• DUNIA ZONGWEIF THE financial managers of the Social Security Commission knew that the Latin root of the word ‘avid’ means ‘greedy’, they would have probably refused to award the N$30 million investment contract to Avid.
But, while those managers cannot blame themselves for not being experts in Latin, they would have every reason to blame the decision handed down last month in the high-profile case involving the now infamous Avid Investment Company for failing to properly prosecute ‘greedy’ directors who commit fraud.
Surely, the judge should be warmly praised for wading in a legally complex case. Still, with the Avid judgement, the High Court missed a golden opportunity to develop Namibia’s fledgling law on corporate and white-collar crimes. In fact, the judge did worse: He confused the entire field of corporate criminal law. This is concerning in view of the ongoing drive by the government to reform state-owned corporations, and improve corporate governance. This is also concerning because, in Namibia and the world over, white-collar crimes are far more harmful and far less policed than ‘street’ crimes. For example, in 2015, the FBI estimated that the United States loses every single year more than U$300 billion because of white-collar crimes.
The Avid decision is wrong essentially because it failed to distinguish between the criminal responsibility of an individual who acts in his personal capacity (traditional liability), and the criminal responsibility of an individual who acts in his capacity as a company director (corporate liability). Without exception, all the leading authorities on criminal law in South Africa and Namibia, CR Snyman, Jonathan Burchell, and Gerhard Kemp, affirm that corporate liability is a special form of liability distinct from traditional liability, and they all treat traditional and corporate liability separately. This is especially important because traditional liability is, admittedly, ill-equipped to tackle corporate crimes, in part because, historically, criminal law evolved to deal with crimes committed by human beings in their own right, and not crimes committed by people on behalf of or for a company.
In late 2004 and early 2005, an investment company set up by the late Lazarus Kandara placed a bid to invest money from the Social Security Commission (SSC). In order to secure that investment from the SSC, the directors of Avid misrepresented the profile and shareholders of the company, as well as its political connections to the country’s ruling party.
Confusion arose when the state prosecutor charged with fraud the Avid directors in their personal capacity. Defence lawyer Sisa Namandje plausibly argued that, before deciding the case, the judge had to determine first whether the accused had acted in their personal or official capacity. The judge rejected that argument because, according to him, the capacity of an accused is not part of the definition of fraud. The judge did not realise that the underlying question was not whether the capacity of the accused was part of the definition of fraud, but whether in this particular case fraud, however defined, called for the application of traditional liability or corporate liability.
The judge said the acts of the accused in their personal and official capacity became “so intertwined” that it was “difficult (if not impossible)” to tell the difference, and that “it could be both”. If he was not in a position to neatly draw a cut between the accused’s personal and corporate capacities, how does he then justify that he convicted them in their personal capacity? Nowhere in the judgment is such a justification to be found.
Yet, in light of the vast research on white-collar crimes, corporate liability was written all over the case, given the fact that to perpetrate the fraud, the accused mostly used company documents (i.e. the shareholders’ list, resolutions, and the company profile); the fact that the SSC could not have possibly awarded the investment contract to a group of people acting in their personal capacity, as opposed to people acting on behalf of a company; and the fact that the amount involved was hefty (N$30 million).
In the end, the judge convicted in their personal capacity two accused (Paulus Kapia and Ines Gases), who had acted in their corporate capacity. Why is this a problem? If the accused had been charged in their corporate capacity, it would have been possible to prosecute, convict and (heavily) fine Avid itself. Like Chicago School economists and lawyers demonstrated, to prosecute a company for the act(s) of its director(s) creates a powerful incentive for other companies to monitor their directors, and upgrade their internal processes. Crucially, the huge cost of enforcing corporate crime laws is no longer solely borne by the state (and taxpayers), but it is shared by companies as well, who now have to keep up stricter standards and procedures for decision-making in order to avoid state criminal prosecutions and fines.
The Avid judgement does not directly speak to the special nature of corporate crimes, and will do little, if anything, to change organisational ethos in Namibia because, though it punished the ‘greedy’ accused, it raises no scarecrow for companies themselves.
