IN THE HIGH COURT OF LESOTHO
In the.matter between
LAHMEYER INTERNATIONAL GMBH
Delivered by the Hon. Mr. Justice G. N Mofolo On the 26th day of August. 2003.
After accused was convicted, the matter was postponed to allow counsel to prepare itself on a sentence to be imposed.
The method adopted being agreed upon by Counsel for the Crown and the Defence, when the matter resumed on 16 July, 2003, Mr. Roux (P.W. 1 at the trial) had been called by the Crown to give evidence on calculation of profits made by Lahmeyer in contracts 46, 51 and 1009.
Duly sworn Mr. Roux had stated that 'we have been asked to estimate the profits earned by Lahmeyer International in respect of LHDA Contract Nos 46, 51 and 1009 ("the contracts")- That the approach was to review the available documentation (set out at 5 below), to extract relevant information and to examine for consistency with other available information. Though they had not audited the amounts included in the documentation reviewed by them, they had nevertheless checked it for reasonableness and consistency with other information for, in order to determine the exact profit earned from the contract it would be necessary to have access to contractor's financial records. They had not had access to all relevant information and did not take responsibility for the veracity of information provided. Their task had been based on documentation made available to them by the Director of Public Prosecutions vide:-
LHDA Contract No. 46
LHDA Contract No. 51
LHDA Contract No. 1009
A memo headed "LAHMEYER'S PROFITS" apparently prepared by Lahmeyer International.
Summary of Total Payments to Lahmeyer International for Contract No. 46 provided by Lahmeyer International.
Draft Invoice No. 116 April, 2003 dated 21 May, 2003 for Contract No. 51 provided by Lahmeyer International.
Final Summary of Earnings for Contract No. 1009 provided by Lahmeyer International.
Memo prepared by Mr. Graeme Monro, LHDA Contracts Branch Manager, dated 26 June, 2003.
In his summary finding re: Contract 46 extracts of which being per Annexure 1, Mr. Roux has testified the contract had been reviewed including section 6 "Remuneration and payments" and while there were differences between the billing arrangements for home office staff and staff resident to ordinarily resident in Lesotho, the main relevant provisions were summarised as:
The Contractor would be paid in accordance with Appendix C (paragraph 6.2);
An escalation (upward price adjustment) was applicable monthly (Appendix C11);
Professional Staff would be billed as billing rates (Appendix C3 (e);
Billing rated were deemed to cover (Appendix C3 (e) and (I); actual direct costs; social charges (medical, pension vacation, sick
leave, statutory holidays, etc.); company overhead costs (administration, office rent and services, communications, computer charges and all other such costs earned by professional and unprofessional staff as required by the programme for design and construction; secretarial; clerical and junior support and other staff not nominated in the schedules; site working hours, shift work and costs of overtime; other indirect charges (such as recruitment costs, inducement allowances, end-of-contract bonuses and the like); and all other costs of the Consultant of performing services in Lesotho except the directly reimbursable costs were in accordance with schedule (Appendix C4); and the consultancy fee was computed at 10.5 % of the amount paid in staff costs.
According to the witness, billing rates used for staff costs were calculated using salary cost of a case marked up by a factor 2.61 thus:-
Staff in Home Office %
Social charges 37
According to his paragraph 8, the witness says the formula was developed to recover all staff-related overhead, administrative and other costs associated
with the contract that were not directly reimbursable. At paragraph 9 he says it is logical that the consultancy fee charged would represent minimum profit earned by the Contractor and paragraph 10 it was possible that the actual profit earned on the contract was substantially higher depending on actual overhead, administration and head office costs and recovery rates of this and other projects.
As to memo headed "LAHMEYER'S PROFIT (Annexure 2'). the witness has testified in terms of the memo the consultancy (paragraph 11) fee amounted to 1,339,232 Maloti and as the bulk of consultancy fee was payable in DM he was not aware of the exchange rate for calculating the Maloti amount and cannot therefore comment on the amount. At paragraph 12 the witness has said a total amount of DM 6,862.037.37 was paid Lahmeyer in terms of contract 46 though from the memo it is unclear what consultancy fee was paid Lahmeyer. At paragraph 14 the witness had concluded the profit earned by the contractor from contract 46 appears to be at least DM 484,368.00 based on the understanding that the mark up factor of 2.61 covered all staff related and administrative costs incurred by the Contractor that were not separately re-
Concerning Contract 51 being extracts as per Annexure 5, with but a few exceptions evidence here is the same as that tendered for Contract 46 except that billing rates were calculated using salary cost as a base, marked up by a factor of 2.765 thus:-
Staff in Home Office %
Social Charges 38.5
Company Overhead 138
Evidence on paragraphs 18, 19 and 20 is the same as that relating to Contract 46 and in terms of the Memo headed "Lahmeyer Profit" (Annexure 2), in terms of the memo the consultancy fee amounted to 2,374,165.00 Maloti ending with the same note as obtains in paragraph 11 of Contract 46.
According to the witness (paragraph 22) in terms of the draft invoice an amount of DM 1,281,367 was paid Lahmeyer International as a consultancy fee
in Contract 51 and the witness concludes that the next profit earned by Lahmeyer from Contract 51 appears to be at least DM 1,281,367 based (paragraph 25) on the understanding that the mark-up factor of 2.765 covered all staff related administrative costs incurred by the Contractor that were not separately reimbursable.
