McBride suspended

Independent Police Investigative Directorate (IPID) head Robert McBride has been suspended, eNCA reported on Tuesday.

On Wednesday last week, an urgent interdict sought by McBride to prevent his suspension from IPID was struck off the roll in the North Gauteng High Court in Pretoria.

"The facts do not support the relief sought, nor the applicable legal considerations. It is accordingly struck off the roll," Judge Hans Fabricius said in his written judgment.

Police Minister Nathi Nhleko had opposed McBride's application.

McBride had received a letter from Nhleko, asking him to make submissions about why he should not be suspended.

Source: News24

NPA boss Nxasana wins battle against suspension - for now

The National Prosecuting Authority boss Mxolisi Nxasana appears to have won round one in his battle against President Jacob Zuma to keep his job.

Following a meeting between the parties today, Nxasana has not been suspended by Zuma, as had been widely expected this week, the Mail & Guardian has established.

Talks were held this morning after Nxasana filed an urgent court interdict on Tuesday to try to compel Zuma to provide him with further clarity on why he wants to suspend him.

The matter was postponed indefinitely but kept on the court roll, and efforts are being made to try to settle the dispute out of court.

Anticipating Nxasana’s suspension

The court action was seen by Zuma’s supporters as a pre-emptive strike, as they were anticipating Nxasana’s suspension by the President on Tuesday, said an NPA source.

Nxasana’s supporters believe attempts were made to get him to resign after the prosecuting authority moved to recharge suspended crime intelligence boss Richard Mdluli with fraud and corruption.

Trouble erupted seven months after he took up his post when Nxasana was asked in May by former justice minister Jeff Radebe to step down, as he had apparently failed his security clearance.

Nxasana pointed out in his court papers this week that Radebe had brought up cases from 30 years ago, and he had declared most of them.

One of these cases involved a murder charge he faced in court when he was 18, which he said he had not declared because he was acquitted on the grounds that he had acted in self-defence.

While some NPA legal figures have clashed with Nxasana, a number of NPA prosecutors have told the M&G they will not stand by and allow Nxasana to be removed from office, without good reason.

“We believe in his integrity and independence,” said a senior NPA prosecutor this week. “He is the only one who can restore our dignity and pride and bury the rot.”

Nxasana had a deadline for Tuesday to provide reasons why he should not be suspended.

Zuma wrote him a letter and made it clear that he intends to suspend Nxasana while he waits for a commission of inquiry into his fitness to hold office to be convened. However, Nxasana said he would not provide the President with reasons why he should not be suspended unless he has further details about why he wants to suspend him.

Nxasana and Zuma are expected to meet again next week, but the presidency is keeping mum on details.

Further court action could take place if Nxasana is not happy with the outcome, said NPA sources, if Nxasana is still not provided with further details on why Zuma wants to suspend him.

Zuma’s spokesperson Mac Maharaj confirmed in a press statement the President had met with the National Director of Public Prosecutions (NDPP) this morning and said they had discussed various matters around the President’s intention to hold an inquiry into the NDPP’s fitness to hold office.

“The President has taken note of the issues raised by the NDPP,” said Maharaj. “An announcement will be made when all the processes have been completed.”

Source: Mail & Guardian

The NPA's reputation is in tatters: Our state institutions need to be rescued

Speech by the DA's Shadow Minister of Justice, Glynnis Breytenbach MP during the budget vote debate on Justice, Parliament, July 15 2014:Our state institutions need to be rescued

South Africa has, if not the strongest, then one of the strongest constitutional legislative frameworks in the world. It is designed to ensure that all our citizens live in safety and security, and that everyone is equal before the law. It is these principles that should guide the criminal justice cluster in the performance of their duties, guided always by the prescripts of the Constitution and the principle of the Rule of Law.

However, this has not been done successfully or at all, and the web of terror that crime throws over South Africa is so strong and far-reaching that every South African has been constrained by it in some way. The lives of many committed and talented South Africans have been lost. Many are deeply traumatised. We have become suspicious of our fellow citizens and distrusting of the institutions that are supposed to keep us safe.

This has a negative effect on the fight against crime in general, and the fight against corruption in particular. This in turn has a disastrous effect on the economy and investment. International investors are hesitant to invest where they believe that they may have no recourse, where they have little faith in the ability of the legal framework to offer adequate protection. A knock-on effect is the high unemployment rate, and the inability to create jobs and employ particularly young people and young graduates.

The 2007 Cabinet adopted a so-called seven-point plan to review and revamp the Criminal Justice System. This, very briefly, was designed to address the most serious shortcomings of the Criminal Justice System, and was to create an effective and efficient so-called Integrated Criminal Justice System. We now find ourselves in mid-2014, and no closer to achieving even the most modest of the goals set out in that plan. Seven years of planning, budgeting and promises of implementation have left us nowhere. Billions have been spent by the Department of Justice and the Criminal Justice Cluster in pursuit of these goals, with very little or nothing to show for it.

This year, again, in his overview of the proposed budget, Minister Masutha refers to these goals, how they will be pursued and achieved and how much will be spent in the pursuit thereof. And this year, again, there can be no realistic expectation of any success in this regard.

The National Prosecuting Authority (NPA) is an important player in the Criminal Justice Cluster, and the institution upon which the achievement of these goals largely rests, is in disarray. It has been without a permanent head for long periods, and the ensuing chaos is as a direct result of this. Acting heads, who by their very nature are directionless, and unsuitable appointments have wreaked havoc on a once strong and dependable institution. This is, of course, the direct result of unabashed and undisguised political meddling in the affairs of the National Prosecuting Authority, and the Criminal Justice Cluster as a whole.

The National Prosecuting Authority is an institution that should have no dirty linen to wash, let alone to be washed in public. Yet week after week we see it lurch from one damaging scandal to the next. Its reputation is in tatters. It is constantly in the news, and never for the right reasons. The public at large has no faith in the organization to fulfill even its most basic mandate, and a budget of billions annually sees no real improvement in its daily functions. Millions are wasted on litigation for poor or no reasons.

The hapless Koki Mpshe was appointed after the inexcusable firing of Vusi Pikoli, solely to facilitate the withdrawal of the corruption and other charges against the President. The appointment of the wholly unsuitable Menzi Simelane was defended to the doors of the Constitutional Court, the equally unsuitable Nomcgobo Jiba was rushed up the corporate ladder in order to be able to replace him, and to oversee the continued stonewalling surrounding the spy tapes saga and the protection of Richard Mdluli, astonishingly even in the face of various court judgements. Under pressure from various sources, the President, having had plenty of time to apply his mind, appointed Mxolisi Nxasana, only to institute an enquiry into his fitness to hold office ten months later, and only after he called for the spy tapes and related documents and re-instituted the charges against Richard Mdluli. It takes no great amount of intelligence to glean the golden thread in this sad tale.

The only sensible thing to do now is for the President to widen the still to be announced terms of reference of the Commission to include an enquiry into the behaviour of other senior managers, notably Adv Jiba and Adv Mrwebi. Both were severely criticized in judgements in the High Court and the Supreme Court of Appeal. The top structure of the National Prosecuting Authority needs to be cleaned out so that those who remain can get on with the core business of the organization.

The Special Investigating Unit (SIU) has not fared much better than the National Prosecuting Authority. Beset by leadership issues the Special Investigating Unit has largely failed to fulfill its proclaimed goals, despite a year on year increase in its budget. Many investigations have dragged on for years, and appear to be nowhere near completion. The Bosasa matter has been live for more than 5 years now, still with no end in sight, and the Head, Adv Soni, admitted last week before the Portfolio Committee that he could give no indication as to when the Nkandla investigation and report would be finalized and placed before the President.

Despite the importance of and public interest in the matter, the Special Investigating Unit only managed to gain access to the premises at Nkandla on 3 July 2014. Adv Soni declined to say who was responsible for the delay, despite the parties involved being legally obliged to co-operate with him. Given the profile of this matter, and the obvious importance and pressure to finalize it, no real progress could be demonstrated, and certainly no will to drive the matter was discernible.

The current presentation before the Portfolio Committee reveals an enormous decrease in cases expected to be finalized, but despite this the Special Investigating Unit felt comfortable to approach Parliament and request an increased budget in order to meet its significantly decreased goals. There can be very little confidence that even these modest goals will be met. Again we see an important component in the Criminal Justice Cluster being reduced to a somewhat embarrassing ineffectiveness due to overt political meddling.

The office of the public protector is a chapter 9 institution and an independent body reporting to Parliament, whose mandate is being followed and fulfilled, but is clearly under fire due to the independence being exhibited. The Public Protector herself is vilified, accused of overreaching her mandate, accused of playing politics and the target of severe personal criticism from certain limited sources, simply because she refuses to bow to political pressure and refuses to allow political interference in the institution, which derives its independence from the Constitution.

Again, the thread of political interference in these institutions is glaring, and the attack on the independence of the Criminal Justice Cluster is palpable.

No amount of budget increases will fix this. No amount of money is going to make these institutions effective in the face of such interference. The interference must stop. And it is our duty, the duty of this fifth Parliament, to all those citizens who voted for us to sit here, to make it stop, and to work towards making the Criminal Justice Cluster effective and efficient, in order to fulfill the role it is enjoined to fill by the Constitution. If we allow the Rule of Law to be eroded any further, we will find it impossible to regain the lost ground.

The great Russian author, Aleksandr Solzhenitsyn wrote: " in keeping silent about evil, in burying it so deep within us that no sign of it appears on the surface, we are implanting it, and it will rise up a thousand fold in the future. When we neither punish nor reproach evildoers, we are not simply protecting their trivial old age, we are thereby ripping the foundations of justice from beneath new generations."

We are tired. We want justice now. Sikathele manje. Sifuna ukulunga.

