AfriForum criticises Craig Warriner’s plea deal for lack of disclosure

AfriForum has slammed the plea agreement between the State and Craig Warriner (pictured), former trustee and fund manager of BHI Trust, saying it is not in the interests of justice.

Warriner was sentenced to a 25 years in prison for fraud following a plea deal in the Palm Ridge Commercial Crimes Court on Monday, 27 May.

He surrendered to authorities and confessed in an affidavit to fraud in early October last year, admitting to misusing the trust’s funds irresponsibly for 22 years. Following his confession, BHI Trust was provisionally sequestrated on 25 October and formally sequestrated on 7 February.

The 60-year-old was charged with 206 counts of fraud and a further charge (count 207) of contravening section 7(1)(a) of the FAIS Act – operating without an FSP licence.

The evidence presented in court showed that Warriner’s scheme affected 206 investors, leading to substantial financial losses. AfriForum’s Private Prosecution Unit represents nearly 50 investors impacted by the BHI scam.

The lobby group sought guarantees that Warriner would testify for the State in future proceedings involving other implicated individuals and requested disclosure of fund usage in the plea agreement. AfriForum additionally urged the State to pursue legal action promptly against specific individuals and entities involved in the case.

Moonstone has seen the plea and sentence agreement. The agreement states, “the State has consulted with the witnesses and in particular the liquidator of BHI Trust and/or members of the financial services authority and afforded them the opportunity to make representations regarding the contents of the agreement”.

Although no mention is made of any consultation with AfriForum, News24 reported that State prosecutor Frans Mhlongo informed the court on Monday that the organisation’s conditions had been fulfilled in Warriner’s affidavit.

During an exclusive media correspondence with Moonstone, Barry Bateman, communications manager of AfriForum’s Private Prosecution Unit, shared that the unit officially expressed dissatisfaction with the plea agreement to the National Prosecuting Authority (NPA) in a letter dated 24 May. Bateman said the prosecutor was informed of this before Monday’s court proceedings.

“Despite this, the prosecutor stated on record that he was of the view that we were satisfied with the plea agreement. We are preparing to approach the NPA to address this,” he said.

According to Bateman, in the plea agreement, Warriner failed to disclose the extent of the scheme, how it functioned, as well as the identities of others involved in the scheme and the roles they played in its operation.

“There is no mention of the assets Warriner accumulated from the fraudulent scheme or how he could assist the SAPS in furthering investigations. We told the NPA that the court should understand how the accused benefited from the crime and whether he has relinquished his benefits as part of plea negotiations,” Bateman said.

In the official correspondence sent on Friday, the unit told the NPA that the haste to finalise this matter without full disclosure by the accused is not in the interest of justice. Bateman told Moonstone it appeared as if the prosecutor was more concerned with finalising the case than acting in the interests of the people affected by the offence.

“It is simply unacceptable that a prosecutor would disregard the objections of nearly 50 victims of a crime before concluding a plea agreement with the accused. The plea is also silent on whether any victim consultations took place, nor with whom,” he said.

What the charge sheet says

In the matter of the State versus Craig Warriner, the charge sheet outlines that BHI Trust received funds from clients referred by specific FSPs, responsible for recruitment and marketing. The fund inflows detailed on the charge sheet pertain only to the period 1 January 2020 to 30 November 2023.

Warriner was responsible “for trading in securities on behalf of the clients”. The document states that he directed Rubicon Administration Services to issue investment certificates signed by him to beneficiaries, promising a 10% annual return and yearly profit withdrawals.

In terms of the agreement, Warriner was entitled to 10% of all capital gains “on such investment as well as to the interest generated on the banking account of BHI Trust on all balances from time to time”.

“Warriner misrepresented to the clients that their funds were invested in several investment ‘strategies’. A relatively small percentage was invested/ traded in securities. The balance of the funds was kept in an interest-bearing money account which generated interest for Warriner,” the charge sheet reads.

It goes on to state that beneficiaries deposited their investment funds into a Nedbank Corporate account Saver money market account. The bank records from 1 January 2020 to 30 November 2023 (the analysis period) show that only about R584 million of the nearly R3 billion received was transferred to JSE broker Afrifocus Securities (Pty) Ltd for securities trading, representing less than 20% of the total.

Additionally, about R576m was transferred back to the BHI Trust money market account from Afrifocus during this period. However, the securities trading did not yield sufficient profits to justify the returns presented to clients.

“Warriner misrepresented to the clients/investors of BHI that the deposited funds were profitably traded. The clients received monthly statements reflecting their apparent returns. The contents of these statements were fabricated,” the charge sheet reads.

Warriner used new investors’ funds to pay out existing beneficiaries, but “in or around 2023 the accused’s position of utilising new depositor’s funds to pay out other investors was no longer sustainable due to lack of available capital in the BHI Trust.”

The audit did not include funds collected before 2020, suggesting the actual scale of the fraud could be several billion rands higher.

What the plea and sentence agreement says

During Monday’s proceedings, Warriner pleaded guilty to all charges. His lawyer, Piet du Plessis, argued in mitigation that Warriner did not initially intend to create a fraudulent scheme but resorted to it after losing about half of the invested capital during the 2008 financial crash. Warriner’s intention was initially to recover these losses through trading, but he eventually fell into a cycle of deception, perpetuating a Ponzi scheme.

Under the plea deal, Warriner agreed to a 20-year prison term.

He received a 15-year sentence for 38 counts, which would have totalled 570 years cumulatively, but the court ordered these to run concurrently. For the remaining counts (count 207 excluded), he received another 15-year sentence, with 10 years to be served concurrently with the first. Additionally, on count 207, he received a 10-year sentence to be served concurrently with the first and second sentences.

“As the accused is already 60 years of age and in terms of this agreement is to serve 20 years imprisonment, he would serve imprisonment for the probable remainder of his natural life and any longer period of imprisonment would constitute a cruel and inhuman punishment,” the plea agreement reads.

However, according to the NPA, the court considered the severity of the offences and imposed a 25-year term.

Parole conditions were not included in the plea agreement.

Mitigating factors

Under the mitigating factors, the plea agreement noted that although Warriner ran BHI Trust like a Ponzi scheme in its later years, he did not initially intend to operate fraudulently.

“But because of factors beyond his control, lost approximately half of the capital base of BHI Trust and then made the incorrect decision to endeavour to trade BHI Trust into a positive and profitable as well as liquid situation by carrying on the business of the Trust instead of making known to the financial trouble of BHI Trust to the investors/depositors and authorities.”

Another mitigating factor was Warriner’s willingness to aid the joint liquidators of BHI Trust and officials from the FSCA’s investigating the trust’s affairs following his arrest.

Warriner’s detailed affidavit exposed the workings of the BHI Trust and named several other entities and individuals involved in the fraud. These revelations are expected to lead to further prosecutions as the investigation continues.

However, as pointed out by AfriForum, the 11-page plea agreement merely recounts the series of events that led to Warriner’s incarceration. Although Warriner freely admits to these events as described in the plea agreement, there is scant detail as to what his legal obligation will be in possible further prosecutions.

According to the plea agreement, Warriner “intends to proceed with such assistance regardless of the outcome of the criminal matter to facilitate the return of as much capital as possible to BHI Trust from persons unfairly advantaged by the payouts on their investments or earning of commissions on funds deposited by investors”.

It further states that he has offered his assistance to facilitate the tracing of funds relating to the trust to ensure “that all creditors are fairly and even-handedly treated and to see to it that as much of the lost capital is retrieved as possible”.