So far as Contract 1009 is concerned, the witness adverted to same facts as were relied on in Contract 46 and 51 and the billing rates app§ar to have been the same as those obtaining in contract 46 while the consultancy fee amounted to 563,011.00 Maloti and (paragraph 32) an amount of DM171,319.17 was paid to Lahmeyer International as a consultancy fee in terms of the contract concluding that, 'in our view the total profit earned by Lahmeyer International appears to be as follows:
Contract 46 - DM 484,368
Contract51 - DM1,281,367
Contract 1009 - DM 167,091
Cross examined by Dr. Kemp as to whether if one wishes to look how much Lahmeyer put in its pocket the representative fee was not to be deducted the witness had replied that in the first 1stace he assumed that the consultancy fee was covered in the 2,61 factor and secondly from a logical viewpoint he did not deem it right to deduct the consultancy fee from the profit if one looks at benefits Lahmeyer derived from the contract. Mr. Roux has also said tax was taken into account in relation to net profit, has also agreed if some invoices have not been paid this is a factor to be taken into account.
Mr. Penzhorn had then 1staced a document marked Exh. "BB" being
sentence in Acres case and Sole's case 1stus a memorandum given by an expert witness Miss Mariana Lala Camerer marked Exh. "CC". Concerning this memorandum by Miss Camerer, is by consent of the parties that the memorandum was handed in lieu of Miss Camerer giving viva voca evidence. If not mentioned before, Exh. "AA" is a document containing Mr. Roux's evidence 1stus other material from which his report was compiled. While Miss Camerer's document was made part of Exh. "BB", Dr. Werner Kunze's document submitted by Dr. Kemp by consent of the parties was marked Exh. "CC".
Dr. Kemp has submitted on behalf of the accused in mitigation of sentence that the top management of 1995 is entirely different from current top management and none of the present management were there in 1998 and that shareholding has also changed. Dr. Kemp has implored the court to look at some of the prejudicial factors operating against the accused such as, for example, that jobs will be lost and further that Lahmeyer may henceforth not be able to tender contracts in Lesotho or Swaziland. It was also possible that the World Bank and European Union and other organizations may impose
sanctions of disbarment against Lahmeyer. In view of the convictions it was likely that contracts outstanding in Lesotho would no longer be performed by Lahmeyer. Cost of litigation to Lahmeyer was considerable and invoices had been annexed of outstanding amounts which could not form part of the profits and had to be deducted. Dr. Kemp has said that in sentencing the court must use general principles governing sentences seeing that bribery is not anything esoteric but is like all other crimes.
Dr. Kemp has submitted the Court must not only direct its attention to the seriousness of the offence, but also circumstances surrounding the commission of the crime. Dr. Kemp has drawn the court's attention to the fact that Lahmeyer were well positioned to be awarded Contracts 12 and 15 but were cheated out of these.
If I understand Dr. Kemp well, he says there was bias against Lahmeyer with scales tilting in favour of French Consortiums. Dr. Kemp has said the court is to take it as a mitigating factor that Lahmeyer complained because there was corruption but authorities turned a deaf ear to the 1steas and had these
pleas been heard corruption in the LHDA would have stopped. Dr. Kemp has said Sole was long corrupt and Lahmeyer has not contributed to his corruption for when contract 46 came up Sole was already corrupt. Ex facie, Lahmeyer had won its bids on merit and there was no evidence of contracts being won by false means. He says financial consequences following the conviction are severe unless the World Bank and other bodies look at the conviction in another light. He says if there were profits these have been paid out to shareholders. He says a fine cannot be fixed mechanically without looking at other criteria namely, circumstances of the accused person. He has said in sentencing the court is to be guided by the time when the offence was committed and not on conviction and as to conversion, it is to be at the time and not to date. The court's attention was also drawn to the fact that accused was convicted on the basis of dolus eventualis for one would punish more severely where dolus directus is a factor than dolus eventualis. He has said straight line equations in aspects of economic crime sentences do not work. Dr. Kemp has said as they were charged on 12 counts, having been acquitted on 5 counts the fine must reflect the discrepancy because they cannot be fined at if they were convicted on all the counts and that Acres approach to sentence is
entirely different from the present case. He says LHDA suffered no financial harm as a result of bribery.
Mr. Penzhorn has commended judgement of Lehohla, CJ. and Culliman AJ in sentencing for both deal extensively with the approach as to sentencing. He says punishing has nothing to do with the amount of bribe because what the court has to consider is the seriousness of the offence committed. Mr. Penzhorn has submitted in the Acres case the Chief Justice had said look, I am going to punish you for the value of the bribe and since any profit you made is ill-gotten profits you also deserve to be punished for this.
Mr. Penzhorn has said the amounts involved are staggering and the punishment must reflect the community's disapproved of the crime whose image undermines the fabric upon which the whole society rests. He has described bribery as cancer and an insidious crime not only peculating society but undermining its very foundations. Mr. Penzhorn has variously quoted from judgements of the Chief Justice in Acres case and Cullinan, AJ in R.v.Sole
and in all material respects wish to associate myself with these remarks of the Chief Justice and Cullinan AJ as expounded by Mr, Penzhorn. I wish to be taken seriously in this. Taken seriously because I see no merit in slavishly repeating salutary and to the point remarks by the Chief Justice and Cullinan AJ on facts that are substantially the same as the present case. To do so would be a worthless exercise and an attempt to break new ground or re-invent the wheel.
