash resources – in truth balance of purchase price
amounting to tens of millions of rands paid for with funds under

administration by seller – non-custodial sentence imposed by
high court on basis that plea of guilty on the two counts was
limited
and was based on
dolus eventualis
and potential rather than actual prejudice – high court
reasoned that minimum sentence provisions inapplicable – erred

in that regard – discussion of acceptance of plea of guilty
in
medias res
– appeal by
State upheld – sentences set aside and substituted by a
sentence of 15 years’ imprisonment –
white-collar crimes
in question deserving of harsher sentence.
ORDER
On
appeal from
: The Western Cape High
Court, Cape Town (Veldhuizen J sitting as court of first instance).
The
following order is made:
1.
The appeal in respect of sentence is upheld.
2.
The sentences imposed by the court below are set aside and
substituted as follows:
‘
i.
On count 2 the accused is sentenced to 15 years’ imprisonment.
ii. On count 6 the
accused is sentenced to 15 years’ imprisonment.
iii. The sentences
are ordered to run concurrently.’
JUDGMENT
Navsa
ADP (Brand, Ponnan, Theron & Zondi concurring):
[1]
This is an appeal by the State, in terms of s 316B of the Criminal
Procedure Act 51 of 1977 (the Act), against sentences imposed
by the
Western Cape High Court (Veldhuizen J) on the respondent, Mr Joseph
Arthur Walter Brown (Brown), pursuant to a conviction
on two counts
of fraud.
[1]
The trial in the
high court, for reasons that will become apparent, attracted a great
deal of public and media attention.
The
issues
[2]
Brown initially pleaded not guilty to a host of charges preferred
against him. After several witnesses had testified on behalf
of the
State he changed his plea to one of guilty on the two counts referred
to above and in due course was convicted and sentenced
on each count
to a fine of R75 000 or a suspended sentence of 18 months’
imprisonment. The dispute in this case has its origins
in the
acceptance by the State, with the approval of the court, of a plea of
guilty,
in medias res
.
The resolution of the dispute around the appropriate sentence
involves,
inter alia
,
a consideration of the precise scope of the plea of guilty and the
extent to which evidence adduced up until that stage and thereafter

during the sentencing phase could be taken into account in the
determination of an appropriate sentence. An unsettling aspect I

intend devoting a discrete part of the judgement to, is the number
and nature of interventions by the court below in favour of
Brown.
First, however, it is necessary to set out the background in the
paragraphs that follow.
The
indictment
[3]
Brown had been indicted in the Western Cape High Court on four counts
of fraud, one count of corruption based on an alleged
contravention
of s 1(1)(
a
)
read with  s 3 of the Corruption Act 94 of 1992, a further count
of corruption based on s 3(
b
)(ii)(
aa
)
and/or 3(
b
)(ii)(
bb
)
and/or 3(
b
)(ii)(
cc
)
and/or 3(
b
)(iv)
read with sections 1, 2, 24, 25, 26(1)(
a
)
of the
Prevention and Combating of Corrupt Activities Act 12 of 2004
,
and one count of money laundering - based on an alleged contravention
of
s 4(
a
)
and/or (
b
)
read with
sections 1
and
4
(i),
4
(ii) and
8
of the
Prevention of
Organised Crime Act 121 of 1998
and two counts of theft. There were a
number of alternative counts which, for present purposes are
irrelevant.
[4]
The indictment comprised 84 pages, containing a general preamble and
specific preambles in relation to each count. In respect
of three of
the four counts of fraud, the allegations against Brown, in essence,
were that he, through companies effectively controlled
by him,
procured large amounts of capital from clients for investment by
fraudulently representing that he would safeguard those
amounts and
obtain favourable returns, when, in fact, the money was thereafter
invested recklessly or misappropriated for the benefit
of Brown, his
associates and/or corporate entities in which he held an interest. In
relation to the fourth count of fraud, the
core allegations against
Brown are as follows: Brown through Fidentia Asset Management (FAM),
which he controlled, purchased an
entity, namely Mercantile Asset
Trust Company (MATCO), that administered pension funds, including the
investment portfolios underlying
those funds. In purchasing MATCO,
Brown fraudulently represented to its shareholders that FAM was able
to pay, in cash, the full
purchase price of R93 million and that it
would only assume management control upon payment of the full
purchase price. The indictment
went on to allege that Brown knew at
the material times that FAM did not have the cash to buy the MATCO
shares and that, in fact,
before the full purchase price had been
paid took control of MATCO’s assets and then used R60 million
of the funds MATCO
was administering,
inter
alia
, on behalf of pension fund
beneficiaries, to pay the balance of the purchase price. Simply put,
Brown used MATCO’s money
to pay the greater part of the
purchase price. Thus, so it was alleged, funds previously under
MATCO’s control for the benefit
of beneficiaries of the
investment portfolio were not employed to that end but were used to
benefit Brown. The single biggest trust
administered by MATCO at the
end of 2002 was the Mine Workers Provident Fund (MWPF). The assets
which MATCO administered and which
Brown through a corporate entity
took control of before paying the full purchase price, so it was
alleged, was an amount of R70
million held in a current account at
Investec bank, as well as a portfolio administered by Old Mutual
worth R1.13 billion.
[5]
In the present appeal we are concerned only with the two counts of
fraud in respect of which Brown pleaded guilty and in relation
to
which he was sentenced. The first (count two), concerns the
investment with FAM by The Transport Education and Training Authority

(TETA), established in accordance with the
Skills Development Act 97
of 1998
. TETA is a statutory entity, the functions of which are,
inter alia
,
the development of a Sector Skills Plan for the Transport Sector. In
short, it is responsible for skills development within that
sector.
Its funds are made up,
inter alia
,
of employer levies. The second count of fraud (count six) comprises
the MATCO transaction and its consequences referred to in
the
preceding paragraph.
[6]
TETA is obliged, in accordance with Treasury Regulations, to have an
investment policy which determines how its assets should
be invested
and protected. That policy must inform the relationship with any
entity with which its funds are invested. Assets of
a body such as
TETA must be protected and its funds should not be invested with any
entity that has an investment profile and status
less than that of
South Africa’s four major banks, namely Standard Bank, Nedbank,
First National Bank and ABSA. According
to the indictment the funds
were procured by FAM pursuant to an improper financial inducement
paid to TETA’s Chief Executive
Officer. TETA’s initial
investment with FAM initially comprised two promissory notes to the
value of R50,3 million and R50 million
respectively. When TETA
requested the return of R15 million, one of the promissory notes
was irregularly sold in order for
FAM to meet that request. During
April 2004, TETA invested a further R100 million with FAM by way
of two cash payments of
R50 million. By that stage TETA had
invested a total of approximately R206 million with FAM. Over time
TETA continued to authorise
the reinvestment of the total amount in
the belief that it had securely invested with FAM. At the end of 2006
TETA informed FAM
that it would not renew its investment. After an
investigation was launched into FAM’s affairs by the Financial
Services
Board (FSB),
[2]
TETA
was informed by FAM that the latter intended to exit the asset
management business and that it would repay the investment
over a six
month period. During the period of the investment, monthly statements
had been dispatched by FAM to TETA, indicating
that the total
investment, including the two promissory notes, was safeguarded and
yielding a return. The State’s case was
that Brown, through
FAM, fraudulently misrepresented to TETA that the promissory notes to
the value of R100,3 million would be
secure and that all its
investments would be managed as trust property, invested safely, and
would yield high returns, whereas
in truth no sooner had he got his
hands on the promissory notes he
cashed
them before their maturity date
for
approximately R6 million less than their value and TETA’s
investment was further diminished by Brown purchasing immovable

property at a cost of more than R11 million and four luxury vehicles
for a total amount in excess of R3 million, and further utilising

TETA’s funds for personal and/or corporate gain to the
prejudice of TETA.
The
trial
Maddock’s
evidence
[7]
Amongst the witnesses to testify in support of the State’s case
after Brown’s initial not guilty plea was Mr Graham
Maddock
(Maddock), a chartered accountant who, in the indictment, is alleged
to have been integral to the commission of the alleged
offences
through a company which he controlled, namely Maddocks Incorporated.
Maddock had earlier been convicted and sentenced
on counts similar to
some of those faced by Brown. In respect of other charges to which
Maddock might have been exposed, he was
presented as a witness in
terms of s 204 of the the Act.
[3]
[8]
Maddock testified about the receipt of the TETA investments, namely
the promissory notes and the moneys referred to in paragraph
6. It is
common cause that the two promissory notes referred to above were not
kept secure or replaced by successive ones as part
of an investment
strategy consonant with the terms of the written mandate by TETA.
Maddock testified that the promissory notes
were cashed before their
maturity date and the proceeds then used
to
purchase
immovable property to the value of R11 million in the names of trusts
under the control of Brown and four luxury motor
vehicles for FAM,
the total value of which was R3 million. The motor vehicles were used
by Brown and three others at FAM, including
Maddock. It was apparent
from Maddock’s testimony that the investments were not
ring-fenced and that FAM’s operating
expenses as well as
substantial dividends to shareholders were paid from whatever
investor funds were available.  Payments
labelled ‘restraint
of trade payments’ were also paid to FAM’s employees out
of investor funds. The written mandate
from TETA required its funds
to be invested with an A-rated Bank in an investment account or in
any one of their other investment
instruments through which an
optimum income could be generated. Maddock testified that, contrary
to that mandate, TETA’s
funds were used in the manner referred
to above as well as to purchase an information technology company
name MGX Software Futures
for approximately R20 million and an office
block at Century City in an amount of R35 million, as well as the
Santè Hotel
and Spa. All the while, FAM despatched false
statements to TETA to the effect that their funds were secure in one
of the big four
banks.
[9]
Maddock’s unchallenged testimony was that at the time of the
MATCO purchase, FAM did not have sufficient cash resources
to pay the
full purchase price as per its undertaking and used investments
managed and administered by MATCO, namely the Investec
moneys
referred to earlier, to pay the balance of the purchase price.
[10]
FAM’s monthly salary bill was R12 million. Once again, it
appears that those were paid from investments that were
being managed
by FAM. The TETA investments with FAM, according to the indictment,
extended from 2003 to 2006. According to Maddock,
the dividend
payments made to shareholders of FAM at the end of 2005 amounted to
R44 million. In respect of the restraint of trade
payments, Maddock
testified that a number of people each received R4 million and that
he, Brown and another director each received
R6 million. The rather
dubious explanation provided by Maddock for the restraint of trade
payments was that it was to ensure that
people did not divulge
company secrets. It must also be borne in mind, as testified to by
Maddock, that FAM charged an initial
take-on fee of 1,5 per cent of
the value of the investment and an annual administration fee was
levied on top of that.
[11]
Maddock, when asked about the generation of profits by FAM and
whether it had the right to dip into investor funds in the manner

described above, said the following:
‘
I
don’t believe he had the right to use investor funds . . .
Because those were investors’ funds that had to be invested
for
the benefit of investors . . . And the company at that time did not
have the profitability in order to distribute further dividends
or so
on from which he could use that money . . . That’s why I
believe that . . . Correct . . . There weren’t –
there
were never sufficient profits in the company, other than the raising
of those funds . . . For the raising fees when we took
over . . . But
that was capital coming in, I mean, or . . . That was . . .
Investors’ funds coming in. We’ve received
investors’
funds . . . And there was a fee put on our fee, or the company fee,
for taking those funds on and administering
them . . . And those –
that – those fees were substantially higher than what was in
the agreement. So other than those
fees, we didn’t have –
there was really no profit being generated that would be able to pay
R12 million to Mr Brown
as dividend, or something like that.
’
[12]
It appears that in 2006 Maddock earned a salary of R194 000 per
month as FAM’s financial manager. He occupied this
position at
all material times. According to Maddock, a director of FAM, like Mr
Koen, earned more than he did.
[13]
Maddock also testified about Brown’s 2006
ex
post facto
attempts to justify the use
in 2003 of TETA funds to purchase immovable property for his benefit.
To that end Brown procured a
letter from Mr Steven Goodwin (Goodwin),
an associate of his, on behalf of an entity called Worthytrade,
falsely indicating that
the amount utilised for the purchase of the
immovable property constituted a reimbursement for amounts which TETA
would have had
to pay to Worthytrade. The letter was backdated to
conceal the fabrication. Maddock also testified about belated
attempts involving
Maddock, Goodwin and Brown to adjust files and
accounts in order to present an acceptable state of affairs to the
FSB when it started
investigating FAM’s affairs.
[14]
The following email dated 6 July 2006 from Goodwin to Brown and
copied to Maddock is significant:
‘
Good
evening Graham/Arthur.
With reference to my
earlier discussion with Graham, and more specifically on my thoughts
on the accounting regarding TETA and related
issues, please find my
ideas below (in no specific order).
I believe that FAM
should show TETA as a client (there is too much documentation to
indicate that this was not the case –
AM have communicated with
the auditor general and I think that we run the real risk of tripping
over our own feet if we try and
side step this – if anyone
calls or speaks to TETA then the cats out the bag) – although
there may be a belief that
we should be in a position to demonstrate
that we hold certain assets in TETA’s name, I believe that we
would pass the test
if we could demonstrate that we are able to
identify certain assets (held in a custodial account for example) or
held for the specific
benefit of TETA by FAM. Remember that if the
proposal is read, we have been given permission to trade in money
market instruments
on TETAs behalf. We may need to allocate some of
the money market instruments to TETA to solve this problem.
We can play around
with the beginning period when we sold the Commerze bank paper
because at that stage TETA was not a Fidentia
client – they
only became a Fidentia client when they moved the ABSA notes to
Fidentia (which was some time after they were
actually purchased and
then for a few months Fidentia only held the ABSA notes) – it
was very shortly after this time that
Rudi left – but I do have
a document signed by Rudi – where he proposes to TETA to sell
the ABSA notes and purchase
RMB notes and where he explains to TETA
the credit rating of RMB versus ABSA Versus FNB (see the documents
which I sent Arthur
previously).
The returns which
are shown to TETA and for which FAM sends a monthly statement, which
have been capitalized on an annual basis,
should continue to be shown
as normal – this will tie up with the mandates and the
agreements and the reports to the auditor
general etc..
The other monthly
profits paid out to Worthytrade including Kukkard and or anything
else should be lumped together as trading profits
shared and or share
of profits on structured deals and or profits resulting from M&A
activities (remember that we can play
with the difference between the
profits shown on the Worthytrade statements and the date that the
profits were actually made (eg
M&A profit on MATCO made in say
June – but only shown on Statement over 12 months beginning in
November (this by agreement
with Worthytrade – very easy to set
up required documentation – or we can say that was a verbal
arrangement –
which Worthytrade can confirm after the fact I
can come up with many different types of profit sharing if required).
If we follow
this route and do not link payments made to Worthytrade
to specific clients and or specific transactions (we may need to
conjure
up numbers which balance back to the amounts paid stemming
from specific events or series of events – which could include

