S v PRINSLOO AND OTHERS 2016 (2) SACR 25 (SCA)
Prevention of crime — Offences — Contraventions of s 2(1) of Prevention of Organised Crime Act 121 of 1998 — Racketeering in contravention of s 2(1)(e) and s 2(1)(f) — Managing enterprise which engaged in racketeering and being involved in enterprise engaged in racketeering — Two separate offences created in terms of s 2(1)(e) and s 2(1)(f) of POCA — No good reason why person who both managed and participated in affairs of enterprise directly should be liable for only one of two roles — No duplication of convictions.
Prevention of crime — Offences — Contraventions of s 2(1) of Prevention of Organised Crime Act 121 of 1998 — Racketeering in contravention of s 2(1)(f) — Mens rea required — Culpa sufficient form of mens rea for offence.
Prevention of crime — Offences — Contraventions of s 2(1) of Prevention of Organised Crime Act 121 of 1998 — Racketeering in contravention of s 2(1)(e) — Mens rea required — No need for further enquiry as to additional mens rea requirement over and above mens rea required by predicate offences listed in sch 1 to POCA.
Prevention of crime — Offences — Contraventions of s 2(1) of Prevention of Organised Crime Act 121 of 1998 — Sentence — Racketeering in contravention of s 2(1)(e) and s 2(1)(f) — Ponzi scheme involving hundreds of millions of rand — Deterrence playing important role — Appellant deceiving financial authorities and grossly misrepresenting extent of her activities — When confronted by authorities she merely changed vehicles through which scheme conducted to avoid closure — Sentence of 25 years’ imprisonment confirmed on appeal.
The six appellants were convicted in the High Court of numerous offences connected to the operation of a Ponzi or multiplication scheme involving hundreds of millions of rand, and were sentenced to lengthy terms of imprisonment. The first appellant initiated the scheme in 1998 and was at all times at the helm of it. The second appellant joined the scheme in 2001 and acted as a public official of two entities used to conduct the scheme. He married the first appellant at the end of that year. The third to sixth appellants were all related to the first appellant in some way and acted as public officers of the various entities used for the purposes of conducting the scheme. Much of the detail of the operation of the scheme was common cause and the appellants did not seriously contest the notion that it was in fact a Ponzi scheme. The entities involved were a number of trusts, a close corporation, a co-operative and a company. The first appellant was the only one who was charged in count 1 with a contravention of s 2(1)(f) of the Prevention of Organised Crime Act 121 of 1998 (the POCA), which provides that —
‘any person who . . . manages the operation or activities of an enterprise and who knows or ought reasonably to have known that any person, whilst employed by or associated with the enterprise, conducts or participates in the conduct, whether directly or indirectly, of such enterprises’ affairs through a pattern of racketeering activity; . . . shall be guilty of an offence’.
All the appellants were charged under s 2(1)(e) of the POCA (count 2) which provides criminal liability for any person who —
‘whilst managing, or [being] employed by or associated with any enterprise, conducts or participates in the conduct, directly or indirectly, of such enterprise’s affairs through a pattern of racketeering activity; . . . .’
It was submitted on appeal on behalf of the first appellant that a contravention of the provision in count 1 required mens rea in the form of dolus and that culpa was insufficient.
Held, that the wording of the POCA, and in particular s 2(1)(f) made it clear that culpa was a sufficient form of mens rea for a contravention of the subsection. There was also no doubt that the first appellant ought reasonably to have known that the scheme’s affairs were conducted through a pattern of racketeering activity, and she therefore in any event had the necessary mens rea in the form of culpa. (Paragraphs  and  at 42c–d and 42i.)
The first appellant also contended that the provision was aimed mainly at punishing persons who controlled others whilst knowing that they were committing crimes, but refrained from engaging in criminal conduct themselves. She could therefore not be convicted of contravening the section as she had personally participated in the activities of the scheme.
Held (per Fourie AJA and Eksteen AJA), that there appeared to be no good reason why a person who both managed and participated in the affairs of the enterprise directly should only be liable for one of the two roles, namely the offences in paras (e) and (f) of ss (1). There was no reason why the legislature would have intended to restrict the prosecution of persons under para (f) solely to those managers who had not dirtied their hands by personal acts of participation in the conduct of the affairs of the enterprise. Such a construction would lead to an absurdity, where the manager of a multibillion-rand racketeering enterprise, who had minimal personal active participation, would only be liable for the minimal-participation role under para (e) and not under para (f) for the extensive managerial role he played in a highly successful criminal enterprise. Her appeal against the conviction on count 1 accordingly had to fail.
Held (per Brand JA dissenting), that the essence of the offence in para (e) was participation in the affairs of the enterprise and that of (f), on the other hand, was knowledge (in the sense that the accused must have known, or ought reasonably to have known, that another person did so), not participation. Logic dictated that participation in racketeering activities would always include knowledge of those activities. While one could have knowledge without participation, the converse was not possible. Of necessity, the conviction of a manager under para (e) had to involve a criminal act in terms of (f). In order to participate in racketeering activities for purposes of (e), the wrongdoer must have had knowledge, proof of which in itself would amount to proof of the offence under (f). It was true that the elements of the two offences were in certain respects different, but that in itself was no answer to an objection to duplication where, as in this case, the greater necessarily included the lesser.
As regards the first appellant’s appeal in respect of count 2, it was contended on her behalf that the state had failed to prove that she had the necessary criminal intent in the form of dolus to contravene the provisions of s 2(1)(e).
Held, that the essence of the offence in s 2(1)(e) was participation through a pattern of racketeering activity and not knowledge. Once it was proved that the accused had participated in the conduct of an enterprise’s affairs through a pattern of racketeering activity, he or she was guilty of a contravention of the section. There was no need for a further enquiry as to an additional mens rea requirement over and above the mens rea required by the predicate offences listed in sch 1 to the POCA.
The first appellant was sentenced to an effective term of 25 years’ imprisonment. This was made up inter alia of 20 years’ imprisonment in respect of each of the contraventions of s 2(1)(e) and s 2(1)(f), as well as 10 years’ imprisonment on each of 10 counts of contravening s 4 of the POCA; 10 years’ imprisonment on each of 17 counts of fraud; 10 years’ imprisonment on each of 2 counts of theft; and various terms of imprisonment ranging from three years to six months for the contravention of various regulatory and compliance offences. It was submitted on behalf of the first appellant that the effective sentence was shockingly inappropriate and required intervention by the court on appeal.
The court held that the present was a matter in which the element of deterrence played an important role. The common theme of the Ponzi schemes was that the hard-earned financial resources of others, often elderly and financially naive people, were invested in the schemes on the strength of outrageous returns offered, which could not be sustained due to the lack of a viable economic enterprise underpinning the scheme. A further aggravating factor was the cynical approach of the first appellant to the directives of the authorities to cease taking investments and to repay investors. She had fraudulently misrepresented the extent of the scheme by grossly understating the number and value of the total investment made in the scheme. These misrepresentations had initially persuaded the authorities not to close down the scheme. When confronted by the authorities, the first appellant merely changed the vehicle through which the scheme was conducted in an attempt to deceive the authorities and to prevent them from closing down the scheme. In these circumstances the court would have been inclined to impose a sentence of the same order and accordingly the court a quo had not acted unreasonably in imposing the sentence. The appeal against sentence was accordingly also dismissed.