Issued by the DA, July 15 2014

Source: Politicsweb

Zuma announces inquiry into NPA boss Nxasana

President Jacob Zuma instituted an inquiry into NPA boss Mxolisi Nxasana, the presidency announced on Saturday.

“President Jacob Zuma has, in terms of Section 12(6)(a)(iv) of the National Prosecuting Authority Act 32 of 1998 and after careful consideration of all the matters before him, decided to institute an inquiry into the National Director of Public Prosecutions, Mr Mxolisi Nxasana,” a statement from the presidency said.

Maharaj said details on whether Nxasana would be suspended will be announced in due course.

Nxasana was thrust into the limelight after he was denied a clearance certificate, when he did not disclose that he had killed a man when he was 18 years old.

Nxasana said he was acquitted of the murder, which took place in 1985 in Umlazi, outside Durban, but this had now come back to haunt him. Nxasana insisted this is part of factional machinations by his rivals at the NPA and politicians who want to get rid of him.

Circulating stories

In May, Nxasana told the Mail & Guardian: “There have been stories circulating, which I will tell a commission of inquiry if there is one,” Nxasana. “They have spread rumours that I want to reinstate charges against President Jacob Zuma, that I want to reinstate charges in the Amigos case in Durban [involving ANC politicians].”

A report by the Sunday Times, claimed that pensioner Aggrieneth Khumalo – the mother of Nxasana’s ex-girlfriend Joyce Khumalo – painted a picture of a man who was a “woman beater, bully and thug” when recalling her late daughter’s relationship with the NPA boss.

Khumalo died in 1998 in an unrelated incident after her relationship with Nxasana.

NPA spokesperson Bulelwa Makeke referred to the report as “an apparent crusade against Nxasana” and told the M&G that the prosecuting agency was not interested in giving the report “any credence”.

Earlier, Zuma denied reports in the New Age that he ordered Nxasana to resign or face being fired.

“The president has not met with Mr Nxasana and has not asked him to resign,” Maharaj said.

NPA spokesperson Nathi Ncube said the article was a lie. “The story is a pure fabrication by information peddlers with a very active imagination,” Ncube told a South African Press Association reporter via SMS.

Sources close to the NPA and the presidency reportedly told the New Age that Zuma met Nxasana recently to discuss Nxasana’s future. It was at that meeting that Zuma reportedly asked Nxasana to resign or face being fired.

Source: Mail & Guardian

Why Only One Top Banker Went to Jail for the Financial Crisis

On the evening of Jan. 27, Kareem Serageldin walked out of his Times Square apartment with his brother and an old Yale roommate and took off on the four-hour drive to Philipsburg, a small town smack in the middle of Pennsylvania. Despite once earning nearly $7 million a year as an executive at Credit Suisse, Serageldin, who is 41, had always lived fairly modestly. A previous apartment, overlooking Victoria Station in London, struck his friends as a grown-up dorm room; Serageldin lived with bachelor-pad furniture and little of it — his central piece was a night stand overflowing with economics books, prospectuses and earnings reports. In the years since, his apartments served as places where he would log five or six hours of sleep before going back to work, creating and trading complex financial instruments. One friend called him an “investment-banking monk.”

Serageldin’s life was about to become more ascetic. Two months earlier, he sat in a Lower Manhattan courtroom adjusting and readjusting his tie as he waited for a judge to deliver his prison sentence. During the worst of the financial crisis, according to prosecutors, Serageldin had approved the concealment of hundreds of millions in losses in Credit Suisse’s mortgage-backed securities portfolio. But on that November morning, the judge seemed almost torn. Serageldin lied about the value of his bank’s securities — that was a crime, of course — but other bankers behaved far worse. Serageldin’s former employer, for one, had revised its past financial statements to account for $2.7 billion that should have been reported. Lehman Brothers, AIG, Citigroup, Countrywide and many others had also admitted that they were in much worse shape than they initially allowed. Merrill Lynch, in particular, announced a loss of nearly $8 billion three weeks after claiming it was $4.5 billion. Serageldin’s conduct was, in the judge’s words, “a small piece of an overall evil climate within the bank and with many other banks.” Nevertheless, after a brief pause, he eased down his gavel and sentenced Serageldin, an Egyptian-born trader who grew up in the barren pinelands of Michigan’s Upper Peninsula, to 30 months in jail. Serageldin would begin serving his time at Moshannon Valley Correctional Center, in Philipsburg, where he would earn the distinction of being the only Wall Street executive sent to jail for his part in the financial crisis.
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American financial history has generally unfolded as a series of booms followed by busts followed by crackdowns. After the crash of 1929, the Pecora Hearings seized upon public outrage, and the head of the New York Stock Exchange landed in prison. After the savings-and-loan scandals of the 1980s, 1,100 people were prosecuted, including top executives at many of the largest failed banks. In the ’90s and early aughts, when the bursting of the Nasdaq bubble revealed widespread corporate accounting scandals, top executives from WorldCom, Enron, Qwest and Tyco, among others, went to prison.

The credit crisis of 2008 dwarfed those busts, and it was only to be expected that a similar round of crackdowns would ensue. In 2009, the Obama administration appointed Lanny Breuer to lead the Justice Department’s criminal division. Breuer quickly focused on professionalizing the operation, introducing the rigor of a prestigious firm like Covington & Burling, where he had spent much of his career. He recruited elite lawyers from corporate firms and the Breu Crew, as they would later be known, were repeatedly urged by Breuer to “take it to the next level.”

But the crackdown never happened. Over the past year, I’ve interviewed Wall Street traders, bank executives, defense lawyers and dozens of current and former prosecutors to understand why the largest man-made economic catastrophe since the Depression resulted in the jailing of a single investment banker — one who happened to be several rungs from the corporate suite at a second-tier financial institution. Many assume that the federal authorities simply lacked the guts to go after powerful Wall Street bankers, but that obscures a far more complicated dynamic. During the past decade, the Justice Department suffered a series of corporate prosecutorial fiascos, which led to critical changes in how it approached white-collar crime. The department began to focus on reaching settlements rather than seeking prison sentences, which over time unintentionally deprived its ranks of the experience needed to win trials against the most formidable law firms. By the time Serageldin committed his crime, Justice Department leadership, as well as prosecutors in integral United States attorney’s offices, were de-emphasizing complicated financial cases — even neglecting clues that suggested that Lehman executives knew more than they were letting on about their bank’s liquidity problem. In the mid-’90s, white-collar prosecutions represented an average of 17.6 percent of all federal cases. In the three years ending in 2012, the share was 9.4 percent.

After the evening drive to Philipsburg, Serageldin checked into a motel. He didn’t need to report to Moshannon Valley until 2 p.m. the next day, but he was advised to show up early to get a head start on his processing. Moshannon is a low-security facility, with controlled prisoner movements, a bit tougher than the one portrayed on “Orange Is the New Black.” Friends of Serageldin’s worried about the violence; he was counseled to keep his head down and never change the channel on the TV no matter who seemed to be watching. Serageldin, who is tall and thin with a regal bearing, was largely preoccupied with how, after a decade of 18-hour trading days, he would pass the time. He was planning on doing math-problem sets and studying economics. He had delayed marrying his longtime girlfriend, a private-equity executive in London, but the plan was for her to visit him frequently.

Other bankers have spoken out about feeling unfairly maligned by the financial crisis, pegged as “banksters” by politicians and commentators. But Serageldin was contrite. “I don’t feel angry,” he told me in early winter. “I made a mistake. I take responsibility. I’m ready to pay my debt to society.” Still, the fact that the only top banker to go to jail for his role in the crisis was neither a mortgage executive (who created toxic products) nor the C.E.O. of a bank (who peddled them) is something of a paradox, but it’s one that reflects the many paradoxes that got us here in the first place.

Part of the Justice Department’s futility can be traced to the rise of its own ambition. Until the 1980s, government prosecutors generally focused on going after individual corporate criminals. But after watching their fellow prosecutors successfully take down entire mafia families, like the Gambino and Bonanno clans, many felt that they should also be going after more high-profile convictions and that the best way to root out corruption was to take on the whole organization. A long-ignored Supreme Court ruling, from 1909, conveniently opened the door for criminal charges against entire corporations. And in 2001, Michael Chertoff, George W. Bush’s new criminal division chief, arrived at the Justice Department ready to put it to use.

Chertoff, who worked at the U.S. Attorney’s office under Rudolph W. Giuliani, the godfather of the Wall Street perp walk, seemed like just the guy to jump-start the initiative — and he arrived at an opportune moment. Prosecutors were beginning their investigation of Enron and probe into Arthur Andersen, the accounting firm that had blessed the energy-trading giant’s phony balance sheets and shredded documents shortly after it detonated. Early in his tenure, Chertoff found himself sitting in a conference room at Justice Department headquarters on Pennsylvania Avenue, listening with growing irritation as lawyers for Arthur Andersen tried to dispose of the Enron case with yet another settlement. The company previously oversaw the fraudulent books of Waste Management and Sunbeam, and it dealt with those previous scrapes by reaching settlements and a consent decree with regulators, vowing never to commit such a crime again. For its Waste Management infractions, the firm paid $7 million. Then, it was the largest civil penalty ever paid.

Andersen was expecting the same kind of wrist-slap. As Chertoff recalls, one high-ranking executive noted brazenly that such settlements were merely “a cost of doing business” — the routine surcharges applied to the nation’s largest corporations. That comment enraged Chertoff, and soon after, his prosecutors indicted the firm. “Destroy documents?” he told me. “It’s hard to view that as a stumble outside of its core business.” In June 2002, Arthur Andersen was convicted by a jury, and within months, the firm closed down, costing tens of thousands of people their jobs.

