SADC PROTOCOL AGAINST CORRUPTION AND AN OVERVIEW OF SA CORRUPTION LEGISLATION

1. SADC PROTOCOL AGAINST CORRUPTION AND AN OVERVIEW OF SA CORRUPTION LEGISLATION

2. Agenda • SADC Protocol Against Corruption • Case Study (Part 1) • The Constitution • Case Study (Part 2) • Companies Act 71 of 2008 • Corporate Governance • Case Study (Part 3) • Suspension • Case Study (Part 4) • Protected Disclosure Act • Case Study (Part 5) • Prevention and Combating of Corrupt Activities Act • Interception of Communication

3. Agenda • Anton Piller Orders • Case Study (Part 6) • Labour Relations Act • Anti-Dissipation Orders • Case Study (Part 7) • Employment Contracts and Policies • Case Study (Part 8) • Independent Contractors and Employees • Constructive Dismissal • Conclusion • Questions and Answers

4. SADC Protocol Against Corruption • Signed on the 14th August 2002 by all 14 Member States and to date ratified by more than two thirds of the Member States. • Member States are : Angola, Botswana, Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe • The Protocol recognises that corruption is an international problem and that there is a need for collective political will to implement anti-corruption strategies in order to combat it. Agreement on what corruption is facilitates co-operation between Member States in cross-border transactions and ensures that criminals have nowhere to hide. • The objective is to update and standardise corruption policies and laws of Member States and bring them in line with the Protocol.

5. SADC Protocol Against Corruption • Corruption is defined as : "…Any act referred to in Article 3 and includes bribery or other behaviour in relation to persons entrusted with responsibilities in the public and private sectors which violates their duties as public officials, private employees, independent agents or other relationships of that kind and aimed at obtaining undue advantage of any kind for themselves or others.” • The definition of public official is very wide : "…Any person in the employment of the State, its agencies, local authorities or parastatals and includes any person holding office in the legislative, executive, or judicial branch of a State or exercising a public function or duty in any of its agencies or enterprises. "

6. SADC Protocol Against Corruption The identified “Acts of Corruption” in Article 3 are broadly as follows : • Active and passive corruption committed by a public official; • Active and passive corruption committed by a person working in the private sector; • Improper influencing of any person in public or private sector relating to such person's decision making functions; • Act by a public official or other employee for purposes of obtaining undue benefit; • Diversion of property by a public official; • Fraudulent use or concealment of property derived from acts of corruption; • Participation in any of the abovementioned acts as a principal, co-principal, agent, instigator, accomplice or accessory after the fact.

7. SADC Protocol Against Corruption Member State Obligations to prevent corruption : • Develop a code of code of conduct for public officials; • Transparency and equity in public procurement ; • Government tax systems that deter corruption; • Promotion of access to public information; • Protection of whistle blowers; • Establishment of anti-corruption agencies; • Good record keeping and development of internal accounting controls; • Mechanisms to encourage public participation in anti-corruption efforts; • Public education and awareness in the fight against corruption; Corruption is an extraditable offence under the Protocol making it difficult for criminals to find refuge in other SADC countries.

8. Case Study (1) Jennifer is a junior employee at Friends Designers (Pty) Ltd, a company involved in the fashion industry. Jennifer gets to work on Monday morning, expecting another dull week at work and decides to sift through her e-mails received over the weekend. She notices an e-mail from her manager, Angelina, and immediately opens it expecting a new instruction. However, she quickly realises that it was not intended to be addressed to her, but rather sets out details of Angelina’s bank account. After a cursory reading, she doesn’t think anything of it and quickly deletes it.

9. Case Study (1) [continued] About 5 minutes later, Angelina comes into Jennifer’s office and asks if she came across any e-mails sent by her. Jennifer says yes but that she deleted it as she didn’t know what it was about and realised that it was not intended to be addressed to her. Jennifer notices the look of relief on Angelina’s face as she leaves. Jennifer is intrigued by the apparent concern on Angelina’s face and her curiosity quickly gets the better of her as she goes into her deleted items folder and scrolls through the e-mail chain. Jennifer notices that the e-mail was actually supposed to go out to Jewels (Pty) Limited, a company to which they have given a lot of work. As she reads the e-mail further, she realises that Angelina has been receiving “kickbacks” (in this case, a new Rolex watch and a cash payment of R110 000) from Jewels in return for contracts being awarded to them.

