The Supreme Court of Appeal (SCA) has recently given judgement in a criminal appeal relating to VAT fraud. The appeal was brought by Izak Engelbrecht against his conviction and sentence on 157 counts of fraud and one of corruption.
Engelbrecht's offences all related to a scheme in which sales of cars were zero-rated for VAT purposes, by fraudulently stating that they were being exported from South Africa. The sales actually took place within South Africa and should have been subject to VAT at the standard rate of 14%. Sars was defrauded of some R1.6m.
The scheme was an elaborate one, involving stolen customs documentation and forged stamps. Three individuals were initially charged. Two of them pleaded guilty, entered into plea-bargain arrangements for lesser sentences and gave evidence against Engelbrecht.
The Regional Court, Bellville sentenced Engelbrecht to an effective seven year prison term. That term comprised a six year sentence with two years suspended, in respect of the fraud convictions and then a three year sentence for the corruption conviction. Engelbrecht appealed unsuccessfully to the High Court. He was then denied leave to appeal further, but successfully petitioned the SCA in order to be able to bring his appeal.
The SCA confirmed the convictions. It was satisfied that Engelbrecht was a willing participant in a clearly fraudulent scheme. It was noted that Engelbrecht had benefitted from the scheme through commissions that he was paid by one of the other participants. Engelbrecht did not himself directly benefit from the non-payment of VAT.
The SCA then considered the sentencing issue. Engelbrecht argued that his sentences and those of the two individuals who entered into plea-bargains was startlingly disparate. The SCA disagreed. The other two individuals pleaded guilty and received the benefit of being able to enter into plea bargains. Engelbrecht pleaded not guilty and so had to go to trial. That trial gave the court the opportunity to hear evidence as to the extent of the scheme and Engelbrecht's involvement in it. The SCA said that, even if the others' sentences were unduly lenient, there was no reason why Engelbrecht should benefit in that regard. The need for strong deterrent sentences in fraud cases was confirmed.
The SCA did, however, find that the cumulative effect of the sentences had not been properly considered. It therefore ruled that the fraud and corruption sentences should run concurrently - resulting in an effective four year sentence.
Engelbrecht's offences all related to a scheme in which sales of cars were zero-rated for VAT purposes, by fraudulently stating that they were being exported from South Africa. The sales actually took place within South Africa and should have been subject to VAT at the standard rate of 14%. Sars was defrauded of some R1.6m.
The scheme was an elaborate one, involving stolen customs documentation and forged stamps. Three individuals were initially charged. Two of them pleaded guilty, entered into plea-bargain arrangements for lesser sentences and gave evidence against Engelbrecht.
The Regional Court, Bellville sentenced Engelbrecht to an effective seven year prison term. That term comprised a six year sentence with two years suspended, in respect of the fraud convictions and then a three year sentence for the corruption conviction. Engelbrecht appealed unsuccessfully to the High Court. He was then denied leave to appeal further, but successfully petitioned the SCA in order to be able to bring his appeal.
The SCA then considered the sentencing issue. Engelbrecht argued that his sentences and those of the two individuals who entered into plea-bargains was startlingly disparate. The SCA disagreed. The other two individuals pleaded guilty and received the benefit of being able to enter into plea bargains. Engelbrecht pleaded not guilty and so had to go to trial. That trial gave the court the opportunity to hear evidence as to the extent of the scheme and Engelbrecht's involvement in it. The SCA said that, even if the others' sentences were unduly lenient, there was no reason why Engelbrecht should benefit in that regard. The need for strong deterrent sentences in fraud cases was confirmed.
The SCA did, however, find that the cumulative effect of the sentences had not been properly considered. It therefore ruled that the fraud and corruption sentences should run concurrently - resulting in an effective four year sentence.