activities used in the TETA process (e.g. trading of instruments) –
but not to the TETA deal specifically) we will not cause
any problem
in respect of profits made not distributed to the client or excessive
profits made or be accused of distributing profits
out of capital
etc. It is important that this be called “profit share” –
rather than fees earned – from
a VAT perspective – this
can be a schedule prepared on a quarterly basis.
I propose that we
have a schedule similar to the one which I sent you previously
setting out the trading profits/profit yields which
is a very
different document and not confused with the TETA statements in any
way. This will also assist in case there is a look
through at how I
distribute these returns and how they are accounted for thereafter.
I have already
generated the basis of what I propose – which balances back to
the actual amounts paid by Fidentia.
Please give this
some thought and let me know – I will prepare the next months
statements on the basis as set out above.’
The
existence, despatch and receipt of the e-mail were uncontested. Nor,
ultimately, it would seem, was its content.
[15]
It was clear from Maddock’s evidence that when FAM was called
upon to repay the TETA investment, it was not able to do
so.
[16]
Maddock testified that at around the time of the FSB investigation,
the monthly statements that FAM, in terms of the investment
mandate,
was required to send to TETA were not punctual and it appears that
Brown and his associates had to ‘construct’
statements.
Naran’s
evidence
[17]
The next material witness in support of the State’s case was Mr
Dalpat Naran (Naran) who, at all relevant times, was
the financial
manager of TETA. He testified about Treasury Regulations that
dictated the investment policy of TETA. Funds could
only be invested
in A-rated banks to generate interest. A-rated banks were the likes
of South Africa’s top four banks referred
to earlier. Such
funds could, however, be invested in those banks through asset
managers such as FAM. According to Naran, Goodwin
had contacted him
and offered a higher return on investments than what TETA was then
receiving. He arranged for a reference check
to be done on FAM, and
the TETA board decided to invest with FAM. He also referred to the
written mandate in terms of which FAM
would invest TETA funds. That
mandate was informed by the TETA investment policy referred to above.
In terms of the investment
agreement, FAM was obliged to supply
monthly investment reports to enable proper accounting on the part of
TETA. In terms of the
agreement, an interest rate was guaranteed with
an extra profit sharing return added to it. The mandate was
non-discretionary.
The capital was guaranteed and the funds would at
all times be invested with an A-rated bank. The promissory notes were
as good
as cash; being an investment instrument that comprised a
promise by the bank to make payment on a specific interest rate at a
specific
point in time, and it was tradable. FAM was not authorised
to cash the promissory notes.
[18]
Naran explained how the total investment by TETA referred to above
came to be made. He came to know, for the first time, that
the
promissory notes had been sold when the FSB investigation was
undertaken. All the statements received in terms of the investment

agreement had given TETA comfort in that it assured the latter that
its investments were secure and were invested in terms of the

mandate. Naran also testified about agreements with FAM to reinvest
the TETA funds, again at an agreed minimum return of 8,5 per
cent
with an additional 2 per cent on a profit participation basis. The
mandate remained constant, and all the while FAM sent TETA
statements
indicating that the funds were secure and accruing interest. All the
indications were that, when the TETA investment
matured on 27
September 2004, the value would be R206 287 134,34. That
amount was scheduled to be reinvested by TETA
with FAM. The estimated
balance as at 27 November 2005, calculated on the basis of the
statements supplied by FAM, was R227 947 283,67.
That
amount was then reinvested with FAM at an agreed minimum interest
rate with an added 2 per cent profit participation. FAM
confirmed to
the Auditor-General that it was holding TETA’s funds securely.
As late as 20 November 2006, FAM confirmed to
TETA that, as at 31
October 2006, it was holding R245 677 210,76 on the
latter’s behalf. TETA only became aware
of its investment being
in jeopardy when the FSB launched its investigation and it was then
decided to call up the investment.
Subsequently, FAM informed TETA
that it had taken a decision to exit the asset management business
and undertook to return investments
to investors over the following
six months. That did not materialise. Naran left TETA at the end of
October 2008, more than a year
after the repayment was due, and at
that stage not one cent of TETA’s funds had been repaid. Nor
was anything paid thereafter.
Goodwin’s
evidence
[19]
Like Maddock, Goodwin, another witness to testify in support of the
State’s case, had also pleaded guilty to charges
similar to
those faced by Brown. Subsequent to a plea of guilty he was sentenced
to ten years’ imprisonment, four years and
nine months of which
were served. He confirmed that he was the sole director of two
companies, namely Intabrand (Pty) Ltd and Worthytrade
(Pty) Ltd, and
testified about how he came to be involved with Brown and FAM.
Goodwin explained how promissory notes were used
as investment
instruments and how they could be used to obtain a credit line which
could then be used to optimise income. He accepted
that, in terms of
the TETA mandate, the promissory note had to remain secure. In
addition, he testified about how, on behalf of
FAM, he paid
substantial financial inducements to the Chief Executive Officer of
TETA to move its funds to FAM and to reinvest
them.
[20]
Goodwin testified about his role in producing the monthly statement
that FAM sent to TETA. In that regard he was part of a
collaborative
effort involving Maddock and Brown. Goodwin was also responsible for
providing verifications sought by the Auditor-General
in relation to
TETA’s investment. According to Goodwin the investigation by
the FSB required a ‘rebalancing of the
books’. He
described the effect of the FSB investigation as follows:
‘
[T]he
temperature was mounting so to speak. . . .’
[21]
The following part of Goodwin’s evidence is significant:
‘
[I]t
was certainly put to me in no uncertain terms at that time, that it
was not because there was a shortfall in the assets, in
other words
there were enough assets to cover the liabilities, in fact the
documents that I have clearly says that there were more
assets than
liabilities. However, they were the wrong kind of assets. They were
assets in property, or they were assets in whatever,
I don’t
know exactly where all these assets were, but that was the
explanation given to me. And so the effort was to move
these assets
which were in property into bank, Land Bank, Development Bank, those
type of securities for a period of time, whilst
these properties and
so on could be liquidated and brought back into – to be made
liquid again.’
I
shall in due course revisit this aspect.
[22]
It is clear from Goodwin’s evidence that, not only was he aware
of the TETA mandate alluded to above, but was instrumental
in its
formulation. Goodwin confirmed the evidence of Maddock to the effect
that he had provided, on behalf of Worthytrade, an
ex
post facto
fabricated justification for
payment to Brown of the amount utilised to purchase the private
property referred to earlier in this
judgment. He testified that the
letter was formulated at Brown’s instance. The substantial
amounts paid as an inducement
were, for obvious reasons, not
disclosed to TETA. According to Goodwin, Brown was aware of the
regular inducements being paid in
relation to the TETA investment,
namely R50 000 per month.
[23]
It is necessary to record that after Goodwin had already been
testifying for at least a day, Brown was for the first time assisted

in his defence by counsel who had not yet placed himself on record
but who appeared to be advising ‘behind the scenes’,
and
was in court and involved in some of the exchanges with the court.
Shortly after engaging in exchanges with Veldhuizen J, counsel
took
over the conduct of the case from Brown whilst Goodwin was
testifying.
[24]
In respect of the MATCO investment, Goodwin testified that the
Mineworkers Pension Fund (MPF) had complained to the FSB that
FAM was
investing in unacceptable and unauthorised asset classes.
[25]
It appears that in relation to his part in the investments Goodwin
was being generously remunerated by way of what he described
as a
profit sharing arrangement.
[26]
An interesting word was used by Goodwin in relation to explanations
that were contrived to subvert the FSB investigation, namely

‘retrofitting’. He later explained that he was ‘creating
stuff and, doing all sorts of things that would not
be done in the
normal course of events’.
[27]
In respect of some of the profit yield due to TETA, there appears to
have been some skimming-off to dubious destinations. In
this regard,
Goodwin said the following:
‘
How
are we going to dealt with the TETA yields paid out every three
months? It would be problematic to explain where some of the
yields
ended up . . .
Well, the yields
paid out every three months were the yields obviously via the
enhanced yield structure that I have described and
they were
obviously paid out to one of my companies and the problematic [thing]
is that some of those yields, was paid to Piet
Bothma and so how was,
how were we going to explain that? This is what I am referring to
here.’
Brown
was intimately involved, according to Goodwin, in the exercise
referred to in this and the preceding paragraphs. Goodwin
acknowledged that creative bookkeeping was an apt description of what
they were engaged in.
[28]
Goodwin accepted unreservedly that the disposal of the TETA
promissory notes and the expenditure incurred in respect of the

purchase of immovable property for the benefit of Brown and luxury
motor vehicles and the other expenditure from the capital amounts

invested by TETA were contrary to the mandate.
[29]
At one stage Goodwin suggested a book entry that would show moneys
invested ‘under the MATCO umbrella’ as being
part of the
TETA investment in order to appease and assure TETA and/or the FSB
that the former’s investment was secure.
[30]
In respect of the MATCO transaction, Goodwin testified that during
discussions about how the purchase was going to be funded,
Brown said
the following:
‘
[W]e’ll
just pay for them with their own money.’
The
emergence of a case for the defence
[31]
At the commencement of cross-examination by counsel now representing
Brown, it was put to Goodwin that Brown and other witnesses
would
testify in support of the defence case. What that case would be was
at that stage not yet disclosed. Much of the first part
of the
cross-examination of Goodwin appeared to be directed at demonstrating
that FAM was a well-run business possessing the requisite
licences,
staffed by skilled people and following appropriate processes. Much
of this was done by what might be described as counsel
– rather
than the witness – testifying.
[32]
During the cross-examination of Goodwin, a defence of sorts was, for
the first time, referred to by counsel representing Brown
and it
appeared to be that FAM in fact had a corporate structure and
divisions and a business strategy, and that it was wrong to
attribute
all the negative consequences that impacted on investments to Brown.
As put by counsel, FAM wasn’t a ‘one-man
show’. The
business strategy alluded to appeared to be that in order to obtain
maximum yield it wasn’t always possible
to adhere to a mandate.
It was described by counsel as ‘a different way of doing it’.
The suggestion appeared to be
that the capital invested was never at
risk. One of the examples provided by counsel as an alternative
maximum profit yielding
investment was the purchase by FAM of the
software company referred to in para 8 above.
[33]
Counsel, in cross-examining Goodwin, indicated that Brown would
testify that he had reputable auditing firm Ernst & Young
value
FAM’s investments on a monthly basis. That appeared to be an
indication that evidence would be presented that care
was being taken
by Brown to ensure that assets exceeded liabilities.
[34]
Counsel also appeared to be suggesting that investing in property in
2003, when the property market was booming, was prudent.
The
suggestion was that Brown would testify to that effect and would
explain that immovable property purchased by FAM would ultimately

provide cover for any investment. At that stage the defence being
constructed seemed to be that FAM had a blend of investments
that
ultimately secured investor funds, and that since FAM was a
discretionary asset manager, this was in order. All of it, however,

was premised on Brown and other witnesses testifying to that effect.
It also ignores the fact that the mandates in question were