10. Case Study (1) [continued] • Issues to consider : • What over-riding considerations exist when dealing with matters of this type? • The role of the Constitution and the Bill of Rights. • The duty of an employee to act in an employer’s best interests.

11. The Constitution • Highest law of the land • Right to privacy • Right to fair labour practices • The limitation clause

12. The Constitution • Section 14 of the Constitution. • Everyone has the right to privacy, which includes the right not to have- • (a) their person or home searched; • (b) their property searched; • (c) their possessions seized; or • (d) the privacy of their communications infringed • Section 23 provides that everyone has the right to fair labour practice.

13. The Constitution • However, the rights contained in the Bill of Rights are subject to section 36 of the Constitution which states: The rights in the Bill of Rights may be limited only in terms of law of general application to the extent that the limitation is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom, taking into account all relevant factors, including— (a) the nature of the right; (b) the importance of the purpose of the limitation; (c) the nature and extent of the limitation; (d) the relation between the limitation and its purpose; and (e) less restrictive means to achieve the purpose.

14. Case Study (2) Jennifer decides that she should report this to her supervising director, Brad. Brad asks her to print out the e-mail and after a quick reading of the e-mail, quickly phones Mr & Mrs Smith Forensics Investigations CC. Brad explains to Mr Smith what has happened and Mr Smith says that he will take on the matter. He asks Brad to set up a meeting between Mr Smith and Angelina, which Brad accordingly does.

15. Case Study (2) • Issues to consider : • The obligations of a director to act in the best interests of the company. • The fiduciary duties of directors. • Corporate governance.

16. Companies Act 71 of 2008 Director Duties in terms of the new Companies Bill • Section 75 – a director must disclose personal financial interests; • Section 76(2) – a director of a company must - (a) not use this position of director, or any information obtained while acting in the capacity of a director – (i) to gain an advantage for the director, or for another person other than the company or wholly owned subsidiary of the company; or (ii) to knowingly cause harm to the company or a subsidiary of the company; and

17. Companies Act 71 of 2008 76(2)(b) communicate to the board at the earliest practicable opportunity, any information that comes to the director’s attention, unless the director – (i) reasonably believes that the information is – (aa) immaterial to the company (bb) generally available to the public, or known to the other directors; or (ii) is bound not to disclose that information by a legal or ethical obligation of confidentiality.

18. Companies Act 71 of 2008 • Section 76(3) – when acting in his capacity as a director, a director must exercise his powers and perform his functions - (a) in good faith and for a proper purpose; (b) in the best interests of the company; and (c) with the degree of care, skill and diligence that may reasonably be expected of a person carrying out those functions and having that director’s general knowledge, skill and experience.

19. Companies Act 71 of 2008 • Section 76(4) – a director is protected against allegations of breach of the duties of care and skill and to act in the best interests of the company in relation to a matter where the director has – (i) taken reasonably diligent steps to become informed about the matter; (ii) either had no conflict of interest in relation to the matter or complied with the rules on conflicts of interest; and (iii) had a rational basis for believing, and did believe, that his decision was in the best interests of the company. In addition, a director is specifically entitled by the business judgment rule to rely on the discharge of functions, and information presented by, persons such as employees and advisers who that director reasonably believes to be reliable and competent.

20. Corporate Governance The following seven characteristics form the basis of good corporate governance: • Discipline • Transparency • Independence • Accountability • Responsibility • Fairness • Social responsibility

21. Corporate Governance • Corporate governance and director’s duties are regulated by the following: • Common law rules and supporting case law. • The Companies Act No. 61 of 1973 (Companies Act) and the Companies Act of 2008. • The company's articles of association. • The Listings Requirements of the JSE Securities Exchange 2003 (Listings Requirements), which apply to companies listed on the JSE. • King III Report. • Applies to all companies although it has no statutory backing and therefore needs to be enforced by company stakeholders in that any non-compliance must be justified to the satisfaction of stakeholders.

