Case study and analysis of the South African law relating to racketeering prosecutions.

1. www.pwc.com
Organised Crime and
Presenting Evidence on
Racketeering
ACFE 4th African Conference
Sandton
September 2011
Adv Jacqueline Fick

2. Agenda
Meet Johnny la Rica
Racketeering defined
How to prove the offence of racketeering
Closing remarks
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3. Meet Johnny la Rica
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4. Meet Johnny la Rica
La Familia
Johnny was born an entrepreneur. When his father died it was just
natural that he would take over the business. For years the family has
been in the curios business, exporting from South Africa to all over the
world. Johnny used to live in South Africa, but has now decided that
his business skills flourish in a tropical environment and he is now
living in the Bahamas. He trusts his manager and shareholder, Rico de
la Fingers to run the business. Rico has a big corner office in the
premises the business owns and where all the goods are packed and
shipped from. They have a wonderful accountant, Kook da Book that
looks after the financial affairs of the business and has always invested
their hard earned cash well. Kook has often wondered how curios can
be so lucrative, but with the salary he earns he has never asked
unnecessary questions. The company, Packadapowda, employs several
packers that also collect the merchandise from where ever the best price
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5. Meet Johnny la Rica
La Familia (continued)
is offered. Johnny also regularly makes contributions to customs
officials in other countries to see that the curios are not damaged when
they arrive and are distributed in the particular country. His network
of agents abroad have also ensured that there is a constant demand for
his products and their loyalty to Johnny has always been paramount.
For their loyalty Johnny has also given them shares in the business.
Even when one shipment of curios developed “mildew” and the customs
official remarked about the white powdery substance leaking from a
calabash, the agent immediately reported this to Johnny and Rico and
the customs official, officer Massif Bribe was also rewarded for his
diligence in spotting a potentially hazardous situation. Packadapowda
has truly been a home to its employees, most who have been on the
wrong side of the law before and have seen the inside of a prison cell
more than once. But family is family and who said loyalty cannot be
bought?
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6. Racketeering defined
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7. Racketeering defined
Prevention of Organised Crime Act 121 of 1998 (POCA)
• Statute was patterned after American law: Racketeer Influenced
Corrupt Organisations Act (RICO)
• Chapter 2 includes provisions that make it a crime to engage in
racketeering.
• Central to the prohibitions against racketeering are the concepts of
an enterprise and a pattern of racketeering activity (PORA).
• Sections vary with regard to the accused person‟s relationship to the
enterprise and pattern of racketeering activity.
• Difference between organised crime and other criminal offences:
Investigative method relies on the event based response. The event
is processed with regard to who is responsible for the crime.
• Racketeering on the other hand needs an entirely different
approach. The quest is to find out what organization is behind those
crimes. Aim is to prosecute the ORGANISATION behind the events.
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8. Racketeering defined
What to look for when considering racketeering charges
• The Accused
• The Enterprise
• Separate from the accused.
• The vehicle which the syndicate used to commit the crimes.
• The Offences
• Pattern of racketeering activity.
• Predicate offences.
• State must establish the existence of an enterprise, a pattern of
racketeering activity and a link between them and the accused (S v
dos Santos and another 2010 (2) SACR 382 (SCA))
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9. Racketeering defined
The accused
• Have to prove that the accused were involved in the illegal activities
or operations of the enterprise by proving their participation in the
PORA. Remember that the accused and the enterprise are two
separate concepts.
• There are seven (7) separate offences in Chapter 2 of POCA. The
property subsections (a) – (d); the racketeering offences (e) – (f); and
the conspiracy to commit racketeering subsection (g)
• Section 2(1)(f) is utilised to charge the Manager of the enterprise
(who ought to have known.)
• Section 2(1)(e) is for any manager, employee, associate if they
participated in the PORA.
• A typical enterprise has common goals and that is to profit from
crime. There will be differentiating jobs within the organisation – a
hierarchy and structure.
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10. Racketeering defined
The Enterprise
• “enterprise” includes any individual, partnership, corporation,
association, or other juristic person or legal entity, and any union or
group of individuals associated in fact, although not a juristic person
or legal entity.
• S v Eyssen 2009 (1) SACR 406 (SCA):
“There is no requirement that the enterprise be legal or illegal. It is
the pattern of racketeering activity, through which the accused must
participate in the affairs of the enterprise, that brings in the illegal
element; and the concepts of „enterprise‟ and „pattern or
racketeering activity are discrete. Proof of the pattern may establish
proof of the enterprise, but this will not inevitably be the case.”