So far as Dr. Kemp's submissions are concerned I am desirous of addressing them to the full save to say that whatever I may have said in my judgement, Roman-Dutch law is our received law and legal system which in this country we have practiced for quite sometime. There can be no doubt that fathers of Roman-Dutch Law took bribery very seriously and if they did we, the recipients, cannot but follow suit. In judgment in Rex vs. Sole (CRI/T/111/99)
Cullinan AJ says at page 5:
'The abhorrence of bribery in Roman-Dutch Law then finds roots in legislation some 350 years old. The expressions of strong reproval have multiplied with the years Indeed they have as Cullinan AJ has shown quoting from S.V.
Westhuizen (4) at p.62 where Barker J observed:
'It is a crime which strikes at the roots of a decent and honourable public administration. The public — that is to say, every citizen of this court — has a vital interest in the honesty and integrity of the officials of any branch of the public service, from government level down to a village management board level. No departure from the strictest standards of honesty and integrity can be tolerated.'
This was just to clear the air for I have to engage in Dr. Kemp's submissions. In mitigation of sentence Dr. Kemp has submitted Dr. Werner Kunze's affidavit marked Exh. "CC" by consent of Counsel for the Crown Mr. Penzhorn. The report by Dr. Kunze raises several mitigating factors one of them being that top management and shareholders of Lahmeyer as from 1995 has since changed. I note that this is the case. Mr. Penzhorn has wondered whether this is taken by the defence as remorse and I also wonder if it is to be taken as such for I did not gather this impression from Dr. Kemp save 1steading that this was a factor to be taken into account with other factors in sentencing accused. The affidavit has also given a list of contracts which Lahmeyer could not tender because it did not wish to risk the spectre of being disqualified. The contracts which Lahmeyer could not tender for as shown above were in South Africa (1) Braamhoek Pump Storage valued at +- 2 million USD, ESCOM. (2) Skuifram Dam, Water supply for Cape Town valued at +- Million USD, DWA.
Development Bank, Inter-American Development Bank, Kuwait Fund as well as European Union, Arab Fund and the Kuwait Fund.
According to sub-paragraph (3) of paragraph 8 portion of services is, in relation to:
World Bank : 15%
European Union : 5 %
African Development Bank : 8 %
Asian Development Bank : 10 %
Inter-American Development Bank : 3 %
Kuwait Fund, Arab Fund : 10 %
(4) Dr. Kunze feels the same would apply to other potential employees associated with the LHDA, for example, the Lesotho Government and the JPTC.
Dr. Kunze has also annexed copies of Lahmeyer's final invoices to LHDA in respect of Contract 46, 51 and 1009 marked "C, "D" and "E". Annexure "A" II shows:
'The contract is a composite contract comprising Unit Price and Reimbursements for actual cost for a total value of DM 1,108,460 and tabulates items amounting to DM 1,108,460. Annexure "B" shows outstanding amounts to be:
and interest on withheld moneys being:
I don't know and have no way of helping Lahmeyer except to say it would be in its interest to be fined.
In the absence of proper numbering, I will call B after the first B, Bl and the B after Bl, B2. B2 shows outstanding claims of Lahmeyer MacDonald Consortium to LHDA, Contract LHDA 51 - 'Muela Hydroelectric Project while annexure "C" to the first "C", Cl being Contract LHDA 46; Invoice No. 109/ September, 1999 which requests for arrangements to pay amounts due to L.H.T.P. into the bank accounts.
An amount of DM 5491.14 to Lahmeyer International GmbH at Dresdner Bank AG, Frankfurt, FRG.
Amount Pound Sterling NIL to be paid to most MacDonald consultants Ltd., at National Westminister Bank, 57 Victoria Street, London SW1 6Q1, England.
Amount Maloti 78,743.36 to be paid to Lesotho Highlands Tunnel Partnership, at Standard Bank, Kingsway, Maseru 100.
Amount Rands 73,828.64 to be paid to Highlands Delivery Tunnel Consultants, at Standard Bank, Randburg, USA; the third "C" (now "C2") shows statement of invoices submitted while the South "C" (now "C3") is a continuation of statements submitted.
Annexure "D" is covering letter of Draft Invoice No. 116 April, 2003. The second "D" (Dl) is summary. 'Muela Hydropower Project and the third "D" (D2) is the end of the draft letter.
It would seem Dr. Kunze's affidavit was submitted to show that not all the money went into Lahmeyer's pocket for a considerable sum is still outstanding, a factor the court has to take into account in imposing sentence.
This court is quite sympathetic with Dr. Kemp though, somehow, it would seem offences are not made to be forgiven but to be punished being the wearisome condition of humanity born under one law and bound to another, created sick and yet commanded to be sound. Strange indeed for nature to hate the errors she herself gives as some poets have observed.
I am saying all this because Mr. Penzhorn has pressed home the need to punish the offence severely and according to him this is an offence that must be deterred at all costs.
Somehow I am attracted by Prof. Snyman's Criminal Law 2nd Ed.