The Andersen case was supposed to embolden the Justice Department, but it quickly backfired. Chertoff’s chutzpah shocked much of the corporate world and even many prosecutors, who thought the department had abused its powers at the cost of thousands of innocent workers. Almost immediately, the Andersen verdict resulted not in more boldness but in more caution on the part of federal prosecutors, including Chertoff himself. In 2003, his investigators were digging into questionable off-balance-sheet deals between the Pittsburgh-based PNC Bank and AIG Financial Products. They contemplated indicting the bank, which spurred Herbert Biern, at the time a top banking-supervision official at the Fed, to demand a meeting with Chertoff to warn him against it. Chertoff told Biern, according to attendees, that if the Justice Department “can’t bring these cases because it may bring harm, then maybe these banks are too big.” In the end, though, Chertoff and the Justice Department blinked. They didn’t indict, and PNC entered into a deferred prosecution agreement. No bank executives were prosecuted. Two years later, the Supreme Court overturned the Arthur Andersen conviction.

From 2004 to 2012, the Justice Department reached 242 deferred and nonprosecution agreements with corporations, compared with 26 in the previous 12 years, according to a study by David M. Uhlmann, a former prosecutor and law professor at the University of Michigan. And while companies paid large sums in the settlements — the days of $7 million cost-of-doing-business fees were over — several veteran Justice Department officials told me that these settlements emboldened defense lawyers. More crucial, they allowed the Justice Department’s lawyers to “succeed” without learning how to develop important prosecutorial skills. Investigations of individuals are more time-consuming and require a different approach than those of a corporation. Indeed, the department now effectively outsources many of its investigations of corporate executives to outside firms, which invariably produce reports that exculpate those at the top. Jed Rakoff, the U.S. District Court judge and former federal prosecutor who has become the most prominent legal critic of the Justice Department, explained the process to me this way: “The report says: ‘Mistakes were made. We are here to take our lumps’ ” — in other words, settlements and, if the transgressions are particularly bad, further oversight. “Lost in that whole thing,” Rakoff said, “was anyone trying to investigate whether the individuals did something wrong.”

The Bush administration may have earned a reputation as being friendly to business interests, but it wasn’t always that way. Around the time of the Andersen investigation, Larry Thompson, the deputy attorney general, was summoned to the White House to defend his department. He and Robert Mueller, the director of the F.B.I., met with the president in the Roosevelt Room of the White House, where they decided not to present legal theory but to show evidence that prosecutors had amassed in matters like the Enron case, demonstrating that executives had made up numbers and lied to the public. Bush seemed stunned. He turned to Mueller and Thompson and said, “Bobby and L.T., continue what you are doing.”

If Chertoff had signaled a green light for going after entire companies, Thompson drafted a memo in 2003 that offered a post-Andersen playbook that went right at the heart of how large corporations protected themselves. For years, big businesses, like tobacco companies, shielded questionable conduct by invoking attorney-client privilege, which could render details of troubling executive dealings inadmissible in court. If a company came under federal scrutiny, it typically paid its executives’ legal bills, hiring some of the nation’s best firms, those who could slow or derail any inquiries. And when multiple executives fell under suspicion, their lawyers would often sign joint defense agreements allowing them to share with one another what they learned about the feds’ case.

Thompson’s memo declared that prosecutors could, in essence, offer a deal, but it wasn’t a very generous one. Companies could win Brownie points for being cooperative only if they eschewed privileges like joint defense agreements. Almost immediately, members of the white-collar bar asserted that this overreach eroded a fundamental right, but they didn’t have to argue incessantly; once again, the Justice Department’s ambition backfired. In the summer of 2006, the government’s once-promising prosecution of executives from KPMG, an accounting and consulting firm suspected of selling illegal tax shelters to wealthy clients, started going bad. (The U.S. attorney’s office in Manhattan felt so confident that it indicted 17 KPMG executives.) The case fell apart when the judge ruled that those prosecutors had violated constitutional rights by pressuring the firm to waive attorney-client privilege and stop paying employees’ legal fees; the government’s zeal, he noted, had gotten “in the way of its judgment.” With the “greatest reluctance,” he threw out the cases against 13 of the executives. (Two others were convicted.)

Soon after, the counteroffensive to the Justice Department’s overreach peaked, led by the white-collar bar and corporate lobbies and aided by The Wall Street Journal’s editorial page, the U.S. Chamber of Commerce and even the American Civil Liberties Union. Senator Patrick Leahy, Democrat of Vermont, contended that the department was abusing corporations; his colleague Arlen Specter, then a Republican from Pennsylvania, readied a bill to prevent the Justice Department from receiving attorney-client privilege waivers. To cut that off, Paul McNulty, the deputy attorney general, released a revised set of rules stating, among other things, that no federal prosecutor could ask a company to waive attorney-client privilege without permission from higher-ups.

Over the years, the KPMG debacle and the corporate revolt would lead the Justice Department to roll back the Thompson memo to nearly the point of reversal. Today prosecutors are prohibited from even asking companies to waive their attorney-client privilege. They are also prohibited from pushing a company to cut off the legal fees for indicted executives or pressuring it to forgo joint defense agreements. “It was very much a game-changer in the business of investigating and defending in those cases,” says Michael Bromwich, a top white-collar lawyer and former inspector general of the Department of Justice.

In the decade since, the courts dulled other prosecutorial tools. A Supreme Court ruling allowed sentences to be set below previously determined mandatory minimums (which made executives less likely to “flip”). Another narrowed an often-used legal theory that said employees were guilty of fraud if they deprived their companies of “honest services” (which helped nab Enron’s former C.E.O., Jeffrey Skilling, among others). No change was momentous on its own — and some may have legitimately restored the rights of defendants — but taken together they marked a significant, if almost unnoted, shift toward the defense. After Lanny Breuer entered the Department of Justice, he testified in front of Congress to restore the honest-services charge for corrupt government officials. But he didn’t even try to broach the topic of a private-sector fix.
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Life on Wall Street is often portrayed as hours of kinetic fury with billions on the line, but the work is more often suited to wonks who are comfortable digesting Excel spreadsheets. Serageldin, who joined Credit Suisse’s information-technology department right out of Yale in 1994, was assigned the late-night job of “cracking tapes” — transferring magnetic tape reels of data, decoding them and running analyses. Senior bankers quickly identified his talent and brought him over to the moneymaking side, where he was soon working in the bank’s catastrophe-bonds business, or securities that transfer the risk of earthquakes and hurricanes from seller to investor. It required mastering geology, fault lines and property-damage projections. In order to achieve the kind of informational advantages that Wall Street requires to make money, Serageldin had to put the statistical runs on a personal computer, waking up in the middle of the night for days at a time to reset it. By 2007, he oversaw about 70 people and generated $1.3 billion in trading revenue.

Serageldin’s group made so much money that some colleagues believed his bosses gave him a pass on risk controls. But by disposition, and by practice, he was anything but a swashbuckler. When the value of mortgage securities began to crater, on what became known as the Valentine’s Day Massacre of February 2007, most traders kept trading, pumping out securities, boosting their personal earnings while endangering — and in some cases destroying — their institutions. Serageldin, however, began ordering his traders to get out of their riskiest positions. The bank’s head of fixed income at the time, James Healy, would later note that Serageldin’s decisions “took courage and personal conviction, in the face of immense pressure” from the sales force.

Yet Serageldin’s caution failed him in one crucial moment. Later that summer, traders in one of his portfolios began to avoid taking the necessary losses on their mortgage-backed securities. Traders are required to hold securities at their current value, known as marking to market, determining how much the portfolio made or lost that day. At one desperate point, one of Serageldin’s traders approached a friend at a small regional bank to give him a so-called independent price that happened to be nearly identical to the prices in the portfolio, enabling them to conceal the size of the losses. In early December, that spreadsheet tallying the losses made its way to Serageldin, who would later admit to recognizing that the prices should have been lower. He had assumed the positions were hedged, a friend of his told me, but instead of saying anything, he tried to protect his reputation. By early 2008, he was out at Credit Suisse. The bank reported him to the U.S. attorney’s office in the Southern District of New York.

In a matter of months, the markets plummeted in a financial crisis that made Enron look like small-time pilfering. And as tens of millions of Americans lost their jobs or homes, an inchoate but palpable demand for justice — for a crackdown — emerged. Breuer may have come with the right pedigree, but he now faced troubles that hurt as much as the debacles of Arthur Andersen and KPMG, or the retreat from the Thompson memo: austerity. The department faced periodic hiring freezes. The F.B.I., which assigned dozens of agents to Enron, had shifted resources to terrorism. The Postal Service wound down an elite unit that had specialized in complex financial investigations. President Obama’s Fraud Enforcement and Recovery Act, which was designed to give hundreds of millions to prosecute financial criminals, was able to deliver only $65 million in 2010 and 2011. Prosecutors reporting to Breuer proposed setting up a mortgage-fraud initiative, a “Prosecutorial Strike Force,” as one July 2009 memo put it, but the Justice Department dithered. Finally it set up the Financial Fraud Enforcement Task Force, an enormous coordinating committee with essentially no investigative operation. One former Justice Department official derided it as “the turtle.”

Resources aside, the erosion of the department’s actual trial skills would soon become apparent. In November 2009, the U.S. attorney’s office in Brooklyn lost the first criminal case of the crisis against two Bear Stearns executives accused of misleading investors. The prosecutors rushed into trial, failing to prepare for the exculpatory emails uncovered by the defense team. After two days, the jury acquitted the two money managers. “For sure,” one former federal prosecutor told me, “it put a chill” on investigations. “Politicos care about winning and losing.”

