While complex financial crimes can be difficult to investigate and prove, the Cinar and Livent cases serve to highlight the substantial risks of engaging in financial wrongdoing, not just for corporate executives who may be directly implicated, but also for those who assist in the wrongful activities.
The recent conviction and sentence imposed following the two year long criminal jury trial of Ronald Weinberg (“Weinberg”), co-founder of Cinar Corp. (“Cinar”), highlights the severe consequences facing those who carry out or assist in financial fraud and other white collar crimes. The Globe & Mail called Weinberg’s guilty verdict a “vindication for a Canadian justice system that has often been criticized for weak enforcement and a poor record for criminal convictions in the area of white collar crime”.
The slow rot of the private and public sector
Since the early 2000s, there have been numerous news reports in South Africa indicating that white collar crime is on the rise. From 2014, despite police statistic reports indicating an 11% decrease in economic crimes, independent studies conducted by PwC indicate a burgeoning increase in fraud, money laundering, corruption, collusion and bribery by senior management in companies and by politicians in high ranking government positions.
South Africa has the potential to increase the number of its successful prosecutions if a greater emphasis is placed on the importance of prosecuting white collar crimes.
Economic crime is constantly evolving and becoming a more complex issue for organisations and economies. In South Africa, more than two thirds of South African organisations have experienced economic crime. The overwhelming cause of the increase in white collar crimes is that detection methods are not keeping pace, local law enforcement agencies place little to no emphasis on white collar crime, bundling together a broad range of illicit activity, including insider trading and credit card fraud together with public procurement fraud and private sector corruption, and there is a general failure to prosecute and punish these crimes effectively. Further, many individuals facing charges of fraud, corruption, money-laundering or insider-trading have the ability to delay prosecution by launching numerous appeals and other actions. This accompanied by South Africa’s back-logged High Court system, the inability of the National Prosecuting Authority (The NPA) to prosecute economic crimes and the poor levels of investigation by police services, in no way serves to deter individuals from committing such crimes.
The enforcement efforts of the Ontario Securities Commission (OSC), the regulator that administers and enforces compliance with the provisions of the Securities Act (Ontario) and the Commodity Futures Act (Ontario), have had mixed success— at best. With a mandate to protect investors and ensure fair and efficient capital markets through monitoring compliance and enforcement measures in the securities industry in Ontario, the regulatory body has been struggling to be taken seriously. Having taken a chapter from the playbook of the American national Securities Exchange Commission (SEC), prosecuting individuals for Insider trading, tipping, and securities fraud, the initial results, which are highlighted below, were underwhelming. Now, in a renewed effort to assert its presence in the capital markets as a regulator with teeth, the OSC is taking new approaches, with more promising results.
Despite internal safe guards and the best efforts of mining companies and their executives, criminal investigations can arise in relation to operations at home or abroad. How a company responds to a criminal investigation or to possible internal criminal misconduct, can have a serious legal and reputational impact, particularly since changes to Canadian law have made it easier for prosecutors to convict corporations and their officers of criminal wrongdoing. Today at Fasken Martineau’s PDAC 2016 seminar, Peter Mantas and Norm Keith of Fasken Martineau and Sandy Boucher of Grant Thornton discussed how proactive a mining company should be during the critical period after suspected criminal wrongdoing is discovered.
Although white collar crime is a worldwide phenomenon, in South Africa it tends to stand out as being particularly prevalent. White collar crime is a growing menace to businesses in and around South Africa. More and more senior managers are being involved in fraudulent schemes and activities. In addition, the sophistication and complexity in the way white collar crimes are carried out are on the rise.
One of the major catalysts of white collar crime in South Africa is that the perpetrators know that they are unlikely to be caught. The lack of investigation and prosecution is a concern to businesses in South Africa. How much protection will they receive if they do fall victim to white collar crime? Investigators of white collar crime attempt to put together dockets, with their attorneys’ assistance, which are then submitted to the National Prosecuting Authority. However, there is a lack of resources to facilitate prosecuting services in dealing with such complex crimes.