non-discretionary.
[35]
Judging by the tenor of counsel’s questions at one stage during
the cross-examination of Goodwin, a further part of the
defence
appeared to be that FAM was entitled to treat all the moneys it had
under management as belonging to one pot of assets
to be dealt with
at will. There was also some suggestion during the cross-examination
of Goodwin that insurance policies put in
place by FAM would protect
investors.
The
plea of guilty
[36]
Shortly after Goodwin testified, counsel representing the State
informed the court that Brown had made a decision to change
his plea
to one of guilty on counts 2 and 6.  A written plea of guilty,
signed by Brown and his counsel, incorporating a series
of admissions
said to be sufficient to sustain a conviction on those counts was
handed in. Brown confirmed that this was indeed
the case. As a
consequence, so the court was informed, the State had decided not to
lead any further evidence and then closed its
case. In turn, counsel
representing Brown closed the defence case. The State then indicated
that the only argument it would put
forward was that Brown be
convicted on counts 2 and 6, the two fraud counts in question. At
that stage, the court understood the
position as follows:
‘
Yes,
well we need to go through this and make sure that the evidence is
sufficient for a conviction.’
[37]
Thereafter, during the early exchanges between counsel for the State
and the court concerning the plea of guilty, Veldhuizen
J appeared to
consider that deviating from an investor mandate coupled with a
representation that the mandate was being adhered
to did not
constitute fraud. The court appeared to suggest that by not adhering
to a mandate, a fund manager only rendered himself
liable to an
action for a breach of contract. When the State insisted that the
court was erring in that regard, the court responded
as follows:
‘
Well
I don’t know then you’re practising in a different legal
system [than] I am because fraud you must have a misrepresentation.’
The
court appeared to be experiencing difficulty with the State’s
submission that the monthly statements by FAM constituted
a
misrepresentation to TETA that the investments were secure. The court
also struggled with the concept that FAM had misrepresented
to MATCO
that it had the cash to finance its purchase of the MATCO shares when
it was clearly not possessed of such funds. The
court, with reference
to the admissions made, took the view in favour of Brown that there
were sufficient assets which, if liquidated,
could fund the purchase.
Counsel for the State was adamant that MATCO envisaged a cash
transaction and that FAM misrepresented
that it was in a position to
pay the cash.
[38]
I consider it necessary to set out the following statements by the
court:
‘
Now
what I propose to do is I would like to have heads of argument, full
heads of argument on these matters and I am going to give
you time to
prepare those heads because I must make it quite clear at this stage
that not only me, I have fully discussed this
with my assessors, I
have a difficulty on count, not so much count 2, count 2 I think
there are admissions which spell out what
will amount to a fraud but
on count 6 I have serious difficulties. Firstly, regarding the
misrepresentation, secondly, regarding
causation what moved MATCO to
hand over control and I want reference to facts on which a decision
can be based. So I’m going
to give you time and I want full
argument on that because at the moment I must tell you I have serious
reservations me and my assessors
whether the admissions on count 6
are sufficient to sustain a conviction.’
[39]
When proceedings resumed, counsel representing the State suggested
that in the light of the difficulties raised by the court,
the more
prudent route to follow would be for the court to question Brown on
the contents of his plea. The court, in response,
put it to counsel
that section 112(1)(
b
)
of the Act did not apply when a plea of guilty is raised beyond the
beginning of a trial.
[4]
Counsel
disagreed. At that stage the only certainty was that uncertainty
reigned about how the tendered plea of guilty was to be
treated. This
became all the more evident from the following exchanges between
counsel representing the State and the court:
‘
[
COUNSEL
]:
I’m only looking at his plea and I’m saying that the
admissions on his plea is sufficient.
If the Court
disagrees with that view of the State, then obviously we have to take
a step back and then I’m saying then the
Court should raise
those concerns that the Court do have regarding the plea with the
accused [today]: are you saying by saying
XYZ that you’re
innocent or is it just mitigation of sentence that you’ve
included in this document? If that process
is then followed and the
Court says: well, I’m now satisfied on the available evidence
and on the – not on the evidence,
on the plea, just on the
plea. I’m satisfied on the plea that you actually intend to
plead guilty and that you did plead
guilty and therefore I can
convict you on those two counts as pleaded.
If the Court says:
no, I am not convinced about that, I’m not satisfied, then the
State would ask for a reopening of the State’s
case. So I’m
saying we have to unfortunately go back a step or two in this whole
process where we are now, in the interests
of justice. And there is
no other reason for that . . .
COURT
:
If you’re wrong on your interpretation of Section 112, what
then? I mean, then I must give a judgment.
[
COUNSEL
]: If
I’m wrong on my interpretation of Section 112, then I would
give – ask for reopening of the State’s case
before
judgment. My learned friend agrees with me that if . . .
COURT
:
Ja
, but
how are you going to know that?
[
COUNSEL
]:
Well, I would like to have an indication from the Court. I mean,
we’re not playing games here. It’s a criminal trial
and
it’s in the interest of justice.
COURT
:
I understand. I quite understand that we’re not playing games.
That’s exactly why we’re in this situation today:
because
of the concerns I raised. But where’s Section 112?
[
COUNSEL]
:
Maybe I can . . . I’ve got it. I’ve given the Court
heads.’
[40]
The uncertainty was compounded by the State not having access to its
own library because it was locked, and further it appeared
that its
access to the relevant authorities online was also limited.
[41]
During further exchanges the court once again expressed reservations
concerning the misrepresentations allegedly made by FAM.
Counsel for
Brown said the following in response to the court:
‘
Dat
ek nie meneer Brown se onskuld kan bepleit op hierdie klagtes nie,
soos ons mos nou reeds ooreengekom het. En ek moet die hof
help. Dit
is wat die hof my uitgestuur het hier op die 10de om te doen.’
[42]
The court then went on to say the following:
‘
But
that is – I don’t think that’s the purpose of
Section 112 and that is certainly not the purpose of any trial,

because I would be extremely unhappy if I found out later that he’s
made admissions just to plead guilty and those admissions
proved to
be false. That is the last thing that should happen. That shouldn’t
happen. So – but what I am concerned
with at the moment is that
the admissions that are before me do not go far enough to prove his
guilt to sustain a guilty verdict
on the indictment as [it] stands.
And
one must always look at the indictment. That’s the starting
point of any trial. So – but you see, as I see it, there
are
two difficulties, two serious difficulties. The first is, he says he
made a misrepresentation but just two paragraphs further
on he says:
well, Fidentia had sufficient assets. Well, then it’s not a
misrepresentation. Then Fidentia made no misrepresentation.
It had
sufficient assets. It could pay the purchase price. The fact that
they preferred not to do so later because of strategic
reasons and
because of the interests of Fidentia, well, that is something else.’
[43]
At that stage it appeared that the court’s continuing concern
was whether in terms of the MATCO transaction there had
indeed been a
misrepresentation. When the court resumed thereafter, a slightly
amended plea of guilty was presented which the court
then appeared to
be satisfied with. That plea, which is central to the present appeal,
is set out hereafter:
‘
1.
In addition to the admissions already made I, the accused, freely
make the following further admissions.
2. I am represented
by Adv B Pretorius and I fully understand my right and the
implications of these admissions.
3. I am making these
admissions in the spirit of finalizing the proceedings and so that
the State would not be required to prove
its case on the fraud counts
2 and 6 anymore.
4. The following
admissions are hereby made by me;
5.
AD TETA COUNT
2.
5.1 Over the period
2003 to 2005 the Transport Educational Trading Authority (TETA)
advanced two promissory notes and two cash amounts
totalling two
hundred million and three hundred thousand Rand to the Fidentia Group
of companies (FID) as an investment on a non-discretionary
mandate,
of which R15 million has been returned.
5.2 I have been the
CEO of FID during the relevant times.
5.3 These amounts
have from time to time been invested in asset classes different to
those specified in the non-discretionary mandate
between FID and
TETA.
5.4At the time and
throughout the period I knew that investing in these alternative
asset classes would be more risky and would
not be as safe as those
described in the TETA mandate and could cause potential prejudice and
I have reconciled myself with this
fact.
5.5 For the period
between May 2003 and September 2006 I knew that the monthly
statements to TETA prepared by Steven Goodwin, Rudi
Bam and Johan de
Jongh and checked by the Financial Director, Graham Maddock were
incorrect. I did not conduct further investigations
to ensure the
correctness thereof. I knew that this could cause potential prejudice
and I have reconciled myself with this fact.
5.6 My actions under
clauses 3 to 5 constituted a misrepresentation of the true facts and
I have thereby caused potential loss to
TETA.
5.7 My actions were
unlawful and constituted fraud by way of
dolus eventualis.
6.
AD MATCO COUNT
6
6.1 Negotiations
between FID and the shareholders, directors and trustees of
Mercantile Asset Trust Company (Pty) Ltd (MATCO) had
commenced in
early 2003 and the intention was that MATCO would enter into an
investment management agreement with FID. This however
did not take
place at the time.
6.2 During September
2004 FID was again approached by MATCO and FID decided to invest in
Matco and entered into a purchase agreement
with the shareholders of
MATCO to purchase all the shares in MATCO and also at the time
entered into an investment mandate agreement
with MATCO.
6.3 The purchase
agreement stipulated that the full purchase price had to be paid in
the following manner before possession and
control of MATCO would be
handed over to FID:
The purchaser shall
pay the Purchase Price to such bank account as the Seller may
reasonably specify in writing by not later than
five business days
before the closing date, in immediately available funds without
offset or deduction.
FID
and I misrepresented that FID was able to do so and thereby induced
the shareholders of Matco to enter into the agreement and
sell their
shares to FID.
6.4 The board of FID
and I made the strategic decision not to liquidate the instruments
held by FID and for FID to charge MATCO
the fees receivable by all
the various entities in FID in order to make up the full purchase
price due and payable before transfer
and control.
6.5 On the date of
the transaction I knew that FID had enough assets in the form of
negotiable instruments to execute the sale of
share agreement, but
not enough liquid cash and that FID would use funds derived from fees
from the investment mandate agreement
with Matco to pay the largest
portion of the purchase price of the shares.
6.6 FID only had
enough cash to pay the minority shareholders and paid them on 19
October 2004.
6.7 On 19 October
2004 FID controlled MATCO due to the transfer of the shares by the
sellers before full payment was made to all
shareholders contra to
the terms of the agreement and FID and I thereafter ordered the
transfer of R69 million from the MATCO current
account to FID.
6.8 A substantial
portion of these funds, to wit R56 million, has been used to pay the
majority shareholders for their shares.
6.9 The above
actions amounted to a misrepresentation of the true facts in respect
of the sale of share agreement and the method
and time of payment.
6.10 Although I was
not directly involved in each and every detail of this transaction I
did not prevent the format of the transaction
and the manner of
payment. I foresaw that this could cause potential prejudice to the
shareholders of Matco and reconciled myself
therewith.
6.11 My actions were
unlawful and constituted fraud by way of
dolus eventualis
.’
Paragraph 6.3 was an
amendment made to the plea subsequent to the concerns raised by
Veldhuizen J. In un-amended form it read as
follows:
‘
The
purchase agreement stipulated that the full purchase price had to be
paid before possession and control of MATCO would be handed
over to
FID and FID misrepresented that it was able to do so.’
The
convictions
[44]
The court, on the strength of the plea, produced the following
judgment:
‘
The
accused is indicted before this Court on four counts of fraud, two
counts of theft, one count of contravening section 1(1)(a)
of the
Corruption Act No. 94 of 1992, one count of contravening section
3(b)(ii)(aa) and/or (bb) and/or (cc) and/or 3(b)(iv) of
the
Prevention of Combating of Corruption Activities Act, No. 12 of 2004,
and lastly, a contravention of
section 4(a)
or
4
(b) of the
Prevention
of Organised Crime Act, No. 121 of 1998
.
Some evidence was
presented to us on certain counts especially counts 1, 2 and 3. The
accused then made certain admissions, Exhibit
E and then changed his
plea to one of guilty on counts 2 and 6. The State closed its case
and the accused followed suit. We were
not satisfied that the facts
admitted by the accused were sufficient to found convictions on
counts 2 and 6. An amended statement
of admissions were thereupon
handed in by the accused, these are contained in Exhibit E1.
Adv Van Vuuren for
the prosecution conceded that the evidence regarding count 1 does not
prove that the accused had the necessary
intention to defraud and as
regards counts 3, 4, 5, 7, 8 and 9 is not sufficient to sustain
convictions on these counts. In our
view this concession is amply
justified.
THE
ACCUSED IS ACCORDINLGY ENTITLED TO BE ACQUITTED ON THESE COUNTS AND
HE IS FOUND NOT GUILTY ON COUNTS 1, 3, 4, 5, 7, 8 AND 9.
We
are satisfied that the admitted facts contained in exhibit E1 are
sufficient to found a conviction on counts 2 and 6 of the indictment.