The fear first wrought by the Andersen case, meanwhile, ossified around financial firms. In early 2009, the Obama administration deliberated over serious tax misconduct by UBS, the Swiss bank, but top Treasury and Justice department officials worried about the effects criminal charges could have on the financial system. UBS settled with the government. Breuer had another shot, in 2012, when the department was moving toward a resolution of a six-year investigation into HSBC, which had become the preferred bank for Mexican and Colombian drug cartels and conducted transactions with countries under American sanctions, including Iran and Libya. Breuer surveyed Washington and London regulators and policy hands and sought assurance that the system could weather an indictment. A top Treasury Department official told Breuer, in carefully couched language, that an indictment could cause broader problems in the financial system. Breuer even went as far as discussing whether banks were too big to indict with H. Rodgin Cohen, a partner at Sullivan & Cromwell, who was representing HSBC in his very own case. Cohen told Breuer that while the Justice Department can’t have a rule not to indict a large bank, prosecutors should, well, take into account how the target has cooperated and what changes it has made to fix the problems. Of course, HSBC happened to have taken those very measures. The Justice Department blinked again. That December, the bank was fined $650 million and forfeited almost $1.3 billion in profits. No one went to jail.

It would be easy to blame the Justice Department’s ineptitude on past mistakes alone. But again, the very ambitions of its prosecutors played a prominent role. Top governmental lawyers generally don’t want to spend their entire careers in the public sector. Many want to score marquee victories and avoid mistakes and eventually leave for prominent corporate firms with starting salaries at 10 times what they make at the Department of Justice. According to numerous former criminal-division employees, Breuer almost immediately signaled his interest in bigger things. In October 2009, Steven Fagell, his deputy chief of staff and former Covington colleague, sent an email to the division. “Do you like giving toasts? Do you think it should have been you accepting the writing Emmy for ‘30 Rock?’ ” Fagell wrote. “If so, we need your wit, smarts and gift for the written word! We’re putting together a speechwriting team for the assistant attorney general.” Prosecutors developing cases against Mexican drug cartels and Al Qaeda members found it more than a little tone deaf. (Fagell says the email request was intended “both to foster internal morale and to send a message of deterrence to the public.”)

According to numerous sources from the Justice Department, the Breu Crew instilled a careerist culture that was fearful of sullying its reputation by losing cases. Kathy Ruemmler, who worked on the Enron task force and later became Obama’s counsel, would needle Breuer: “How many cases are you dismissing this week?” Later Ruemmler was upset when the Justice Department decided against retrying a case against Merrill Lynch executives who helped Enron boost its earnings with an infamous transaction involving a Nigerian barge. (Breuer was recused from the barge case.) A former prosecutor at the Justice Department in Washington concurred that Breuer’s staff didn’t “want to pursue cases where they feel the person is 100 percent guilty but they are only 70 percent sure they can win at trial.” Prosecutors contrasted that with previous eras, some fondly recalling a line favored by James Comey, who served as one of George W. Bush’s deputy attorneys general and emphasized the need for “real-time” white-collar prosecutions. “We have a name for prosecutors who have never lost — the ‘Chicken(expletive) Club.’ ” (In a statement, Breuer said he had a strong record of white-collar enforcement: “Where there were cases to bring, we brought them, and where there were not, we took a pass.”)

But given that Washington rejected a unified national task force, these career motivations would prove particularly relevant. When Preet Bharara, former chief counsel for Senator Charles E. Schumer, arrived in the Southern District of New York in 2009, he had a decision to make. There were cases arising from the financial crisis, which could take years to investigate and, after all that, never make it to a jury. Or there were insider-trading cases, which were far more straightforward. Someone improperly learns nonpublic details about a company and makes a killing on the stock market. “You do have a tough choice,” one former Southern District prosecutor says. “Am I going to chase after crimes I don’t know were committed and don’t know who by, or do we go after crimes we do know were committed and by whom?”

Bharara focused on insider trading, and his office has amassed a stunning 80-0 record of prosecutions, locking up the hedge-fund titan Raj Rajaratnam and Rajat Gupta, the former managing director of McKinsey & Company and a director at Goldman Sachs. They took down eight former employees of Steven A. Cohen’s notorious SAC Capital hedge fund. (Notably, however, they haven’t been able to bring charges against the man himself.) Time magazine put Bharara on its cover, with the bold headline: “This Man Is Busting Wall Street.” Yet Bharara didn’t touch Wall Street’s real players — top bankers. The former prosecutor was almost sheepish about the insider-trading cases when I spoke to him: “They made our careers, but they don’t change the world.” In fact, several former prosecutors in the office told me that going after bankers was never a real priority. “The government failed,” another former prosecutor said. “We didn’t do what we needed to do.”

As a result, Bharara and his team neglected seemingly winnable cases in their own backyard, including one particularly big one. After Lehman imploded, the Justice Department’s Washington headquarters split responsibility investigating what the bank’s executives knew among three U.S. attorney’s offices: the Southern and Eastern districts of New York and the New Jersey operation. But for all of that manpower, to those closest to the Lehman probe, the government’s case was seemingly conducted by one lawyer, Bonnie Jonas, an assistant U.S. attorney for the Southern District. She would make pilgrimages to the offices of Jenner & Block, a prestigious law firm that had been assigned to investigate the Lehman bankruptcy. Jonas would pore over the 40 million-odd pages of Lehman documents the firm assembled. (The Southern District says it devoted multiple people and ample resources to the investigation.)

Nonetheless, the Justice Department never aggressively pursued what may have been the most promising angle. On Sept. 10, 2008, the chief financial officer of Lehman Brothers, Ian Lowitt, told shareholders and the public that the bank had $42 billion of available cash, or liquidity. The bank’s position, Lowitt reassured, “remains very strong.” Lehman would file for bankruptcy five days later. “What they were saying was not just wrong but materially wrong,” Robert Byman, a Jenner & Block partner, told me.

Over 14 months, Jenner & Block would put about 130 lawyers on the case to prepare a report on the collapse. At one point, recalls Stephen Ascher, a partner, one of them discovered “this wonderful chart” breaking down the liquidity figure into three categories: high, moderate and low. Of those billions, $15 billion was in the “low” category, generally because it had been pledged as collateral to other banks. One former Lehman executive told me that several other company managers understood that they could not tap much, if any, of that encumbered money. And at least two executives objected to how the bank was representing its liquidity, including its international treasurer, Carlo Pellerani, according to the Jenner & Block report. The law firm found that regulators, credit-rating agencies and Lehman’s outside lawyer had no idea that the liquidity pool wasn’t, in fact, all that liquid. When Lowitt came to talk to Jenner & Block, he explained that he had not fully understood the issues when he assured investors of its liquid assets. That may be a reasonable defense, but it does not appear that prosecutors and federal investigators made a serious attempt to test how much Lehman’s chief financial officer knew about his own books. Three Lehman executives and one regulator at the Federal Reserve, all of whom were involved in the bank’s desperate attempts to keep itself liquid, told me they were never even interviewed by any federal-government officials.

When Wall Street bankers are arrested, they often do what is known in finance as an expected-value analysis: They weigh the cost of fighting, how long it would take and the chances of the best and worst outcomes. Serageldin was a Wall Street banker with a foreign name who helped make securities that played a role in blowing up the global economy. He seemed to reach a logical conclusion: Plead guilty and take his chances with a judge’s sentence. Other bankers made the opposite choice. After ignoring the risks of the housing and credit bubbles, they took the high-risk-high-reward gamble again, hiring top lawyers and claiming that they never intended to deceive. As it turned out, they benefited from a decade of subtle changes that favored corporate executives under investigation. Serageldin took the sucker’s bet. Prosecutors simply got their man by default.

In his first months in prison, Serageldin has tried to remain upbeat. The investment-banking monk is now spending his nights in a basketball-court-size room with about 70 others. If the problem sets don’t occupy him, he is allowed five books at a time. After explaining that he had lived abroad, Serageldin became known as London. The extent of his crime, meanwhile, has been revised. Initially prosecutors implied that the trader had been part of a conspiracy to hide $540 million worth of losses. By the time he was sentenced, the government was down to accusing him of conspiring to hide about $100 million. An internal Credit Suisse analysis put the misstatement at $37 million. “There’s not a moment’s doubt on my part” that such mismarking happened elsewhere during the crisis, Fiachra O’Driscoll, a friend and former colleague of Serageldin’s, who has been an expert witness in private litigation, told me. “I have seen evidence along the way that similar things happened dozens of times.”

Federal prosecutors have their own explanation for how only one Wall Street executive landed in jail in the wake of the financial crisis. The cases were complex to investigate and would have been infernally difficult to explain to juries, some told me. Much of the crisis and banker transgressions stemmed from recklessness, not criminality. They also suggest that deferred prosecutions — with their billions in settlements and additional oversights — can be stricter punishments than indictments. Still, while the Department of Justice has not been without its successes — it won a guilty plea from BP in the Deepwater Horizon spill, and it’s currently going after traders in the wake of the JPMorgan Chase London Whale trading loss — these remain exceptions even beyond the financial sector. Federal prosecutors almost never bring criminal charges against top executives of large corporations, from banking to pharmaceuticals to technology. In March, the Justice Department entered into a deferred prosecution against Toyota but did not indict the company or any top executives. As the economy limps back from the Great Recession, compensation has recovered, corporate profits are at record levels and executives see that few, if any, of their peers ever go to prison anymore. Perhaps one reason Americans have come to begrudge the wealthy is a resentment of their culture of impunity.

Larry Thompson became known for his memo, but back in the Clinton administration, the deputy attorney general Eric Holder laid out his own memo for strengthening corporate prosecutions. But he undermined his own words by also explaining that prosecutors needed to take into account the collateral economic consequences. In testimony in front of the Senate in March, Holder, who is now the U.S. attorney general, seemed to lament the position government enforcers had found themselves in. “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute — if we do bring a criminal charge — it will have a negative impact on the national economy, perhaps even the world economy.” Holder quickly walked back the remarks. Soon after, Lanny Breuer returned to Covington & Burling as a vice chairman.