Of retributive theory he says the theory is based on the premise that the commission of a crime disturbs the legal order which can only be restored by punishing the crime for if a rule has been contravened, the scales of justice have been disturbed and can only be restored if the offender is punished the procedure being to "cancel out" or "wipe clean" the crime thus restoring the balance and quoting from both the German philosophers Hegel and Kant Snyman has asserted that punishment must therefore follow upon the commission of a crime for this is a "categorical imperative." (pp. 17/18).
I have not found Mr. Penzhorn's submissions on the deterred theory much different from those of Prof. Snyman. But Prof. Snyman has gone further to say retribution presupposes moral guilt in that the offender merely gets what he deserves.
According to Prof. Snyman, the extent of the punishment must be appropriate to the extent of the harm done or of the violation of the law so that
the less harm, the less punishment of the debt which the offender owes the legal order. This had been Mr. Penzhom's submission and I now understand on what it was premised though, according to him, it is not so material to base punishment on the extend of the damage what the court has to consider being the seriousness of the offence as, in so far as bribery is concerned the international community takes a dim of view of corrupt practices. Prof. Snyman says that the idea of a relationship between the punishment and the extend of the consequence of the crime is found in the Old Testament principle of "an eye for an eye and a tooth for a tooth" called Lextalion's and the talio principle. Prof. Snyman reminds us that the retributive theory is the oldest of all the theories of punishment (ibid 18/19). Prof. Snyman says the idea of proportional relationship between damage and punishment inherent in the retributive theory is of great importance in the imposition of punishment for if the theory were rejected and reliance 1staced on relative theories it would mean punishment could be imposed which would be out of proportion to the crime committed and if all the emphasis were on prevention the best thing to do would be to imprison for life or execute each thief who took even the smallest article and such harsh punishment would probably be the best form of
deterrence. Equally the reformative theory applied in isolation would also have the result that a person who committed a relatively minor offence could be subjected to reformative treatment for a lengthy period in an effort to cure him of his errant way (pp. 18/19). Though the theory has been criticised, according to Prof. Snyman they do not appear valid enough to influence the court for it is the only one which relates punishment directly to the completed crime and to the idea of justice. According to Prof. Snyman, if one were to apply only the deterrent, preventative and reformative theories it would be possible to imprison or keep them in rehabilitation centres even before they had committed any crimes as mere manifestation of an inclination to crime would be enough to deprive a person of his freedom.
As I have said, Mr. Penzhorn has relied on the general theory of deterrence which, according to Prof. Snyman at p. 21 '-----the community is generally deterred by the threat of possible punishment rather than its actual imposition on an individual. It would also appear the theory is based upon the theory that man prefers the painless to the painful as Beccaria, van Feuerback and Bentham wrote and that as a reasonable being man will always weigh the
advantages and disadvantages of a prospective action before he decides to act though, as Prof. Snyman correctly states, this is not always so. The weak point according to Prof. Snyman is that the deterrent theory lacks cogent proof" for it is hard to say how many people would commit the crime if there were no sanction. Speaking for myself, the present case and especially Acres case has received such media attention and so much has been said about them and indeed the publicity is so wide and adverse to company intcrcst(s) that the publication alone is so preventative I doubt punishment would add anything to the shock engendered by the conviction.
Besides, man is an individual and is interested more in his affairs than other people's affairs and where A fails B may no necessarily fail. Present day South Africa despite very harsh criminal sanctions is no different from the old South Africa in that crime is as high now as it was then. Besides, crime is the result of sociological and economic factors and I agree with Prof. Snyman (p.21) that 'many criminologists are of the opinion that a belief in the deterrent effect of punishment on the community as a whole rests on faith rather than on truly empirical evidence.'
As a general rule though, where a particular crime is of out of control in a particular community, this calls for heavy sentence to warn would-be offenders. Not only this, in such a situation if the court was imposing fines or reasonable custodian sentences, it would be time for harsher custodian sentences or heavy penalties. I was not addressed on how rife corruption is in this country save that the offence is serious from a donor point of view. Application of the deterrent theory also receives criticism if any individual is sacrificed for the sake of the community and singled out for punishment and used as a means to an end, something claimed by Prof. Snyman to be immoral. General deterrence no doubt requires publicity though throughout the trial the media was conspicuous by its absence though when judgement was handed down the media attended. Also, life is chance and many criminals take chances and not being nabbed by law enforcement officers succeed in their pursuit of crime.
In the event, does deterrence mean a caught thief must pay for the crimes of others, potential and actual?
I take the view that punishment is not only retributive, a deterrent and reformation but that it has educational value by drawing our attention as to what kind of conduct is prohibited by law 1stus, of course, the unpleasant consequences that may flow from transgression of legal norms. The preventative theory overlaps with both the deterrent and reformative theories though certain forms of punishment are in line with the preventative theory though not necessarily servicing the aims of deterrence and reformation as, for example, capital punishment, life imprisonment and suspension or forfeiture of a driver's licence. Actually, a driver's licence is suspended or forfeited to deprive the driver the ability to inflict further harm. The driver is in the first 1stace fined on conviction but the punishment does not stop here lor there is further punishment relating to his ability to drive. With respect, these are statutory provisions and of course there is authority at common law that an offender can be punished for the offences and additional punishment relating to ill-gotten profits.
According to the judgement in S. vs. Zinn, 1969 (2) SA 537 (AD), the
Judge-President of the Cape of Hope Provincial Division in sentencing accused for fraud had over emphasised the effect of crime at the expense of accused person and because of the misdirection the Appeal Court had set the sentence aside and new, reduced sentence imposed. Mr. Penzhorn has emphasised loss of business confidence by reason of the bribery charges and persuaded the court to follow suit.