22. Case Study (3) At the meeting, Mr Smith tells Angelina that he is aware of various corrupt dealings that she is involved in. She denies the allegations and insists that she wants to speak to her attorney. Mr Smith says that she may not, and says that if she does not explain the suspect transactions, this would amount to an admission of the allegations and she will be suspended immediately. She refuses to comment and Mr Smith informs her that she is suspended with immediate effect and gets security to escort her out of the premises. Mr Smith asks Brad to lock her laptop computer away in the company safe.

23. Case Study (3) Issues to consider: • Rights of the employee when being questioned. • Employer’s obligations before suspending an employee.

24. Suspension Three minimum requirements set out in Mogothle v Premier of The Northwest Province & others [2009] JOL (LC): • The employer must have a justifiable reason to believe, prima facie at least, that the employee has engaged in serious misconduct; • There is some objectively justifiable reason to deny the employee access to the workplace based on the integrity of any pending investigation into the alleged misconduct or some other relevant factor that would place the investigation or the interests of affected parties in jeopardy; and • The employee must be given the opportunity to state a case before the employer makes any final decision to suspend the employee.

25. Case Study (4) Mr Smith then calls in Maddox, an independent contractor with Friends Designers who works as a delivery-man, for an interview. It was suggested to Mr Smith that he should interview Maddox as he has been working closely with Angelina for the past 5 months for usually about 6 hours a day. Brad’s feeling is that if anyone knows what Angelina has been up to, it would be Maddox. Maddox is not happy to be called in for an interview and tends to be very cagey. Mr Smith becomes quite aggressive however, and tells him that if he does not co-operate, he will make his working environment at the company very uncomfortable. Maddox shrugs at this suggestion and says that it cannot get worse than it already is. Mr Smith does not take kindly to this and suggests that Maddox must be involved with the kickbacks that Angelina has been receiving. This is the last straw for Maddox who then gets up and says to Mr Smith that he can tell Brad that the relationship between him and the company is over.

26. Case Study (4) Mr Smith reports back to Brad about the interviews. Brad is delighted by the feedback he receives from Mr Smith concerning Angelina’s suspension and shrugs off Maddox’s outburst, saying it’s no real loss as he only really did work for Angelina and that he had not been happy anyway with the way Maddox was looking after the company’s vehicle which he had been using for the deliveries. Brad immediately sends an e-mail to all the employees from Friends Designs. He explains to the company that corruption will not be tolerated at the company and sets out details of the suspension of Angelina, and praises Jennifer in the e-mail for informing him about the corruption. Jennifer is not too happy about her being mentioned in the e- mail as she knows that Angelina is popular amongst her colleagues and is worried that she may now suffer some abuse from Angelina’s friends.

27. Case Study (4) Issues to consider: • Obligations of employers to protect whistle-blowers. • The ramifications of the Protected Disclosures Act. • Be factual in communication – Don’t leap to conclusions!

28. Protected Disclosure Act • Section 3 of the PDA states: • No employee may be subjected to any occupational detriment by his or her employer on account, or partly on account, of having made a protected disclosure. • Meaning of “occupational detriment”. • Other reasonable steps that should be taken by an employer.

29. Case Study (5) The next day, Brad asks Mr Smith whether they should get the police involved. Mr Smith says that the police are useless and that they tend to get in the way. He says that he will deal with the matter himself and asks to inspect Angelina’s office. He sees a cell phone of hers and asks Brad if he may hold onto it so that he can go through the messages and the directory. He also discovers bank statements and telephone invoices on her desk. He picks these up and puts it in his briefcase. He then collects Angelina’s laptop from the company safe so that he can go through all her e-mails which he does over the course of the next week.

30. Case Study (5) Issues to consider: • Is there any obligation to report such criminal • activities? • Is the monetary value of the kickbacks involved of • any significance? • Intercepting an employee’s communications lawfully. • Securing the chain of evidence. • Inspecting personal documents belonging to the • employee on the company premises. • Is it possible to seize other documents which the • employee may have in her possession for • investigation purposes?