Source: New York Times

Reserve Bank fines banks over lack of effective anti-money laundering measures

SOUTH Africa’s big four banks have been fined R125m by the Reserve Bank for failing to have appropriate measures to ensure compliance with the provisions of the Financial Intelligence Centre Act (Fica).

Standard Bank was slammed with the highest financial penalty of R60m, FirstRand was hit with R30m, Nedbank R25m and Absa R10m.

Standard Bank was found to have failed to meet its obligations to report cash transactions above R24,999.99 to the financial intelligence centre. It was also criticised for slack controls for detecting property associated with terrorist activities.

The bank said in a statement it had taken “immediate remedial action to address the issues identified” and initiated a programme to address the findings.

Absa, FirstRand and Nedbank were also penalised for keeping inadequate customer verification details and transactional records.

In terms of Fica, the Reserve Bank is tasked to supervise and enforce compliance with Fica rules to ensure that banks have controls to deal with money laundering and combat the financing of terrorism.

However, the Reserve Bank said the fines did not mean that South Africa’s big four banks had in any way facilitated transactions involving money laundering and the financing of terrorism.

All the big-four banks were directed to take remedial action to address weaknesses when it comes to identifying and verifying customers’ details.

Earlier in the year, Standard Bank plc in the UK was hammered with a £7.6m fine by the UK’s Financial Conduct Authority for failures in its money laundering controls and procedures over corporate customers connected to politically exposed persons.

Source: Business Day

Board Investigations and the Curse of the Mummy’s Tomb – Part I

On this day in 1923, the tomb of King Tut was opened. It created a worldwide stir that has in many ways continued down into the 21st century. Clearly, the boy ruler influenced Steve Martin , (How’d you get so funky?, Funky Tut). Moreover, when the King Tut exhibit first toured the US in the 1970s, it sold out everywhere that it went. And, of course, there was the Curse of the Mummy’s Tomb, which led to some great Universal classic horror pictures. This curse may have killed the dig’s benefactor, Lord Carnarvon who died just months after entering the tomb in November 1923, but the archeologist who discovered King Tut, Howard Carter, seemingly outlived the curse, dying at the age of 64 on the eve of World War II.

I thought about the techniques employed by these two archeologists in the Curse of the Mummy’s Tomb when I read an article in the Corporate Board magazine, entitled “Successful Board Investigations” by David Bayless and Tammy Albarrán, partners in the law firm of Covington & Burling LLP. Why the Curse of the Mummy’s Tomb? It is because if a Board of Directors does not get an investigation which it handles right, the consequences can be quite severe. Over the next two posts I will explore the article by Bayless and Albarrán. Today in Part I, I will review the author’s five key objectives, which they believe a board must pursue to ensure a successful investigation. Tomorrow. in Part II, I will review the authors seven considerations to facilitate a successful board investigation.

The authors recognize that the vast majority of investigations will be handled or directed by in-house counsel. However, if and when such an investigation is needed, it is critical that it be handled with great care and skill. The authors note that “While this task is fraught with peril, there are a number of steps a board can take to ensure that the investigation accomplishes the board’s goals, which will enable it to make informed decisions, and withstands scrutiny by third parties” because it is this third party scrutiny, in the form of regulators, government officials, judges/arbitrators or plaintiffs’ counsel in shareholder actions, who will be reviewing any investigation commissioned by a Board of Directors. The authors believe that there are five key goals that any investigation led by a Board of Directors must meet. They are:

Thoroughness - The authors believe that one of the key, and most critical, questions that any regulator might pose is just how thorough is an investigation; to test whether they can rely on the facts discovered without having to repeat the investigation themselves. Regulators tend to be skeptical of investigations where limits are placed (expressly or otherwise) on the investigators, in terms of what is investigated, or how the investigation is conducted. This question can be an initial deal-killer particularly if the regulator involved views an investigation insufficiently thorough, its credibility is undermined. And, of course, it can lead to the dreaded ‘Where else’ question.

Objectivity - Here the authors write that any “investigation must follow the facts wherever they lead, regardless of the consequences. This includes how the findings may impact senior management or other company employees. An investigation seen as lacking objectivity will be viewed by outsiders as inadequate or deficient.” I would add that in addition to the objectivity requirement in the investigation, the same must be had with the investigators themselves. If a company uses its regular outside counsel, it may be viewed with some askance, particularly if the client is a high volume client of the law firm involved, either in dollar amounts or in number of matters handled by the firm.

Accuracy - As in any part of a best practices anti-corruption compliance program, the three most important things are Document, Document and Document. This means that the factual findings of an investigation must be well supported. For if the developed facts are not well supported, the authors believe that the investigation is “open to collateral attack by skeptical prosecutors and regulators. If that happens, the time and money spent on the internal investigation will have been wasted, because the government will end up conducting its own investigation of the same issues.” This is never good and your company may well lose what little credibility and good will that it may have engendered by self-reporting or self-investigating.

Timeliness - Certainly in the world of Foreign Corrupt Practices Act (FCPA) enforcement, an internal investigation should be done quickly. This has become even more necessary with the tight deadlines set under the Dodd-Frank Act Whistleblower provisions. But there are other considerations for a public company such as an impending Securities and Exchange Commission (SEC) quarterly or annual report that may need to be deferred absent as a timely resolution of the matter. Lastly, the Department of Justice (DOJ) or SEC may view delaying an investigation as simply a part of document spoliation. So timeliness is crucial.

Credibility - One of the realities of any FCPA investigation is that a Board of Directors led investigation is reviewed after the fact by not only skeptical third parties but also sometimes years after the initial events and investigation. So not only is there the opportunity for Monday-Morning Quarterbacking but quite a bit of post event analysis. So the authors believe that any Board of Directors led investigation “must be (and must be perceived as) credible as to what was done, how it was done, and who did it. Otherwise, the board’s work will have been for naught.”

To help manage these five issues the authors have seven tangible considerations they suggest that a Board of Directors follow to help make an investigation successful. Tomorrow I will review and scrutinize these seven considerations.

Source: FPCA Compliance and Ethics Blog by Thomas Fox.

Thomas Fox has practiced law in Houston for 30 years. He is now an Independent Consultant, assisting companies with anti-corruption and anti-bribery compliance and international transaction issues. He was most recently the General Counsel at Drilling Controls, Inc., a worldwide oilfield manufacturing and service company. He was previously division counsel with Halliburton Energy Services, Inc. where he supported Halliburton’s software division and its downhole division. Tom is the author of the award winning FCPA Compliance and Ethics Blog and the international best-selling book “Lessons Learned on Compliance and Ethics”. His second book, “Best Practices Under the FCPA and Bribery Act” was released in April, 2013. He recently released his first eBook, “GSK In China: A Game Changer in Compliance”. He writes and lectures across the globe on anti-corruption and anti-bribery compliance programs.

Zuma buys time for Hawks

President Jacob Zuma and some of his ministers have asked the Constitutional Court for another 18 months to fix the legislation governing the Hawks, the unit that is meant to fight serious organised crime in South Africa.

Zuma, Justice Minister Jeff Radebe and Police Minister Nathi Mthethwa have indicated that they will appeal an order by the Western Cape High Court that found the act governing the Hawks still allows for too much political interference. This means the uncertainty over the Hawks, which replaced the Scorpions, will now drag into its sixth year. The Constitutional Court originally declared the act unconstitutional in 2011.

The current case follows the Western Cape High Court’s ruling in December, in favour of the Helen Suzman Foundation, which found that the police’s updated act was still unconstitutional.
The court ruled that adequate mechanisms to prevent political interference in the Hawks were still lacking.

The court gave Parliament a year to rectify this, but Zuma and his ministers have argued that this is not enough time. In court papers filed at the Constitutional Court, Zuma and his ministers ask that Parliament should be given 18 months to fix the legislation. This because “amendment is complex” and because “the period afforded to Parliament coincides with an imminent national election”.

A source familiar with the Hawks said the unit was demoralised and had lost some of its best investigative capacity from the days of the Scorpions.  City Press has previously reported on the disagreement and the incoherence that has been caused by confusion over the fate of the unit.

The Helen Suzman Foundation has asked the court to confirm the order of constitutional invalidity. It is also asking the Constitutional Court to declare further sections of the act unconstitutional. One of the sections it is referring to includes a provision that empowers the minister to do “integrity testing” of Hawks members, which the foundation believes is an intimidation tactic. It believes this could include the bugging of Hawks officers’ phones.

Source: City Press

President Proclaims Civilian Secretariat Commencement

The remaining sections of the Civilian Secretariat for Police Service Act of 2011 that did not come into effect in December 2011 will now come into force on 1 April 2014.

The act seeks to give effect to section 208 of the Constitution by establishing a civilian secretariat tasked with monitoring, assessing and evaluating the performance of the South African Police Service (SAPS).

The minister of police will be responsible for the new secretariat.

Provincial police secretariats will be expected to align their planning and operations with the new national secretariat.

The civilian secretariat will be expected to:

• Exercise civilian oversight over the SAPS
• Advise the minister on developing and implementing policies
• Provide administrative support to the minister
• Communicate with stakeholders
• Form a partnership with stakeholders to improve service delivery by SAPS
• Improve relations between itself and the independent police investigative directorate

In terms of the sections that are to now come into effect, section 4(2) refers to the establishing of the secretariat as a national department while 4(3) deals with the secretary as the accounting officer of the secretariat.

Section 14 focuses on the responsibilities of the secretary in terms of finances and accountability.