The Judge-President in the Zinn case above is quoted as having said:
"if confidence in business of this kind is shattered it means less food on the 1state for those thousands of little men. This is not a case of just financial wolves — the one eating the other — this is a crime, a series of crimes which go to the very basis of the financing and development of an industry which gives employment to thousands of people in this country, (p.539)."
The Judge-President adding that accused was no longer young and had to consider the deliberate falsification of statements over a long period of years added:-
"This whole case reeks of deliberate, calculated, dishonesty; deliberate, calculated falsification and I cannot allow, that society, the who whole of it could be exploited by men to their own advantage. If this were to be allowed, if the fact that a man is no longer young, if the fact that a man now and then spits blood from his brochial tubes
is to be an excuse, then the whole of our business life, the whole of our society and economic structure, the many small people who live in this community, must suffer, a shattering crack and business and industry in this city will stop."
Amongst other things, it was contended on behalf of the appellant that the Judge-President's reaction was coloured by emotional extravagance. It had been submitted amongst other things that the appellant was subjected to a crippling interest burden. I did try to elicit from Mr. Penzhorn as to who, exactly, as a result of the accused's act, suffered loss and Dr. Kemp also raised this.
According to Rumpft, J at p.540, 'one is driven to the conclusion that the learned Judge-President considers the crimes to be of such magnitude that, if any weight were given to the personal circumstances of the appellant, business and industry in the whole of Cape Town would come to disastrous end'. The Judge-President's remarks were nonetheless not taken as strongly by the Appeal Court who saw them as 'a hyperbole, exaggerating beyond permissible limits the nature and effect of the crime and minimising the personality of the offender' (also p.540).
As regards the duties of a Judge in imposing sentence the learned Cullinan, AJ dealt with this in the Sole's case above and I am disinclined to revisit the timely remarks of the learned Judge. In Zinn's case above Rumpff J as to the deterrent aspect of sentence speaks of the appellant having to be put away for a long time to protect society; he also speaks of crimes committed over a long period of time and the abuse of confidence. Needless to say the remarks are apposite to the instant case.
It has been said punishment must fit the criminal, the crime, be fair to society and blended with a measure of mercy (see S. vs. Kumalo. 1973(3) SA 697 (AD) and yet in S. vs. Roux. 1975(3) SA 190 it was said mercy is founded on and arises out of the three basic elements expounded above in Kumalo's case and that, after considering the three elements it appears mercy ought to be shown, shown so that sentence will be an appropriate one in the circumstances.
It is possible I misread Mr. Penzhorn when he said though companies are criminally liable in our law there isn't much of a precedent in penalizing a
company for profits made in coloured or crime ridden transactions such as bribery.
In S. vs. Deal Enterprises (Pty) Ltd and others. 1978 (3) SA 302 (WLD)
the company and its two directors had been bribing a railway official for a period of over 8 years and the company had received substantial benefits as a result of the transaction. Deal Enterprises (Pty) Ltd ("Deal") was formed in about 1966 with a share capital of Rl00.00. Of the 100 shares of R1 each, 45 were to Mr. Peter Casimir Davis, 45 to Mr Johan Venter Bekker and the remaining 10 to Mr. Gordon Donald Wilson. Until 1975 the company's business consisted to trading second-hand metal material such as rails, sleepers and pipes and reconditioning them. Deal became holding company of some ten subsidiaries which included Benbrew Steel (Pty) Ltd ("Benbrew") (which carried on the business of dealing in scrap metal), and Transvaal and OFS Mining Materials Supplies (Pty) Ltd ("Jomms"), whose business was the manufacture of tools for sale to the mining industry.
In 1966 Bekker was introduced to Mr. Johan Smook who worked in a section of the Chief Stores Superintendent, at Railway Headquarters, Johannesburg and had been a railway employee for 40 years. "Section A" dealt with the purchase and sale of permanent railway material and Smook' s responsibility included sale of used rails, sleepers and fastenings. Bekker along with Peter Davies had visited Smook to learn about obtaining materials from the Railways.
Smook had advised visiting of various stores depots where surplus material was kept and with the information Peter Davis and Bekker found if a market could be created a huge business was in the offing. They had started in May 1966 and up to 1974 business had peaked with net profit of R55,489 in 1988, R265,000 in 1970 and R883,000 in 1974. Not only Deal prospered but Smook's financial position. The only amount deposited into this banking account was the R200.00 salary but in the following years he deposited various cheques, savings and fixed deposits totaling R90,000.00. Smook retired thinking 'the glass was set fair for the evening of his days unaware dark clouds were gathering and Nemesis approaching.'
Irregularities had been found in "section "A" and it was speculated the irregularities were the result of customer's preferential treatment by Smook' Smook was charged and convicted. Charged together were Deal Enterprises (Pty) Ltd. a corporate body and Benbrew Steel (Pty) Ltd also a corporate body both represented by their director Casimir Davis. There were X counts of bribery, one of fraud and alternatively theft. According to the court, in some cases it was possible to reach the conclusion that Smook treated Deal's applications with an indulgence which was not granted to other applicants.
Evidence revealed that amounts of R200.00 to R300 per month wore authorised by Peter Davis for entertainment of business associates but when difficulty arose with the railway staff because of their long working hours, it had been decided to convert the entertainment method to buying gifts.
