The successful appeal by the State against the judgment by the High Court against J Arthur Brown certainly makes for interesting reading.
The judgment found that the Western Cape High Court erred in finding that the minimum sentence provisions did not apply. It set aside the two sentences and substituted it with a sentence of 15 years’ imprisonment.
Brown pleaded guilty to the following two charges:
- misrepresenting to an investor that assets in excess of R200 million were being managed in accordance with the agreed mandate and
- misrepresenting to shareholders of an entity that administered pension funds that the purchase price of the underlying assets would be paid from purchaser’s own cash resources.
The five judges of the Supreme Court of Appeal were scathing in their views on how the judge handled the case, and also had some hard words to say about how council for the state acted.
Concerning the case for the State, the judge at the Cape High Court said:
The uncertainty was compounded by the State not having access to its own library because it was locked, and further it appeared that its access to the relevant authorities online was also limited.
At one stage, the judge accused the State of mismanaging the case, particularly in relation to its acceptance of Brown’s plea of guilty.
Dealing with Dawood Seedat of the FSB’s evidence of the shortfall of R406 million, the court said:
‘If his findings are factually correct, then I find it astounding that you have been brought to court on only the nine counts listed in the indictment. I find it even more astounding that the State saw fit to accept your pleas of guilty on the facts set out in the admissions you made in terms of section 220 of the Criminal Procedure Act 51 of 1977. If the facts related by this witness are correct, then something is sorely wrong and I can only think the prosecution case has been poorly handled.’
The Appeal Court, in reviewing the case, also stated:
The State, relieved at not having to continue to deal with the mass of documentation and the complexities of the investment industry, was probably too eager to accept the plea without thinking through the consequences.
It was even more harsh on what it terms “Repeated unwarranted judicial interventions” by the judge of the High Court, and cites a substantial number of examples to prove its point.
Below are some of the views expressed by the Supreme Court:
Evaluating evidence consistent with the plea
[103] In deciding on an appropriate sentence, the court ought not to have restricted itself to the bare facts contained in the plea. The tendered plea does not provide context nor does it present enough of a picture for the court to properly fulfil its sentencing function. I will, however, accept in favour of Brown that, in considering the evidence adduced up until the acceptance of the plea and presented in mitigation and aggravation of sentence, no regard can be paid to evidence inconsistent with the plea.
More particularly, evidence tending toward dolus directus and actual loss on the part of investors has to be discounted. It is also necessary to remind ourselves that Brown pleaded guilty on the basis that he foresaw potential, rather than actual prejudice.
Consideration of the relevant evidence
[105] I now turn to a consideration of the relevant evidence. Accepting in Brown’s favour that he might have had, as a primary object, optimising investment returns by investing in a range of asset classes contrary to the mandate, it is nevertheless strikingly clear that he and his cohorts were at the very least ‘gung-ho’ about how they dealt with investor funds. They ignored the most basic regulatory rules directed at ensuring that the funds were safeguarded and treated as trust funds.
[108] After the investigation by the FSB was launched, Brown, instead of owning up to his misdeeds, resorted to subterfuge and deceit. The unchallenged evidence of Maddock and Goodwin, concerning the reconstruction of accounts and statements described as ‘retrofitting’, and the resort to measures such as the engineered letter from Goodwin on behalf of Worthytrade are all consistent with that pattern of deceit. This must surely count against Brown.
[116] The conclusion by the (Western Cape High) court that the two counts of fraud on which Brown had been convicted were not that serious and that his moral blameworthiness was limited, is entirely unjustified.
The actual Appeal Court judgment is an interesting document. Click here to download a copy.
