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Paul O’Sullivan, the corruption-busting entrepreneur and founder of Forensics for Justice, joined the BizNews Power Hour to weigh in on Markus Jooste, the former Steinhoff CEO who has been charged with fraud in Germany. O’Sullivan will be speaking about State Capture at the annual BizNews Investment Conference, on 17 March 2021. – Jarryd Neves
Paul O’Sullivan on Markus Jooste and the fraud charges in Germany:
The investigations in Germany probably started a year – or maybe even more – before any investigation started in South Africa. The South African investigations were triggered by the prompt resignation of Jooste, after the auditors refused to sign off the accounts. He resigned and that led to a collapse in the share price. Then all the bad things started coming out of the woodwork.
I think it was only at that time that South African authorities started an investigation. Up until then, South Africa was blissfully unaware of the criminal docket that had been opened in Germany. Remember, the company was originally based on the JSE and then it moved to Germany. In fact, I think it had a dual listing. So the Germans had a good head start on it. There were people in Germany that had their noses out of joint as a result of what was going on.
They had already like the criminal complaint. We investigate corporate fraud, and some of the corporate fraud cases we investigate can take two to three years to unravel what, essentially, has been going on for quite a number of years. It’s only after you’ve interviewed so many people and obtained so much documentary evidence that you’re in a position to join the dots. It would be premature to arrest, charge or prosecute anybody unless you have all the facts. Otherwise you’ll get surprises in the criminal trial and in Europe – as is the case with South Africa – they have these double jeopardy laws. If you’re charged and not convicted – you’re acquitted – you can’t be charged with the same offence.
On why it’s so difficult to unravel fraud:
Most auditors, they carry out audits to look at the transactions within the company. A lot of them – you’ll see their disclaimers – they accept the undertakings given by directors. They do not question enough of what is placed in front of them. Now, in my opinion auditors don’t audit for fraud – they audit for normality. So, a lot of audits are carried out and the fraud is not picked up. It’s only when somebody picks up the fraud and they start to investigate specific allegations, that they unravel and something else pops out. They say,’hang on a second, look at this. This is far worse than we ever suspected’.
To give you an example, we got a tip off in 2015, concerning alleged corruption on the part of then acting chief of police Kgomotso Phahlane. When we did our initial investigation – which was at the end of 2015/early 2016 – we uncovered what we considered to be the building of a mansion at a luxury estate for R8 million – and yet there were no cash flow.We opened a corruption document that.
IPID continued to carry out further investigations, and they unraveled literally hundreds of millions of rand – of fraud and corruption – relating to very sizeable contracts, issued to a company that was doing all the electronic work for the police. Remember, fraud and corruption is a covert crime. It’s not like robbing a bank. You have tellers who can say ‘they came in, they pointed a gun and they stole the money’. You have a crime scene that’s easier to see. If there’s a murder, you have a body.
Now with corporate fraud – especially if the people committing the fraud cover up their tracks – it takes a long time for the evidence to pop out of the woodwork. In fact, in some cases, you have to raid offices to get the evidence. That’s what the German police did. They raided a number of offices.
On Markus Jooste facing the law:
There’s an extradition treaty with the EU. They wanted to extradite Radovan Krejčíř, but he had to face the music for crimes he committed in South Africa. He can only be extradited when he’s finished serving the time for the offences he committed in South Africa. The same would apply here. Now, until such time as he’s been arrested and charged in South Africa, he’s extraditable. If I was in his shoes, I’d probably want to jump on a plane and fly to Germany, because life in a German prison would be far easier for him than life in a South African prison. So it’ll be interesting to see what happens.
On the BizNews Investment Conference:
I think we’ll be talking about why South Africa can survive state capture and how it can survive. I have a number of passports – as is widely known – and I can live anywhere in the world. I choose to live in South Africa, and the reason I choose to live in South Africa is because, in my opinion, it’s the best country in the world. Yes, we have some challenges, but they are fixable.
I think if we get enough of the fixable people out there doing the job, we will come right. The methods used have to change slightly. I’ll also be covering some of the areas that people don’t necessarily know about when it came to state capture. How they, effectively, shut down the criminal justice system so that all of these – what I call Zuptoids – were protected from criminal prosecution.
As an example, it’s now almost six years ago, when we opened the docket involving R4 billion that was stolen from Prasa. To this very day – six years later – not a single person has been arrested and charged. Our docket contained prima facie evidence of corruption, fraud, theft and money laundering. Yet, not a single person has been charged.
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