We do not find it necessary at this stage to elaborate on the exact
basis for this.
THE
ACCUSED IS THEREFORE AND IN ACCORDANCE WITH HIS PLEA FOUND GUILTY ON
COUNTS 2 AND 6 OF THE INDICTMENT.
’
Sentencing
proceedings
[45]
Sentencing proceedings followed. First, Brown testified in mitigation
of sentence. At the outset, it appeared that Brown would
be repentant
and forthcoming, indicated by the following statement:
‘
Your
Lordship the purpose of the evidence that I’m going to lead in
mitigation is not to blame or apportion blame on other
people or
anything such as that it is so that the Court could come to a just
verdict in the circumstances. This trial and this
matter has been
very emotive and obviously carries massive media interest and to date
in six years I’ve not been allowed
to tell my side of the story
so we intend to lead some evidence but the evidence is not to lay
apportion [or] blame at other people
or anything to that effect it’s
me taking responsibility but also being afforded the opportunity for
the sake of the Fidentia
staff, for the sake of my family and
everybody that has suffered as a result of this so that the truth is
out.’
However,
almost immediately thereafter his principal concern appeared to be
the effect on his family and FAM’s employees.
[46]
The breakdown of Brown’s family life and his separation from
his wife and children who are in Australia, and the 22 days
he spent
in jail subsequent to his arrest loomed large in Brown’s
testimony in mitigation. Being restricted to the Western
Cape in the
years following his arrest rankled with him.
[47]
Brown initially testified that he had a Bachelor of Commerce degree,
but seemed to be experiencing difficulty obtaining documentary
proof
of that fact from the university at which he had studied. Brown’s
evidence at the end of his examination in chief,
when he was asked
whether he had anything he would like to put before the court,
contained the following about his degree:
‘
I
testified yesterday that I have a B.Comm. degree. Now this is
something I need to explain. I had studied at UPE for two years,

started my business, got married, we had a child and for all intents
and purposes abandoned those studies. Now because I was commuting

between Port Elizabeth and the Eastern Cape and various of the other
ex-homelands. So I then proceeded to do the other subjects
at my
father’s university, then applied . . . At Unitra . . . Then
applied to UPE for special exemption because I had exceeded
the
timeframe and all of that. They issued me with the exemption. I had
completed all the subjects and qualified. When this Fidentia
thing
happened – and in fact the certificate was submitted to the
Financial Services Board, I actually have proof of that
– all
my documents were at Fidentia so I don’t have those original
documents. After my release Mr Kahn did approach
the university for a
copy but the university’s answer at the point in time that they
had been merged with these various other
institutions and they are
unable at this point in time to locate their record.’
Under
cross-examination, when he was asked whether he had a degree from the
University of Port Elizabeth, he stated:
‘
That
is correct in respect of my explanation, Advocate van Vuuren.’
When the court asked
him whether he had a degree, he replied:
‘
I
believe so, Your Lordship, yes.’
Later
he conceded that he hadn’t passed all of his first and second
year subjects. He also explained that he had only completed
three
years of a five year period of study at the University of Port
Elizabeth. His explanation was that he had ‘applied
for
exemption’. It can fairly be said that his evidence in this
regard was an illustration of obfuscation and evasion and
in the
ultimate analysis just plain dishonest.
[48]
Very early in his career, Brown developed a penchant for structuring
financial services solutions and consulted to banks, locally
and
internationally. Brown testified that at one stage in his career, he
started trading in financial instruments for his own account.
He had
built up a very good rapport and credibility with banks. According to
Brown he had at that stage sold a fairly successful
business
comprising pharmacies in doctors’ practices. In 2001 he and Mr
Louis Koen and Maddock discussed setting up their
own business:
‘
I
had through . . . consulting . . . seen there was a big gap in the
market that all the big financial institutions and so on had
been
missing. One of the things was services to what is known as the
bottom of the pyramid market, that . . . was being wholly
ignored at
the time. Private equity investment in development projects . . . was
being ignored at that time so we set about building
a company.’
[49]
FAM was the business that Brown started in 2003. It appears that by
that time Brown had accumulated R25 million of his own
money. The
following part of his testimony provides some insight into how he
viewed his conduct that led to his two convictions:
‘
[T]he
sad thing about this . . . is the four clients in [FAM] which is what
this whole issue is about, it’s a drop in the
ocean in respect
of all the deals that we did and all the investors that we did have
and all the transactions that we did conclude
if one looks at the
size of what we started with . . . .’
[50]
Ironically, Brown chose the word Fidentia for his company because it
‘appealed to my sense of history and my sense of
what right is
and what is wrong and also it appealed to what we wanted to achieve’.
[51]
Over the first six months of FAM’s existence, in furtherance of
his business plan, Brown had built up a team of highly
skilled
people. He was, he testified, intent on setting up checks and
balances. Brown appeared at an early stage in his testimony
to be
shifting some of the blame onto Maddock. It will be recalled that
FAM’s transactions were processed through the trust
account of
Maddocks Incorporated. He had this to say about Maddock:
‘
I
never had insight into that account I trusted him implicitly as he
testified that  the accounting records and so on were
being
prepared by himself and his staff whilst we were setting up our
operations.’
[52]
A further example of Brown’s view of his own conduct that led
to his convictions is the manner in which he described
his business
methods as similar to that of Warren Buffet, one the world’s
wealthiest individuals:
‘
Mr
Buffet uses the exact same structure where if he uses other people’s
funds to acquire a private equity as in fact he did
. . . when he
bought the New York Times. The exact same structure that we
implemented was the most robust structure in order to
protect
interests being the investors’ interests but give you the
flexibility to properly manage these assets to their maximum
value.’
[53]
Brown also presented as an excuse that FAM’s business had grown
exponentially and too fast and that it had fallen behind
in ‘the
administration of the contracts’. He repeatedly complained of
being hounded and unfairly treated by the media
and the FSB.  He
appeared to be especially pained by the public image that he felt was
wrongly constructed:
‘
Fidentia
was presented as this entity that willy-nilly went and spent
investors’ money and we bought cars and we did all of
this
stuff and bought sports teams but it was a business plan.’
[54]
According to Brown the curators who had taken over the business
subsequent to the FSB investigation were responsible for the

dwindling value of FAM’s assets which might have contributed to
FAM not being able to meet investor claims. He said the following:
‘
Now
if they sell a company for less than half of the purchase price not
even value, for sure there’s going to be damage, for
sure
there’s going to be losses and these are the losses . . . that
I am in the public domain being blamed for and everybody
associated
with Fidentia . . . .’
[55]
Brown insisted that FAM had sufficient assets to cover its
liabilities but conceded that this was disputed by the curators.
[56]
Brown claimed that the FSB report was completely false. He testified
that according to the TETA mandate TETA could not withdraw
its
investment all at once, without notice; there was a 90 day notice
period. According to Brown the only potential prejudice that
he
foresaw as a result of not complying with the TETA mandate and
investing in the wrong asset classes was that TETA might have
to wait
a little longer than the 90 day notice period before its investment
was returned:
‘
[T]he
only risk that there was that we would pay the balance of the
purchase price late.’
[57]
In respect of the MATCO transaction it is important to note how Brown
sought to minimise his blameworthiness for having taken
control of
that entity before the full purchase price had been paid:
‘
I
think it’s a question of our over zealousness to get involved
and do the transaction and their desperateness to do the transaction

that resulted in that situation.’
[58]
Brown complained about being attacked in a police van and in prison.
It appears to have been by fellow prisoners. After his
arrest Brown’s
estate was sequestrated.
[59]
Brown testified that he has been offered gainful employment. The
purpose of that statement was probably directed at avoiding
a
custodial sentence. Insofar as his private life was concerned, it is
clear that Brown’s stepfather was an important and
nurturing
influence in his life. In addition, Brown maintained a close
relationship with his own father. Brown has three younger
brothers,
one of whom suffers from epilepsy. Brown is not yet divorced but has
a girlfriend. He considers himself to be someone
who is liable to be
taken advantage of.
[60]
During his time at Pollsmoor Prison Brown wrote to obtain ministerial
intervention to improve the lot of prisoners who were
in need of
better conditions. He also testified about the social development
programmes FAM had initiated. Brown had started a
choir and assisted
children with their schooling. In an exchange with the court after he
was asked how he viewed the prospect of
future incarceration Brown
said the following:
‘
The
only way I can answer this is to say that, as I said at the outset of
this, this has been a very long six years and I am quite
tired of
looking over my shoulder, I am quite tired of all the adverse media,
I am quite tired of all the litigation and I want
finality and if
that means that I need to spend some time in prison to get finality
then I will and I will try and make something
positive out of it. I
will because my nature is to try and help people. So I am quite sure
if the Court deems it reasonable to
give me a prison term that there
will be some or other project that I could make a positive
contribution towards, use my skills
and the things that I have also
learnt in this process, to try and assist other people.’
[61]
Under cross-examination, Brown stated that:
‘
[W]hen
this portfolio was out of balance from time to time it was due to our
failings in respect of administration. It wasn’t
that we set
out to breach mandates and defraud people and so on.’
[62]
According to Brown he deviated from the mandates in question because
of bad cash-flow planning. He conceded, however, that
at the time the
first promissory note was sold, FAM was not experiencing a cash-flow
problem. From his evidence, it is clear that
during 2010, at the time
that he was testifying, TETA had not yet received any part of its
investment back and it was unclear whether
it would recoup its entire
investment.
[63]
Brown conceded that, when the first promissory note was cashed, he
took R11 million for himself. That money was used to acquire
a
beach-side residential property and another one slightly away from
the beach. At first, he stated that he considered it a good

investment and then went on to say that the properties were for the
benefit of his family. He almost immediately thereafter appeared
to
justify taking the  R11 million from the proceeds of the sale of
the first promissory note by stating that he was entitled
to fees for
assisting with TETA’s prior investment problems. It will be
recalled that the letter provided by Goodwin on behalf
of Worthytrade
provided a justification that Goodwin accepted to have been a
fabrication. Brown also admitted to the purchase of
the luxury motor
vehicles referred to earlier.
[64]
A short while later during his testimony, Brown reverted to
justifying the purchase of the property and the motor vehicles
as
part of FAM’s overall portfolio planning. Almost immediately
thereafter, Brown sought to justify the purchase of the motor

vehicles as an entitlement flowing from the fees that FAM had earned.
[65]
Brown conceded that TETA funds were used to purchase the software
company referred to earlier. He admitted that the company
did not
generate profits in the first year of its purchase. Brown insisted,
however, that the company was a valuable investment.
According to
Brown FAM’s cash-flow problems became evident in 2006. The TETA
investment commenced in 2003. Brown explained
the deviation from the
TETA mandate on the basis that he wanted to optimise income. Brown
testified that the software company had
been purchased for R21
million with TETA funds. Asked how quickly these assets could be
liquidated to meet a recall of the investment
by TETA, Brown
testified as follows:
‘
[T]hat
would obviously depend on the market conditions at the time. It would
also depend on what the offer was. We received various
offers over
the period of time for Santè. But I would have to speculate,
maybe six months . . . Well they would be able
to get it but they
wouldn’t get it immediately, no.’
[66]
At this stage the court took exception to the State’s attempts
to show that TETA had suffered actual loss. The court
reminded the
State that the plea that had been accepted was limited to a
concession that there had only been potential prejudice.
A debate
ensued between counsel for the State and Veldhuizen J concerning the
extent to which evidence adduced up until the acceptance
of the plea
of guilty could be considered. That debate appeared to embrace the
question whether the State, in adducing controverting
evidence, could
go beyond the
dolus eventualis
that had been admitted towards proving
dolus
directus
. It was the first of many
exchanges between the court and counsel for the State concerning
these two issues.
[67]
Brown continued to testify about alternative investments that
deviated from the TETA mandate. He explained that FAM had used
TETA
funds to purchase the Santè Spa and Hotel, which had not been
fully built at that time. FAM had paid R89 million to
purchase the
hotel. FAM appears to have used TETA funds to complete the building.
Asked about whether that was not a risky investment,
Brown replied as
follows:
‘
That
is only very risky in respect of the call up of the money if you
don’t have insurance number one and number two if you
don’t
have other instruments or cash to be able to repay the investors.’
Asked
about whether the insurance would cover fraud, Brown replied:
‘
Yes,
you can in fact. I don’t know if that applies in this instance
though.’
A
debate then ensued between the court and counsel for the State about
the propriety of that line of questioning. As stated earlier,
I shall
later in this judgment deal with material interventions by the court.
[68]
Brown took the view that it counted in his favour that he would have
been able to borrow money against these assets in order
to meet
investor claims. Brown was unable to say whether any of the TETA
funds were used to purchase MATCO. Brown’s justification
for
purchasing MATCO despite not being possessed of the cash and for
investing TETA’s moneys in alternative investments in
the
following terms is significant:
‘
[D]id
you have the money sufficient in assets which you could liquidate . .
. Yes.  . . . to repay them. . .
Did you have it? In
what form? . . . In various assets.
Like
what? . . . Dep instruments, money market instruments, cash in the
bank, private equity investments and properties, as I have
just
testified.’
[69]
In respect of the MATCO transaction, R1,13 billion of moneys from
that entity invested with Old Mutual was called up immediately
by FAM
after already having taken R70 million from MATCO’s Investec
investment. Brown admitted that, after the MATCO takeover,
he had
become a trustee, with MATCO structured as a trust administration
business. It appeared to operate as a trust, registered
with the
Master of the High Court, administering sub-trusts for the benefit of
beneficiaries. Trustees consider and process applications
from
beneficiaries for payment and assistance, etc. Whilst Brown contested
the media description of the beneficiaries as widows
and orphans in
relation to pension funds, he acknowledged that that description had
been coined.
[70]
From the Old Mutual funds, a number of immovable properties were
acquired, including an office block at Century City. With
MATCO
money, Brown had also purchased farms and beach-side property in the
Eastern Cape. The latter property did not generate any
income. One of
the properties was bought in the name of a trust, with Brown and his
wife included as trustees.
[71]
Brown denied being reckless with investor funds and was adamant that
the curators had made massive profits on the sale of immovable