31. Prevention and Combating of Corrupt Activities Act • The general offence of corruption as defined in Section 3 of of thePrevention and Combating of Corrupt Activities Act 12 of 2004 (“PACCA”)is very broad and includes three elements, namely a “giver”, an “acceptor” and a “gratification”. • A giver is defined as “any person who directly or indirectly gives or agrees or offers to give to any other person any gratification, whether for the benefit of that other person or for the benefit of another person.” • An acceptor is defined as “any person who directly or indirectly accepts or agrees or offers to accept any gratification from any other person, whether for the benefit of himself or herself or for the benefit of another person”. • PACCA’s definition of gratification is very broad and includes money, donations, gifts, loans, property, avoidance of a loss or other disadvantage, discounts, commission, bonuses, deductions, contract of employment or any status, honour, right, privilege, etc. • A person or body is guilty of an offence of corruption where the giving and/or accepting of the gratification inter alia amounts to any “unauthorised or improperinducement to do or not to do anything”.

32. Prevention and Combating of Corrupt Activities Act • Section 34 of PACCA • Duty to report corrupt transactions. • By persons holding a position of authority. • Monetary value.

33. Interception of Communication • Right to privacy • Prohibited in terms of the Regulation of Interception of Communications and Provision of Communication-Related Information Act 70 of 2002. • Interception permitted only in certain instances.

34. Interception of Communication • In terms of Chapter 3, a judge may, upon application to him/her, issue an interception direction to intercept communications. • Must be satisfied on the facts alleged that there are reasonable grounds to believe: • A “serious offence” has been, is being or will be committed; • It is necessary to gather information concerning an actual • or potential threat to the public health or safety, national • security or actual threat to the compelling national economic • interest of the Republic;

35. Interception of Communication • (c) The making of a request for the provision, or the provision to the competent authorities of a country or territory outside the Republic, of any assistance in connection with, or in the form of, the interception of communications relating to organized crime or any offence relating to terrorism, or the gathering of information relating thereto, is in accordance with an international mutual assistance agreement or in the interest of the Republic’s international relations and obligations; or • (d) It is necessary to gather information concerning property which is or could probably be an instrumentality of a serious offence or the proceeds of unlawful activity.

36. Interception of Communication • Searching of business e-mails by employer. • Sections 4(1) and 6 of the Act. • Section 4(1) states: • Any person, other than a law enforcement officer, may intercept any communication if he or she is a party to the communication, unless such communication is intercepted by such person for purposes of committing an offence.

37. Interception of Communication • Section 6(1) provides, ‘Any person may, in the course of the carrying on of any business, intercept any indirect communication— (a) by means of which a transaction is entered into in the course of that business; (b) which otherwise relates to that business; or (c) which otherwise takes place in the course of the carrying on of that business; in the course of its transmission over a telecommunication system.’

38. Interception of Communication • Qualified in terms of section 6(2) which states:  “A person may only intercept an indirect communication in terms of subsection (1)— (a) if such interception is effected by, or with the express or implied consent of, the system controller; (b) for purposes of— (i) monitoring or keeping a record of indirect communications— (aa) in order to establish the existence of facts; (bb) for purposes of investigating or detecting the unauthorized use of that telecommunication system; (cc) where that is undertaken in order to secure, or as an inherent part of, the effective operation of the system; or

39. Interception of Communication (ii) monitoring indirect communications made to a confidential voice-telephony counselling or support service which is free of charge, other than the cost, if any, of making a telephone call, and operated in such a way that users thereof may remain anonymous if they so choose; (c) if the telecommunication system concerned is provided for use wholly or partly in connection with that business; and (d) if the system controller has made all reasonable efforts to inform in advance a person, who intends to use the telecommunication system concerned, that indirect communications transmitted by means thereof may be intercepted or if such indirect communication is intercepted with the express or implied consent of the person who uses that telecommunication system.”

40. Interception of Communication • Prudent for employer to get employee’s consent in terms of section 5 of the Act. • Include in employment contract or in employer’s policies. • Section 5 of the Act states: • Any person, other than a law enforcement officer, may intercept any communication if one of the parties to the communication has given prior consent in writing to such interception, unless such communication is intercepted by such person for purposes of committing an offence.