Mr. Justice Nicholas the Presiding Judge has quoted from the Bothnia case Vol 1 of O'Malley and Hardcastle's Election Petition 117 at125-126 where Mr. Justice Willes said:
"it is somewhat remarkable with reference to this distinction (i.e. in the Parliamentary Elections Act 1868) between bribery and treating, that it has existed from early times; and that even with respect to that form of bribery of a person who holds judicial 1stace, express provisions have been made distinguishing treating from bribery. And without going back to Old books, 1 may mention what is within my own knowledge, that when I took oath of a Judge some 14 years ago, one of the terms of the oath was (and, unless it has been altered by recent Acts, I suppose Judges take the same oath at the present day), you shall not take any gift from any man who may have 1stea pending before you, unless it be meat or drink, and that of small value. That is not a mere form, chanted ancient times; it is as much as to express that the law will trust even a person who may have to decide upon the lives and properties of others to take, but only in the form of refreshment, which is to be consumed at the moment and not pocketed or reserved for future enjoyment, small quantities of meat and drink. Moreover, it is an illustration of that saying, which is quite familiar to Lawyers, that the law deals with substance and not with shadows. The law allows those trivial matters which occur from time to time, and cannot be prevented, which really do no mischief except in the minds of the suspicious; no inferences to be drawn against a person who simply eats or drinks in the way of moderate refreshment. Well, now. I am quite conscious that, that which might present attractions to one man which he could not resist may to another appear possible to avoid. A hungry creature will go into the trap for a bait, at which the well-fed one will turn up his nose with disdain. But it must be obvious (I have said enough, and I meant no more in what I said than to introduce what really is at the bottom of the decision in all these cases) that the Judge must satisfy his mind whether that which was done was really done in so unusual and suspicious a way that he ought to impute to the person who has done it a criminal intention in doing it, or whether the circumstances are such that it may fairly be imputed to the man's generosity, or to his profusion, or to his desire to express his good will to those who honestly help his cause without resorting to the illegal means of attracting voters by means of an appeal to their appetites."
The learned Judge has drawn a distinction between legitimate entertainment and bribery, an important aspect of the difference though, in our case, we have gone past this stage.
Deal Enterprises (Pty) Ltd had been convicted on counts 1, 3, 4, 5, 6, 7, 8 and not guilty on counts 2, 9 and 10 being more or less what happened to Lahmeyer.
In sentencing the company Nicholas J. had started with the remarks:
"You have been convicted of very serous crimes". And then he had referred to S v. Naker and Another, 1975 (!) SA 583 (A) in which Homes JA gave the following characterization of bribery, the terms of which he said were denunciatively emotive — although accurate."
"Bribery is a corrupt and ugly offence striking cancerously at the root of justice and integrity, and it is calculated to deprive society of fair administration. In general, courts view it with abhorrence."
The learned Judge had gone on at p.317:
"The crime of bribery must be punished severely. If it is not, then as Alexander Pope prophesied in Moral Essays, 'At length corruption, like a general flood (so long by watchful ministers withstood) shall deluge all; and avarice creeping on, spread like a low-born mist, and blot the sun."
The learned Judge also alluded to the fact that Mr. Kriegler on behalf of accused had said there were mitigating features in the case one of them being that he had said there was no evidence that the Railways suffered any loss as a result of accused's conduct. And it was in these terms that Dr_Kemp submitted on behalf of accused quite apart from a question from the bench. The learned Judge had agreed for everything that Deal acquired was paid for
as, indeed, in the case of Lahmeyer. The learned Judge had, however, disagreed that this was a factor in mitigation in the circumstances of the case for as he said on the same page:
"(Bribery) is a crime which strikes at the roots of a decent and honourable public administration. The public — that is to say. every citizen of this country — has a vital interest in the honesty and integrity of the officials of any branch of the public service down to a village management board level. No departure from the strictest standards of honesty and integrity can be tolerated.
As Schreiner said:
"The law of bribery is designed to protect the state against those who by gills tempi its officials to use their opportunities as such to farther private interest in state affairs. (Rex vs. Chorle 1945 AD 487 at 496).
"It is designed to protect the community generally against corrupt public administration."
(Hunt, South African Criminal Law and Procedure, Vol. III at 210 para. 111).
According to the learned Judge, it was also submitted that Deal was enterprising, active, hard-working, efficient, busy travelling the country. Indeed it was submitted on behalf of Lahmeyer that it was efficient, presented good proposals, scored high marks in the bidding process and it did not seem that there was any irregularity in the award of contracts to Lahmeyer. As Nicholas J. found, it was true but irrelevant for it does not mitigate the seriousness of the crime (p.317) in that Deals' activities were performed not as a public service but for its own benefit. It can be said the same goes for
Lahmeyer. It was said Deal has no claim to more lenient treatment because as a by product of its activities the South African Railways may have been benefitted. It's more murky in the case of Lahmeyer; is it not true that as a result of Lahmeyer's activities Sole was benefitted? Undoubtedly, in paying Bam to bribe Sole, Lahmeyer was cutting corners and encouraging the Chief Executive of the LHDA to disregard laid down procedures and favour Lahmeyer.