property owned by FAM and/or related trusts. He refused to
acknowledge that registering property in trusts controlled by him had

placed investments at risk.
[72]
Brown conceded under cross-examination that he had denied to the FSB
that TETA was FAM’s client. He attempted to explain
this away
by stating that TETA had previously been Worthytrade or Goodwin’s
client. He was confronted by the fact that the
TETA mandate had been
concluded with FAM.
[73]
According to Brown, he experienced remorse. Asked to expand on the
statement, he said the following:
‘
I
did testify in my evidence in chief that staff members have lost
their work. There’s issues in respect of recoveries from
the
investors. I did include all of that. I didn’t say that I had
remorse for myself.’
He
later went on to say:
‘
I
assisted the investors that approached me. I went to the Living
Hand’s trustees when they requested, the trustees at the
time,
they have since changed. Given them all the financial records and the
information that I did have and, you know, there were
a myriad of
things. I even went as far as assisting the Antheru Trust with
applications as far as it was within my means.’
[74]
From Mr Brown’s evidence it appeared that there had been
extensive litigation between him and the FSB. He also conceded
that
he had launched two applications to stay his prosecution.
[75]
Mr Zacharias Venter (Venter), Mr Brown’s maternal uncle, was
the next witness to testify in mitigation of sentence. He
testified
that both of Brown’s parents were selfless people. Brown’s
father had died in an attempt to save someone
else’s life.
Brown’s stepfather, equally, was someone who cared about
people. Brown was raised in a God-conscious environment.
Insofar as
Brown’s plea of guilty on two counts of fraud was concerned,
Venter took the view that he expected nothing less
of the man because
he was someone who took responsibility for his actions. Venter
experienced Brown as someone who had matured
quickly and who took
responsibility for his actions. In his view, Brown’s trial and
accompanying tribulations saw a growth
in him for the better.
Evidence
in aggravation of sentence
[76]
The State then proceeded to adduce evidence in aggravation of
sentence. The first person to testify in that regard was Mr Dawood

Seedat (Seedat), a chartered accountant in the employ of the FSB
since April 2006, with 22 years of experience in financial
management.
He was part of the inspection team that investigated the
affairs of FAM and associated companies. He explained that the FSB’s

primary function was to oversee the activities of financial
institutions other than banks. It was the FSB’s task to ensure

compliance with statutory prescripts. The FSB is the body tasked with
the licencing of bodies or persons who provide financial
services.
The statutory regulatory regime was to create a responsible and safe
environment for investors. The Financial Advisory
and Intermediary
Services Act 37 of 2002 (the FAIS Act) contains provisions relating
to the requirements for persons and entities
who engage in this
business. The FSB has promulgated a code of conduct for businesses
which engage in the financial services industry.
[77]
Seedat explained that FAM was licenced to provide advice and to
render intermediary services in relation to a wide category
of
financial products, including discretionary financial services
relating to management of financial products, confined to money

market instruments, warrants, certificates and the like. Seedat also
referred to the
Financial Institutions (Protection of Funds) Act 28
of 2001
and its provisions which dictate that a director, member,
partner, official, employee or agent of a financial institution, or
of
a nominee company who invests, hold, keeps in safe custody,
controls, administer or alienate any funds of the financial
institution,
or any trust property, must, with regard to such funds,
observe the utmost good faith and exercise proper care and diligence.
Insofar
as trust property is concerned, the instruments or agreement
by which the trust or agency in question has been created observe the

utmost good faith and exercise the care and diligence required of a
trustee in the exercise or discharge of his or her powers and
duties.
[78]
Seedat was adamant that FAM was constrained to comply with the terms
of any investment mandate and to report to clients on
investments
placed with it. There were stringent accounting and audit
requirements that apply to financial service providers who
have a
discretionary FSB licence. He noted that s 19 of the FAIS Act
stipulates that the monies received from clients for investment

purposes have to bear the character of trust funds in the hands of
the FSB.
[79]
Seedat testified that there were material breaches by FAM of
accounting and auditing requirements. In respect of the TETA
transaction, there was no room for a deviation from the mandate. The
FSB had launched an investigation into FAM’s affairs
as a
result of complaints received from Mr Bam, a former director of FAM.
Seedat recalled an interview with Brown during November
2006 where
Brown denied that TETA had been a FAM client. When Seedat showed him
documents to the contrary, he could not explain
them.
[80]
Seedat questioned Brown about his assertion that FAM held assets that
balanced portfolios and that there was no need for concern
about
there being insufficient assets to meet investor claims. Seedat
specifically asked about a promissory note of R150 million,
allegedly
held by FAM. Brown assured him that he was in possession of that note
and would produce it. The note did not exist and
Brown could not
produce it.
[81]
According to Seedat, written statements from FAM’s own auditors
indicate that it owed more to clients than the value
of its assets.
FAM’s auditors did not appear to be able to do a proper
reconciliation of investor accounts and were unable
to verify that a
proper allocation of investments had been made. Furthermore, FAM’s
auditors noted that in respect of the
MATCO transaction, FAM’s
directors had accepted that they had overcharged on fees and had
agreed to correct it. FAM’s
auditors disagreed with FAM’s
valuation of the software company and considered the valuation to be
excessive. The auditors
recorded that they had requested a list of
non-monetary assets held by FAM. The list that was provided did not
indicate who the
owners of the assets were. This added to the
auditors’ concern as to the general requirements set out in the
regulatory statutes
and the FSB’s code of conduct requiring
clients’ funds to be separately identifiable from that of the
Financial Services
Provider. The FSB’s own investigation
revealed that the issues identified by FAM’s auditors as
troubling were justified.
[82]
Seedat testified that, based on the FSB’s last calculations,
giving FAM the benefit of the doubt in respect of certain

investments, the FSB found that R406 million could not be accounted
for. This discrepancy was the difference between the amount
of money
received from clients, as against FAM’s investments on their
behalf. Seedat testified that from the FSB’s
analysis it
concluded that FAM would not be able to honour its monthly
obligations to clients without liquidating existing portfolios
or
property investments. It was clear to the FSB, Seedat testified, that
FAM treated all the investments it received as a common
cash pool
from which they could draw to settle whatever present claims were
made. Later, Seedat testified that funds had been transferred
to
offshore bank accounts by FAM and that those accounts have not yet
been investigated. It is not beyond the realm of possibility
that
there might be some recovery from that source.
[83]
When Seedat testified about how FAM had misappropriated TETA funds
and how Brown had contravened statutory injunctions, Veldhuizen
J
intervened and the debate continued about how far the State could go
in adducing and controverting evidence beyond its acceptance
of
Brown’s plea of guilty. At one stage, the court accused the
State of mismanaging the case, particularly in relation to
its
acceptance of Brown’s plea of guilty.
[84]
Seedat testified that the FSB concluded that FAM and key individuals
within that corporate structure did not act with honesty
and
integrity as required by the FSB’s general code of conduct.
However, under cross-examination, Seedat conceded that the
FSB could
not say that every cent of investor funds was misappropriated.
[85]
The last witness to testify for the State was Mrs Ivanka Atcheson
(Atcheson), a MATCO trustee at the time that it was sold
to FAM. She
described MATCO’S business as follows:
‘
The
business was basically involved in administrating funds for
beneficiaries, for pension funds and provident funds, in order to
pay
school fees and all the necessary – until the beneficiary
became of age 21, whatever limit was set on the trust, so as
to
assist the beneficiary in mainly getting an education, providing for
school fees and uniform. That was the main objective of
the
business.’
[86]
After all the evidence was adduced the State and defence presented
their submissions concerning the effect of Brown’s
plea of
guilty and the evidence that might rightly be taken into account in
arriving at an appropriate sentence.
Judgment
on sentence
[87]
Veldhuizen J then proceeded to sentence Brown and to that end
produced a seven page judgment. In the first few paragraphs Velhuizen

J recorded Brown’s personal circumstances. He took into account
in favour of the appellant that he had been pained because
his two
children and his wife had moved to Australia and he had not seen them
for the last five years. He also appeared to consider
favourably the
fact that Brown had been scorned by his friends and the public at
large and even by his church. He considered the
‘trauma and
personal suffering’ that Brown had endured due to his
prosecution.
[88]
Considering the nine charges that appeared in the indictment,
Veldhuizen J stated that, on the face of it, they were extremely

serious charges which carry heavy penalties. That notwithstanding,
the court went on to say the following:
‘
Considering
the publicity which your case has received in the media, I think it
appropriate to make it clear what you have not been
convicted of. You
have not been convicted of having stolen money from investors or
pensioners, or that you defrauded them. You
have not been convicted
of having stolen money from Fidentia or its subsidiaries. Your
conduct underlying your convictions, can
in no way be described as a
Pyramid scheme. I cannot overemphasize that the two counts of fraud
that you have been convicted of,
are an extremely diluted version of
the fraud that the indictment alleges. The second count of fraud
relates only to fraud against
the shareholders of MATCO, not against
widows & orphans. These two counts of fraud pale when compared to
the charges in the
indictment. But it [has] been accepted by the
prosecution that you never had the intention to cause actual
prejudice or damage.
You have only admitted and been found to have
intended potential prejudice and your moral blameworthiness must
accordingly be judged
in the light thereof.’
[89]
Dealing with Seedat’s evidence of the shortfall of R406
million, the court below said the following:
‘
If
his findings are factually correct, then I find it astounding that
you have been brought to court on only the nine counts listed
in the
indictment. I find it even more astounding that the State saw fit to
accept your pleas of guilty on the facts set out in
the admissions
you made in terms of
section 220
of the
Criminal Procedure Act 51 of
1977
. If the facts related by this witness are correct, then
something is sorely wrong and I can only think the prosecution case
has
been poorly handled.’
[90]
The court went on to deal with the submission on behalf of the State
that the minimum sentence prescribed in terms of
s 51(2)(
a
)
of the
Criminal Law Amendment Act 105 of 1997
applied and that Brown
should be sentenced to imprisonment for a period of not less than 15
years.
[91]
Having regard to the plea of guilty in respect of the TETA and MATCO
transactions, the court held that, since Brown had pleaded
guilty on
the basis that there had been no actual prejudice and all that he had
foreseen was potential prejudice, the offences
in question did not
fall within the category of crimes of fraud involving amounts of more
than R500 000 which was the jurisdictional
fact required for the
minimum sentence provisions to be applicable. Thus, Veldhuizen J held
that the minimum sentence legislation
did not apply and that he was
at large to pass a sentence which was just and fair. He went on to
state the following:
‘
It
is clear that these crimes, when compared to the crimes with which
you were originally charged, do not carry the same high degree
of
moral blameworthiness. I do not think that a sentence emphasising the
rehabilitative purpose of sentencing is required. I must
emphasise
that the business world, like the rest of society, must be
scrupulously honest and fair in their business dealings, and
this
sentence must serve to deter other likeminded persons, and also serve
as punishment for you. At the end of the day, society
demands that a
sentence be imposed which is fair and just, keeping in mind your
crimes and your personal circumstances.’
The
sentence itself
[92]
Veldhuizen J went on to impose the following sentences:
‘
1.
On count 2, you are
SENTENCED TO PAY
A FINE OF R75 000,00 (SEVENTY FIVE THOUSAND RAND) OR SERVE 18
(EIGHTEEN) MONTHS IMPRISONMENT
. A
further
18 (EIGHTEEN) MONTHS
IMPRISONMENT
is
imposed, but
SUSPENDED FOR A PERIOD
OF FOUR (4) YEARS
on condition that
you are not again convicted of the crime of fraud committed during
the period of suspension.
2.
On count 6, you are also
SENTENCED TO
PAY A FINE OF R75 000,00 (SEVENTY FIVE THOUSAND RAND) OR SERVE
18 (EIGHTEEN) MONTHS IMPRISONMENT
.
A further
18 (EIGHTEEN) MONTHS
IMPRISONMENT
is imposed, but
SUSPENDED FOR A PERIOD OF FOUR (4)
YEARS
, on condition that you are
not again convicted of the crime of fraud committed during the period
of suspension.’
[93]
The State, aggrieved at the sentences which they considered to be
disproportionate to the enormity of the fraud perpetrated
by Brown,
launched the present appeal.
Conclusions
Change
of plea during a trial
[94]
More than 25 years ago, in
S v Mokhobo
1989 (1) SA 939
(A),
this court had occasion to consider s 112 of the Act, in relation to
it being applied both at the commencement of proceedings
as well as
after the State has led evidence and an accused has then elected to
change his plea from not guilty to guilty. At 943D-E
the following
appears:
‘
Artikel
112 vind normaalweg toepassing wanneer ‘n beskuldigde by die
aanvang van ‘n verhoor skuldig pleit. Daar is egter
niks in die
artikel wat spreek teen ‘n aanwending van die bepalings daarvan
indien ‘n beskuldigde wat aanvanklik onskuldig
gepleit het sy
pleit wens te verander nadat die Staat getuienis begin lei het nie –
mits, natuurlik, die anklaer bereid is
om op daardie stadium ‘n
pleit van skuldig te aanvaar. Dit mag dan egter nie nodig wees om die
beskuldigde te ondervra, of
vir hom om in sy verklaring erkennings te
maak, aangaande elemente van die misdaad wat reeds deur getuienis
bewys is nie.’
[95]
In
Mokhobo
the
court was concerned principally with whether the death sentence could
be imposed in the absence of evidence proving the guilt
of the
accused. Put differently, the death sentence could not be imposed if
guilt was based solely on a statement constituting
a plea of guilty
or if a conviction followed upon questioning in terms of s 112 after
a plea of not-guilty had been changed to
one of guilty.
[5]
[96]
In
S v Abrahams en andere
1980 (4) SA 665
(C) at 668A-B, Vivier J recognised that s 112 did not
apply only to a plea of guilty before a trial commenced, but that it
also
applied when there was a change of plea from not guilty to
guilty during the course of the trial.
[97]
In
S v Sethoga & others
1990 (1) SA 270
(A) this court dealt with the effect of a change of
plea from not guilty to guilty after evidence had been led by the
State. In
that case, statements were tendered in terms of s 112(2) of
the Act admitting all the material elements of the offences to which