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11. Racketeering defined
Characteristics of an Enterprise
• A differentiation of roles and a differentiation of tasks
• A system of command
• A common or shared goal/purpose
• Intention to make a profit
• Continuity of personnel
• The enterprise is an entity separate and apart from the pattern of
activity in which it engages
• The enterprise is the organising principle behind the “events”
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12. Racketeering defined
The Offences: Pattern of Racketeering Activity
• A “Pattern of Racketeering Activity” is defined as:
The planned, ongoing, continuous or repeated participation or
involvement in any offence referred to in Schedule 1 and includes at
least two offences referred to in Schedule 1, of which one of the
offences occurred after the commencement of this Act and the last
offence occurred within 10 years (excluding any period of
imprisonment) after the commission of such prior offence referred
to in Schedule 1.
• Participation must be by way of ongoing, continuous or repeated
participation or involvement.
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13. Racketeering defined
Section 2(1)(e)
“Any person who – whilst managing or employed by or associated with
any enterprise, conducts or participates in the conduct, directly or
indirectly, of such enterprise‟s affairs through a pattern of racketeering
activity;
within the Republic or elsewhere, shall be guilty of an offence.
Participation in the affairs of the enterprise is the offence. The accused
is guilty by virtue of two things:
(i) being involved in an enterprise (to be part of the group of
racketeers), and
(ii)being involved in the commission of two or more offences (Schedule
1).
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14. Racketeering defined
Acquiring or maintaining an interest in or control of the
enterprise (Section 2(1)(d))
Any person who –
acquires or maintains, directly or indirectly, any interest in or control of
any enterprise through a pattern of racketeering activity;
in the Republic or elsewhere, shall be guilty of an offence.
• In terms of this provision, the interest in (or control of) the
enterprise is acquired or maintained through a pattern of
racketeering activity.
• Johnny, manager and agents
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15. Racketeering defined
Section 2(1)(f)
“Any person who –
manages the operation or activities of an enterprise and who knows or
ought reasonably to have known that any person, whilst employed by or
associated with that enterprise, conducts or participates in the conduct,
directly or indirectly, of such enterprise‟s affairs through a pattern of
racketeering activity;
within the Republic or elsewhere, shall be guilty of an offence.”
• Managing the operation or activities of the enterprise is the offence.
• Target is the Manager.
• Must be shown that the accused is in a position of some kind of
management.
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16. Racketeering defined
Prosecuting the Manager
• How do we prosecute a manager who ought to have known?
• Guilt can be proved by negligence. Johnny does not bother himself
with the day to day operations of the business.
• Benefit of racketeering prosecution: prosecute those who cannot be
touched with the normal concepts of liability.
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17. Racketeering defined
Property connected to racketeering
• Section 2(1)(b) deals with receiving, s 2(1)(c) deals with using, and
section 2(1)(a) includes both receiving and using.
• I.t.o. section 2(1)(a) it is an offence to receive or retain and use or
invest property derived from a pattern of racketeering activity.
• I.t.o. section 2(1)(b) it is an offence to receive property derived from
a racketeering activity on behalf of an enterprise.
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18. How to prove the offence of racketeering
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19. How to prove the offence of racketeering
Have to supply proof of the following three things:
- The Enterprise
- The Pattern of Racketeering Activities
- The Relationship between the accused and A & B above
• A Legitimate legal entity can be proved by the company charter.
• The elements of each offence needs to be proved through the
evidence deduced.
• To prove the relationship we have to prove knowledge. In the
circumstances the only deduction is: “Sure he knew”
• If an accused is an employee/associate we must prove that he
participated in the events.
• Who are we targeting? We are prosecuting the accused for the
collective activity of the enterprise.
• Instead of a misjoinder – we charge the accused as an enterprise
conducting a PORA.
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20. How to prove the offence of racketeering
S v dos Santos and Another 2010 (2) SACR 382 (SCA):
“.... Regarding the contention that an accused must first be tried and
convicted of the predicate offences before he or she could be indicted on
racketeering charges under POCA, that the decision whether to
prosecute, and on what charges, rested with the prosecutor.
Prosecutions under POCA, together with prosecutions for the predicate
offences, would usually involve considerable overlap in the evidence...
Such overlap did not of itself occasion an automatic invocation of an
improper splitting of charges or duplication of convictions.
... Since the POCA substantive offences were not the same as the
predicate offences, the State was at liberty to prosecute them in
separate trials or in the same trial. It followed as well that there could
be no bar to consecutive sentences being imposed for the two distinct
crimes because the one required proof of a fact which the other did
not.”
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21. Closing remarks
• Difficult and arduous investigations and prosecutions
• Approval from NDPP for prosecution
• Section 3(1):
• Any person convicted of an offence referred to in section 2(1) shall
be liable to a fine not exceeding R1 000 million, or to
imprisonment for a period up to imprisonment for life.
• Way to get the guy at the top!
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22. “Victories often occur after you see no
way to succeed but refuse to give up
anyway.”
Dave Weinbaum
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