The proclamation notice was published in Government Gazette 37151.

Prior to the notice, the presidency had indicated in a statement at the beginning of December that the remaining sections were to commence on 1 April.

Source: SABINET

ANC at 102: when the revolution eats its own children

There are few people who can talk about the state of the ANC without sighing and shaking their heads. The transition from a liberation movement to a political party in government has not been kind – the organisation appears to be on a mission of self-destruction with lure of power and wealth tattering its fibre, and factionalism and patronage constantly diminishing its stature. The ANC has been able to reach the grand age of 102 because of the strength of its leadership and its popularity throughout its lifespan. But now it is difficult to hold up the ANC in 2014 against the organisation with a progression of heroic leaders which took power in 1994. Most bizarre is the way it has turned on itself. By RANJENI MUNUSAMY.

Lieutenant General Sean Tshabalala died of a broken heart. His body was found in his locked office at the police headquarters in Pretoria on Christmas Eve. Tributes at his memorial service and funeral tell the story of a once proud Umkhonto we Sizwe (MK) soldier and one of the first line of VIP protectors when the ANC returned from exile, withering in a state of depression after being marginalised by the police management.

A furore erupted after Tshabalala’s funeral where former national police commissioner Bheki Cele revealed a list of 18 names of former MK combatants serving or formerly in the South African Police Service who were allegedly on a target list, presumably of the current national commissioner Riah Phiyega and her political bosses. Tshabalala’s name allegedly topped the list. His friends and former colleagues had earlier told of Tshabalala’s heartbreak at being shifted sideways from Protection and Security Services division of the police to the information technology division and later to a non-job at the police inspectorate.

Police Minister Nathi Mthethwa acted swiftly to meet with some of the people on the list and dismiss the claims as rubbish. Phiyega denied knowledge of the list. However, the perception exists that experienced ANC and MK members were being steadily hounded out of the security services since President Jacob Zuma won power at the ANC’s Polokwane conference.

There has been a deluge of early retirements and resignations from the Department of State Security, the military and the SAPS in recent years, most of which involved people who served in MK or ANC intelligence structures during the liberation struggle. Some of these people went into exile in their teenage years, some were involved in dangerous intelligence missions at great personal cost, some were trained in the camps under the ANC’s most iconic leaders.

Their departure from the security services has been a curious phenomenon. Zuma, formerly head of intelligence in the ANC, has always seen security and intelligence as high priority. But after the recall of Thabo Mbeki, it would seem that paranoia set in and people perceived to be loyal to the former president were systematically weeded out, irrespective of their skills, service to their country with distinction or role in the liberation struggle.

Cele is well aware of the purge because he was instrumental in implementing it while he was national commissioner. In one case, he called a high-ranking officer who was on a mission abroad immediately back to the country and informed him he was being transferred to another job. It did not take long for the officer to resign from the police service. Cele was also the one who transferred Tshabalala out of the Protection and Security Services division.

Tshabalala, unlike most of his comrades, stuck it out in the police despite being sidelined – a decision which probably eventually cost him his life. Shortly before his death, Tshabalala had received a letter transferring him to the Northern Cape province (viewed as the Siberia of deployments), and this is possibly the reason his depression became too much to bear.

Tshabalala is just one of many of people whose lives have been destroyed by the organisation they dedicated their lives to. Others have been able to move on with their lives but their disillusionment with the ANC is profound. For many of them, the ANC was not just a political organisation but a way of life, a reason for being. To see the organisation self-destruct is worse than a family feud or divorce because they had chosen the ANC over their families and their own safety when they joined the struggle.

There are various explanations for the purge. The first is that ANC people in the security services would refuse to use state institutions to fight power battles in the party. There is always the risk that loyalty to the ANC would outweigh loyalty to the individual in power, which could lead to instructions being ignored, undermined or disclosed. The theory goes that this is why Zuma and Mthethwa saw use in Richard Mdluli – as a person who worked for the apartheid era police, he has no affiliation to the ANC and is loyal only to those who pay his salary.

The second theory is that the security ministers felt threatened by the seniority, knowledge and experience of the commanders serving under them. In terms of ANC hierarchy, many of the officials were senior to the current batch of ministers and this was a source of tension, particularly when there were differences of opinion on operational issues. But while there might have been underlying resentment, it would be strange if Zuma allowed the security services to be depleted of loyal and experienced officials on the basis of his ministers' inferiority complexes.

The third theory is more complex. A former senior member of the security services says the success of South Africa’s transition was partly due to the fact that security of the country was in the hands of the “doves”.

“This ensured that national security was based on human security. Now the focus is on state security. For the first time, security is now in the hands of the ‘hawks’, just like during the Apartheid era when the hawks saw a red (communists) under every bed. So we have come full circle with the hawks again in charge,” he said.

He said the current crop of hawks are fixated on external threats to the country, such as from foreign governments, imperialist forces and lobby groups, and they trade on conspiracy theories. “The real threats to the country are unemployment, inequality and poverty, and our failure to deliver. But anyone who puts forward that view is hounded out, marginalised or made redundant.

“They do not want to hear about our own failures; they prefer nonsensical stories about plots against the president, like what was in the Mdluli report. The plot is the failure of delivery. That is the biggest threat to national security,” the retired member said.

The theory is consistent with how the state and ANC views the personal security of the president and the state as interchangeable – as exemplified by the handling of the issue of the security upgrades at Zuma’s Nkandla estate. But the retired security official says people often overlook how the Constitution defines the governing principles around national security: “National security must reflect the resolve of South Africans, as individuals and as a nation, to live as equals, to live in peace and harmony, to be free from fear and want and to seek a better life”.

The Constitution says nothing about the President and his Cabinet receiving special protection in their homes and cars as a principle of national security but dictates that ordinary people should be “free from fear”. It would appear that the organisation which drafted this Constitution has these days lost sight of these principles.

To the ANC at 102, it would seem, people, even their most experienced and dedicated comrades, are expendable. It has become a pattern that factional battles need to be fought till one group is hounded out and the organisation belongs only to the victors. From branch to national level, battles are fought for dominance of leadership positions, and those who lose are treated as pariahs and purged from positions in the state.

At the ANC national conferences, voting for the top six positions and the national executive committee takes place according to slates, dependent only according to loyalty to those who control the faction. As a result, the organisation is controlled by the winning faction and those outside the faction are marginalised, irrespective of their seniority, credentials or what they have to offer the party or the country.

Both Mbeki and Zuma appear to believe that the best way to protect their presidencies is to surround themselves with loyalists who tell them what they want to hear and fight off dissent on their behalf. It is this very tendency which builds resentment in the ANC and leads bad decision-making.

As the ANC celebrates its 102nd anniversary, it is also in the process of compiling its lists of representatives to serve in Parliament and the provincial legislatures. The list process is also likely to be defined by factional politics, with loyalists able to get higher on the lists and stand a better chance of becoming a member of Parliament. Those who refrain from factional battles or who campaigned against Zuma’s second term at the ANC’s Mangaung conference are less likely to be elected.

But there are also a number of people who are declining nomination because they cannot in good conscience agree to serve the ANC in its current state. “It is a bloody nightmare for us,” said one high-ranking member who has declined nomination.

He said if the party was serious about its future and that of the country, they would ask the president and other ANC leaders steeped in scandal to step aside. “But in the NEC, few can stand up and impose their integrity. The rest will be found wanting themselves,” he said.

Others, however, believe that they should remain in the fold and the ANC will self correct at its next conference in 2017. But what is the likelihood of it and how much damage would have been done by then? With the organisation a shadow of its former self now, what will it look like with four years still to go under the current leadership?

Despite the many problems in the ANC, there are only few people who are able to speak up and confront the issues besetting the organisation. The leadership seems to believe that the organisation is resilient and can withstand the scandals and strife. And those who do speak out are treated as disgruntled elements that should be disregarded. ANC and South African Communist Party veteran Ronnie Kasrils wrote in The Guardian last year: “The ANC's soul needs to be restored; its traditional values and culture of service reinstated. The pact with the devil needs to be broken”.

The ANC simply ignored him.

And so, Africa’s oldest liberation movement turns 102 on Wednesday. It is a momentous occasion for the organisation with a proud history and iconic leaders to still be going strong and enjoying the support of the majority of South Africans. While the current leaders mark the occasion with celebratory rallies, doubling as campaign events, many people will be looking on from the outside, mourning for days gone by when the ANC was a home for all.

Perhaps it is normal for any political organisation to find itself unable to keep its soul once it gets touched by the spoils of uninterrupted power. It has happened many times before, and it will happen many times in the future. What is surprising, though, is how history always fails to teach the ones at the top. At 102, the ANC is drifting into the darkness, increasingly disconnected from the lives and reality of those they are sworn to protect: the masses that continue to exist in the tough reality and fearing a hopeless future. DM

Source: Daily Maverick

How JPMorgan shorted Madoff

Big banks may not be evil. But what's becoming increasingly clear is that the bigger they are, the more evil stuff they are involved with.

Hidden in the document detailing Tuesday's settlement between the Department of Justice and JPMorgan Chase over Bernie Madoff's Ponzi scheme was this nugget: JPMorgan was essentially shorting Madoff.

In other words, it wasn't only that JPMorgan (JPM) ignored and failed to report to authorities the numerous red flags its employees encountered over the 20 years it served as the main banker to the largest financial fraud in history. To be sure, JPMorgan did that. But on top of that, the bank was actually betting that Madoff was a fraud, and presumably expecting to collect when others found out.

Given that fact, it's not much of a surprise that JPMorgan decided to settle for $1.7 billion rather than fight the charges.