the accused pleaded guilty. It is necessary to record that they
pleaded guilty to only some of the charges that had been preferred

against them. The pleas were accepted by counsel for the State.
Counsel representing the accused and the State were informed by
the
presiding Judge in Chambers that he considered there to be sufficient
evidence to justify the conviction of all the appellants
on
all
counts
. Counsel indicated that they
were prepared to leave the matter in the hands of the court. On
resumption the State closed its case
whereupon the appellants did
likewise. The trial court convicted the accused on all the counts.
[98]
In
Sethoga
this court reaffirmed the correctness of the
position adopted in
Makhobo
and
Abrahams
. It went
further and noted that once an accused pleaded not guilty, a court is
seized with the duty of determining the issues between
the State and
the accused raised by the latter’s original plea of not guilty.
It held (at 275C-E):
‘
The
prosecutor cannot interfere with the exercise of that duty and compel
the Court to enter a verdict of guilty on a lesser charge
by seeking
to limit the
lis
between
the State and the accused. Any acceptance by the prosecutor of a plea
of guilty to a lesser offence can accordingly only
take place with
the Court’s consent. This was first laid down in
R
v Komo
1947 (2) SA 508
(N) at 511, and
has been consequently followed since then. (See
R
v Seboko
1956 (4) SA 618
(O);
S
v Cordozo
1975 (1) SA 635
(T);
S
v Mlangeni
1976 (1) SA 528
(T).) In my
view it represents the true position, which
a
fortiori
applies to a case such as the
present where there are several counts and the appellants, having
initially entered pleas of not guilty
to all counts, seek –
after evidence has been led – to change their pleas to guilty
on certain of the charges. Nothing
in the provisions of s 112
detracts from the correctness of this conclusion.’
[99]
In
S v Olivier
2007 (2) SACR 596
(C) Moosa J had regard to the
decisions in
Abrahams
,
Sethoga
and
Mokhobo
. At
para 10 he said the following:
‘
In
my view the evidence tendered by the State forms part of the record
of these proceedings. (In
S v
Mokhobo
1989 (1) SA 939
(A) at 943, the accused initially pleaded not guilty
to two charges of murder, but after medical evidence of the cause of
death
of the two deceased was led, the accused altered his plea on
both counts to one of guilty. This was accompanied by a written
statement
in terms of s 112(2). The State accepted the plea of guilty
and closed its case. The Court, on the strength of the admissions
contained
in the accused’s s 112(2) statement and the medical
evidence, convicted the accused. Implicit in that finding, the Court,

in convicting the accused, relied not only on the admissions
contained in the s 112(2) statement, but also on the evidence
presented
in the trial prior to the change of plea.) I therefore rule
that the evidence tendered by the State prior to the change of plea,

constitutes evidence in these proceedings.’
[100]
In A Kruger
Hiemstra’s Criminal Procedure
(2013) at
17-12, the acceptance of a plea of guilty is discussed in the
following terms:
‘
(i)
At the beginning of the case, when the accused is asked to plead. The
case is then still in the hands of the prosecutor and
the court
cannot prevent the prosecutor from accepting a plea of guilty on the
charge as [it] stands, or on an alternative or permitted
other charge
(
S v Cordozo
1975 (1) SA 635
(T);
S v Mlangeni
1976
(1) SA 528
(T);
S v Sethoga and Others
1990 (1) SA 270
(A) at 274I-275G). If the prosecutor accepts a plea
of guilty to an alternative or other charge, the main charge falls
away and
the accused cannot be convicted of it (
S
v Ngubane
1985 (3) SA 677
(A) at 683).
The court at 683E described such acceptance as a
sui
generis
act by which the prosecutor
limits the ambit of the
lis
between
the state and the accused in accordance with the accused’s
plea.
(ii)
In the course of the case, and after the accused, by a plea of not
guilty, has joined issue with the state. It often happens
that the
accused in the course of the trial changes the plea to one of guilty
to a lesser offence which is then a competent verdict
on the charge
in question, which the prosecutor may accept. In the
Sethoga
case
supra
at
274I-275G the Appellate Division explained the fundamental
distinction between acceptance of a plea by the prosecutor before
and
after the beginning of the trial. Before the trial commences, i.e. at
the plea stage, the prosecutor is
dominus
litis
and as such entitled, by means of
acceptance of a plea of guilty to another offence, to limit the
lis
between the state and the accused in
accordance with the plea. However, as soon as the trial has
commenced, the duty rests on the
court to adjudicate the case as
defined by the charge and the plea. The prosecutor cannot interfere
with the exercise of this duty;
he or she cannot at this stage by the
acceptance of a plea limit the court’s functions of
adjudication. Such limitation requires
the consent of the court.’
[101]
The plea tendered by Brown was accepted by both the court and the
prosecution without each understanding its true tenor or
appreciating
their respective roles. It will be recalled that at the time that the
plea was tendered and accepted, Veldhuizen J
took the view that s 112
did not find application when a plea of guilty was tendered
in
medias res
. He considered it to only
apply when a plea was tendered at the commencement of a trial. A
slight amendment was effected to the
plea initially tendered because
of the court’s concern about whether, in respect of the MATCO
transaction, the facts stated
in the plea were sufficient to found a
conviction. Thereafter Veldhuizen J, without more, proceeded to
convict the accused on the
strength of the plea of guilty. It will be
recalled that in terms of the plea, Brown accepted his guilt on the
two counts on the
basis of
dolus
eventualis
.
[102]
Having regard to the authorities referred to above, Veldhuizen J was
obliged, when the plea was tendered, to consider whether
the plea
ought to be accepted, with particular regard being paid to the effect
of the evidence led up until that stage. So, for
example, he could
have put to counsel that the evidence summarised above was such that
it could confidently be concluded that the
appellant was guilty of
the charges on the basis of
dolus
directus
. Because he ostensibly
misunderstood his adjudicatory role, he abdicated that
responsibility. That notwithstanding, the plea was
accepted by the
court and also by the prosecution. The State, relieved at not having
to continue to deal with the mass of documentation
and the
complexities of the investment industry, was probably too eager to
accept the plea without thinking through the consequences.
Before us,
counsel representing the State rightly conceded that in this regard
the State could have done better.
Evaluating
evidence consistent with the plea
[103]
In deciding on an appropriate sentence, the court below ought not to
have restricted itself to the bare facts contained in
the plea. The
tendered plea does not provide context nor does it present enough of
a picture for the court to properly fulfil its
sentencing function. I
will, however, accept in favour of Brown that, in considering the
evidence adduced up until the acceptance
of the plea and presented in
mitigation and aggravation of sentence, no regard can be paid to
evidence inconsistent with the plea.
More particularly, evidence
tending toward
dolus directus
and
actual loss on the part of investors has to be discounted. It is also
necessary to remind ourselves that Brown pleaded guilty
on the basis
that he foresaw potential rather than actual prejudice.
[104]
It is necessary, whilst engaging in the exercise referred to in the
preceding paragraph, namely an evaluation of the evidence
consistent
with Brown’s plea, to remind ourselves of the definition of
dolus eventualis
. In CR Snyman
Criminal Law
5ed (2008)
at 184 it is defined as follows:
‘
A
person acts with intention in the form of dolus eventualis if the
commission of the unlawful act or the causing of the unlawful
result
is not his main aim, but:
(
a
) he
subjectively foresees the possibility that, in striving towards his
main aim, the unlawful act may be committed or the unlawful
result
may be caused and
(
b
) he
reconciles himself to this possibility.’
The
learned author goes on to say the following:
‘
Another
way of describing component (b) is to say that X was reckless as to
whether the act may be committed or the result may ensue.
However, it
does not matter whether component (b) is described in terms of
“reconciliation with the possibility” or
in terms of
“recklessness”.’
Snyman
gives an example of where a person might be held to have
dolus
eventualis
at 185:
‘
If
X has
dolus eventualis,
it
is possible that he may in the eyes of the law have the intention to
bring about a result even though he does not wish the result
to
follow. In fact,
dolus eventualis
may be present even though X hopes that the prohibited result will
not
follow. In this form of intention the voluntative element consists in
the fact that X directs his will towards event A, and decides
to
bring it about even though he realises that a secondary result (event
B) may flow from his act.’
The
learned author points out that there are two requirements for the
existence of
dolus
eventualis
:
[6]
‘
The
first is that X should
foresee
the possibility of the result, and the second is that he should
reconcile
himself to this possibility. The first may be described as the
cognitive part of the test and the second as the conative (or
volitional)
part of the test.’
Consideration
of the relevant evidence
[105]
I now turn to a consideration of the relevant evidence. Accepting in
Brown’s favour that he might have had, as a primary
object,
optimising investment returns by investing in a range of asset
classes contrary to the mandate, it is nevertheless strikingly
clear
that he and his cohorts were at the very least ‘gung-ho’
about how they dealt with investor funds. They ignored
the most basic
regulatory rules directed at ensuring that the funds were safeguarded
and treated as trust funds.
[106]
Brown was equally unthinking when spending moneys drawn from what he
considered to be a common pool of investments to be dealt
with at
whim. He sought comfort in the fact that the business had grown
exponentially and that there were, at some stage, sufficient
assets
to meet immediate investor claims.
[107]
It is relevant that the investments in businesses such as MGX
Software Futures held significant risks. All the while, the
investor
concerned was being assured that the mandate was being adhered to.
[108]
After the investigation by the FSB was launched, Brown, instead of
owning up to his misdeeds, resorted to subterfuge and deceit.
The
unchallenged evidence of Maddock and Goodwin, concerning the
reconstruction of accounts and statements described as
‘retrofitting’,
and the resort to measures such as the
engineered letter from Goodwin on behalf of Worthytrade are all
consistent with that pattern
of deceit. This must surely count
against Brown.
[109]
The TETA and MATCO transactions involved hundreds of millions of
rands. Thus the amounts at risk were substantial.
[110]
In respect of the MATCO transaction, a material consideration is that
a substantial number of beneficiaries of the portfolios
which had
been plundered by FAM belonged to a vulnerable class. In respect of
the TETA funds, it is important to note that the
investment emanated
from a statutorily compelled body whose purpose was skills
development.
[111]
Venter’s testimony that Brown was a person who took
responsibility for his deeds is belied by the years it took before
he
pleaded guilty. The admissions that Brown made during his trial up
until the plea of guilty was tendered were presented in a
piece-meal
fashion and were mostly formal in nature. He declined at the outset
to provide an explanation in support of his plea.
Whilst it is his
right it is not consistent with someone of whom it is claimed was
owning up to his deeds. He also engaged in extensive
litigation that
had the effect of delaying the commencement and completion of his
trial.
[112]
The promise at the beginning of Brown’s testimony, that he was
going to be forthcoming and repentant was almost immediately
rudely
dashed. His primary concern appeared to be his own interests and
comfort. He railed against the FSB which, after all, was
only
fulfilling its statutory mandate. He criticised the police, the
media, the Reserve Bank, the curators and the public. His
asserted
remorse was more apparent than real. A substantial part of his
evidence thereafter was devoted to criticism of regulatory

