Clearly the most effective fighter against corruption in this country continues to be the US department of justice (DOJ). Whatever you might think of the way the world’s most powerful state throws its military weight around, it’s really wonderful what it does with its power to investigate and prosecute corporate corruption almost anywhere in the world.
To be fair to South Africa’s National Prosecuting Authority (NPA), it did work with the DOJ on the investigation into SAP SA, the local subsidiary of German software multinational SAP. The NPA says that about R750m of the fine of approximately R4.1bn ($220m) SAP has to pay will go to South Africa’s criminal assets recovery account as “punitive reparation payments in recognition of the social and economic harm caused by [SAP’s] conduct”.
Indeed, our prosecuting authority has made progress on a number of cases. In September 2022 it charged consulting firm McKinsey with fraud, corruption and theft related to a Transnet contract — but sadly, the NPA’s prosecutions are often undermined by the shoddy work of the South African police. What a joy it must be to work with the well-resourced teams from the DOJ.
This was the second co-ordinated resolution between the DOJ and South African authorities in just over a year. The first was the R5.5bn fine slapped on ABB, a Swedish-Swiss multinational corporation, in late December 2022. That fine was paid to settle charges related to bribes paid for Eskom contracts. The amount of R2.5bn ended up in our criminal asset recovery account.
In between those two mega-amounts was the $2.45m fine levied on research and consulting services company Gartner. This, according to the website of the US’s Securities & Exchange Commission (SEC), relates to “a corrupt arrangement with a South African consulting firm to obtain and retain contracts from the South African Revenue Service”.
The SEC works closely with the DOJ to ensure enforcement of the Foreign Corrupt Practices Act (FCPA), which is the powerful piece of legislation that essentially allows the US authorities to interfere wherever they want. According to the FCPA “Resource Guide” the act allows US authorities to go after any domestic company or any company with a listing on a US stock exchange. It doesn’t end there. If the conduct involved a telephone call, an e-mail, a text or a fax sent to or received in the US, or if it involved the US banking system, it will also fall within the DOJ’s jurisdiction.
The act deals with the payment of bribes — anywhere in the world — to foreign officials, foreign political parties or candidates for foreign political office. The US House of Representatives says it regards such activity as unethical and counter to the moral expectations of the American public. Not only that, say the Americans, it’s bad business and erodes public confidence in the integrity of the free market.
The US makes the point that if left unchecked such behaviour leads to inefficiency, and that it applies pressure to ethical companies to follow suit or risk losing business.
On the South African front Japanese multinational Hitachi was the first high-profile company to be targeted by the DOJ for making “improper payments” to the ANC. Back in 2015 the company paid $19m to settle charges related to contracts to build power plants for Eskom.
While it often feels as though South Africa is the world leader in corruption, the SEC’s data suggests we’re a good way down on a list that China dominates.
South American countries come a distant second, followed by Africa, with South Africa not being too prominent. But that low ranking refers only to the cases the DOJ/SEC deals with. Many of the grim findings of the Zondo commission have not been targeted by the US regulators.
Mind you, what should we make of the comment contained in the DOJ press release explaining the SAP case? Noting that it is the second case in just over a year, the DOJ says: “We look forward to continuing to strengthen our relationship with South African authorities ...” So it's likely we could move up the list.
And the DOJ is not just responsible for policing the FCPA. It is also the only entity that has successfully prosecuted foreign-exchange traders charged with manipulating trade in the rand. How embarrassing that our local Competition Commission appears to have done nothing more than copy and paste parts of the DOJ’s charge and then bizarrely extend it to almost every financial institution in the country.
Worryingly, former president Donald Trump expressed some concerns about the FCPA restricting US companies’ ability to operate in the global environment. If he wins this year’s US election, we might see the first reining in of the DOJ’s decades-old power. That is a very grim prospect.