And then it was submitted that there was no proof that other customers of the Railways had been prejudiced by Deal's conduct. Of course Lahmeyer's conduct prejudiced other contractor/consultants. But as the learned Judge put it at p. 317, it was not possible to make any assessment of the extent of the prejudice to other customers, and in this such an exercise is not possible save that prejudice to other contractors/consultants was substantial.
I have made no comparative study but I was specifically addressed on this, and there can be no doubt that from the time ZM Bam was paid by Lahmeyer for the latter it to bribe Sole, was nothing succeeds like Success for
Lahmeyer. If accused was succeeding in all her bids, were oilier contractors/consultants also succeeding? At p. 317 Nicholas J. has made bold to say:
"Deals purchases exceeded those of all other purchasers combined' in that most of Deal's applications were granted, and other customers must have suffered incalculable prejudice in that their applications were not considered by Smook without bias and on their merits."
It was also submitted on behalf of Deal that benefits received by Deal were minimal. In adverting to annexure "CC" Dr. Werner Kunze's affidavit, this is what Dr. Kemp was probably attempting saying the benefits were not that much for, afterall, LHDA owes Lahmeyer much, so much that the court must take this into account in determining sentence. And then it was said there was no warrant for finding that it was Deal who corrupted Smook. Once more, in precise terms Dr. Kemp had submitted long before contract 46 was in sight Sole was already corrupt and that he was corrupt was not the responsibility of Lahmeyer. Mr. Kriegler's argument had been that it was apparent Smook had received bribes from other persons.
Concerning this, the court had found p.318 that 'the punishment would
be no different whether Smook was previously of unsullied purity or whether he was already corrupt.
Mr. Kriegler had further advanced a mitigating factor that there is no evidence that any of the bribees were ever put under any pressure by the accused or that any of the bribes were used as a lever to obtain benefits. Dr. Kemp has gone as far as saying considering there was no evidence of any irregularity on the award of contracts to Lahmeyer, it cannot be said that Sole was paid to favour Lahmeyer. Nicholas J's reaction to this though is that 'where the carrot succeeds, there is no point in using the goad' and with this I agree.
The learned Judge had come to the conclusion that in his opinion the crimes of which accused had been convicted 'were entirely without mitigating features' for the crimes, as he said (p. 318) were committed for the sole purpose of making profits; they were the product of a systematic and cynical 1stan for corrupting lowly paid railwayman over a period of seven years; and the amounts involved were very substantial. In the instant case facts are the same
except that it was to corrupt, over a period of six years, a Chief Executive, mirror and hope for future administration of the country.
The court had then turned to accused No.l Deal Enterprise (Pty) Ltd represented by Peter Casimir Davis in his capacity as director saying in terms ofs. 332 (2) (c) of Act 51 of 1977, the court could not impose upon him in his representative capacity any punishment other than a fine and that the line would be payable by Deal and may be recovered by attachment and sale of Deal's property. Because the crimes of which he was convicted in his representative capacity were committed for the purpose of making profits, justice demanded that fine to be imposed should at least be commensurate with the profits derived, for it is repugnant to morality and justice that a convicted wrongdoer should be left in possession of any part of the fruits of his crime. It was said in the case the difficulty lay in the assessment of profits made by Deal in consequences of the benefits obtained by means of bribes which have been proved to have been given.
The court recognised the fact that while Deal made very large profits during the years it bought materials from the Railways, it cannot be said that all those profits arose from illicit acts and there were in the records, only two pieces of evidence as to the relationship between bribes and profits.
In this instant case there is no difficulty assessing profits for Mr. Roux's evidence put the issue beyond any doubt. It is immaterial what may have happened to the profits for all that the court is concerned with is that since it is repugnant to morality and justice that a convicted wrongdoer should be left in possession of any part of the fruits of the crime, the fine imposed should at least be commensurate or in keeping with the profits made or derived. In the instant case there is evidence which this court has believed that all the profits arose from illicit acts.
The court had observed that Deal had not sought fit to 1stace before court (nor Lahmeyer has done so) evidence as to profits derived by Deal from crime of which it had been convicted, or as the basis on which it assessed payments to Smook and other railwaymen (in our case payments to Z M Bam and Sole).
Nicholas J. had said the result was that the court was obliged to apply a ratio which is of necessity arbitrary, but high enough to ensure there is no reasonable possibility that its application will operate unfairly to accused. The court had found no one in the position of Deal would have engaged in course of conduct of bribing railway officials if the ratio of bribe to profits had been only 1:1 and, in the light of Exh. "V" the ratio, in respect of one transaction at least was 1:15 and according to Peter Davies' evidence in some transactions it was 1:100 or 15:100 and he did not think the application of 1:2 would be unfair to accused though some might consider it ludicrously high. In the instant case there is no evidence of the proportion or ratio of bribe to profit and it would seem it was expected that sentence would be fixed mechanically as Dr. Kemp submitted. It was, on the contrary, Mr. Penzhorn's submission that figures had nothing to do with sentence for what was material was the seriousness of the crime. I have read Deal's judgement as authority for the proposition that where as in this case a convicted entity or person had not 1staced evidence before court of profits derived from crimes of which it had been convicted, or as the basis on which it assessed payment to bribes, in the result the court was obliged to apply some ratio albeit not necessarily arbitrary but high enough to ensure it does not
operate unfairly to accused. I understand this as to mean that a court cant close it's eyes and tell itself: this is a serious case, you are fined so much. In my view this accords with good common sense for if it was otherwise there would be serious discrepancies in sentencing. In Acres case above the Appeal Court has not applied mathematical equations and ratios except having taken all factors and circumstances into account for and against accused, imposed what, in the circumstances, is a proper sentence.