authorities, the media, the police and the prosecution. Brown’s
statements of sympathy concerning investors appeared contrived
and
reeked of insincerity. His apology to investors is qualified and his
evidence as a whole reeks of self-pity.
[113]
Brown’s testimony concerning the Bachelor of Commerce degree
was, as described earlier, simply false, as was his explanation
about
utilising R11 million of TETA’s funds to purchase property in
the name of the trust controlled by him. His tendency
to dishonesty
is reinforced by Seedat’s evidence that he had denied that TETA
had been a client of FAM’s.
[114]
It is apparent from Brown’s testimony that he continuously
downplayed and minimised his moral and legal blameworthiness.
[115]
It must be relevant that by the time of the trial and, indeed, even
at the time of the hearing before us, there was no indication
that
the TETA funds had yet been repaid. This is not a consideration of
actual loss or an exclusion of the possibility that investors
might,
ultimately, be repaid at least some part or all of their investment,
but is an exercise in weighing Brown’s explanation
that the
negative impact of the manner in which the funds were treated by FAM
was limited to investors having to wait a short while
before they
were repaid. Brown’s reliance on insurance cover as adequate
protection of investor funds is cynical and obviously
misplaced as it
is trite that fraud unravels all.
[116]
The conclusion by the court below that the two counts of fraud on
which Brown had been convicted were not that serious and
that his
moral blameworthiness was limited, is entirely unjustified.
Applicability
of minimum sentence provisions
[117]
The court below erred primarily by holding that s 51(2)(
a
) of
Act 105 of 1997 was inapplicable. Veldhuizen J, in arriving at that
conclusion, had regard to the TETA and MATCO transactions.
In respect
of the first, he considered that Brown had only admitted to making
representations contained in the monthly statements
to TETA which had
the potential to cause prejudice. In respect of the MATCO
transaction, he took into consideration that the minority

shareholders were paid and that, through the handing over of control
of MATCO, funds became available to pay the balance of the
purchase
price to the majority shareholder. Veldhuizen J said the following:
‘
Those,
in essence, are the facts which constitute the two crimes of which
you have been convicted. These two crimes, as you admitted,
involved
potential prejudice and not actual prejudice and certainly do not
“involve amounts of more than R500 000,00”.
After
you made the admissions which I mentioned, and changed your plea, the
State simply closed its case. The State, with regard
to both counts,
accepted that your conduct entailed potential prejudice and not
actual prejudice.
After we convicted
you, the State led evidence which, if it be accepted, constitute
crimes which are far more serious.
I
cannot sentence you for crimes of which you have not been convicted,
that would be wrong. I can only sentence you for that of
which you
have been convicted. It is, accordingly, my judgment that section 51
of Act 105 of 1997 does not apply.’
[118]
Fraud is defined by Snyman as follows:
‘
Fraud
is the unlawful and intentional making of a misrepresentation which
causes actual prejudice or which is potentially prejudicial
to
another.’
[7]
The
unlawful and intentional making of a misrepresentation does not have
to cause actual loss for it to constitute fraud. That fact
eluded the
court below. In respect of each of the transactions in question Brown
committed fraud involving tens of millions of
rands, way beyond the
R500 000 threshold, which is the jurisdictional fact that
triggers the minimum sentence provisions.
Those assets were at risk
and the potential prejudice has to be viewed from that perspective.
Thus, in concluding that the minimum
sentence legislation did not
apply, the court below erred. I may add that even if the court below
was correct in its conclusion
that the minimum sentence did not find
application, it ought to have considered whether, given the objective
gravity of the offences,
a custodial sentence was nonetheless called
for. That  it did not do. I shall now turn to consider whether
there are substantial
and compelling circumstances justifying a
departure from the prescribed minimum sentence of 15 years’
imprisonment.
An
appropriate sentence
[119]
In answering that question, the oft cited decision of this court in
S
v Malgas
2001 (1) SACR 469
(SCA) is instructive. Marais JA (para
8) said the following:
‘
In
what respects was it no longer to be business as usual? First, a
court was not to be given a clean slate on which to inscribe
whatever
sentence it thought fit. Instead, it was required to approach that
question conscious of the fact that the legislature
had ordained life
imprisonment or the particular prescribed period of imprisonment as
the sentence which should
ordinarily
be
imposed for the commission of the listed crimes in the specified
circumstances. In short, the Legislature aimed at ensuring a
severe,
standardised, and consistent response from the courts to the
commission of such crimes unless there were, and could be
seen to be,
truly convincing reasons for a different response. When considering
sentence the emphasis was to be shifted to the
objective gravity of
the type of crime and the public’s need for effective sanctions
against it. But that did not mean that
all other considerations were
to be ignored. The residual discretion to decline to pass the
sentence which the commission of such
an offence would ordinarily
attract plainly was given to the courts in recognition of the easily
foreseeable injustices which could
result from obliging them to pass
the specified sentences come what may.’
[120]
Brown’s personal circumstances alluded to above are not such
that, by themselves, they compel a departure from the prescribed

minimum sentence. I have taken into account, in Brown’s favour,
that he initiated social responsibility programmes such as
starting a
choir and assisting school children. He was also a first offender.
However, it is quite clear that the message by the
legislature is
that white collar criminals who commit offences of a certain
magnitude must not be permitted a soft landing. I have
at some
length, contrary to the approach of the high court, considered the
seriousness of the offence. Such trauma as was visited
upon Brown
because of his misdeeds was entirely of his own making. Brown, in
testifying, showed a remarkable lack of insight into
the gravity of
his conduct. There was scant, if any, trace of real remorse. It is
clear that Brown is a man of enormous energy
with heightened business
acumen and was the driving force behind FAM. Would that he had used
those skills with a better moral compass.
His continuing dishonesty
demonstrated during his testimony redounds to his discredit. Lastly,
the question of whether
dolus eventualis
on its own constitutes a substantial and compelling circumstance
justifying a lesser sentence is required to be addressed. Although

the absence of
dolus directus
may well count in his favour it is but one of the totality of factors
to be taken into account. Having regard to all the aggravating

factors referred to earlier, I am unable to conclude that there are
substantial and compelling circumstances present that would
justify a
departure from the prescribed minimum sentence.
[121]
In my view, the sentence imposed by the court below tends toward
bringing the administration of justice into disrepute. Less

privileged people who were convicted of theft of items of minimal
value have had custodial sentences imposed.
[8]
We must guard against creating the impression that there are two
streams of justice; one for the rich and one for the poor.
[122]
In
S v Blank
1995 (1) SACR 62
(A) at 73B-D this court, in
dealing with fraudulent conduct of a stockbroker, said the following:
‘
In
view of all these facts, I feel fully justified in imposing a
sentence which will deter not only the accused and other stockbrokers

from committing crimes similar to those of which the accused has been
convicted, but also others involved in business who may be
tempted to
indulge in larger-scale crimes of dishonesty. The time has already
arrived when the severity of punishments imposed
for this sort of
crime while of course taking the personal circumstances of a
particular accused into account, should proclaim
that society has had
enough and that the courts, who are the mouthpiece of society, will
not tolerate such crimes and will severely
punish offenders: cf
S
v Zinn
1969 (2) SA 837
(A) at 542D-E.’
At
75i-76a the court, with apparent approval, quoted the following part
of the judgment of the trial court:
‘
In
matters which come up on review and on appeal, these courts daily
confirm sentences of a fine plus several years’ imprisonment,

conditionally suspended, for shoplifting, where items worth a few
rand are involved; and also sentences of unsuspended imprisonment,

frequently of four or five years, where a motor vehicle has been
stolen.’
[123]
In
Blank
the
appellant, a stockbroker, had participated in schemes with senior
employees of a life-insurance company to purchase shares and
sell
those shares to the company at a profit and receive part of the
proceeds. The scheme involved 48 fraudulent transactions spanning
a
period of 17 months. The total profits exceeded R9,75 million of
which the appellant received nearly R1,5 million. In considering
an
appropriate sentence this court confirmed the view of the trial court
that there is a need for absolute honesty by stockbrokers.
It took
the view that, if a broker fell short of the standard required of
him, he had to expect the full rigour of a severe sentence
being
imposed on him, both as punishment, and to deter others. This court
dismissed an appeal against the sentence of 8 years’

imprisonment. What this court said about stockbrokers applies equally
to asset managers who are in a fiduciary position in relation
to
investor assets.
[124]
In
S v Assante
2003 (2) SACR 117
(SCA) the appellant, a 50-year old father of two
with no previous convictions, was convicted of 108 counts of fraud,
perpetrated
against a bank of which he was a branch manager, which
together totalled an amount of R345 million. He was sentenced on each
of
the counts to 15 years’ imprisonment. The sentences on all
the counts, except one, were ordered to run concurrently. The
effective sentence was 24 years’ imprisonment. It is noteworthy
that the judgment records that the appellant had not directly

benefitted from the frauds. Investors were encouraged to think that
they were lending money to the bank whereas, in truth, the
moneys
were employed for the development of sectional title and cluster
homes. Problems arose when the activities of the property
developers
did not provide enough cash-flow to ensure the repayment of loans
when they became due. This court dismissed an appeal
against
sentence.
[125]
For the reasons set out above, I would incline towards setting aside
the sentences imposed by the court below and substituting
them with
the prescribed minimum sentence of 15 years’ imprisonment on
each count of fraud, and ordering the two sentences
to run
concurrently.
Repeated
unwarranted judicial interventions
[126]
Regrettably and finally, it is necessary to deal with the nature and
frequency of judicial interventions during proceedings
in the court
below. At an early stage in Maddock’s testimony, which was to
the effect that investor funds were being used
to benefit Brown, FAM
and its directors, counsel for the State asked Maddock whether Brown
had the right to use funds in this manner,
Veldhuizen J intervened
and asked how Maddock could know whether that was so. The reply was
obvious:
‘
Because
those were investors’ funds that had to be invested for the
benefit of investors.’
A
short while later, after Maddock informed the court that he was FAM’s
financial manager and that he was responsible for
keeping books of
account, Veldhuizen J suggested to him that FAM was keeping proper
books ‘and things like that’. The
judge went on to
enquire of Maddock whether the software used by FAM allowed for the
integration of all the related companies,
to which the answer was in
the affirmative. The judge went on to say the following:
‘
[COURT]:
I see. I see. You were always happy with that, I mean that as far as
the accounting in these companies were concerned,
that you . . .
[WITNESS]: I was
happy with the accounting. I think some of the – you know maybe
like loans in one company to the other company
became a bit
intricate.
[COURT]: Yes. . .
[WITNESS]: But I was
happy that all the transactions were accounted for.’
It is necessary to
set out the full exchange between the judge and Maddock that
followed:
‘
[COURT]:
Yes, and I mean you conveyed this much to the accused, that the
accounting, you are on top of it and there is – you
would have
said listen I have got a problem here, I have got a problem there but
I mean you were paid a very handsome salary.
[WITNESS]: Correct.
[COURT]: So he was –
did you tell him that listen it is under control?
[WITNESS]: We were –
we did a lot of work on getting all the accounts right and –
from when we moved from the one system
to the other – it took
quite a time for us to put the Great Planes system in and that was
correct and we did used to produce
monthly management accounts in a
pack and a report on each various company.
[COURT]: And this
was given to the accused?
[WITNESS]: Yes, it
was.
[COURT]: I see. So
from all appearances, as far as he would have been concerned, the
accounting and so on was in order. It was .
. .
[WITNESS]:
I believe so.’
[127]
It will be recalled that, when the first glimpses of a possible
defence emerged by way of the cross-examination of Goodwin,
it was to
the effect that Brown had relied on the expertise of others and on
the processes that had been put in place.
[128]
During Maddock’s evidence, when he was being asked in-chief
whether, at the time certain statements were sent to TETA,
the first
promissory note had been sold, he replied in the affirmative. The
court then interrupted and asked the following:
‘
I’d
like to know, Mr Maddock, do you know this from your own knowledge or
is this or are you presuming?’
The
ensuing answers were incrementally emphatic that Maddock knew this
from first-hand experience.
[129]
Some time later, when the court had concerns about counsel for the
State putting leading questions to Maddock, he asked the
latter
whether he knew how the money was spent after the first promissory
note was cashed. He repeated that R11 million of that
money was used
to purchase immovable property and that R3 million was used to
purchase the motor vehicles. Veldhuizen J then asked
whether Maddock
was aware whether any of the money was used to purchase a replacement
promissory note. The answer by Maddock was
that he was not aware that
that had happened.
[130]
When Maddock testified in relation to the TETA investment about how
efforts were being made to reconstruct accounts and statements
so
that the FSB would not be any the wiser and stated that those efforts
would not be a true reflection of what had happened to
the TETA
money, the court intervened. It is necessary, once again, to set out
the full exchange between Veldhuizen J and Maddock:
‘
COURT
:
Well then you better tell us why you believe that . . . Because I
mean just expressing an opinion that you don’t believe
that
it’s a true reflection, that’s not good enough, then
you’d better tell us why do you say that.
[WITNESS]: I’m
not aware of the property developments that are reflected on here or
the returns of those at all. . .
[COURT]: Ja, you’re
not aware of it, but you knew that money went there, to property
development. . .
[WITNESS]: There
were certain funds that – out of all the funds in Fidentia,
that were used for purchase of property in Horizon
Bay and the hotel
and so on.
[COURT]: We know
about that, Mr Maddock. You see it’s one thing for you to say
that this is not a true reflection . . . but
there’s another
answer and this is you may not know whether it’s a true
reflection. Now what is it exactly, because
I mean you know money
went to property development, you may not know how much or where
exactly it came from, or do you?
[WITNESS]: Well I
know how much went into various property if I had access to the
accounts . . .
[COURT]: If you had
access. Did you have access?
[WITNESS]: No, I’m
saying if I had access now, I could show you what was spent on
various properties through the financial
records.
[COURT]: Oh, right,
but then in what respect is this not a true reflection?
[WITNESS]: Because I
believe that a lot of the funds had been spent and not necessarily on
investments for Teta, they’d been
used for the payment of
salaries or the payment of, as I mentioned, the property or the cars.
[COURT]: But then
what did you do, because the accused asked you in the e-mail:
“
Graham,
does this support the financials on our side?”
So he wanted to know
is this supported, I mean that’s a silly thing to do if you
know that you’re not putting up a true
reflection of what’s
going on, then to ask your accountant is this supported by the
financials, the accountant is going to
reply, don’t be silly,
you know man it’s not a true reflection. That’s my
difficult[y], do you understand, Mr
Maddock?
[WITNESS]:
Ja, I do understand.’
[131]
Whilst Maddock was testifying about an exchange of correspondence
from which it appeared that explanations were being constructed
to
deal with the FSB and with cash flows, the court intervened and said
the following:
‘
You
see I must tell you that I may be wrong, but I have an idea that Mr
Brown will not really contest the flow of money. It’s
there and
I think we may find that we’re spending a lot of time
indicating that money went here, money went there and all
that, and
we may find at the end of the day that the accused will probably say
yes, no that’s true, that’s all that’s
admitted,
I’ve no problem with that. There may be a difficulty with the
source of the money and things like that, that’s
fine, you
see.’
[132]
At one stage, when counsel representing Brown was cross-examining
Goodwin, the court said the following:
‘
And
I know the State has narrowed this to one, Fidentia Asset Management,
and you have ably indicated that what we’re dealing
with is not
Fidentia Asset Management, we’re dealing with a group of
companies, far, far wider than just the one company,
and that there
was substance in the companies in the sense that it had a structured
management system.’
[133]
When counsel put it to Goodwin that Brown had caused Ernst &
Young to value FAM’s investments on a quarterly basis,
the
court intervened and an exchange with the witness followed:
‘
COURT
:
Let’s put it this way. Ernst & Young is a very big firm.
[WITNESS]: Yes.
COURT
:
Let’s call them a firm. Well respected, not so?
[WITNESS]: Yes. Yes,
they are.
COURT
:
And, I mean, they have branches all over.
[WITNESS]: Yes.
COURT
:
So you’re dealing with a recognised, highly respected, regarded
firm of auditors.
[WITNESS]:
Yes.’
[134]
As referred to earlier, when dealing with the exchange between
counsel for the State and the court on the plea of guilty,
the court
took the view that not adhering to an investor’s mandate while
representing that you were, was not fraud. The court
likened it to a
breach of contract.
[135]
When counsel for the State was explaining to the court that FAM had
paid the purchase price for MATCO’s shares with
MATCO’s
own money, the court responded by asking: ‘But why did MATCO
hand over transfer control?’ There was a
further exchange about
whether there had been testimony that the full purchase price had
been paid in cash. The court persisted
in asking whether anybody knew
why MATCO had handed over full control. Veldhuizen J had regard to
the statement in the tendered
plea that FAM had made a strategic
decision not to liquidate negotiable instruments held by it, and then
said the following:
‘
So
here you sit with a purchaser he says he enters into an agreement
because he knows he’s got enough assets in the form of