JPMorgan is essentially being penalized for being Madoff's banker. But the big bank did a lot of business with Madoff over the years. It had the Madoff funds' main bank account. It also invested in Madoff through feeder funds. And it created derivatives that it sold to people who couldn't get into a Madoff fund but still wanted to profit from the performance of Madoff's hedge fund. The derivatives were supposed to rise and fall with Madoff's performance. But since it was all faked, the derivatives only rose. And people wanted them.

That last bit is how JPMorgan got into the messy business of shorting Madoff, which actually was the right call, but now looks pretty bad.

It is normally very hard to short a hedge fund. Most don't have shares that trade. And when they do, they are for the parent company and not the fund. But when you create a derivative based on a hedge fund, as JPMorgan did, you create the opportunity for a short. The buyer of the derivative is going "long," and the seller is going "short." And in this case, it was JPMorgan that was the seller of Madoff-linked derivatives, at one point as much as a few hundred million.

For a time, JPMorgan hedged its bet, in part by putting some of the bank's own money into Madoff-related funds. But in the fall of 2008, JPMorgan suddenly pulled nearly 80% of that money out. That left it essentially short Madoff.

But it didn't get its short right either. According to the settlement, JPMorgan bankers were worried that they were "exposed to substantial risk in the event that Madoff Securities continue to perform successfully." Madoff, even if it was a fraud, could continue to fake his returns for a while longer. That would mean losses for JPMorgan's short position.

So they eventually decided just to get out of Madoff completely. In late 2008, the bank spent nearly $75 million canceling all the equity derivatives it had left related to Madoff, except for $5 million. It held onto that position even after finally reporting in mid-October 2008 to British authorities that it feared Madoff was a fraud.

In late November 2008, just two weeks before Bernie was arrested, JPMorgan, according to the Justice Department's settlement, got an offer to rip up that last $5 million short bet against Madoff. The bank declined, with a trader replying that they thought the short bet was "as of today ... very valuable."

That was the best Madoff trade JPMorgan made; that is, until Tuesday.

Source: CNN Money

The Foreclosure Crisis

What happened to all the homes foreclosed on when the housing bubble burst? Millions of people lost their homes and most of their life savings when the value of their homes plummeted during the most recent financial collapse. Many found they could not keep up with mortgage payments, either because they lost their jobs during the recession or because they were overextended financially for some other reason. Some would say many never should have been offered the loans in the first place. The fact remains that many people went from pursuing the “American Dream” of home ownership to struggling just to keep a roof over their heads by renting in a very short span of time.

The banks lost tons of money on loans that would never be paid in full, but they did have something very tangible in place of the money – the property. The real estate still belonged to them. Home buyers were left with nothing after pouring thousands of dollars into the effort to purchase a home, only to be turned out when they simply did not have the resources to complete the transaction. The banks were promptly bailed out by the taxpayers, despite questionable lending practices that ultimately resulted in sizable settlements. Little of the proceeds of these settlements ultimately made it into the hands of the people actually wronged. Some of the states used large chunks of the settlement money to fill budget holes instead of compensating former homeowners for their losses.

Many contend that being able to just pay some money, often obtained by questionable means to begin with, without admitting any guilt on the part of the lending institutions or any of their executives was inadequate punishment for the serious nature of the wrongs perpetrated. That the companies were willing to spend that much money to avoid criminal prosecution or admission of any guilt indicates our government may have let them off too lightly. Certainly many of those most affectedly believe that is the case.

The result of all the foreclosure activity was the availability of enormous numbers of homes to be resold, often in bulk, for vastly reduced prices. Who better to step into the void created by the individuals forced into foreclosure than large institutional buyers – hedge funds and other private equity companies capable of raising large amounts of capital to invest in the family home market. This happened to a large degree. particularly in areas of the country where the housing market became the most depressed in terms of property values. The idea was often to turn these properties into rental units until such time as property values returned to levels that would allow them to be sold at a tidy profit. The result could then end up being that people who had lost their homes to foreclosure would end up renting similar property from one of these large institutional owners. They would have a place to live, but be unable to accumulate any equity in the property to be used in the future as a cushion against possible financial difficulties, or to pass on to heirs.

In effect, this trend has resulted in even further redistribution of wealth in this country upward – from the poor and particularly the middle working class people to the wealthy. Investors in private equity companies and hedge funds on this scale do not, for the most part, supplement their low wage incomes with food stamps or social security checks. People who live from paycheck to paycheck (believe me, there are many more of us than the Wall Street crowd would like us to believe) do not have spare change to put into a hedge fund waiting for the profits to start rolling in.

So the banks either get their money back from the bailout, or from the proceeds from reselling the repossessed real estate. The large investors get their money back with a profit for just collecting rent or repairing and reselling the properties. The only people who have little or nothing to show for their efforts are those who toiled to earn enough money to start trying to purchase a home, only to see it all evaporate in a sudden economic downturn. Their money ended up in the hands of the flimflam artists who sold them the rotten loans in the first place, along with those wealthy enough to buy the properties at rock bottom prices and further profit from them upon a resurgence in the real estate market.

Something is drastically wrong with a system such as ours which enables a very small percentage of the population to profit greatly at the expense of so many more others. The notion that only minimal amounts of money (in terms of the enormous wealth gained in the process) are seen by the powers that be to be adequate recompense for the misery created by these transactions is appalling. These companies and people produced far more economic damage to far more people than Bernie Madoff ever dreamed of. He was sentenced to 150 years in prison. They received bonuses. Attempts begun at effectively regulating the responsible financial institutions to ensure that a repeat performance can be avoided have been stymied at every turn by politicians, many of whom are beholden to the very interests they claim to want to regulate.

Some say we have the best government money can buy. It certainly serves the moneyed interests far better than rest of us. There are some elected officials willing to stand up to them and fight for rest of us. Unfortunately, they are currently a small minority in Congress and the legislatures of most states. Until we get effective regulation of the financial services industry to prevent future robbery of this sort, the economic inequality and impoverishment of ever more members of our society will continue. We need to back those who are willing to stand up for us and increase their numbers and influence in our government at every opportunity. Never again should this sort of disaster be allowed to be perpetrated on such a large segment of the American people with absolutely no accountability on the part of those responsible for it. Never again should the victims (in this case, the American taxpayers) be held responsible for financing this sort of economic chicanery, while those responsible stash their take in tax shelters and pay not a dime of their own money in fines or spend as much as a day in prison. This is a case where the punishment has to this point fallen far short of the seriousness of the crime.

Further Suggested Readings:
Wall Street Hedge Funds Buy Up Rental Properties
Hedge Funds As Landlords? In Search of Returns, Wall Street Buys Up Foreclosed Homes
Hedge Fund Blackstone Buying $100 Million in Foreclosed Homes Every Week
Hedge Funds Crowd First-Time Buyers Out of Housing Market
Foreclosure Bulk Sales Program Allows Banks and Hedge Funds to Buy Low After Selling High
Hedge Funds Are Fueling Foreclosure Inflation
Private Equity Has Too Much Money to Spend on Homes

Source: Rcooley123's Blog

Antony Jenkins admits 'it could take 10 years to rebuild trust in Barclays'

Barclays’ chief executive, Antony Jenkins, has said that it could take up to a decade for the bank to regain public trust in the aftermath of a series of scandals.

Mr Jenkins made the comment in a speech to students at Brooke House Sixth Form College in East London.

In the chat, which was broadcast on this morning's Today programme on BBC Radio 4, Mr Jenkins said: “Trust is a very easy thing to lose, and a very hard thing to win back.

"In my view it will takes several years - probably five to ten - to rebuilt trust in Barclays."

Barclays was the first bank to be implicated in the Libor scandal, in which traders rigged the London inter-banking rate, leading to a £290 million fine in June 2012, and the bank was also involved in the PPI mis-selling scandal.

Mr Jenkins vowed to restore Barclay’s reputation when he was made CEO in August last year, after the Libor scandal brought down his predecessor, Bob Diamond. In February he revealed his plan to overhaul the bank by fundamentally changing the culture under which its traders operate.

He added in his speech that he hoped the future actions of Barclays would help rebuild confidence in the wider banking sector.

Mr Jenkins chose as his theme “the importance of long-term thinking and planning, and proper leadership”.

“Trust is lost in weeks and months, and regained in years and decades,” he said.

"My point is not that short term markets are bad or inaccurate. They serve a very useful purpose. It is susceptible to elevator analysis – this is up this is down. In addition to looking at the short term and what that tells us how do we focus on longer term drivers of the economy."

British economist John Kay told the Today programme, which Mr Jenkins was guest editing, that bankers' now spend more time than religious leaders telling the public that they are ethical, while simultaneously working in an industry that has acted anything but ethically.

“Over the last 20 years banks have systematically destroyed their relationship with their customers,” Mr Kay said, adding that he was not very optimistic that things would improve.

Mr Jenkins responded by saying that that the cure to a rotten culture is proper leadership from the top, but that the process is a slow one.

"In my view leadership sets the culture in big organisations and culture drives organisational performance. If you want a different sort of organisational performance, a more ethical business, you’re going to have to change culture. Culture takes time to change and it comes back to leadership. If you take a long term perspective you’ll build the right culture," he said.

Mr Jenkins added that he was setting a target for Barclays to be more trusted than not by 2018.

It is one of eight commitments Jenkins will make to staff, customers, shareholders and what he calls society in a few months.

Source: Independent

Volcker Rule: Real Bank Regulation or Smoke and Mirrors?

U.S. regulators have approved new legislation, the Volcker Rule, which seeks to prevent the similar acts of risk-taking on Wall Street that helped trigger the 2008 financial crisis. The rule aims to limit banks’ trading bets, being bared from trading for their own profit. The legislation itself is over 900 pages long, with new narrower exemptions for legitimate trades.