Nicholas J. had then proceeded to say there was no admissible evidence before court at to Deal's ability to pay large fines though there was evidence that during the years 1968 and 1975 Deal made profits totalling R2,000.000 and there was nothing to suggest it was not in possession of substantial assets.
As to Lahmeyer's ability to pay large fines, there is evidence that in respect ofContracts 46, 51 and 1009 Lahmeyer earned DM 1,932,826 profits. It is not that this has to be balanced against the fact that LHDA still owes Lahmeyer, but that the fact that there are outstanding amounts by LHDA to Lahmeyer this a mitigating factor to be taken into account by the court.
In arriving at the profit figure earned on the three contracts namely Contract 46 (DM 484, 368) Contract 51 (DM 1,281,367) Contract 1009/DM 167,091), a distinction has to be made between "booked" income and cash received. It has been found necessary to do so because since whatever income was booked would have created a corresponding debt on the part of LHDA, which debt would be wiped off by payments. The payment stage does not affect the income as earned and recorded. It is not the role of the court to deal with Lahmeyer's provision for doubtful debts or its capacity to collect such debts.
If it was intended by Lahmeyer that what LHDA owes it should operate as a mitigating factor in the sense that since it is owed it's not able to pay a large fine, I don't see how this can be a mitigating factor coming, as it does, late in the trial and from Dr. Kunze alone.
It has been argued that conversion of currency into Maloti should be on the day the profit was earned and not on conviction or sentencing. The court considers that, in passing sentence, it is not necessary to convert profit into
Maloti in that the profit should be paid back in the currency in which it was earned. This is simply a refund of illegitimate gains and should be returned as such. In addition, the court imposes a fine as a punitive measure on Lahmeyer. The additional fine serves as a signal to other would be offenders that the crime of bribery will be dealt with severely in Lesotho.
It would appear in the judgment wrong figures were converted these being amounts received by Sole. The error escaped this court's attention.
Accused was charged and convicted of:-
Count2: FRF 135,760.00
Count 6: DEM 24, 256.00
Count 7: DEM 61,870.00
Count 9: DEM 9,975.23
Count 10: DEM 58,801.15
Count 11: DEM 17,600.00
Count 12: DEM 47,600.00
I was more than half-way with this judgement when counsel for the accused and defence namely Mr. Woker and Dr. Kemp approached me in chambers to say sentencing Acres was proceeding before the Appeal Court and it seemed the Appeal Court was not inclined to agree with the sentencing mechanist as advocated for by the Crown and it seemed it was wiser for this court to await the result of the case. I cannot say that I decided to await the result in Acres save to say that the course seemed sensible.
I have perused the sentencing in Acres v. Rex C of A (CRI) of 2002 (High Court CRI/T/2/2002) and since the present case is CRI/T/144/02. I am of the view that CRI/T/144/02 appearing in Acres case is only a typographical error.
The Appeal Court has endorsed the trial Court's approach in respect of the profit made by having taken this into account in determining sentence. The Appeal Court has, however, found that in having regard to the considerations, a Court cannot ignore other consideration and at p. 60 had found:-
'— we believe the court's attention should be more properly directed at determining a fair punishment having regard to all the relevant considerations, both aggravating and mitigating.'
The Appeal Court has also found (p.61) that where an accused is charged of a number of counts and is acquitted and convicted in some, the degree of the moral guilt of the appellant must be regarded as diminished to the relevant extent.'
According to the Appeal Court (p.62), 'aggravating circumstances cannot be over-emphasized at the expense of mitigating circumstances.'
My reading of the Appeal Court's judgment is that a court having taken account of all the relevant factors aggravating and mitigating, a court is at large to impose what we believe to be a proper sentence/ The Appeal Court has, in addition found 'a significant deterred sentence is called for in this premeditated and carefully 1stanned criminal act' (p.67).
In the instant case the amounts involved total 135,760.00 French Francs in Count 2 and a total of 220,102.38 German Deutschmarks for Counts
6,7,9,10,11 and 12.
Compared to Acres case, these are relatively small amounts. Dr. Kemp in mitigation of sentence has said this court is to take account of the fact that the accused was at least acquitted in 5 counts and I am aware that in Acres case above this factor, amongst other factors, was taken into account by the Appeal Court in sentencing.
Having taken into account all relevant factors both aggravating and mitigating and the case deserving a deterrent sentence, this court is at large to impose an appropriate sentence and the sentence of court is payment of:-
Count 2: M4,200,000
Count 6: M 800,000
Count 7: Ml,900,000
Count 9: M 150,000
Count 10: Ml,800,000
Count 11: M 300,000
Count 12: Ml,500,000
In respect of time and space counts 6 and 7 are very close and it would seem justice demands that these be taken as one and to run concurrently. However, given the nature of the offence, our view is that all counts are to run consecutively.
The result is that the accused is sentenced to pay a fine of Ml 0,650,000.
My Assessors agree.
G. N. MOFOLO
For the Crown: Mr. Penzhorn, S.C. Mr. Woker
For the Defence: Mr. Alkema Dr. Kemp, S.C.