41. Anton Piller Orders • Right to search premises and seize evidence without prior warning. • Ex parte application. • For such an application to be successful, must satisfy the following: • (i) There must be ‘an extremely strong prima facie case’; • (ii) The damage, potential or actual, must be very serious for the applicant; • (iii) There must be clear evidence that the respondents have in their possession incriminating documents or things, and that there is a real possibility that the respondents may destroy that material; and • (iv) The remedy is the only reasonable and practical means of protecting the applicant's rights.

42. Case Study (6) The following week, Mr Smith reports back to Brad. He tells Brad that he has found 8 cases in the e-mails where there are definite instances of kick-backs received by Angelina. Brad is highly upset and immediately phones Angelina to inform her that she has been dismissed with immediate effect.

43. Case Study (6) Issues to consider: • The correct procedures for the dismissal of employees. • Are there remedies available to ensure that should the company • wish to recover damages from the employee, she may not • dissipate or hide the assets before judgment is made.

44. Labour Relations Act • Disciplinary action must be both substantively and procedurally fair. • Substantive fairness refers to the guilt of the employee(s) and the • appropriateness of the penalty imposed. • Procedural fairness relates to the process of determining the • employee’s guilt as well as imposing the suitable penalties.

45. Labour Relations Act Item 4 of the Code of Good Practice: Dismissal (Schedule 8 to the Labour Relations Act 66 of 1995) sets out the basic minimum requirements: • The employer should conduct an investigation to determine • whether there are grounds for dismissal; • The employer should notify the employee of the allegations • against him/her using a form and language that the employee • can reasonably understand; • The employee should be permitted to state his/her case in • response to the allegations; • The employee should be entitled to a reasonable time to prepare • a response and to the assistance of a trade union representative • or a fellow employee; • Following the inquiry, the employer should communicate the • decision taken, and preferably furnish the employee with written • notification of that decision.

46. Anti-Dissipation Orders • Where respondent believed to be deliberately disposing of or concealing his assets in order to ensure that he will be devoid of property within the jurisdiction of the South African High Courts by the time the applicant obtains a judgment against him. • Applicant may apply to the court to grant an application to interdict the • respondent from dissipating or hiding his assets. • 4 conditions must be satisfied:

47. Anti-Dissipation Orders • The respondent has assets within the jurisdiction of any High Court; • The respondent, if not interdicted, will secrete those assets, remove • them from the areas of the jurisdiction of the various High Courts or • dissipate them, or that a well-grounded apprehension exists that the • respondent will do so; • The applicant prima facie has a valid cause of action against • the respondent, on a ground which will need to be set out in the founding • affidavit; and • The intention of the respondent in dissipating or concealing his • assets is to frustrate or render hollow a judgment which the applicant • expects to obtain in proceedings already instituted or about to be • instituted.

48. Case Study (7) Maddox and Angelina go to their lawyer, who happens to be the same attorney, Joe Black. Joe is appalled at the treatment Angelina has received. Whilst going through the policies of the company, he is particularly interested by the Disciplinary Policy which states that an employee may only be suspended if there is a reasonable concern that he/she will interfere with any investigations. The policy further states that an employee may only be suspended once he/she has been notified in writing by the General Manager of the company. Joe also peruses Angelina’s employment contract. His face lights up slightly when he comes across a clause stating that Angelina is entitled to market the Company up to a value of R30 000 a month and may accept any gratuity received in the course of such duties.

49. Case Study (7) Issues to consider: • The importance of employment contracts and company policies. • The effect of an unfair suspension. • The acceptance of gifts.

50. Employment Contracts And Policies • Employment contract is a basic and vital employment right. According to Section 29 of South Africa's Basic Conditions of Employment Act, an employer is required to provide each and every worker with an accurate understanding of their roles and responsibilities. • In order for business entities to protect themselves, it is highly • recommended that such employment information be recorded in the form • of an employment contract and that these are drafted meticulously. In • doing so, the employer is able to protect both itself and its employees. • Policies relating to specific areas of the business entity should also be • implemented to provide guidelines on their conduct. These should also • be carefully drafted.