Five U.S. regulatory agencies voted on the rule which seeks to ban a lucrative practice for banks, that is proprietary trading. Aside from the trading, the new legislation also limits banks’ investments in hedge funds and private equity funds. The rule is named for Paul Volcker, a former Federal Reserve chairman who was an adviser to President Obama during the financial crisis.

Banks had hoped to substantially soften the rule, but the infamous “London Whale,” JPMorgan’s $6 billion trading loss in 2012, motivated regulators to devise a tough version. The impact of the regulations will depend on how forcefully the banks are monitored in order to assure that they are not trying to mask speculative bets as permissible trades.

The rule promises surveillance of big banks’ trading operations, the majority of which will be summarized through documentation requirements which force banks to justify trades and strategies, basically the banks will have to monitor themselves, and report their actions honestly and accurately. Regulators will be responsible for checking the banks’ self-reporting.

“The rule is so conceptual it’s all about the implementation,… The regulators didn’t draw really bright lines for hedging or market-making. This thing is one giant loophole if it’s badly implemented.” – Marcus Stanley, policy director for Americans for Financial Reform, a group that represents more than 250 organizations.

The public will be placing their trust in regulators once again, who in the past failed to notice, or neglected to mention, the potential dangers facing the financial market.

“No one will really know whether regulators, who have failed so abysmally in the past, have learned from the crisis and will start regulating the banks for real by aggressively enforcing the Volcker Rule,” – Dennis Kelleher, president of Better Markets, a nonprofit group that advocates stringent rules on big banks.

The Volcker Rule is being portrayed in the media as being tough: restricting the investment decisions of the banks. In reality however, there remains no thorough outline detailing the regulation procedures, and the responsibility lays mostly on the banks to regulate themselves, and for us to trust that they are going to report their actions honestly. We are apparently also expected to trust that the regulators are going to inform the public promptly, and follow proper criminal procedures, if there are any exchanges or actions which diverge from the permitted guidelines set out in Volcker’s new rule.

“At some point someone is going to have to write up a manual for examiners on what to look for and how to enforce that stuff. That’s going to be a really important document,” – Bradley Sabel, legal counsel at Shearman and Sterling.

For now though, we just get to wonder if his is the beginning of real regulation for the banks, or new set of smoke and mirrors.

Source: http://www.exposingthetruth.co

South Africans losing trust in political and business ethics

According to research by Transparency International, South Africa is perceived as being more corrupt this year than it was last year.

What is considerably alarming is that 50% of persons interviewed perceived the judiciary as corrupt; 70% perceived parliament as corrupt and a staggering 83% perceived the South African Police Service as corrupt.

In a statement on Tuesday, local civil society organization Corruption Watch (CW) said the perceptions were indicative of a public that was losing trust in political, public, and business leadership.

Source: the Sowetan

Mdluli wins bid to appeal charges ruling

Suspended police crime intelligence head Richard Mdluli, the National Prosecuting Authority and the Specialised Commercial Crime Unit may appeal against a ruling that charges against him must be reinstated, the high court in Pretoria ruled on Monday.

Freedom Under Law (FUL) did not oppose the application, and said the matter concerned issues of significant public importance which ought to be aired in the Supreme Court of Appeal.

An application by the public interest group to revive a previous interim interdict stopping Mdluli from returning to work would continue only at a later stage.

National police commissioner Riah Phiyega has agreed to give the FUL 30 days' notice if she wants to reinstate Mdluli.

The FUL said it reserved its rights to approach the court again.

Deputy Judge President of the high courts in Johannesburg and Pretoria Aubrey Ledwaba granted leave to appeal against Judge John Murphy's ruling in September in favour of the FUL.

Decision set aside

Murphy had set aside decisions to withdraw charges of money laundering and murder, and disciplinary proceedings, against Mdluli.

Ledwaba said there were compelling reasons to grant leave, and there was a reasonable prospect that another court might come to a different conclusion.

Considering the importance and complexity of the issues, the Supreme Court of Appeal in Bloemfontein would be the correct court to deal with the matter.

Ledwaba said Murphy was not available to hear the application. The application for leave to appeal began before Murphy in October, but due to "some unfortunate altercation" between him and William Mokhari SC, Ledwaba intervened and postponed the matter indefinitely.

The altercation started when Mokhari, who represented the police commissioner, told Murphy it was presumptuous to ask if Phiyega intended reinstating Mdluli.

Murphy repeatedly told Mokhari to sit down and when he refused, Murphy walked out of the court. Mokhari, who is the chairperson of the Johannesburg Bar Council, has since laid a formal complaint about the judge's "demeaning" remarks with the Judicial Service Commission. – Sapa

Organised Crime and Money Laundering

Parliament should reject Robert McBride's nomination as head of the Independent Police Investigative Directorate

Dr Mamphela Ramphele, the leader of Agang SA, calls on Parliament to reject the appointment of disgraced former Ekurhuleni metro police chief Robert McBride as head of the Independent Police Investigative Directorate (Ipid).

"McBride has tarnished his copybook with too many criminal charges that he has managed to escape in the past, making his potential appointment to such an important public institution highly questionable," she said. "South African citizens deserve better - they deserve clean government that looks after the interests of every citizen, not the political elite," she said.

Dr Ramphele, who addressed a meeting in the Strand district of Cape Town last evening, called on South Africans to vote for a clean and professional police force - one of the key issues Agang SA is championing in the run up to the 2014 elections.

At the meeting, she praised the Strand Broadlands community for the way in which they had managed to root out a scourge of drug dealers by working together with the police in a peaceful and effective campaign over a period of seven months.

Her message follows the alarming event last week in Khutsong, west of Johannesburg, where residents took the law into their own hands against gangsters, and killed six people.

"This country desperately needs to respect its public institutions, including the police, so that we can have law and order. We need a country that is free of corruption and crime - a country that trains and pays its police force well and expects the best of them," Ramphele said.

"Imagine we could have a country where everybody feels safe on the streets. It is possible, if we all insist on the best services our nation can deliver to us all."

Statement issued by Dr Mamphela Ramphele, the leader of Agang SA, November 13 2013

Source: Politicsweb

Parties denounce McBride's nomination for IPID head

Opposition parties have criticised a decision to recommend former Ekurhuleni metro police chief Robert McBride as head of the Independent Police Investigative Directorate (IPID).

The Democratic Alliance would "vehemently" oppose the appointment in Parliament, MP Dianne Kohler Barnard said on Tuesday. "IPID is responsible for investigating police officials in positions of authority and deals with sensitive information on a daily basis, thus the executive director must be a person free of scandal."

Lobby group AfriForum said Police Minister Nathi Mthethwa should resign for nominating McBride. "Minister Mthethwa, with this step, clearly indicated that the efficacy and integrity of the police is not a priority for him," said spokesperson Ian Cameron.

The Freedom Front Plus said the recommendation made a "farce and mockery" of Mthethwa's comments that he would eradicate corruption in the police. "IPID investigates corruption in the police and the head of this institution should not be a controversial person and should have an irreproachable character," spokesperson Pieter Groenewald said.

Christian Democratic Party leader Theunis Botha said the recommendation was "a serious challenge for being the sickest joke of the millennium".

"This makes a mockery of all the ANC promises that the policy of cadre deployment will be based on merit."

Shortlisted

Mthethwa said earlier that Cabinet decided at a meeting on Wednesday to recommend McBride as IPID executive director. "We believe Mr McBride's appointment as head of IPID will help this important institution to achieve [its] ... mandate," Mthethwa said.

He said McBride was the successful candidate following shortlisting, an interview process, and Cabinet's endorsement. "However, in line with the IPID Act, the appointment can only be finalised once Parliament has concurred."

Kohler Barnard said Mthethwa had requested that the portfolio committee on police consider McBride's nomination in a letter published in Parliament's announcements, tablings and committees on Tuesday morning. According to the IPID Act, the nomination must be considered within 30 parliamentary days.

She said the IPID should not be led by "such a controversial figure".

"The executive director must be suitably qualified for the position, not have previous convictions, and be a person of integrity."

Cameron said Mthethwa's decision had jeopardised the integrity of the police. "McBride had been previously arrested for arms smuggling, drunk driving and defeating the ends of justice. Now he must investigate and control corruption and malpractice in the police ...," he said.

Groenewald said Mthethwa was violating the public's trust with the recommendation. "McBride is extremely controversial and definitely not suitable for the position. The public should be able to trust the head of the IPID because a lot of complaints are against the [South African Police Service]."

Fired

Botha said Mthethwa should be fired. "Surely, no other minister is as determined to destroy his or her department," he said.

"If President [Jacob] Zuma does not now fire this bungling minister, the ANC should not be surprised when the world likens the Cabinet to a bunch of clowns."

McBride, who is a former MP and government official, won an appeal in March against a conviction of drunken driving and attempting to obstruct justice.

He was arrested in 2006 after crashing his official car on the R511 following a Christmas party. In September 2011, a Pretoria magistrate sentenced McBride to two years imprisonment for driving under the influence of alcohol and in effect three years' imprisonment for attempting to obstruct the course of justice.

In 1998, McBride was arrested in Mozambique on charges of gun-running. He spent seven months in a Maputo prison and was later cleared of all charges. He claimed he was investigating illegal gun-running with the National Intelligence Agency.

In 1999, McBride faced an assault charge after he, underworld boss Cyril Beeka, and another man visited an escort agency and allegedly assaulted an employee.

McBride was part of an Umkhonto we Sizwe group that bombed the Why Not Restaurant and Magoo's Bar in Durban on June 14 1986. Three people were killed and 69 were injured in the explosion. He was captured and convicted, and sentenced to death.

In 1992, he was released after his actions were classified as politically motivated. He was later granted amnesty at the Truth and Reconciliation Commission. – Sapa


Source: Mail & Guardian