negotiable instruments so at that stage if he prefers to liquidate
those negotiable instruments he would be in a [position] to
pay. So
now there at that stage there can be no misrepresentation, now at a
later date for strategic reasons he decides I’m
not going to
liquidate this I’m going to pay in another way.’
[136]
The State continued to struggle to persuade the court that there was
a fraudulent misrepresentation that the purchase price
for MATCO had
been wholly met from FAM’s funds and it was on that basis that
it took control. It bothered the court that
Brown’s plea
recorded that he knew that FAM had enough underlying assets that
would ultimately cover the purchase price.
In the continuing exchange
with counsel for the State, the court said the following about the
MATCO shareholders:
‘
I
mean, if they want to be stupid enough to hand over control without
receiving payment, well, that’s their problem.’
[137]
The court, at one stage addressing counsel representing Brown,
appeared to be indicating that he shouldn’t plead guilty
on the
MATCO transaction. The court appeared to discount the evidence that
had already been led, which I summarised in some detail
above.
[138]
After convicting Brown, during sentencing proceedings when counsel
representing him led his evidence and asked about how well-structured

FAM was and informed the court that the object was to show that Brown
was not running a scam and that FAM was a professional concern,
the
court responded as follows:
‘
No,
but no, no if that’s the purpose of this I don’t think
that’s necessary because there’s no evidence
before me
and the State can’t now present evidence that he was running a
scam because he hasn’t been convicted of that
and I regard that
as irrelevant. There’s no evidence before me that he’s
stolen any money from Fidentia. There’s
no [evidence] before me
that he has stolen money from investors. There’s no evidence
before me that he has run a pyramid
scheme. There’s no evidence
that actual prejudice, actual damage has been caused. The defence and
the State is bound by the
agreement that they entered into and that’s
it.’
A
short while thereafter, the court said the following:
‘
Look
isn’t it a question here, I mean this company grew in a short
space of time tremendously and you have to have your control

structures in place to do that and at one stage you had assets
allocated in the wrong place didn’t you, your asset base for

the Financial Services Board wasn’t properly structured?’
[139]
During an exchange between the court and counsel representing Brown
about whether the latter should attempt to lead evidence
to show that
Brown never had the intention to do anything criminal, the court
stated that the State will not be allowed to show
that Brown always
had criminal intent. When counsel pointed out that Brown had pleaded
guilty to certain counts, the court said
the following:
‘
Two
counts, two counts
on very limited
representations.’ (My emphasis.)
[140]
When Brown was testifying in mitigation of sentence about the
potential prejudice he foresaw, namely that investors would
have to
wait a little bit longer for their money, the court responded as
follows:
‘
Well
the point it this if they knew that you didn’t invest it in
terms of the agreement well they could cancel the agreement,
they
could say it’s a breach of contract, they would be able to
cancel the agreement and reclaim the money, immediate payment
of the
money so that they were entitled to do then isn’t that
correct?’
The
reply by Brown, predictably, was in the affirmative.
[141]
When Brown was being cross-examined about cashing the first TETA
promissory note, against the background of how the continued

existence of a promissory note, or of one that had replaced, provided
security, the court intervened, chastised counsel for the
State and
asked the following question of him:
‘
Mr
Van Vuuren, don’t interrupt me when I am asking a question. The
money comes in, now what were they supposed to do with
the cheque
then, the promissory note. Should it just lie there?’
When
that was answered in the affirmative, the court responded as follows:
‘
I
mean surely you must be able to do something with it . . . .’
[142]
Shortly thereafter, the court, ignoring the concept that funds
invested with an asset management company, particularly in
the form
of secure instruments, should be treated as trust funds and
safeguarded, said the following:
‘
Yes.
But I mean if I invest money in a bank it doesn’t remain my
money. . . It becomes my bank’s money. If I invest
money with
the bank with a condition that you invest it this way, right, and the
bank takes money and invests some of it in that
portfolio, so it is
still not my money.’
[143]
It will be recalled that during the initial and extended exchanges
concerning the applicability of s 112 at the time that
the plea was
tendered, the court and counsel representing the State appeared not
to appreciate their proper roles in relation thereto.
During Brown’s
testimony, the court said the following, which indicated clarity on
the issue:
‘
I
must tell you that was my initial reaction, is once evidence is led
then it is in the Court’s discretion whether there can
be a
plea of guilty – well a plea of guilty can always be there –
whether that can be accepted. You see, so that was
as simple as
that.’
[144]
During Seedat’s testimony, the court once again displayed its
view of Brown’s conduct on which the conviction
was based:
‘
But
now tell me, Mr Van Vuuren, when someone says, these amounts have
from time to time been invested in asset classes different
to those
specified.’
‘
That’s
not an appropriation.’
[145]
The passages reflecting the court’s interventions and exchanges
with witnesses and counsel reflect an on-going consistent
attitude
that Brown’s conduct was not that reprehensible. A judicial
officer faced with continuing evidence that trust moneys
were being
used in the manner described above ought to have been concerned about
the propriety of such action rather than repeatedly
seeking to excuse
it. On occasion, accused persons complain that they have been
prejudiced by judicial officers entering the arena.
In the present
case the State has cause for complaint. I have taken into account
that for a substantial part of the proceedings
Brown was
unrepresented and would have been entitled to protection by the court
in its role of ensuring a fair trial. The interventions
set out above
went beyond a court’s obligation in that regard. The judge,
very early on, was antagonistic to the State’s
case and
repeatedly intervened to the benefit of Brown. I agree with counsel
for the State that the judge’s behaviour reflected
in these
passages is deserving of censure. Counsel representing Brown was
constrained to agree.
Maddock’s
potential indemnity
[146]
A final observation concerns the indemnity that Maddock might have
been entitled to in terms of s 204(2)(
b
)
of the Act. That subsection provides that, in the event of a witness
testifying frankly and honestly in answering questions which
might
incriminate him, he would be entitled to be discharged from
prosecution. The court failed to conduct an enquiry in terms
of s 204
despite being requested to do so. It was clearly an oversight. It is
for the prosecution and Maddock to take such further
steps as they
might be advised in regard thereto.
[147]
For all the reasons set out above, the following order is made:
1. The appeal in
respect of sentence is upheld.
2. The sentences
imposed by the court below are set aside and substituted as follows:
‘
i.
On count 2 the accused is sentenced to 15 years’ imprisonment.
ii. On count 6 the
accused is sentenced to 15 years’ imprisonment.
iii. The sentences
are ordered to run concurrently.’
________________________
MS NAVSA
ACTING DEPUTY
PRESIDENT
APPEARANCES:
FOR
APPELLANT: Adv. W J Downer SC (with him T du Toit-Smith)
Instructed
by:
The
Director of Public Prosecutions, Cape Town
The
Director of Public Prosecutions, Bloemfontein
FOR
RESPONDENT: Adv. B W Pretorius
Instructed
by
The
Legal Aid Board Cape Town Justice Centre, Cape Town
Bloemfontein
Justice Centre, Bloemfontein
[1]
Sections
316B(1) & (2) provide:
‘
(1)
Subject to subsection (2), the attorney-general may appeal to the
Appellate Division against a sentence imposed upon an accused
in a
criminal case in a superior court.
(2)
The provisions of section 316 in respect of an application or appeal
referred to in that section by an accused, shall apply
mutatis
mutandis
with reference to a case in which the attorney-general
appeals in terms of subsection (1) of this section.’
[2]
The
Financial Services Board was established in terms of s 2 of the
Financial Services Board Act 97 of 1990. That Act provides
‘for
the establishment of a board to supervise compliance with laws
regulating financial institutions and the provision
of financial
services; and for matters connected therewith’.
[3]
Section
204 provides that a witness whom the prosecutor informs the court
will be presented on behalf of the prosecution and will
be required
to answer questions that may incriminate him, is a competent witness
and, if in the opinion of the court, answers
questions frankly and
honestly he may be discharged from prosecution of the defence
specified by the prosecutor and in respect
of which a verdict of
guilty would be competent upon a charge relating to the offence so
specified. Such discharge shall be entered
on the record of the
proceedings.
[4]
Section
112(1)(
b
)
of the Act provides:
‘
(1)Where
an accused at a summary trial in any court pleads guilty to the
offence charged, or to an offence of which he may be
convicted on
the charge and the prosecutor accepts that plea –
.
. .
(
b
)
the presiding judge, regional magistrate or magistrate shall, if he
or she is of the opinion that the offence merits punishment
of
imprisonment or any other form of detention without the option of a
fine or of a fine exceeding the amount determined by the
Minister
from time to time by notice in the
Gazette,
or if requested
thereto by the prosecutor, question the accused with reference to
the alleged facts of the case in order to ascertain
whether he or
she admits the allegations in the charge to which he or she has
pleaded guilty, and may, if satisfied that the
accused is guilty of
the offence to which he or she has pleaded guilty, convict the
accused on his or her plea of guilty of that
offence and impose any
competent sentence.’
[5]
Mokhobo
at 942G-H.
[6]
At
185.
[7]
Snyman
at 531.
[8]
See
S
v Nkambule
1999
(1) SACR 225
(T) and
S
v Mahlo
2006
JDR 0145 (T).