Cape Town - Fidentia fraudster J Arthur Brown has been sentenced to serve 15 years in jail by the Supreme Court of Appeal after his previous sentence, in the Cape High Court, was set aside on appeal.
After years of litigation and legal process, as well as a heavily criticised sentence in the Western Cape High Court, Brown’s new sentence has been widely welcomed.
Brown was charged with stealing from widows and orphans after he bought high-end property and expensive cars with investment money entrusted to his investment company Fidentia by a pension fund of the National Union of Mineworkers, among others.
He was eventually found guilty on two fraud charges.
He was fined R150 000 and given a suspended jail term by Western Cape High Court Judge Anton Veldhuizen.
The National Prosecuting Authority lodged an appeal against the sentence which was heard in the Supreme Court of Appeal in Bloemfontein last month.
On Monday the court handed down 15 years’ imprisonment on each of two fraud charges, saying the sentences would run concurrently.
Brown was convicted of fraud relating to his handling of investments for the Transport Education and Training Authority and the Mantadia Asset Trust Company between 2002 and 2006.
He had originally faced 192 charges.
“It wasn’t just about the amount involved. It was about the impact that the commission of the crime had,” said NPA spokesman Nathi Mncube.
He said Brown would have to report to the nearest prison “as soon as possible” to begin his sentence, but Brown’s legal team had not yet made contact with the NPA.
Speaking to the Cape Argus on Monday, Brown said he was not prepared to comment on the judgment until Tuesday.
“I still cannot comment on it now. My legal counsel and I are still studying the judgment, after which we will decide what course of action to take. I can only talk to you on Tuesday.”
Financial Services Board deputy chief executive Caroline da Silva was overjoyed by the sentence.
“Numerous adjectives come to mind,” she said when asked how she felt. We are delighted, we feel vindicated. We did not rest to ensure justice was served. And you can say we are relieved, because this is a very important result for the country. The Supreme Court of Appeal made its own findings about why the High Court gave such a lenient judgment. There were a host of reasons, but the most important one I think was that the High Court failed to fully understand the duty of trust. The High Court did not treat the mandate (in which an investor gives an investment manager a specific mandate with regards to investments) and trust (as in holding money or funds in trust) the way it should have been treated. The High Court also did not consider it fraud when such mandates and trusts were breached, while it should have been.
“If the verdict by the High Court had stood, it would have set a very bad precedent that we could not afford.”
Da Silva said Brown used every tool in the box to fight the charges against him, which showed he had no remorse.
“It was a long, technical battle from 2007 when Fidentia was placed in curatorship and because of its complicated nature, it made it look as if Brown had a case. I hope this case teaches people a few lessons. I hope criminals learn from it that we will not let them go and that they will be prosecuted, while I hope that investors also learn to be careful of to whom they give their hard-earned money.”
Sentencing Brown, the Supreme Court of Appeal found the High Court had erred in several critical areas.
“Having regard to the authorities referred to above, (Judge) Veldhuizen was obliged, when the plea was tendered, to consider whether the plea ought to be accepted, with particular regard being paid to the effect of the evidence led up until that stage,” the Supreme Court of Appeal’s judgment reads.
The Supreme Court of Appeal also had some criticism for the prosecution.
“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. Before us, counsel representing the State rightly conceded that in this regard the State could have done better.”
The worst was reserved for Brown, as the court explained its judgment and sentence.
“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,” the judgment read.
“After the investigation by the Financial Services Board was launched, Brown, instead of owning up to his misdeeds, resorted to subterfuge and deceit.”
Testimony that Brown was a person who took responsibility for his deeds was belied by the years it took before he pleaded guilty, the court found.
It found that Brown’s admissions were presented in a piecemeal fashion.
“He railed against the FSB which, after all, was only fulfilling its statutory mandate. He criticised the police, the media, the Reserve Bank, the curators and the public.”
Brown’s statements of sympathy concerning investors appeared contrived and reeked of insincerity.
His apology to investors was qualified and his evidence as a whole reeked of self-pity.
“It is apparent from Brown’s testimony that he continuously downplayed and minimised his moral and legal blameworthiness.”
Timeline: Fate of the fraudsters
2007: The Living Hands Umbrella Trust, a provident fund for orphans, is one of four that lost investments worth more than R1.3 billion when Fidentia and its associated companies were placed under curatorship.
The company’s management, including founder J Arthur Brown, were investigated for fraud and embezzlement and promptly arrested.
2008: Former Fidentia accountant Graham Maddock was charged with various criminal offences. He entered into a plea bargain and was sentenced to seven years behind bars. He has since been released on parole.
In the same year Brown’s attorney said the conman was raped in the back of a prison van taking him from Pollsmoor Prison to court.
2009: The company’s former director Steven Goodwin fled the country. He was later arrested in the US. Once back in South Africa he was charged and subsequently entered into a plea agreement. He was sentenced to an effective seven years’ imprisonment. He is also out on parole.
2013: Brown was found guilty on two counts of fraud, after being accused of running a multimillion-rand pyramid scheme using investors’ money for personal gain. He was acquitted on seven other charges.
The State appealed against the decision.
2014: The appeal was heard by the Supreme Court of Appeal in Bloemfontein last month, and yesterday Brown was sentenced to 15 years behind bars.
Cape Argus